The Dy. CIT, Central Circle-2(1), Ahmedabad V. Shri Paresh L. Mehta, Kutch

ITSSA 472/AHD/2017

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 3753 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 6 month(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 28-06-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 28-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 131; 153A; 143(2)

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “B” BENCH Before: Shri P.M. Jagtap, Vice President And Shri Siddhartha Nautiyal, Judicial Member Deputy CI T, Central Circle-2(1), Ah medabad (Appellant) Vs Shri Paresh L. Me hta, A-37 Kataria Shopping RTO Relocation Site Bhuj, Kutch-370001 PAN: AEKPM6708F (Respondent) Assessee b y: Shri Bandi sh Sopar kar , A. R. Revenue by: Shri Mudit Nagp al, CIT- D. R. Date of hea ring : 28-04-2022 Date of pronounce ment : 29-06-2022 आदेश/ORDER PER : SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER:- These two appeals have been filed by the Revenue against the order of the ld. Commissioner of Income Tax (Appeals)-12, Ahmedabad in Appeal no. CIT(A)-12/167-168/DCIT-CC-2(1)/16-17 vide order dated 25/10/2017 passed for the assessment years 2008-2009 & 2009-10. IT(SS)A Nos. 472 & 473 /Ahd/2017 Assessment Years 2008-09 & 2009-10 I.T(SS).A Nos. 472 & 473/Ahd/2017 A.Y. 2008-09 & 2009-10 Page No. DY CIT vs. Shri Paresh L. Mehta 2 2. The revenue has taken the following grounds of appeals:- IT(SS)A No. 472/Ahd/2017 “1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law and/or on facts in not appreciating the provisions of section 153A of the I.T. Act which requires the total income to be brought under tax without any restriction. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law and/or on facts in holding that such assessment or reassessment u/s 153A is to be restricted only to the incriminating materials found during the search. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law and/or on facts in deleting the addition of Rs.1,83,86,882/-made on account of suppression of profit by the assessee by way of Client Code Modifications without appreciating the facts brought about by the AO in his assessment order. 4. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) ought to have upheld the order of the A.O. 5. It is, therefore, prayed that the order of the Ld. CIT (A) be set aside and that of the A.O. be restored to the above extent.” IT(SS)A No. 473/Ahd/2017 “1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law and/or on facts in not appreciating the provisions of section 153A of the I.T. Act which requires the total income to be brought under tax without any restriction. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law and/or on facts in holding that such I.T(SS).A Nos. 472 & 473/Ahd/2017 A.Y. 2008-09 & 2009-10 Page No. DY CIT vs. Shri Paresh L. Mehta 3 assessment or reassessment u/s 153A is to be restricted only to the incriminating materials found during the search. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law and/or on facts in deleting the addition of Rs.10,28,25,154/- made on account of suppression of profit by the assessee by way of Client Code Modifications without appreciating the facts brought about by the AO in his assessment order. 4. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) ought to have upheld the order of the A.O. 5. It is, therefore, prayed that the order of the Ld. CIT (A) be set aside and that of the A.O. be restored to the above extent.” 3. Since both the appeals are emanating from a common order passed by Ld. CIT(A) for AY 2008-09 and AY 2009-10, we shall consider both the appeals together. 4. The brief facts of the case are that search was conducted under section 132 of the Act in the case of Mehul Mehta & Group on 19-07-2013. The assessee being one of the members of the group, was also subject to search and seizure actions. The assessee had already filed his original return of income for A.Y. 2008-2009 on 26/09/2008 and for A.Y. 2009-2010 on 22/09/2009. The time limit for of notice u/s 143(2) of the Act had already expired on the date of search. Subsequent to search, assessee was in receipt of notice under section 153A of the Act. In response to the notice under section 153A, assessee filed return of income on 05-11-2014 declaring total income of ₹ 4,44,80,560/- for AY 2008-09 and assessee also filed return of income for A.Y. 2009-10 on 10-11-2014 declaring total income of ₹ 1,84,04,240/- under section 153A of the Act. During the course of I.T(SS).A Nos. 472 & 473/Ahd/2017 A.Y. 2008-09 & 2009-10 Page No. DY CIT vs. Shri Paresh L. Mehta 4 assessment proceedings, the Assessing Officer, on the basis of data received from the NSE, observed that the assessee has entered into share transactions through "Amrapali Finance & Capital Services Ltd." (ACFSL). The Assessing Officer stated that during the course of search conducted on ACFSL at its premises, it was found that ACFSL has resorted to large scale Client Code Modification (CCM) in various segments. The Assessing Officer observed that the CCM carried out by ACSFL is not an inadvertent error, but has been used as a systematic tool to evade taxes. The Assessing Officer observed that an analysis of CCM data clearly establishes CCM has been carried out in a thoughtful, systematic manner with a mala-fide intention to avoid the payment of taxes on the true income by setting off the profits against the F & O losses. In view of above arguments, the Assessing Officer was of the view that CCM carried out by appellant were not an inadvertent error but had been used as a systematic tool to evade taxes. Accordingly, the Ld. Assessing Officer made additions on account of alleged CCM to the tune of ₹ 1,83,86,82 for AY 2008-09 and Rs.10,28,25,154/- for AY 2009-10. 