Vallabhbhai Laljibhai Patel, Surat V. DCIT, Central Circle-1, Surat

ITSSA 32/SRT/2021

• Counselvise Citation: [2022] 103 COUNSELVISE.COM (IT) 9284 (ITAT-SURAT)
• Duration Of Justice: 1 year(s) 5 month(s) 4 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 30-10-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 19-10-2022
• Assessment Year: 2012-2013
• Appeal Filed On: 26-05-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Income from undisclosed sources; Earning of tax free income; Period of limitation; Condonation of delay
• Section: 68; 143(3); 133A; 153A; 143(2); 153C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER IT(SS)A No. 32/SRT/2021 (AY: 2012-13) (Physical Court hearing) Valllabhbhai Laljibhai Patel, A/140, Sant Darshan Building, Near Bambawadi, Katargam Road, Surat-395004. PAN : AAVPP6773E Vs The DCIT, Central Circle-1, Surat. APPELLANT RESPONDEDNT Appellant by Shri Nitin Gheewala, CA Respondent by Shri Ashok B. Koli, CIT-DR Date of hearing 20/10/2022 Date of pronouncement 31/10/2022 Order under section 254(1) of the Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal filed by the assessee is directed against the order of the Learned Commissioner of Income Tax (Appeals)-4, Surat [in short ‘the CIT(A)’], dated 24/03/2021 for the Assessment Year (AY) 2012-13, which in turn arises against assessment order passed by the Assessing Officer under section 143(3) r.w.s. 153C of the Income Tax Act, 1961 [hereinafter referred to as ‘the Act’], dated 30/12/2017. The assessee has raised the following grounds: “1. In law and in the facts and circumstances of the appellant’s case, the learned CIT(A) has grossly erred in confirming the LTCG shown in respect of Sale of Share of Polytex India Ltd of Rs.11,55,816/- as undisclosed income. The Ld. CIT(A) should have deleted the addition made by the Assessing Officer of LTCG of Rs.11,55,816/- as undisclosed income and should have held that the transaction of sale of shares is a genuine transaction and the capital gain on the same should be treated as exempt long term capital gain. 2 IT(SS)A No.32/SRT/2021/AY.2012-13 Vallabhbhai Laljibhai Patel 2. In law and in the facts and circumstances of the appellant’s case, the learned CIT(A) has grossly erred in dismissing ground of the appellant’s appeal before him challenging the levy of interest u/s 234B and 234C of the Act, on the ground that levy of interest was consequential in nature. The appellant denies its liability to pay interest. 3. The appellant craves leave to add, alter, amend and/or withdraw any ground or grounds of appeal either before or during the course of hearing of the appeal.” 2. The assessee vide his application dated 07.10.2022, raised the following additional grounds of appeal: “1) On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in confirming addition made by AO of Rs.11,55,816 being alleged LTCG shown in respect of sale of share of Polytex India Ltd. as undisclosed income, without appreciating that such addition is not based upon any incriminating material found during the course of search at searched party and therefore such addition made by AO is deserved to be deleted. 2. The appellant craves leave to add, amend and/or withdraw any ground or grounds of appeal either before or during the course of hearing of the appeal.” 3. On perusal of record, we find that appeal of the assessee is barred by four (4) days of prescribed period of limitation for filling appeal before the Tribunal. The Learned Authorized Representative (ld. AR) for the assessee submits that impugned order was passed by ld. CIT(A) on 24.03.2021 and the present appeal is filed on 27.05.2021, thus there is delay of four (4) days in filling appeal before Tribunal. The ld. AR of the assessee submits that Hon'ble Supreme Court of India in Miscellaneous Application (MA) No. 21 of 2022 & 665 of 202 in Suo Motu Petition (Civil) No. 3 of 2020 already allowed the period of limitation for taking recourse of law up to 01.03.2022, vide order dated 10.01.2022 and further ninety (90) days period was granted to file appeal before the various courts. 3 IT(SS)A No.32/SRT/2021/AY.2012-13 Vallabhbhai Laljibhai Patel Thus, the impugned delay of four (4) days is also covered by the order of Hon'ble Apex Court dated 10.01.2022. There was no intentional or, deliberate delay in filling appeal before Tribunal. The ld. AR for the assessee prayed for condoning the delay in filling present appeal. 4. On the other hand, Learned Senior Departmental Representative (ld. Sr. DR) for the Revenue submits that Bench takes decision in condoning the delay in accordance with law. 5. We have considered the rival submissions of both the parties on the plea of condonation of delay and find that assessee has filed appeal within the time period allowed by Hon'ble Apex Court in Suo Motu Petition (Civil) No. 3 of 2020 vide order dated 10.01.2022 in MA No. 21 of 2022 & 665 of 2021. Therefore, respectfully following the decision of Hon'ble Apex Court, the delay in filling is condoned. The appeal is admitted for adjudication on merit. Now, we shall advert to the adjudication of grounds appeals. 