The DCIT, Central Circle- 2(4), Ahmedabad V. Shri Kalpesh Kantilal Patel, Ahmedabad

ITSSA 48/AHD/2018

• Counselvise Citation: [2024] 101 COUNSELVISE.COM (IT) 7583 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 year(s) 2 month(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 29-04-2024
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 27-02-2024
• Assessment Year: 2009-2010
• Appeal Filed On: 28-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Document seized; Cost of acquisition; Validity of assessment; Block assessment; Documents seized; Set aside; Capital Gains
• Section: 263; 132; 144; 139; 143(3); 153A; 14A; 143(2); 48; 22; 153C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “A” BENCH Before: Smt. Annapurna Gupta, Accountant Member And Shri T.R. Senthil Kumar, Judicial Member The DCIT Central Circle-2(4), Ahmedabad (Appellant) Vs Shri Kalpesh K Patel 32, Ambica Society Usmanpura Ahmedabad PAN: AAWPP5054D (Respondent) Shri Kalpesh Kantilal Patel 22, Ambica Society Usmanpura Ahmedabad PAN: AAWPP5054D (Appellant) Vs The ACIT Central Circle-2(4), Ahmedabad (Respondent) Revenue Rep: : Shri Akhilendra Pratap Yadaw, CIT-DR Assessee Rep: Shri Mahesh Chhajed, A.R. Date of hearing : 28-02-2024 Date of pronouncement : 30-04-2024 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:- These appeals are filed by the Revenue and Assessee as against the common appellate order dated 27.12.2017 passed by the Commissioner of Income Tax (Appeals)-12, Ahmedabad arising IT(SS)A No. 48/Ahd/2018 Assessment Year 2009-10 IT(SS)A No. 45/Ahd/2018 Assessment Year 2012-13 I.T.A No. 48 & 45/Ahd/2018 A.Y. 2009-10 & 2012-13 Page No DCIT Vs. Shri Kalpesh Kantilal Patel 2 out of the assessment order passed under section 144 r.w.s. 143(3) r.w.s. 153A of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the respective Assessment Years 2009-10 and 2012-13. IT(SS)A No. 48/Ahd/2018 (A.Y. 2009-10-Revenue Appeal) 2. The brief facts of the case is that the assessee is an individual deriving income from business, capital gain and other sources. The assessee filed its original Return of Income u/s.139(1) of the Act on 30.12.2009 declaring total income of Rs.7,04,230/-. The return was taken for scrutiny assessment and assessment order was passed u/s.143(3) of the Act on 29.11.2011 determining the income at Rs.7,85,650/-. This assessment order was set aside by Pr.CIT, Central-3, Ahmedabad u/s. 263 of the Act being an erroneous order and prejudicial to the interest of Revenue. 2.1. It is thereafter a search action u/s. 132 of the Act was carried out in the case of Shayona Group on 15.10.2013, wherein the residence of the assessee was also covered, but no incriminating documents were seized relating to this Assessment Year 2009-10. However the Assessing Officer made additions on purchase and sales of property, disallowance u/s. 14A, disallowance of various other expenses and disallowance u/s.57(iii) of the Act and determined the assessed income at Rs.1,97,89,860/-. 3. Aggrieved against the same, the assessee filed an appeal before Commissioner of Income Tax (Appeals)-12. The Ld. CIT(A) by common order dated 27.12.2017 partly allowed the assessee appeal I.T.A No. 48 & 45/Ahd/2018 A.Y. 2009-10 & 2012-13 Page No DCIT Vs. Shri Kalpesh Kantilal Patel 3 and quashed the assessments for the Assessment Years 2008-09 to 2011-12 by observing as follows: “13. A.Y. 2008-09 to A.Y. 2011-12 The AYs 2008-09 to 2011-12 are unabated years. From the careful perusal of the impugned assessment orders u/s 144 r.w.s. 143(3) r.w.s. 153A for the assessment years A.Y. 2008-09 to AY 2011-12-it is seen that the additions are on account of account of purchase and sale of property and income of capital gains, disallowance of interests paid u/s 14A and u/s 57 (iii) and disallowances out of expenses claimed. There is no reference in the assessment orders to the seized documents/ materials found from any of the two searches - Shayona Group and Vikas Shah Group. The additions being not based on any incriminating material the additions in respective assessment years cannot be sustained. Though the Ld AR apart from legal submission for assessment to be not valid has made submission on merit also but they are rendered academic and require no specific adjudication. The assessment orders for the assessment years - A.Y. 2008-09 to AY 2011- are quashed and the AO is directed to delete the additions made to the total income in respective years. Grounds related to the substantive additions made succeed for these years. Appeals for the assessment years from A.Y. 2008-09 to AY 2011 are thus partly allowed.” 4. Aggrieved against the appellate order, the Revenue is in appeal before us raising the following Grounds of Appeal: 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law and on facts in not appreciating the provisions of section 153A of the IT. Act. 1961 which requires the total income to be brought under tax without any restrictions. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law and on facts in holding that such assessment or re-assessment u/s 153A of the I.T. Act, 1961 is to be restricted only to the incriminating materials found during the search. I.T.A No. 48 & 45/Ahd/2018 A.Y. 2009-10 & 2012-13 Page No DCIT Vs. Shri Kalpesh Kantilal Patel 4 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law and on facts in quashing the assessment order passed by the Assessing Officer u/s 153A of the I.T. Act, 1961. 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. 5. At the outset, the Ld. CIT-DR Shri Akhilendra Pratap Yadaw submitted that the ld. CIT(A) erred in quashing the assessment order in the absence of any incriminating material seized by the department. Therefore the same is liable to be set aside. 6. Per contra, the ld. Counsel Shri Mahesh Chhajed appearing for the Assessee submitted that this issue is squarely covered by the recent Supreme Court Judgment in the case of PCIT, Central –Vs- Abhisar Buildwell Pvt. Ltd. reported in [2023] 149 taxmann.com 399 (SC) holding that in respect of completed assessments/ unabated assessments, no addition can be made by the Assessing Officer in the absence of any incriminating material found during the course of search. Therefore the Revenue appeal is liable to be dismissed. 7. We have given our thoughtful consideration and perused the materials available on record. It is well settled Principle of law by various judgments rendered by the Hon’ble Apex Court and Jurisdictional Gujarat High Court, when an assessment has to be made in relation to the search or requisition u/s.153A of the Act, namely, in relation to material disclosed during the course of I.T.A No. 48 & 45/Ahd/2018 A.Y. 2009-10 & 2012-13 Page No DCIT Vs. Shri Kalpesh Kantilal Patel 5 search or requisition, if in relation to any particular assessment year, at the same time when there is no incriminating material found, no addition or disallowance can be made in relation to that assessment year in exercise of powers under section 153A of the Act and the earlier assessment shall have to be reiterated. This legal preposition is now settled by the Hon’ble Supreme Court by judgments dated 24-04-2023 in the batch of cases namely PCIT -Vs- Abhisar Buildwell Pvt. Ltd. holding that in respect of completed assessments/unabated assessments, no addition can be made by Assessing Officer in the absence of any incriminating material found during the course of search under section 132 or requisition made under section 132A of the Act by observing as follows: “Section 153A, read with sections 132 and 143, of the Income-tax Act, 1961 - Search and seizure - Assessment in case of (Conditions precedent) - Whether object of section 153A is to bring under tax undisclosed income which is found during course of search or pursuant to search or requisition; therefore, only in a case where undisclosed income is found on basis of incriminating material, Assessing Officer would assume the jurisdiction to assess or reassess total income for entire six years block assessment period even in case of completed/unabated assessment- Held, yes - Whether in case of search under section 132 or requisition under section 132A, Assessing Officer assumes jurisdiction for block assessment under section 153A and that all pending assessments/reassessments shall stand abated - Held, yes - Whether in respect of completed assessments/unabated assessments no addition can be made by Assessing Officer in absence of any incriminating material found during course of search under section 132 or requisition under section 132A - Held, yes - Whether, however, completed/unabated assessments can be reopened by Assessing Officer in exercise of powers under section 147/148 subject to fulfilment of conditions as envisaged/mentioned under section 147/148 and those powers are saved - Held, yes I.T.A No. 48 & 45/Ahd/2018 A.Y. 2009-10 & 2012-13 Page No DCIT Vs. Shri Kalpesh Kantilal Patel 6 7.1. The Hon’ble Supreme Court in the case of Abhisar Buildwell Pvt. Ltd. considered Judgments of various High Courts and concurred with one of the Judgment of the Gujarat High Court in the case of Saumya Construction and laid down the following points in a nutshell : “... ... 13. For the reasons stated hereinabove, we are in complete agreement with the view taken by the Delhi High Court in the case of Kabul Chawla (supra) and the Gujarat High Court in the case of Saumya Construction (supra) and the decisions of the other High Courts taking the view that no addition can be made in respect of the completed assessments in absence of any incriminating material. 