M/S PNG TRADING PRIVATE LIMITED,CHANDIGARH V. DCIT, CHANDIGARH

ITA 238/CHANDI/2015

AI Insights

The case involves M/s PNG Trading Pvt. Ltd., which appealed against the orders of the CIT(A) for the assessment years 2005-06 and 2006-07. The appeals were directed against the additions made under Section 68 (unexplained cash credits) and Section 69 (unexplained expenditure) of the Income Tax Act, following a search operation. The Tribunal examined whether these additions were sustainable in the absence of any incriminating material found during the search. The Tribunal referenced decisions from the Delhi High Court and the Supreme Court, which clarified that completed assessments cannot be disturbed without incriminating material found during the search.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 469834 (ITAT-CHANDIGARH)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-03-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Other Referred Cases: CIT Vs Kabul Chawla (2015) 61 taxman.com 412, Abhisar Buildwell Pvt. Ltd. 454 ITR 212
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KUSUM BA NSAL
• Assessee Lawyers: NIKHIL GOYAL
• Keywords: Reassessment proceedings; Block assessment; Bogus Share capital; Bogus
• Section: 143(2); 153; 132; 153A; 68; 69

Judgement Text

"आयकर अपील य अ\u000bधकरण,च\u0010डीगढ़ \u0014यायपीठ, च\u0010डीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, ‘B’ CHANDIGARH BEFORE SHRI RAJPAL YADAV, VICE PRESIDENT AND SHRI MANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER आयकर अपील सं./ ITA Nos. 238 & 239/CHD/2015 ITA Nos. 831 & 832/CHD/2018 \rनधा\u0011रण वष\u0011 / Assessment Year : 2005-06, 2006-07 M/s PNG Trading Pvt. Ltd., SCO 99-100, 3rd Floor, Sector 17-B,Chandigarh. Vs The DCIT, Central Circle-1, Chandigarh. \u0016थायी लेखा सं./PAN NO: AADCP3942J अपीलाथ\u001a/Appellant \u001b\u001cयथ\u001a/Respondent Assessee by : Shri Nikhil Goyal, Advocate and Shri Ashok Goyal,CA Revenue by : Smt. Kusum Bansal, CIT DR and Dr. Ranjit Kaur, Addl. CIT, Sr.DR Date of Hearing : 18.03.2025 Date of Pronouncement : 19.03.2025 HYBRID HEARING O R D E R PER RAJPAL YADAV, VP The present four appeals are directed at the instance of the assessee against the separate orders of ld. CIT(A) dated 29.12.2014 passed in assessment year 2005-06, 2006- 07 (quantum appeals) and against the orders of CIT(A) dated ITA Nos.238 & 239/CHD/2015 & ITA Nos. 831 & 832/CHD/2018 A.Y.2005-6 & 2006-07 2 27.03.2018 passed in assessment year 2005-06, 2006-07 [penalty appeal under Section 271(1)(c)]. 2. First we take ITA 238/CHD/2015 in assessment year 2005-06. The assessee has raised six grounds of appeal, out of which Ground Nos. 1, 4, 5 and 6 are general grounds which do not call for recording of any specific finding. The assessee has taken additional ground of appeal by way of a letter dated 28.01.2017. Under this additional ground of appeal, assessee has pleaded that ld. CIT(A) has erred in confirming the addition of Rs.1,09,50,000/- ( under Section 68) and Rs.3,28,500/- (under Section 69) as unexplained expenditure are uncalled for because no incriminating material has been found during the course of search relevant to such additions. In substance, the plea taken under Ground No. 2 and 3 also revolves around this additional ground. Thus, the whole issue involved in the present appeal is whether any addition in the absence of any seized material is sustainable or not. 3. The brief facts of the case are that assessee has filed its regular return of income under Section 139(1) on ITA Nos.238 & 239/CHD/2015 & ITA Nos. 831 & 832/CHD/2018 A.Y.2005-6 & 2006-07 3 06.11.2006. A search under Section 132(1) was carried out on M/s Surya Nectar and Parabolic Group of cases on 17.09.2010. The assessee was also one of the concerns which was covered under search operation. Apart from these business premises, the residential premises of the Director was also covered under search. The AO has issued a notice under Section 153A and in response to that notice, assessee has filed its return of income on 10.09.2012 declaring total income at ‘nil’. A notice under Section 143(2) was issued and served upon the assessee. The ld. AO has