6. Brief facts of the case are that a search action under section 133A was carried out at the premises of Shri Hari Gems group, on 06.11.205, which was subsequently converted into search action under section 132. During the course of search and survey proceedings, certain incriminating material and evidence in the form of mirror image of digital date storages were impounded and seized. Certain incriminating material pertains to assessee was also found. Therefore, the case of the assessee was centralized. On the basis of search action carried on 06.11.2015 notice under section 153C was issued to the assessee to file his return of income. In response to notice under section 153C, the assessee filed his 4 IT(SS)A No.32/SRT/2021/AY.2012-13 Vallabhbhai Laljibhai Patel return of income on 16.09.2016, declaring non-agricultural income of Rs.5,98,570/-. The Assessing Officer noted that assessee has shown income as a share of profit in Krish Developers, interest on capital with the said firm under the head income from business, the interest income on saving bank and other interest. On the basis of evidence found during the course of search action, the Assessing Officer made certain addition on protective as well as substantive basis under section 68 and 69. 7. The Assessing Officer on the basis of computation of total income filed with the return of income as well as from the date available on ITS and ITD Module, noted that assessee claimed exempt income of Rs.11,56,816/- on the sale of shares of Polytex India Ltd. The scrip is of low value listed company with no actual assets. The Assessing Officer narrated the balance sheet and profit and loss account of Polytex India Ltd., in para no.7 of assessment order. The Assessing Officer was of a view that sharp rise in the price of shares was a designed way, which is normally achieved through circular trading of shares of select group who are in connivance. On the basis of his observation, the Assessing Officer asked the assessee as to why the Long Term Capital Gain should not be added to the income of assessee. The assessee filed its reply and contended that the transaction entered by assessee, was genuine and furnished the relevant evidences. The submission of assessee was not accepted by Assessing Officer. The assessing officer held that member of this group started ploughing back their unaccounted income in the guise of Long Term Capital Gain in the scrips of Unno Industries, Gujarat Meditech Ltd., etc., from the financial year 2011-12 onwards. The 5 IT(SS)A No.32/SRT/2021/AY.2012-13 Vallabhbhai Laljibhai Patel assessee availed benefit of Long Term Capital Gain under section 10(38) through this scrip. The Assessing Officer added back such Long Term Capital Gain as an income from undisclosed sources. By passing assessment order on 30.12.2017 under section 143(3) read with section 153C. 8. Aggrieved by the additions in the assessment order, the assessee failed appeal before ld. CIT(A). Before ld. CIT(A), the assessee filed detailed written submissions. The submissions of assessee is recorded in para no.7 of order of ld. CIT(A). In the submission, the assessee submitted that Assessing Officer has failed to appreciate that transaction of Polytex India Ltd. is a genuine transaction, the assessee furnished contract notes. Sale was made through recognized stock exchange after due payment of Security Transaction Tax (STT). The sales were held more than twelve months and resultant gain was claimed as exempt. The shares of assessee are absolutely genuine. The Assessing Officer has not produced any evidence to prove otherwise. The Assessing Officer made addition on presumption basis, that some members of the group plough back their unaccounted income through penny stock. The Assessing Officer has not brought any evidence on record to show that these agencies alleged any stock manipulation against the assessee or his broker. Merely, these stock prices moved sharply in absence of any other evidence, it cannot be said that these stock prices of the company are artificially inflated or manipulated by assessee or the group persons. The assessee also relied on various case laws. The ld. CIT(A) after considering the submission of assessee held that assessee has relied on various case 6 IT(SS)A No.32/SRT/2021/AY.2012-13 Vallabhbhai Laljibhai Patel laws of jurisdiction Tribunal vide facts of the cases assessment order different in those case laws and plea of assessee is non-tenable in the eyes of law and upheld the addition made by Assessing Officer. Further aggrieved, the assessee has filed the present appeal before this Tribunal. 9. We have heard the submissions of ld. AR of the assessee and ld. CIT-DR for the Revenue. At the outset of hearing, the ld. AR of the assessee submits that he has raised additional grounds vide application dated 07.10.2022. The additional grounds of appeal are purely legal in nature and goes to root of the case. The ld. AR of the assessee submits that addition of Long Term Capital Gain as undisclosed income, is not based on any incriminating material found during the course of search action. No new facts for adjudication of additional grounds of appeal are required to be brought on record. The additional grounds of appeal can be adjudicated on mere appreciating of facts available on record. Admittedly, no incriminating material with regard to alleged Long Term Capital Gain was found during the ‘search and survey’ action carried out on 06.11.2015. As no new facts is required to be brought on record, therefore additional grounds of appeal may be admitted for adjudication. 10. On the other hand, ld. CIT-DR for the Revenue submits that no such plea was either before the Assessing Officer or ld. CIT(A) that the said addition is not based on incriminating material. As per the scheme of the Act, there is no such condition in the provision under section 153C that no addition can be made in absence of incriminating material or evidence found during the search. 