DCIT, Central Circle-2(2), Ahmedabad V. Rajeshkumar Babulal Agarwal (HUF), Banaskantha

ITSSA 65/AHD/2018

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 5188 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 11 month(s) 12 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 15-02-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 04-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Search and seizure; Validity of assessment; TDS; Set aside
• Section: 132; 143(3); 153A

Judgement Text

आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरणआयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण, अहमदाबाद 瀈यायपीठ अहमदाबाद 瀈यायपीठअहमदाबाद 瀈यायपीठ अहमदाबाद 瀈यायपीठ ‘A’ अहमदाबाद। अहमदाबाद।अहमदाबाद। अहमदाबाद। IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, AHMEDABAD (Conducted Through Virtual Court) ] ] BEFORE SHRI PRAMOD M. JAGTAP, VICE PRESIDENT AND SMT.SUCHITRA R. KAMBLE, JUDICIAL MEMBER IT(SS)A No.65/Ahd/2018 Assessment Year : 2010-11 DCIT, Cent.Cir.2(2) Ahmedabad. Vs Shri Rajeshkumar Babulal Agrawal (HUF) 39, APMC Market, Iqbalgadh Dist. Banaskantha. PAN : AACHA 5546 F / (Appellant) / (Respondent) Assessee by : None Revenue by : Shri Vijaykumar Jaiswal, CIT-DR /Date of Hearing : 25/01/2022 /Date of Pr onouncement: 16/02/2022 आदेश / O R D E R PER PRAMOD M. JAGTAP, VICE-PRESIDENT This appeal is by the Revenue against the order of Commissioner of Income-tax (Appeals)-12, Ahmedabad passed in appeal no.CIT(A)-12/345- 348/CC-2(4)/15-16 and the Grounds of Appeal raised by the Revenue therein read as under: “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 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/or on facts in holding that such assessment or re-assessment u/s 153A of the IT. Act, 1961 is to be restricted only to the incriminating materials found during the search. IT(SS)A Nos.65/Ahd/2018 DCIT Vs. Shri Rajeshkumar B. Agarwal HUF AY : 2010-11 2 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 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.” 2. The assessee in the present case is a HUF engaged in the business of trading in agricultural commodities like castor seeds, guvar, bajra etc. For the Asstt.Year 2010-11, the assessee filed its return of income on 14.10.2010 declaring total income of Rs.8,17,720/-. The case of the assessee was selected for scrutiny assessment and after detailed discussion and verification of records, assessment order under section 143(3) was passed on 29.3.2012 by making certain disallowances. Subsequently, a search and seizure action under Section 132 of the Act was conducted in the case of Manoj Agrawal & Group on 27.9.2012. The assessee being one of the members of the Group was also subject to search & seizure action. Pursuant thereto, notice under section 153A was issued, and the assessee in response, filed return of income on 6.5.2014 declaring income at Rs.8,69,4000/-. The AO while making assessment under section 153A made the following disallowances: Sr. No. Particular Amount (in Rs.) 1. Addition on account of rejecting books of account and estimating gross profit @ 4% 2,31,03,320/- 2. Addition on account of agriculture income as income from other sources 1,53,240 3. Disallowance u/s.40(a)(ia) of the Act. 1,98,234 Total 2,34,54,794 IT(SS)A Nos.65/Ahd/2018 DCIT Vs. Shri Rajeshkumar B. Agarwal HUF AY : 2010-11 3 3. The above additions made by the AO were challenged by the assessee in the appeal preferred before the ld.CIT(A). The ld.CIT(A) vide order dated 6.12.2017 allowed the appeal of the assessee on the preliminary issue of validity of assessment under section 153A of the Act, as there was no incriminating material found during the course of search. Aggrieved by the order of the ld.CIT(A), Revenue is in appeal before the Tribunal. 4. Though in this case, notice of hearing has been served through the Department to the assessee on 17.1.2022, however, no-one entered appearance on behalf of the assessee. Therefore, with the available material on record, and with assistance of the ld.DR, we proceed to adjudicate the appeal ex parte qua the assessee-respondent. 