14. In view of the above and for the reasons stated above, it is concluded as under: (i) that in case of search under section 132 or requisition under section 132A, the AO assumes the jurisdiction for block assessment under section 153A; (ii) all pending assessments/reassessments shall stand abated; (iii) in case any incriminating material is found/unearthed, even, in case of unabated/completed assessments, the AO would assume the jurisdiction to assess or reassess the 'total income' taking into consideration the incriminating material unearthed during the search and the other material available with the AO including the income declared in the returns; and (iv) in case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabated assessments. Meaning thereby, in respect of completed/unabated assessments, no addition can be made by the AO in absence of any incriminating material found during the course of search under section 132 or requisition under section 132A of the Act, 1961. However, the completed/unabated assessments can be re-opened by the AO in exercise of powers under sections 147/148 of the Act, subject to fulfilment of the conditions as envisaged/mentioned under sections 147/148 of the Act and those powers are saved. I.T.A No. 48 & 45/Ahd/2018 A.Y. 2009-10 & 2012-13 Page No DCIT Vs. Shri Kalpesh Kantilal Patel 7 8. Respectfully following the above Supreme Court Judgment, we do not find any merits in the grounds raised by the Revenue. Thus Ground Nos. 1 to 5 raised by the Revenue are hereby dismissed. 9. In the result, the appeal filed by the Revenue is dismissed. IT(SS)A No. 45/Ahd/2018 (A.Y. 2012-13-Assessee Appeal) 10. For the Assessment Year 2012-13, the assessee filed its original Return of Income u/s.139 of the Act on 28.09.2012 declaring income of Rs.25,95,590/-. The Assessing Officer disallowed interest payment of Rs.5,22,907/- u/s. 57(iii) as the same were not utilized in the business purpose, addition of Rs.65,42,000/- on purchase and sale of property/land considered as business income and also addition of Rs.3,00,000/- as unexplained cash payment and determined the assessed income of Rs.92,56,400/- and demanded tax thereon. 11. Aggrieved against the assessment order, the assessee filed an appeal before Ld. Commissioner of Income Tax (Appeals). The Ld. CIT(A) upheld the validity of assessment by observing as follows: “.....It has been held earlier that the AY 2012-13 is unabated with respect to proceedings u/s 153A emanating from search in Shayona Group of cases on 15.10.20013 but was abated with respect to proceedings u/s 153C emanating from search in Vikas Shah Group of cases on 03.01.20013 and the earlier proceedings u/s 153C getting merged with the later proceedings u/s 153A, it is not a case of reassessment and the additions made for AY 2012-13 need not essentially be based only on materials found during the course of two searches. It appears that the proceedings u/s 153C initiated by the DCIT CC-2(2) in connection with Vikas Shah Group of cases being dropped should not vitiate the position. With due respect to the case laws quoted by the Ld AR in support of I.T.A No. 48 & 45/Ahd/2018 A.Y. 2009-10 & 2012-13 Page No DCIT Vs. Shri Kalpesh Kantilal Patel 8 appellant's contention for quashing of the impugned assessment order for the year, I find that the assessment u/s 144 r.w.s. 143(3) r.w.s. 153A for the year, therefore, is not protected in favour of the appellant. All the grounds related to legal validity of the assessment order and the additions made there in are dismissed.” 11.1. Further on merits of the case, the Ld. CIT(A) confirmed the addition of Rs.65,42,000/-. However deleted the addition on the interest expenses of Rs.5,22,907/- and also unexplained cash payment of Rs. 3,00,000/- in favour of the assessee. 12. Aggrieved against the appellate order, the assessee is in appeal before us raising the following Grounds of Appeal: 1. The order passed by Ld. CIT(A) is in violation of law, equity and justice. 2. The Ld. CIT Appeal has erred in law and on facts considering that proceedings U/S 153C of Act is merged with 153A of Act whereas the proceedings U/S 153C of Act is withdrawn by the assessing officer issued notices. 3. The Ld. CIT (A) has erred in law and on facts in uphelding the order of Ld. A.O. without issuing notice U/S 143(2) of the Act. 4. The Ld. CIT (A) has erred in law and on facts in uphelding the order of the Ld. A.O. passed U/S 144 of the Act when there was no failure of appellant which empower the Ld. A.O. to invoke Sec. 144 of the Act. 5. The Ld. CIT (A) has erred in law and on facts in considering that assessment is abated and hence passed the order ignoring the decisions of jurisdictional High Court that no addition can be made in search assessment when there is no incrementing documents found during course of search. 6. The Ld. CIT (A) has erred in law and on facts in uphelding the order of Ld. A.O. to treat profit on sale of assets of Rs. 65,42,000/- as business income. 