Priya Blue Industries Pvt..Ltd., Bhavnagar V. The ACIT.,Cent.Circle-2(1), Ahmedabad

ITSSA 371/AHD/2012

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 5041 (ITAT-AHMEDABAD)
• Duration Of Justice: 7 year(s) 2 month(s) 11 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 14-10-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2004-2005
• Appeal Filed On: 03-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ORS PR
• Assessee Lawyers: URVASHI SHODHAN ARS; S N SOPARKAR
• Keywords: Earning of tax free income; Proportionate interest; Rule 8D; Set aside
• Section: 143(3); 153A; 14A; 68

Judgement Text

, B IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER () ./ I.T(SS).A. NOS. 371 TO 375/AHD/2012 ( ASSESSMENT YEARS : 2004-05 TO 2008-09) PRIYA BLUE INDUSTRIES PVT. LTD. 1563/A, ASHIRWAD, OPP: PANNA TOWER, RUPANI SARDARNAGAR ROAD, BHAVNAGAR / VS. ACIT CENTRAL CIRCLE- 2(1), 3 RD FLOOR, AAYKAR BHAVAN, ASHRAM ROAD, AHMEDABAD ./ ./ PAN/GIR NO. : AABCP2808B ( APPELLANT ) .. ( / RESPONDENT ) & () ./ I.T(SS).A. NOS. 418 TO 420/AHD/2012 ( ASSESSMENT YEARS : 2005-06 TO 2007-08) ASST. COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE-2(1), 3 RD FLOOR, ROOM NO.306, ANNEXIE TO AAYAKAR BHAVAN, ASHRAM ROAD, AHMEDABAD / VS. PRIYA BLUE INDUSTRIES PVT. LTD. 1563/A, ASHIRWAD, OPP: PANNA TOWER, RUPANI SARDARNAGAR ROAD, BHAVNAGAR ( APPELLANT ) .. ( / RESPONDENT ) / ASSESSEE BY : SHRI S. N. SOPARKAR & SMT. URVASHI SHODHAN, A.RS. / REVENUE BY : SHRI ALOK SINGH, CIT.D.R. IT(SS)A NOS. 371/AHD/12 & 7 ORS. [PRIYA BLUE INDUSTRIES P. LTD. ] -2 - !' DATE OF HEARING 27/08/2019 #$%& !' / DATE OF PRONOUNCEMENT 14/10/2019 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEALS AND CROSS APPEALS AT THE INST ANCE OF ASSESSEE & REVENUE ARISE FROM THE RESPECTIVE ORDERS OF THE COM MISSIONER OF INCOME TAX (APPEALS) (CIT(A)) AGAINST RESPECTIVE ASSESSM ENT ORDERS FOR DIFFERENT ASSESSMENT YEARS AS TABULATED BELOW: IT(SS)A NOS. NAME OF ASSESSEE AY CIT(A)S ORDER DATED AOS ORDER DATED AOS ORDER UNDER SECTION 371/AHD/12 PRIYA BLUE INDUSTRIES PVT. LTD. 2004-05 08.06.2012 30.12.2011 153A R.W.S. 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT) 372/AHD/12 & 418/AHD/12 -DO- 2005-06 -DO- -DO- -DO- 373/AHD/12 & 419/AHD/12 -DO- 2006-07 -DO- -DO- -DO- 374/AHD/12 & 420/AHD/12 -DO- 2007-08 -DO- -DO- -DO- 375/AHD/12 -DO- 2008-09 -DO- -DO- -DO- 2. THE GRIEVANCES RAISED BEING COMMON, ALL THE CAPT IONED CASES AS TABULATED WERE HEARD TOGETHER AND DISPOSED OF BY TH E COMMON ORDER. 