5. In the appeal filed appeal before Ld. CIT(A), the assessee argued that while accusing the assessee of entering CCM, the Assessing Officer has not produced any evidence to prove that the appellant has indulged into any such technique and evaded taxes by resorting to the same. Neither is there any evidence in form of documents or statements nor any proof of receipt and payment of cash in order to show that transactions have been settled out of books. Only from such quantum of CCM transactions at broker's premises, the assessee has been accused and found guilty of using CCM as a tool of I.T(SS).A Nos. 472 & 473/Ahd/2017 A.Y. 2008-09 & 2009-10 Page No. DY CIT vs. Shri Paresh L. Mehta 5 tax evasion. Apart from that there is no evidence against the appellant which proves the allegations of the Assessing Officer. The assessee thus argued that even the broker of appellant being ACFSL has not accused the appellant of having indulged into any fraudulent CCM technique. There is no statement recorded of any person who has alleged appellant of entering into any such fraudulent practice. It was submitted by appellant that there is no evidence of settlement of alleged transactions in cash. The Assessing Officer has not proved any receipt or payment of cash with respect to transactions with broker of the appellant. The assessee further submitted that the very process of client code modification happens through the intervention of relevant recognized exchanges to rectify the error. Such kind of modification of code is quite normal in this trade, which is under supervision and intervention of the relevant stock exchanges. Thus, mere fact that client codes have been modified in case of appellant is not enough for taking an adverse view against the appellant. Reliance was placed on various judgments, some of them being Mumbai High Court in case of Coronation Agro Industries Ltd. reported in [2017] 390 ITR 464 (Bombay) and Kunvarji Finance Pvt. Ltd & Group IT(SS)A No. 615/Ahd/2010 dated 19/03/2015, decision of Hon'ble Mumbai Bench in case of Ashok Goyal HUF reported in 165 TTJ 306 and Mumbai ITAT in case of ITO vs PAT Commodity Services P. Ltd. in ITA No. 3498 and 3499/Mum/2012 dated 07/08/2015. The Ld. CIT(A) allowed the assessee’s appeal with the following observations: “6.7 It is thus observed that AO has made entire addition on both the assessment years and presumption and on the ground that there is I.T(SS).A Nos. 472 & 473/Ahd/2017 A.Y. 2008-09 & 2009-10 Page No. DY CIT vs. Shri Paresh L. Mehta 6 CCM carried out by the broker, and there is tax evasion. The contention of AO is not supported by any documents found during the course of search at appellant’s premises or third-party premises or any statement of broker. Even AO has not brought any other cogent material evidences to disprove the contention of appellant that all the transactions are genuine transactions. The assessments cannot be made or are sustained on the basis of suspicions and surmises and even if circumstances were such as to justify suspicion, it is still not enough to make or sustain an assessment. Reliance is placed on the decisions of the Hon'ble Supreme Court in the case of Omar Salay Mohammed Sait v. CIT 37 ITR 151 (SC) and UOI v. Playworld Electronics Private Limited 184 ITR 308 (SC). 6.8 in view of the facts discussed herein above and relying upon decisions referred supra, it is held that AO is not justified in making additions of ₹ 1,83,86,882/-in AY 2008-09 and ₹ 10,28,25,154/-in AY 2009-10. Thus related ground of appeal in both the assessment years and succeed and the addition made is deleted. 6. The Revenue is in appeal before us against the aforesaid orders passed by ld. CIT(A). The Ld. Departmental Representative primarily relied upon the observations made by the Ld. Assessing Officer in the assessment order for the respective years. In response, the counsel for the assessee primarily reiterated the arguments put before the Ld. CIT(A) in appeal proceedings. The counsel for the assessee submitted that the assessment order passed had nothing to do with any material found during search proceedings. The I.T(SS).A Nos. 472 & 473/Ahd/2017 A.Y. 2008-09 & 2009-10 Page No. DY CIT vs. Shri Paresh L. Mehta 7 counsel for the assessee submitted that no incriminating material was found during the course of search carried out and hence the additions made during the course of assessment proceedings are purely on conjectures and surmises. He relied upon the observations made by the Ld. CIT(A) in the appeal order where he gave a categorical finding that no material was found incriminating the assessee. The counsel for the assessee submitted that the issue in hand is directly and squarely covered by several decisions in favour of the assessee. 7. We have heard the rival contentions and perused the material on record. In the case of Pr. CIT v. Saumya Constructions 81 Taxman.com 292 (Gujarat), the Gujarat High Court held that under section 153A, an assessment has to be made in relation to search or acquisition, namely, in relation to material disclosed during search requisitioned. If no incriminating material was found during search, no addition can be made on basis of material collected after the search. The Delhi High Court in the case of Kabul Chabla (2015) 380 ITR 573 (Delhi High Court) has held that completed assessment can be interfered by the Assessing Officer while making assessment u/s. 153A 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 ware not produced or not already disclosed or made in the course of original assessment. The Gujarat High Court in the case of Pr. CIT v. Sunrise Finlease 89 Taxman.com 1 (Gujarat) has held that where no incriminating evidence against assessee was found or seized during the course of search so as to attract provisions of section 153A proceedings, no additions could be I.T(SS).A Nos. 472 & 473/Ahd/2017 A.Y. 2008-09 & 2009-10 Page No. DY CIT vs. Shri Paresh L. Mehta 8 made on the basis of statement of director of assessee company which were recorded under section 131 much later after search. The ITAT Rajkot Bench in the case of a Rajat Minerals v. DCIT 114 Taxman.com 536 (Ranchi- Trib) held that where no incriminating evidence against the assessee was found or seized during course of search, invocation of provisions of section 153A and making additions/disallowances on basis of tax evasion petition found much after search was unjustified. The Delhi High Court in the case of Pr. CIT v. Jaypee financial services Ltd 127 Taxman.com 419 (Delhi), held that where AO during the course of post search proceedings under section 153A against assessee-share trader found certain evidences showing client code modification done by assessee which were not for genuine reasons and, accordingly, made addition on account of such client code modification, since impugned addition was not made by AO based on any incriminating material found during search against assessee and assessment was not pending on date of search, impugned addition was unjustified and same was to be deleted. In the instant case, we observe that search was carried out in the case of the assessee on 19-07-2013 and assessee had already filed his original return of income for assessment year 2008-09 on 26-09-2008 and for assessment year 2009-10 on 22-09-2009. Even the time-limit for issuance of notice under section 143 (2) of the Act had already expired on the date when the search was carried out. It is observed that the AO had issued show cause notice to the assessee based upon data received from NSE and not based on any documents/incriminating material found during the course of search at assessee’s premises. It is observed that on the basis of data received from NSE, the assessing officer has concluded that assessee has either shifted profit out of his books of I.T(SS).A Nos. 472 & 473/Ahd/2017 A.Y. 2008-09 & 2009-10 Page No. DY CIT vs. Shri Paresh L. Mehta 9 account or claimed loss and made additions on this basis. In our view, the AO has not made additions in both the assessment years based upon any incriminating material found during the course of search at the assessee’s premises but made additions based upon data received from NSE. The AO has stated that the search was carried out in the case of ACFSL, broker of the assessee on 26-10-2012 but while passing the assessment orders, AO has not brought anything on record which can prove that assessee has made unaccounted transaction with the said party received cash in view of alleged profit shifted from assessee’s premises. The AO while passing the order has not relied upon any incriminating material found during the course of search at ACFSL while making the additions on account of CCMs. Therefore, in the instant facts, we are of the considered view that the Ld. CIT(A) has not erred in facts and in law in deleting the additions for assessment years 2008- 09 and 2009-10 by relying on various decisions on this issue and in absence of any incriminating material found during the course of search forming the basis of assessment. 8. In the combined result, appeal of the Revenue is dismissed for assessment years 2008-09 and 2009-10. Order pronounced in the open court on 29-06-2022 Sd/- Sd/- (P.M. JAGTAP) (SIDDHARTHA NAUTIYAL) VICE PRESIDENT JUDICIAL MEMBER Ahmedabad : Dated 29/06/2022 I.T(SS).A Nos. 472 & 473/Ahd/2017 A.Y. 2008-09 & 2009-10 Page No. DY CIT vs. Shri Paresh L. Mehta 10 आदेश े / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/ आदेश से, उप/सहायक पंजीकार आयकर पी य कर , हमदाबाद