5. Before us, the ld.DR reiterated the grounds of appeal, and argued that the ld.CIT(A) has erred in law in not appreciating the provisions of section 153A of the Act, which requires “total income” to be brought to tax without any restrictions, and there is no need for any incriminating material found during the course of search, and therefore, quashing of the assessment order by the ld.CIT(A) is bad in law. The ld.DR further submitted that the ld.CIT(A) ought to have upheld order of the AO and prayed that the order of the ld.CIT(A) be set aside, and that of the AO be restored. 6. We have carefully considered the submissions of the ld.DR and gone through the records placed before us. Though the search assessment order made under section 143(3) read with section 153A is running into 18 pages, but nowhere in the assessment order, the ld.AO has brought out any seized/incriminating material found during the course of search. The IT(SS)A Nos.65/Ahd/2018 DCIT Vs. Shri Rajeshkumar B. Agarwal HUF AY : 2010-11 4 discussion made by the AO is on three counts; viz. (i) estimation of 4% GP on sale of agricultural produce, where addition of Rs.2,31,03,320/- has been made, (ii) disallowance of 50% of agriculture income claimed by the assessee of Rs.1,53,240/-, and (iii) non-deduction of TDS on the interest paid to five parties of Rs.1,98,234/-. 7. The only question that requires to be considered by us is, whether the additions made by the AO in the order under section 153A are based on seized material or not? A perusal of the assessment order makes it very clear that there is no seized or incriminating material available with the AO on the basis of which the said additions were made. The ld.CIT(A) in his order followed jurisdictional High Court judgment in the case of CIT Vs. Saumya Construction P.Ltd., Tax Appeal No.24 of 2015 (Guj) and that of the ITAT, Ahmedabad Bench in the case of Vijay Kumar D. Agarwal Vs. DCIT in IT(SS)A.Nos.153 to 156/Ahd/2012, Delhi High Court judgment in the case of Meeta Gutgutia, 02 taxman.com 287 and Gujarat High Court judgment in the case of PCIT Vs RSA Digi Prints dtd. 6.9.07 in Tax Appeal No.469 of 2007 and concluded that in 153A assessment proceedings any addition or disallowance can be made only on the basis of material collected during the course of search or requisition, and when no incriminating material is found, earlier assessment would have to be reiterated. 8. To the similar effect are the judgments of Hon’ble jurisdictional High Court of Gujarat delivered in other cases, the gist of which is given below: a) PCIT-4 -Vs- Saumya Construction (P.) Ltd. [2017] 81 taxmann.com 292 (Gujarat) Section 153A bears the heading 'assessment in case of search or requisition'. From the heading of section 153, the intention of the Legislature is clear, viz., to IT(SS)A Nos.65/Ahd/2018 DCIT Vs. Shri Rajeshkumar B. Agarwal HUF AY : 2010-11 5 provide for assessment in case of search and requisition. When the very purpose of the provision is to make assessment in case of search or requisition, it goes without saying that the assessment has to have relation to the search or requisition. Thus, while in view of the mandate of sub-section (1) of section 153A in every case where there is a search or requisition, the Assessing Officer is obliged to issue notice to such person to furnish returns of income for the six years preceding the assessment year relevant to the previous year in which the search is conducted or requisition is made, any addition or disallowance can be made only on the basis of material collected during the search or requisition. In case NO incriminating material is found, the earlier assessment would have to be reiterated. b) PCIT Vs. Desai Construction (P.) Ltd. [2017] 81 taxmann.com 271 (Gujarat) Section 153A of the Income-tax Act, 1961 - Search and seizure - Assessment in case of (Scope of assessment) - Assessment years 2004-05 and 2005-06 - In absence of any incriminating material found during search, Assessing Officer, in assessment under section 153A, would not be entitled to interfere with assessee's claim for deduction under section 80-IA, which was part of original assessment proceedings and such assessment had abated [In favour of assessee] c) PCIT–1 Vs Devangi [2017] 88 taxmann.com 610 (Gujarat) After the search conducted at the assessee's premises, the Assessing Officer initiated proceedings under section 153A on the basis of the incriminating material seized for the period of the assessment year 2004-05 