3. AS INFORMED AT THE TIME OF HEARING, THE ASSESSEE HAS INTER ALIA RAISED A COMMON GROUND IN ALL THE FIVE APPEALS PERTAINING TO AYS. 2004-05 TO 2008-09 WHEREBY THE ASSESSEE HAS CHALLENGED THE JUR ISDICTION USURPED BY THE AO UNDER S.153A OF THE ACT TOWARDS ADDITIONS/DI SALLOWANCES MADE. IN VIEW OF THE PRELIMINARY OBJECTION OF THE ASSESSEE W HICH SEEKS TO PUT QUESTION MARK OVER THE LEGITIMACY OF THE ADDITIONS/ DISALLOWANCES MADE UNDER S.153A OF THE ACT, WE DEEM IT EXPEDIENT TO DI SPOSE OF THE AFORESAID PRELIMINARY GROUND AS IT STRIKES TO THE ROOT OF THE MATTER. IT(SS)A NOS. 371/AHD/12 & 7 ORS. [PRIYA BLUE INDUSTRIES P. LTD. ] -3 - 4. WHEN THE MATTER WAS PUT FOR HEARING, THE LEARNED SENIOR COUNSEL FOR THE ASSESSEE, AT THE OUTSET, SUBMITTED THAT THE ADD ITIONS/DISALLOWANCES MADE IN ALL THE FIVE APPEALS (SUPRA) HAS NO RATIONAL CON NECTION OR LIVE LINK WITH MATERIAL FOUND IN THE COURSE OF SEARCH ACTION CARRI ED OUT UNDER S.132 OF THE ACT ON 12.01.2010 IN THE CASE OF ASSESSEE. THE LEA RNED AR SUBMITTED THAT IN PURSUANCE OF NOTICE UNDER S.153A OF THE ACT FOR VARIOUS ASSESSMENT YEARS IN APPEAL, THE ASSESSMENT WAS COMPLETED UNDER S.153A FOR AYS. 2004-05 TO 2008-09 BY MAKING DISALLOWANCES UNDER S. 14A R.W. RULE 8D OF THE ACT, ADDITIONS ON ACCOUNT OF UNACCOUNTED SALES AND CERTAIN ADDITIONS MADE BY INVOKING SECTION 68 OF THE ACT ALL OF WHICH ARE UNCONNECTED TO THE MATERIAL UNEARTHED IN THE COURSE OF SEARCH AND ARE SUBJECT MATTER OF REGULAR ASSESSMENT. 4.1 THE LEARNED SENIOR COUNSEL FOR THE ASSESSEE ASS ERTED THAT THIS KIND OF ADJUSTMENTS MADE ARE SUBJECT MATTER OF REGULAR ASSE SSMENT AND DO NOT RESONATE WITH THE SCHEME OF SEARCH ASSESSMENT UNDER S.153A OF THE ACT DE HORS REFERENCE TO ANY INCRIMINATING MATERIAL. THUS, NO ADJUSTMENT IN THE RETURN OF INCOME IS PERMISSIBLE UNDER S.153A OF THE ACT. 4.2 THE LEARNED SENIOR COUNSEL NEXT SUBMITTED THAT ALL THE FIVE RETURNS OF RESPECTIVE ASSESSMENT YEARS HAVE BECOME TIME BARRED AND WERE NOT PENDING FOR ASSESSMENT AT THE TIME OF SEARCH. THEREFORE, T HE REGULAR ASSESSMENT/DEEMED ASSESSMENT STANDS CONCLUDED AT TH E TIME OF SEARCH RELATING TO VARIOUS ASSESSMENT YEARS IN QUESTION AN D THUS DO NOT GET ABATED BY THE OPERATION OF 2 ND PROVISO TO SECTION 153A OF THE ACT. IT WAS CONTENDED THAT NO ADDITION CAN BE MADE ON THE BASIS OF RE-APPRECIATION OF REGULAR ACCOUNT OF THE ASSESSEE IN THE PROCEEDINGS UNDER S.153A OF THE ACT. 4.3 IT WAS SUBMITTED IN ELABORATION THAT THE RETURN S FOR RESPECTIVE ASSESSMENT YEARS IN CONSIDERATION WERE FILED EARLIE R PRIOR TO SEARCH AND THE ASSESSMENT PROCEEDINGS IN PURSUANCE THEREOF IS DEEM ED TO HAVE BEEN CONCLUDED ON EXPIRY OF THE TIME LIMIT PROVIDED FOR INITIATION OF ASSESSMENT PROCEEDINGS. THE TIME LIMIT FOR ISSUANCE OF NOTICE UNDER S.143(2) OF THE ACT STOOD EXPIRED AT THE TIME OF SEARCH AND IN THE ABSENCE OF ANY PENDING ASSESSMENT, THE ASSESSMENT FOR AY 2005-06 TO 2008-0 9 PURSUANT TO THE IT(SS)A NOS. 371/AHD/12 & 7 ORS. [PRIYA BLUE INDUSTRIES P. LTD. ] -4 - ORIGINAL RETURN ACHIEVED FINALITY. THE LEARNED SEN IOR