The DCIT, Central Circle-2(1), Ahmedabad V. Smt. Dollyben R. Desai, Mehsana

ITSSA 51/AHD/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 1993 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 9 month(s) 10 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 16-11-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 06-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VINOD TALWANI
• Assessee Lawyers: S N DIVATIA
• Keywords: Search and seizure; Document seized; Earning of tax free income; Documents seized
• Section: 40A(3); 143(3); 153A; 14A; 132

Judgement Text

IT(SS)A NO. 51/AHD/2017 DCIT VS. DOLLYBEN R DESAI ASSESSMENT YEAR: 2009-2010 PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH, AHMEDABAD [CORAM: JUSTICE P P BHATT, PRESIDENT AND PRAMOD KUM AR, VICE PRESIDENT] IT(SS)A NO. 51/AHD/2017 ASSESSMENT YEAR: 2009-10 DEPUTY. COMMISSIONER OF INCOME-TAX ..A PPELLANT CENTRAL CIRCLE-2(1), AHMEDABAD VS DOLLYBEN R DESAI ..........RESPONDENT 5, ASHOKNAGAR SOCIETY, RADHANPURA ROAD, MEHSANA [PAN : AHVPD 0806 D] APPEARANCES BY VINOD TALWANI, FOR THE APPELLANT S N DIVATIA, FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : 31.10.2018 DATE OF PRONOUNCEMENT : 16.11.2018 O R D E R 1. THIS APPEAL, FILED BY THE ASSESSING OFFICER, CHA LLENGES ORDER DATED 28 TH NOVEMBER 2016 PASSED BY THE CIT(A) IN THE MATTER OF ASSESSME NT UNDER SECTIONS 143(3) R.W.S. 153A OF THE INCOME TAX ACT, 1961, FOR THE ASSESSMENT YEARS 2009-10. 2. GRIEVANCES RAISED IN THE APPEAL ARE AS FOLLOWS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN LAW AND/OR ON FACTS IN NOT APPRECIATING TH E 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 C ASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN LAW AND/OR ON FACTS IN HOLDING THAT SUCH A SSESSMENT OR RE-ASSESSMENT 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 C ASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN HOLDING THAT AS THE GROUND ON LEGALITY OF ADDITIONS IS ALLOWED, THE OTHER GROUNDS ON MERITS ARE CONSIDERED NOT NECESSARY TO B E ADJUDICATED AS THE SAME ARE PURELY ACADEMIC. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN LAW AND/OR ON FACTS IN DELETING THE DISALL OWANCE OF TOSS OF RS.52,71,627. IT(SS)A NO. 51/AHD/2017 DCIT VS. DOLLYBEN R DESAI ASSESSMENT YEAR: 2009-2010 PAGE 2 OF 5 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN TAW AND/OR ON FACTS IN DELETING THE DISALL OWANCE U/S 40A(3) OF THE ACT OF RS. 17,96,860/-. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN LAW AND/OR ON FACTS IN DELETING THE DISALL OWANCE U/S 14A OF THE ACT OF RS.15,125/-. 7. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN LAW AND/OR ON FACTS IN DELETING THE DISALL OWANCE OUT OF INTEREST EXPENSES OF RS.8,14,517/-. 