7. The appellant craves liberty to add, amend, alter or modify all or any grounds of appeal before final appeal. I.T.A No. 48 & 45/Ahd/2018 A.Y. 2009-10 & 2012-13 Page No DCIT Vs. Shri Kalpesh Kantilal Patel 9 12.1. And also Additional Grounds of Appeal as follows: (1) The assessment order passed by Ld. AO is bad and illegal as the Ld AO had no valid jurisdiction. (2) The assessment order passed by Ld. AO is bad and illegal as the approval granted by JCIT U/S 153D of the Act is null and void as he has granted approval U/S 153D of the Act in a mechanical way and without application of mind. 13. During the course of hearing Ld Counsel fairly submitted that if the case is to be decided mainly on the question of no incriminating material, the assessee is not pressing other and additional grounds raised by it. Ground No. 5 is no addition can be made in search assessment, when there is no incriminating documents found during the course of search. Ground no. 6 is Ld. CIT(A) erred in confirming the profit on sale of assets of Rs. 65,42,000/- as business income. 13.1. The Ld. CIT(A) considered the issue in detail and confirmed the addition by observing as follows: “...I have perused the assessment order and considered the appellant's submission on noted that the AIR information pertains to properties the issue. The AD has purchased and sold in every year and that in the return of income filed u/s 139 for all the years the assessee is showing Long Term and Short Term Capital Gains or Losses on sale of such properties. However, the assesse has never shown by agriculture income in case of the assessment years which prove that such purchase of properties was not in the nature of investment for the purpose of earning capital gain and on the contrary the transactions were in the nature of business. The AO has placed reliance on Smt, bulunanibai Vs. ACTT (1993) 70 Taxman 67 (SC), Hemchand Hirachand Shah Vs. CIT (1995) 83 Таxmann 626 and N.A.Baby Vs. DCIT Central (2015) 62 taxmann.com 22 (Ker). Accordingly the AO held the transactions in land to be in the adventure of trade and treated the difference (Rs.65,42,000/-) between the sale consideration (Rs. 68,42,000/-) and the acquisition cost (Rs.3,00,000/-) as business income. Only I.T.A No. 48 & 45/Ahd/2018 A.Y. 2009-10 & 2012-13 Page No DCIT Vs. Shri Kalpesh Kantilal Patel 10 materially relevant part of the appellant's submission is that the appellant did not sell any land other than this land and that the land was sold after holding for a long time and without development on it. To my considered view, the distinction between business income and income from capital gain is very thin and though the Courts have laid down various tests for determination of an income as income from business, still it is not as distinct as water type compartments. It is not a question of period of holding of a particular property as emphasized by the Ld. AR but every year there being purchase of some land and sale of some other land give credence to inference of the AO that the assessee has been dealing in land for the purpose of earning income and assessee very regular and systematically and therefore the income from the sale of land during the year should be considered as income from business. The treatment and the addition made by the AO is confirmed and appeal on this ground fails.” 13.2. Ld. Counsel drawn our attention to the assessment order passed by the Assessing Officer wherein the Ld. A.O. treated profits shown by the assessee in the Return of Income on sale of assets claimed by the assessee as capital gain was not accepted by the A.O. and treated the same as business income. Thus there is no incriminating material found or seized during the course of search. The Ld. CIT(A) also confirmed the addition on sale of land as “business income” without there being any seized material found during the course of search. In the absence of any seized material, the addition made by the AO is bad in law following Supreme Court Judgment in the case of Abhisar Buildwell Pvt. Ltd. 14. We have given our thoughtful consideration and perused the materials available on record. The addition made in the assessment order is the profit on sale of asset of Rs.65,42,000/- is assessed as ‘business income’ as against capital gains claimed by the assessee. There is no reference about any seized material found in the I.T.A No. 48 & 45/Ahd/2018 A.Y. 2009-10 & 2012-13 Page No DCIT Vs. Shri Kalpesh Kantilal Patel 11 premises of the assessee on sale of assets. Thus respectfully following the Supreme Court Judgment in the case of Abhisar Buildwell Pvt. Ltd. The Ground nos.5 & 6 raised by the assessee is hereby allowed and remaining all other Grounds are dismissed as not pressed. 15. In the result, the appeal filed by the Assessee is partly allowed. 16. In the combined result the appeal filed by the Revenue in IT[SS]A No.48/Ahd/2018 is dismissed and appeal filed by the assessee in IT[SS]A No.45/Ahd/2018 is partly allowed. Order pronounced in the open court on 30-04-2024 Sd/- Sd/- (ANNAPURNA GUPTA) (T.R. SENTHIL KUMAR) ACCOUNTANT MEMBER True Copy JUDICIAL MEMBER Ahmedabad : Dated 30/04/2024 आदेश कȧ ĤǓतͧलͪप अĒेͪषत / 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 अपीलȣय अͬधकरण, अहमदाबाद