COUNSEL ACCORDINGLY SUBMITTED THAT THE ASSESSMENT OF INCOME UNDER S.143 (3) R.W.S. 153A OF THE ACT MUST HAVE NEXUS TO THE INCRIMINATING MATERIAL, IF ANY, FOUND IN THE COURSE OF SEARCH IN VIEW OF SEVERAL DECISION ON THI S SCORE. THE LEARNED AR SUBMITTED THAT IN THE ABSENCE OF ANY INCRIMINATING MATERIAL REFERRED TO IN THE ASSESSMENT ORDER, THE ACTION OF THE AO/CIT(A) I N MAKING ADJUSTMENTS IN THE RETURN OF INCOME IN THE COURSE OF SEARCH ASS ESSMENT UNDER S.153A OF THE ACT IS WITHOUT SANCTION OF LAW IN VIEW OF SEVER AL DECISIONS OF HONBLE GUJARAT HIGH COURT INCLUDING THE CASE OF PCIT VS. SAUMYA CONSTRUCTION PVT. LTD. (2016) 387 ITR 529 (GUJ). SUCH ADDITIONS/DISALLOWANCES IN THE COURSE OF SEARCH ASSESSMENT IN BAD IN LAW AND THUS REQUIRES TO BE SET ASIDE. 4.4 HAVING CITED THE LEGAL POSITION, THE LEARNED SE NIOR COUNSEL ADVERTED OUR ATTENTION TO THE ORDER OF THE CIT(A) AND SUBMIT TED THAT SPECIFIC LEGAL GROUND WAS TAKEN SEEKING TO CHALLENGE THE AUTHORITY OF THE AO TO INDULGE IN MAKING ADDITIONS/DISALLOWANCES OF REGULAR ITEMS HAV ING NO BEARING WITH THE INCRIMINATING MATERIAL. IT WAS SUBMITTED THAT THE CIT(A) HAS HOWEVER FAILED TO DISPOSE OF THIS LEGAL GROUND AND PROCEEDE D TO DEAL WITH THE ISSUES ON MERITS. 4.5 ADVERTING TO THE MERITS OF THE ADDITIONS, THE L EARNED AR CONTENDED THAT ONE OF THE DISALLOWANCES HAVE BEEN MADE IN ALL THE FIVE YEARS WITH REFERENCE TO SECTION 14A OF THE ACT. IN THIS CONTE XT, THE LEARNED SENIOR COUNSEL POINTED OUT THAT SUCH DISALLOWANCE IS NOT P ERMISSIBLE IN THE ABSENCE OF ANY EXEMPT INCOME AND WHERE THE EXEMPT I NCOME EXISTS, THE DISALLOWANCE CANNOT EXCEED SUCH EXEMPT INCOME. THE LEARNED AR FURTHER POINTED OUT THAT THE MAJOR DISALLOWANCE UNDER S.14A OF THE ACT RELATES TO PROPORTIONATE INTEREST EXPENDITURE WHICH IS ALSO NO T PERMISSIBLE IN VIEW OF THE AVAILABILITY OF SUBSTANTIAL INTEREST FREE OWN F UNDS FAR IN EXCESS OF THE CORRESPONDING INVESTMENTS GIVING RISE TO THE EXEMPT INCOME. THE LEARNED AR THUS SUBMITTED THAT SUCH DISALLOWANCES ARE ALSO REQUIRED TO BE DELETED/MODIFIED SUITABLY. THE LEARNED AR FURTHER SUBMITTED THAT OTHER ADDITIONS ON ACCOUNT OF UNACCOUNTED SALES ALSO DO N OT HOLD WATER AND REQUIRES TO BE DELETED. IT(SS)A NOS. 371/AHD/12 & 7 ORS. [PRIYA BLUE INDUSTRIES P. LTD. ] -5 - 5. THE LEARNED DR FAIRLY ACCEPTED THE ASSERTIONS MA DE ON BEHALF OF THE ASSESSEE TOWARDS NO-DISPOSAL OF LEGAL GROUND UNDER S.153A OF THE ACT AND SUGGESTED THAT MATTER MAY BE REMANDED BACK TO THE F ILE OF THE CIT(A) FOR ADJUDICATION OF LEGAL ISSUE. 