3. TO ADJUDICATE ON THIS APPEAL, ONLY A FEW UNDISPU TED FACTS NEED TO BE TAKEN NOTE OF. A SEARCH AND SEIZURE OPERATION UNDER SECTION 132 WAS CARRIED OUT AT THE ASSESSEES PREMISES ON 3 RD JANUARY 2013. THE INCOME TAX RETURN RELATED TO T HE PRESENT YEAR WAS FILED BY THE ASSESSEE ON 29 TH SEPTEMBER 2009 AND THE TIME LIMIT FOR ISSUANCE O F NOTICES UNDER SECTION 143(2) WAS COMPLETED ON 30 TH SEPTEMBER 2010. THE ASSESSMENT THUS ACHIEVED FINA LITY EVEN BEFORE THE SEARCH OPERATION WAS CARRIED OUT. THERE IS NO DISP UTE THAT NO DISCRIMINATING MATERIAL WAS FOUND DURING THE SEARCH OPERATION, SO FAR AS RELATA BLE TO THE ADDITIONS MADE IN THE IMPUGNED ASSESSMENTS UNDER SECTION 153A R.W.S. 143(3) ARE CO NCERNED. YET, THE ASSESSING OFFICER, DURING THE IMPUGNED ASSESSMENT PROCEEDINGS, MADE DI SALLOWANCES OF RS 17,96,860 UNDER SECTION 40A(3), OF RS 52,71,627 IN RESPECT OF LOSS CLAIMED, OF RS 8,14,517 ON ACCOUNT OF INTEREST DEDUCTION CLAIM AND OF RS 15,121 UNDER SEC TION 14A. AGGRIEVED BY THE ADDITIONS SO MADE IN THE COURSE OF IMPUGNED ASSESSMENT PROCEEDIN GS UNDER SECTION 153A R.W.S. 143(3), THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE TH E CIT(A). GRIEVANCES WERE RAISED, INTER ALIA , IN RESPECT OF JURISDICTION OF THE ASSESSING OFFIC ER TO DISTURB THE COMPLETED ASSESSMENT ON BASIS OTHER THAN INCRIMINATING MATERIAL FOUND DU RING THE SEARCH OPERATIONS. ACCEPTING THIS PLEA, THE CIT(A) QUASHED THE IMPUGNED ADDITIONS BY OBSERVING AS FOLLOWS: 6.1.1 THERE IS NO DISPUTE THAT THE ASSESSMENT UNDE R REFERENCE WERE CONCLUDED AND UNABATED, AND ALSO THAT THERE IS NO INCRIMINATING S EIZED MATERIAL USED OR RELIED UPON BY THE AO FOR MAKING THE ADDITION. THUS THE ADDITIO NS MADE BY THE AO ARE NOT SUSTAINABLE IN THE ABSENCE OF SUPPORTING SEIZED DOC UMENTS OR MATERIAL. IT IS SEEN THAT IN THE ASSESSMENT ORDER THE A.O HAS HIMSELF NOTED T HAT 'NO DOCUMENTS OR MATERIAL WERE FOUND OR SEIZED FROM THE PREMISES.' IT IS ALSO SEEN FROM THE IMPUGNED ORDER THAT THE ADDITION HAS BEEN MADE ON THE BASIS OF BOOKS OF ACCOUNTS CALLED FOR AND EXAMINED DURING THE ASSESSMENT PROCEEDINGS AND NO REFERENCE HAS BEEN MADE BY HIM TO SEIZED DOCUMENTS OR MATERIAL. 6.1.2 CONSIDERING THE FACTS AS DISCUSSED ABOVE, I A M OF THE VIEW THAT THE A.O WAS NOT JUSTIFIED IN MAKING THE ADDITION OF RS.17,69,084/- U/S 40A(3) OF THE ACT, AND THE SAME IS DELETED. GROUND OF APPEAL NO 2 IS ALLOWED. ........ ........ 7.1.1 IT IS SEEN THAT IN THE ASSESSMENT ORDER THE A .O HAS HIMSELF NOTED THAT 'NO DOCUMENTS OR MATERIAL WERE FOUND OR SEIZED FROM THE PREMISES.' IT IS ALSO SEEN FROM THE IMPUGNED ORDER THAT THE DISALLOWANCE HAS BEEN M ADE ON THE BASIS OF BOOKS OF IT(SS)A NO. 51/AHD/2017 DCIT VS. DOLLYBEN R DESAI ASSESSMENT YEAR: 2009-2010 PAGE 3 OF 5 ACCOUNTS AND FINANCIAL STATEMENTS CALLED FOR AND EX AMINED DURING THE ASSESSMENT PROCEEDINGS AND NO REFERENCE HAS BEEN MADE BY HIM T O SEIZED DOCUMENTS OR MATERIAL. 7.1.2 CONSIDERING THE FACTS AS DISCUSSED ABOVE, I A M OF THE VIEW THAT THE A.O WAS NOT JUSTIFIED IN DISALLOWING BUSINESS LOSS OF RS.52,71, 627/- AND THE SAME IS DELETED. GROUND OF APPEAL NO 3 IS ALLOWED. ........ ........ 8. GROUND OF APPEAL NO 4 IS AGAINST THE ADDITION OF RS.8,14,517/- ON ACCOUNT OF DISALLOWANCES OF INTEREST EXPENSES. DURING ASSESSME NT PROCEEDINGS, THE A.O NOTED THAT THE APPELLANT HAD PAID INTEREST ON UNSECURED L OANS AND HAD GIVEN INTEREST FREE LOANS TO TWO PARTIES WITH WHICH SHE HAD NO BUSINESS RELATIONSHIP. THE APPELLANT ON THE OTHER HAND CHALLENGED THE LEGAL VALIDITY OF THE ASS ESSMENT COMPLETED U/S 143(3) RWS 153A OF THE ACT. 8.1 AS 1 HAVE HELD IN DETAIL IN MY FINDING FOR GROU NDS OF APPEALS NOS 2 AND 3 ABOVE, IN THE ABSENCE OF ANY INCRIMINATING MATERIAL OR DOCUME NTS SEIZED OR FOUND DURING THE SEARCH ACTION, AND SINCE THE ASSESSMENT WAS NOT PEN DING BEFORE HIM AS ON THE DATE OF SEARCH, THE A.O WAS NOT JUSTIFIED IN DISALLOWING BU SINESS LOSS OF RS.8,14,517/- AND THE SAME IS DELETED. GROUND OF APPEAL NO 4 IS ALLOWED. 9. GROUND OF APPEAL NO 5 IS AGAINST THE ADD ITION OF RS.15,121/- U/S 14A OF THE ACT. DURING ASSESSMENT PROCEEDINGS, THE A.O NOTED T HAT THE APPELLANT HAD EARNED EXEMPT INCOME AND HAD ALSO MADE INVESTMENTS WHICH M AY EARN EXEMPT INCOME. APPLYING THE PROVISIONS OF SECTION 14A OF THE ACT R W RULE 8D, HE ADDED THE AMOUNT OF RS. 15,121/- TO THE APPELLANT'S TOTAL INCOME. THE A PPELLANT IN HER SUBMISSIONS STATED THAT THE ASSESSMENT COMPLETED U/S 143(3) RWS 153A W AS LEGALLY INVALID. 9.1 AS 1 HAVE HELD IN DETAIL IN MY FINDING FO R GROUNDS OF APPEALS NOS 2 , 3 AND 4 ABOVE, IN THE ABSENCE OF ANY INCRIMINATING MATERIAL OR DOCUMENTS SEIZED OR FOUND DURING THE SEARCH ACTION, AND SINCE THE ASSESSMENT WAS NOT PENDING BEFORE HIM AS ON THE DATE OF SEARCH, THE AO WAS NOT JUSTIFIED IN ADD ING RS.15,121/- U/S 14A OF THE ACT, AND THE SAME IS DELETED. GROUND OF APPEAL NO. 5 IS ALLOWED. 4. THE ASSESSING OFFICER IS AGGRIEVED OF THE RELIEF SO GRANTED BY THE CIT(A) AND IS IN APPEAL BEFORE US. 5. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE AP PLICABLE LEGAL POSITION. 6. THE QUESTION THAT REALLY CALLS FOR OUR CONSIDERA TION IS WHETHER, IN THE ABSENCE OF ANY INCRIMINATING MATERIAL FOUND DURING THE SEARCH OPER ATIONS AS A RESULT OF WHICH THE ASSESSMENTS UNDER SECTION 153A ARE FRAMED, THE COMP LETED ASSESSMENTS CAN BE DISTURBED BY MAKING THE ADDITIONS ON THE BASIS OF MATERIAL OTHER THAN INCRIMINATING MATERIAL FOUND DURING THE SEARCH OPERATIONS. IT(SS)A NO. 51/AHD/2017 DCIT VS. DOLLYBEN R DESAI ASSESSMENT YEAR: 2009-2010 PAGE 4 OF 5 7. THIS ISSUE IS NO LONGER RES INTEGRA . UPHOLDING THE STAND OF THIS TRIBUNAL THAT DURING THE POST SEARCH ASSESSMENT PROCEEDINGS UNDER SECTIO N 153 A IN RESPECT OF COMPLETED ASSESSMENTS ADDITIONS CANNOT BE MADE OTHER THAN ON THE BASIS OF INCRIMINATING MATERIAL FOUND DURING SEARCH OPERATIONS, HONBLE JURISDICTI ONAL HIGH COURT, IN THE CASE OF PCIT VS SAUMYA CONSTRUCTIONS PVT LTD [(2016) 387 ITR 529 (G UJ)] HAS OBSERVED AS FOLLOWS: .IT IS NOT THE CASE OF THE APPELLANT THAT ANY IN CRIMINATING