7 IT(SS)A No.32/SRT/2021/AY.2012-13 Vallabhbhai Laljibhai Patel 11. We have considered the submissions of both the parties and find that additional ground of appeal raised by assessee is purely legal in nature and can be adjudicated on appreciation and facts available in the order of the lower authorities. In our view, no new facts are to be brought on record for adjudication of additional ground of appeal, therefore, we admit additional grounds of appeal for adjudication. 12. On merit, the ld. AR of the assessee invited our attention on para no. 7 of the assessment order, wherein the Assessing Officer recorded that on perusal on computation of income filed with return of income and data available on ITS and ITD Module, the Assessing Officer noted that assessee has shown Long Term Capital Gain/exempt income of Rs.11,56,816/- on sale of shares of Polytex India Ltd. (supra). The ld. AR of the assessee submits that the Assessing Officer has made the addition only on the basis of material filed by assessee along with return of income. The addition of undisclosed income by treating the long term capital again as shame transaction, is not based on the incriminating material. No such incriminating material was found during the search action on 06.11.2015. The time period for issuing notice under section 143(2) for assessment year 2012-13 has expired on the date of such on 06.11.2015, thus the assessment for that year was not abated assessment. The ld. AR for the assessee submits that now it is a settled legal position that no addition under section 153A or 153C can be made in absence of incriminating material found during the course of search action in the unabated assessment. To support his submission, the ld. AR of the assessee relied on the decision of Jurisdictional High Court in 8 IT(SS)A No.32/SRT/2021/AY.2012-13 Vallabhbhai Laljibhai Patel CIT vs Saumya Construction Pvt. Ltd. (Tax Appeal No. 24 of 2016) dated 14.03.2016, Principal Commissioner of Income Tax vs Ani Bholabhai Patel dated 30.08.2017 and Hon'ble Delhi High Court in the case of Commissioner of Income Tax vs Kabul Chawla (2015) 61 taxmann.com 412 (Del.). 13. On the other hand, ld. CIT-DR for the Revenue submits that as per the scheme of section 153A or 153C, there is no restriction on the power of Assessing Officer to assess any other income for six assessment year immediately preceeding assessment year relevant to the previous year in which search is conducted. To support his submissions, the ld CIT-DR for the revenue relied on the decision of Allahabad High Court in Balaji Maharaj 447 ITR 517 (All) and Calcutta High Court in PCIT VS Swati Bajaj 446 ITR 56 / (2022) 139 taxmann.com 352 (Kol). 14. We have considered the submissions of both the parties and have gone through the order of lower authorities carefully. There is no dispute that search action on Hari Gems was carried out on 06.11.2015. Admittedly, neither the assessment proceeding for AY.2012-13, was pending on the said date nor notice under section 143(2) was issued to the assessee. Further, the time limit for issuing notice under section 143(2) for AY 2012-13 has already elapsed, when search action was carried on 06.11.2015. We further found that the Assessing Officer while making addition of Long Term Capital Gain as undisclosed income, nowhere recorded or referred that such addition is based on any incriminating evidence or material found during the search action. Moreover, the Assessing Officer recorded that on perusal of computation 9 IT(SS)A No.32/SRT/2021/AY.2012-13 Vallabhbhai Laljibhai Patel of income and the date available on ITS and ITD Module, he noted that assessee claimed /earned exempt income on sale of shares of Polytex India Ltd. Thus, admittedly such addition is not based on incriminating material, found during the course of search action. The Hon'ble jurisdictional High Court in the case of Saumya Construction (supra), wherein held that no addition in absence of incriminating material can be made in the unabated assessment. Similar view was taken by Delhi High Court in the case of Kabul Chawla (Del. HC) (supra) and Bombay High Court in CIT Continental Warehousing Pvt. Ltd (2015) 58 taxmann.com 78 (Bom). In view of the aforesaid factual discussion, we are of the view that no addition and the abated assessment can be made in the absence of incriminating material found during the course of search action. 15. So far as objections of ld CIT-DR for the revenue is concerned that the language of the section 153A and 153C nowhere restrict the power of assessing officer in making addition, which in not base on the incriminating evidence. We are not convinced with such submissions as the Hon’ble Jurisdictional High Court in Saumya Construction (supra), wherein held that no addition in absence of incriminating material can be made in the unabated assessment. Hence, the reference of decisions no-jurisdictional High court will not help the revenue. Moreover, the ratio of decision in Saumya Construction (supra) has been substantially affirmed by Hon’ble Supreme Court in case of CIT Vs Singhad Technical Education Society (2017) 84 taxmann.com 290-SC. 10 IT(SS)A No.32/SRT/2021/AY.2012-13 Vallabhbhai Laljibhai Patel 16. Therefore, we direct the Assessing Officer to delete the addition of undisclosed of income Rs.11,55,816/-. Considering the facts that we have allowed the additional ground of appeal and directed Assessing Officer to delete the addition of undisclosed income, therefore adjudication of additional grounds of appeal is being academic in nature. 17. In the result, the appeal filed by the assessee is allowed. Order pronounced in open court on 31/10/2022. Sd/- Sd/- (Dr. A. L. SAINI) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Surat, Dated: 31/10/2022 SAMANTA Copy to: 1. Appellant 2. Respondent 3. CIT(A) 4. CIT 5. DR /True copy/ By order // TRUE COPY // Asstt. Registrar, ITAT, Surat