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. WE FIND THAT THE GROUND CONCERNING SCOPE OF AUTHORITY OF THE AO TO M AKE VARIOUS ADDITIONS/DISALLOWANCES WITHIN THE SWEEP OF SECTION 153A OF THE ACT IS LEGAL IN NATURE AND GOES TO THE ROOT OF THE JURISDI CTIONAL ASPECT OF SEARCH ASSESSMENT. HOWEVER, AS FAIRLY CONSENTED ON BEHALF OF BOTH THE SIDES, WE CONSIDER IT EXPEDIENT TO REMIT THE MATTER BACK TO T HE FILE OF THE CIT(A) FOR EXAMINATION OF LEGAL OBJECTION RAISED BY THE ASSESS EE ON SUSTAINABILITY OF ADDITIONS/DISALLOWANCES IN PROCEEDINGS UNDER S.153A OF THE ACT IN THE ALLEGED ABSENCE OF ANY INCRIMINATING MATERIAL IN TH E LIGHT OF LEGAL PROPOSITION SET OUT BY THE JURISDICTIONAL HIGH COUR T WHERE NO ASSESSMENT IS STATED TO BE PENDING. IN THE ABSENCE OF THE ASSESS MENT RECORDS AND REFERENCE TO ANY MATERIAL FOUND IN THE COURSE OF SE ARCH AND ALSO ON ACCOUNT OF NON-DISPOSAL OF SPECIFIC GROUND AS TAKEN IN THIS REGARD BEFORE CIT(A), WE ARE NOT IN A POSITION TO OPINE ON THE ISSUE EITH ER WAY. THE LEGAL ISSUE IS THUS RESTORED TO THE FILE OF THE CIT(A) FOR DETERMI NATION THEREOF IN ACCORDANCE WITH LAW AFTER TAKING NOTE OF PRESENCE O R OTHERWISE ANY OF INCRIMINATING MATERIAL. IT WILL BE OPEN TO THE ASS ESSEE TO ESTABLISH ITS CASE BEFORE THE FIRST APPELLATE AUTHORITY AFRESH WITH RE FERENCE TO THE LEGAL ISSUE RAISED CONCERNING MAINTAINABILITY OF ADDITIONS/DISA LLOWANCES IN SECTION 153A PROCEEDINGS. THE MATTER IS THUS REMANDED BACK TO THE FILE OF THE CIT(A) IN RELATION TO ALL THE FIVE ASSESSMENT YEARS . 7. WE MAY HASTEN TO ADD THAT THE CIT(A) WHILE DETER MINING THE ISSUE SHALL NOT PUT THE ASSESSEE IN A WORSER POSITION QUA ITS EARLIER ORDER AND THUS WOULD NOT DISTURB THE ISSUES ALREADY DETERMINED ON MERITS. 8. WE FURTHER REFRAIN FROM ADJUDICATING THE CHALLEN GES MADE ON MERITS BOTH BY ASSESSEE AND REVENUE AS THE JURISDICTIONAL ASPECT OF INTRINSIC NATURE IS PENDING FOR DETERMINATION. IT SHALL BE O PEN TO THE ASSESSEE AS IT(SS)A NOS. 371/AHD/12 & 7 ORS. [PRIYA BLUE INDUSTRIES P. LTD. ] -6 - WELL AS REVENUE TO PUT FORTH THEIR CHALLENGE ON MER ITS BEFORE THE TRIBUNAL IF SO REQUIRED DEPENDING ON THE OUTCOME OF THE LEGA L ISSUE BEING REMITTED BACK AND RESTORED TO THE FILE OF THE CIT(A). WE DO NOT CONSIDER IT APPROPRIATE TO GO INTO THE ISSUES CONNECTED WITH ME RITS OF THE ADDITIONS/DISALLOWANCES AT THIS STAGE OF THE PROCEE DINGS. 9. ACCORDINGLY, ALL THE APPEALS CONNECTED TO AYS. 2 004-05 TO 2008-09 ARE DISPOSED OF IN TERMS OF ABOVE DIRECTIONS. 10. IN THE RESULT, ALL THE APPEALS OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES WHEREAS ALL THE APPEALS OF REV ENUE ARE DISMISSED AS INFRUCTUOUS. SD/- SD/- (MAHAVIR PRASAD) (PRADIP KUMA R KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 14/10/2019 TRUE COPY S. K. SINHA !'#' / COPY OF ORDER FORWARDED TO:- ). / REVENUE 2. / ASSESSEE +. ,-.! /! / CONCERNED CIT 4. /!- / CIT (A) 2. 345 6!6-.7 ' -.&7 89, / DR, ITAT, AHMEDABAD :. 5;< = / GUARD FILE. BY ORDER / 7 /8 ' -.&7 89, THIS ORDER PRONOUNCED IN OPEN COURT ON 14/10/2019