observed in paragraph No. 5.2 that during the course of search, a document inventorized as A-3 was found and seized from the residence of Director Shri Vineet Gupta. Page No. 4 of this document has been reproduced on page No. 3 of the assessment order. The ld. AO has explained this page in paragraph No. 5.2.1 which read as under : “5.2.1 This paper dated 16.9.2010 has the heading Vineet/PEPL/PDL where Vineet is Vineet Gupta, PEPL is Parabolic Estates Pvt. Ltd. and PDL is Parabolic Drugs Ltd. As per table A there is share capital introduction in favour of PEPL for Rs. 80,00,000/- out of which cash back due (to be paid to the entry provider) is for Rs. 82,40,000/- after adding service charge @ 3%. This clearly shows that assessee is paying commission/service charges @3% for obtaining accommodation entry in form of share capital.” ITA Nos.238 & 239/CHD/2015 & ITA Nos. 831 & 832/CHD/2018 A.Y.2005-6 & 2006-07 4 4. The AO, thereafter, observed that Investigation Wing has carried out a search upon the office premises of one Shri Tarun Goyal, Chartered Accountant at 13/34, WEA Arya Samaj Road, Karol Bagh, Delhi. According to the AO, Shri Tarun Goyal was engaged in providing accommodation entries to various concerns in the shape of bogus share application money, loan etc. On the strength of alleged information, he confronted the assessee as to why share application money received by it, be not treated as bogus and ultimately made an addition of Rs.1,09,50,000/-. The AO further made an addition of Rs.3,28,500/- for commission paid by the assessee @ 3% for arranging such bogus entries. 5. The appeal to the CIT(A) did not bring any relief to the assessee. 6. Before us, ld. Counsel for the assessee has submitted that assessee has filed its regular return of income. No notice under Section 143(2) was issued for scrutinizing those returns. Thus, assessment for assessment year 2005-06 as well as 2006-07 attained finality before the search carried ITA Nos.238 & 239/CHD/2015 & ITA Nos. 831 & 832/CHD/2018 A.Y.2005-6 & 2006-07 5 out at the premises of the assessee on 17.09.2010. During the search, no incriminating material was found which can authorize the AO to make additions. He further submitted that page No. 4 of Annexure A-3 has been used by the AO which has been reproduced on page 3 of the assessment order and this page has been explained by the AO in paragraph No. 5.2.1. Shri Vineet Gupta can be a Director of any number of companies but at the heading of the page, expression written is “Vineet/PEPL/PDL”. The AO has observed that PEPL represent ‘Parabolic Estates Pvt. Ltd.’ and PDL represent ‘Parabolic Drugs Ltd.’. Thus, this document has no concern with ‘PNG Trading Pvt. Ltd.’ i.e. the assessee. Therefore, in view of the latest decision of the Hon'ble Supreme Court in the case of Abhisar Buildwell Pvt. Ltd. 454 ITR 212, the addition is not sustainable. 7. The ld. CIT DR on the other hand relied upon the orders of Revenue Authorities. She was unable to controvert the submissions made by the ld. Counsel for the assessee. She could not drew our attention towards any specific document which was found during the course of search and exhibits ITA Nos.238 & 239/CHD/2015 & ITA Nos. 831 & 832/CHD/2018 A.Y.2005-6 & 2006-07 6 alleged bogus share application money received by the assessee. She drew our attention towards the finding of the CIT(A) in paragraph No. 6.1. 8. We have duly considered the rival contentions and gone through the record carefully. There is no dispute with regard to the fact that before the search, time limit to issue notice under Section 143(2) for scrutinizing the returns of assessment year 2005-06 as well as 2006-07 has expired. During the course of search, no incriminating material was found. Thus, both these assessments are unabated and they attained finality. Additions could not be made by the AO without discovery of any incriminating material during the course of search. 