MATERIAL IN RESPECT OF THE ASSESSMENT YEAR UNDER CONSIDERATION WAS FOUND DURING THE COURSE OF SEARCH. AT THE RELEVANT TIME WHEN THE NOTICE CAM E TO BE ISSUED UNDER SECTION 153A OF THE ACT, THE ASSESSEE FILED ITS RETURN OF I NCOME. MUCH LATER, AT THE FAG END OF THE PERIOD WITHIN WHICH THE ORDER UNDER SECTION 153A OF THE ACT WAS TO BE MADE, IN OTHER WORDS, WHEN THE LIMIT FOR FRAMING TH E ASSESSMENT AS PROVIDED UNDER SECTION 153 WAS ABOUT TO EXPIRE, THE NOTICE H AS BEEN ISSUED IN THE PRESENT CASE SEEKING TO MAKE THE PROPOSED ADDITION OF RS.11 ,05,51,000/- ON THE BASIS OF THE MATERIAL WHICH WAS NOT FOUND DURING THE COURSE OF SEARCH, BUT ON THE BASIS OF A STATEMENT OF ANOTHER PERSON. IN THE OPINION OF TH IS COURT, IN A CASE LIKE THE PRESENT ONE, WHERE AN ASSESSMENT HAS BEEN FRAMED EA RLIER AND NO ASSESSMENT OR REASSESSMENT WAS PENDING ON THE DATE OF INITIATION OF SEARCH UNDER SECTION 132 OR MAKING OF REQUISITION UNDER SECTION 132A, WHILE COM PUTING THE TOTAL INCOME OF THE ASSESSEE UNDER SECTION 153A OF THE ACT, ADDITIO NS OR DISALLOWANCES CAN BE MADE ONLY ON THE BASIS OF THE INCRIMINATING MATERIA L FOUND DURING THE SEARCH OR REQUISITION. 8. ONCE IT IS NOT IN DISPUTE THAT THE ADDITIONS IN QUESTIONS ARE NOT BASED ON ANY INCRIMINATING MATERIAL FOUND DURING THE SEARCH OPER ATION, AS IS THE UNDISPUTED FACTUAL POSITION IN THIS CASE, THE VERY FOUNDATION OF THE ADDITIONS CEASES TO BE SUSTAINABLE IN LAW. THAT IS PRECISELY WHAT THE LEARNED CIT(A) HAS HELD. 9. IN VIEW OF THE ABOVE DISCUSSIONS, AS ALSO BEARIN G IN MIND ENTIRETY OF THE CASE, WE APPROVE THE CONCLUSIONS ARRIVED AT BY THE LEARNED C IT(A) AND DECLINE TO INTERFERE IN THE MATTER. 10. AS THE ADDITIONS STAND DELETED ON THE SHORT LEG AL GROUND DISCUSSED ABOVE, THERE IS NO OCCASION TO DEAL WITH THE MERITS. THAT ASPECT OF TH E MATTER, GIVEN THE FINDINGS ABOVE, IS WHOLLY ACADEMIC AT THIS STAGE. 11. IN THE RESULT, THE APPEAL IS DISMISSED. PRONOUN CED IN THE OPEN COURT TODAY ON THE 16 TH DAY OF NOVEMBER, 2018. SD/- SD/- JUSTICE P P BHATT PRAMOD KUMAR (PRESIDENT) (VICE PRESIDENT) AHMEDABAD, DATED THE 16 TH DAY OF NOVEMBER, 2018 IT(SS)A NO. 51/AHD/2017 DCIT VS. DOLLYBEN R DESAI ASSESSMENT YEAR: 2009-2010 PAGE 5 OF 5 COPIES TO: (1) THE APPELLANT (2) THE RESPOND ENT (3) CIT (4) CIT(A) (5) DR (6) GUARD FILE BY ORDER TRUE COPY ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD 1. DATE OF DICTATION: ....WORDS PROCESSED BY HONB LE VP ON HIS LAPTOP 08.11.2018............ 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: ...08.11.2018.... 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S.: 16.11.2018... 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: .16.11.2018.. 5. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK : . 16.11.2018. 6. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK : . 7. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER : . 8. DATE OF DESPATCH OF THE ORDER: ......