onwards, and made the addition for the assessment years 2000-01 to 2004-05. The Tribunal deleted the addition holding that only undisclosed income and undisclosed assets deducted during the search could be brought to tax and in assessee's case no incriminating material was found with respect to the assessment years 2000-01 to 2004-05, at the time of search. Held that the Tribunal was correct in law in holding that the scope of section 153A was limited to assessing only search related income. d) PCIT, Ahmedabad Vs Dipak Jashvantlal Panchal [2017] 88 taxmann.com 611 (Gujarat) Section 153A of the Income-tax Act, 1961 - Search and seizure - Assessment in case of - Only undisclosed income and undisclosed assets detected during IT(SS)A Nos.65/Ahd/2018 DCIT Vs. Shri Rajeshkumar B. Agarwal HUF AY : 2010-11 6 search can be brought to tax in assessment under section 153A [In favour of assessee] e) Principal Commissioner of Income Tax v. Rameshbhai Jivraj Desai [2020] 120 taxmann.com 82 (Gujarat) Pursuant to a search conducted in 'M' group of cases on 3-1-2013, a notice under section 153A was issued against assessee - In course of assessment proceedings, Assessing Officer noted that for relevant assessment year 2009-10, assessee had written off bad debts of certain amount, however, no relevant records or details were furnished by assessee towards said claim of bad debt - In view of same, he made disallowance of bad debt of assessee and, accordingly, made additions to its income - Before Tribunal, assessee contended that notice as well as proceedings under section 153A(1) were wholly illegally and unlawful in view of no incriminating material found in respect of this year during course of search - Tribunal allowed said technical ground raised by assessee and deleted impugned addition made to income of assessee - Whether there was no error in impugned order of Tribunal and same was to be upheld. 9. The ratio of decisions of the Hon’ble jurisdictional High Court rendered in various cases, as discussed above, clearly shows that the scope of unabated assessment under Section 153A of the Act is limited and addition in such assessment can be made to the total income of the assessee only on the basis of incriminating material found during the course of search. Although the absence of such incriminating material found during the course of search does not affect the validity of the assessment under Section 153A, the additions made by the Assessing Officer in such assessment without there being any incriminating material found during the course of search to support and substantiate the same are not sustainable as rightly held by the learned CIT(A). We, therefore, uphold the impugned order of learned CIT(A) deleting the additions made by the Assessing Officer in the unabated assessment made in the present case IT(SS)A Nos.65/Ahd/2018 DCIT Vs. Shri Rajeshkumar B. Agarwal HUF AY : 2010-11 7 under Section 153A of the Act in the absence of any incriminating material found during the course of search to support and substantiate the same and dismiss the appeal of the Revenue. 10. In the result, appeal of the Revenue is dismissed. Order pronounced in the Court on 16 th February, 2022 at Ahmedabad. Sd/- Sd/- (SUCHITRA R. KAMBLE) JUDICIAL MEMBER (PRAMOD M. JAGTAP) VICE-PRESIDENT Ahmedabad, Dated 16/02/2022 **Vk/Bt /Copy of the Order forwarded to : 1. ! / The Appellant 2. "# ! / The Respondent. 3. $%$&' # # ( / Concerned CIT 4. # # ( ) (/ The CIT(A)- 5. + , # &' , # # &' , /DR,ITAT, Ahmedabad, 6. , ./ 0 /Guard file. / BY ORDER, True Copy ह # $ज (Asstt. Registrar) # # &' , ITAT, Ahmedabad 1. Date of dictation : 31-1-2022 / 16-02.2022 2. Date on which the typed draft is placed before the Dictating Member. : 16.02.2022 3. Date on which the approved draft comes to the Sr.P.S./P.S : 16.02.2022 4. Date on which the fair order is placed before the Dictating Member for pronouncement. : 16.02.2022 5. Date on which fair order placed before Other Member : 16.02.2022 6. Date on which the fair order comes back to the Sr.P.S./P.S. : 16.02.2022 7. Date on which the file goes to the Bench Clerk. : 16.02.2022 8. Date on which the file goes to the Head Clerk. : 9. The date on which the file goes to the Assistant Registrar for signature on the order. : 10. Date of Despatch of the Order :