9. The Hon’ble Delhi High Court in the case of CIT Vs Kabul Chawla (2015) 61 taxman.com 412, after considering host of decisions propounded following propositions in the concluding paragraph of the judgment, which read as under:- “Summary of the legal position ITA Nos.238 & 239/CHD/2015 & ITA Nos. 831 & 832/CHD/2018 A.Y.2005-6 & 2006-07 7 37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: i. Once a search takes place under Section 132 of the Act, notice under Section 153 A (1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs \"in which both the disclosed and the undisclosed income would be brought to tax\". iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment \"can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material.\" v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any ITA Nos.238 & 239/CHD/2015 & ITA Nos. 831 & 832/CHD/2018 A.Y.2005-6 & 2006-07 8 other material existing or brought on the record of the AO. vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153 A 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 were not produced or not already disclosed or made known in the course of original assessment. Conclusion 38. The present appeals concern AYs, 2002-03, 2005-06 and 2006-07.On the date of the search the said assessments already stood completed. Since no incriminating material was unearthed during the search, no additions could have been made to the income already assessed. 39. The question framed by the Court is answered in favour of the Assessee and against the Revenue. 40. The appeals are accordingly dismissed but in the circumstances no orders as to costs”. 10. This judgment and other judgments on this school of thought have fallen for consideration of the Hon’ble Supreme Court, in the case of Abhisar Buildwell Pvt.Ltd., who concurred with the Hon’ble Delhi High Court as well as Hon’ble Gujrat High Court. The relevant part of the finding of the Hon’ble Supreme Court in this aspect reads as under:- “11. As per the provisions of Section 153A, in case of a search under Section 132 or requisition under Section 132A, the AO gets the jurisdiction to assess or reassess the ‘total income’ in respect of each assessment year falling within six assessment years. However, it is required to be noted that as per the second proviso to Section 153A, the assessment or re- assessment, if any, relating to any assessment year falling ITA Nos.238 & 239/CHD/2015 & ITA Nos. 831 & 832/CHD/2018 A.Y.2005-6 & 2006-07 9 within the period of six assessment years pending on the date of initiation of the search under Section 132 or making of requisition under Section 132A, as the case may be, shall abate. As per sub-section (2) of Section 153A, if any proceeding initiated or any order of assessment or reassessment made under sub-section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) or section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to sub- section (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Commissioner. Therefore, the intention of the legislation seems to be that in case of search only the pending assessment/reassessment proceedings shall abate and the AO would assume the jurisdiction to assess or reassess the ‘total income’ for the entire six years period/block assessment period. The intention does not seem to be to re- open the completed/unabated assessments, unless any incriminating material is found with respect to concerned assessment year falling within last six years preceding the search. Therefore, on true interpretation of Section 153A of the Act, 1961, in case of a search under Section 132 or requisition under Section 132A and during the search any incriminating material is found, even in case of unabated/completed assessment, the AO would have the jurisdiction to assess or reassess the ‘total income’ taking into consideration the incriminating material collected during the search and other material which would include income declared in the returns, if any, furnished by the assessee as well as the undisclosed income. However, in case during the search no incriminating material is found, in case of completed/unabated assessment, the only remedy available to the Revenue would be to initiate the reassessment proceedings under sections 147/48 of the Act, subject to fulfilment of the conditions mentioned in sections 147/148, as in such a situation, the Revenue cannot be left with no remedy. Therefore, even in case of block assessment under section 153A and in case of unabated/completed assessment and in case no incriminating material is found during the search, the power of the Revenue to have the reassessment under sections 147/148 of the Act has to be saved, otherwise the Revenue would be left without remedy. 12. If the submission on behalf of the Revenue that in case of search even where no incriminating material is found during ITA Nos.238 & 239/CHD/2015 & ITA Nos. 831 & 832/CHD/2018 A.Y.2005-6 & 2006-07 10 the course of search, even in case of unabated/completed assessment, the AO can assess or reassess the income/total income taking into consideration the other material is accepted, in that case, there will be two assessment orders, which shall not be permissible under the law. At the cost of repetition, it is observed that the assessment under Section 153A of the Act is linked with the search and requisition under Sections 132 and 132A of the Act. The object of Section 153A is to bring under tax the undisclosed income which is found during the course of search or pursuant to search or requisition. Therefore, only in a case where the undisclosed income is found on the basis of incriminating material, the AO would assume the jurisdiction to assess or reassess the total income for the entire six years block assessment period even in case of completed/unabated assessment. As per the second proviso to Section 153A, only pending assessment/reassessment shall stand abated and the AO would assume the jurisdiction with respect to such abated assessments. It does not provide that all completed/unabated assessments shall abate. If the submission on behalf of the Revenue is accepted, in that case, second proviso to section 153A and sub- section (2) of Section 153A would be redundant and/or re- writing the said provisions, which is not permissible under the law. 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”. 10.1 Thus, the issues agitated in the present appeals are squarely covered by the decision of Hon'ble Supreme Court in the case of Abhisar Buildwell Pvt. Ltd. Accordingly, appeal of the assessee is allowed and addition of Rs.1,09,50,000/- made under Section 68 and Rs.3,28,500/- added under Section 69 of the Act are deleted. ITA Nos.238 & 239/CHD/2015 & ITA Nos. 831 & 832/CHD/2018 A.Y.2005-6 & 2006-07 11 11. Now we take ITA 239/CHD/2015. We find that there is no disparity on facts in the present case. In assessment year 2006-07, addition of Rs.25,00,000/- with the aid of Section 68 has been made. We find that except variation in the quantum, no other variation is available rather both the assessment orders are verbatim same and same material has been used as cut and paste. Thus, facts of assessment year 2005-06 are fully covered on this year also. Accordingly, we delete the addition of Rs.25,00,000/-. 12. Now we take ITA 831/CHD/2018 and ITA 832/CHD/2018. 13. The ld. AO has imposed penalty under Section 271(1)(c) of the Act by way of a separate order of even date i.e. 15.02.2016. The AO has imposed a penalty of Rs.39,28,310/- and Rs.8,41,500/- in assessment year 2005-06, 2006-07 respectively. These penalties have been imposed on unexplained additions made to the total income of the assessee in both these years. ITA Nos.238 & 239/CHD/2015 & ITA Nos. 831 & 832/CHD/2018 A.Y.2005-6 & 2006-07 12 14. Since we have already deleted the additions made to the income of the assessee, therefore, there is no foundation to visit the assessee with the penalty on account of concealment of income. Accordingly, both these appeals are allowed and penalties imposed upon the assessee in assessment year 2005-06 and 2006-07 are deleted. 15. In the result, all four appeals are allowed. Order pronounced on 19.03.2025. Sd/- Sd/- (MANOJ KUMAR AGGARWAL) (RAJPAL YADAV) ACCOUNTANT MEMBER VICE PRESIDENT “Poonam” आदेश क\u0002 \u0003ितिलिप अ\tेिषत/ Copy of the order forwarded to : 1. अपीलाथ\u000f/ The Appellant 2. \u0003\u0010यथ\u000f/ The Respondent 3. आयकर आयु\u0014/ CIT 4. िवभागीय \u0003ितिनिध, आयकर अपीलीय आिधकरण, च\u0018डीगढ़/ DR, ITAT, CHANDIGARH 5. गाड\u001c फाईल/ Guard File आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar "