Case Law Details
DCIT Vs Vaishali Pigments Pvt. Ltd. (ITAT Pune)
Conclusion: Additions made by AO on account of unaccounted amount under Section 69A of Income Tax Act received on sale of plot at CIDCO, Aurangabad was to be deleted as amounts with regard to the sale of a certain plot were not received by the assessee as no incriminating material was found during search from the premises of the assessee and the amount was not received by assessee in the relevant assessment year.
Held: Assessee-company was carrying out the business of manufacturing and trading of dies and pigments, but no business activity was carried out during the period when the assessment proceedings were carried out. After the search and seizure conducted under Section 132 at the residential premises of one of its directors, K K Sadani, AO made an addition of Rs. 3,79,00,000/-. AO passed the assessment order under Section 143(3), calculating total income at Rs. 3,79,00,000 against the assessee’s declared NIL income, which was based on the documents seized from the residence of director Mr. K K Sadani. Assessee, being aggrieved by the order of AO, approached CIT(A). CIT(A) allowed the appeal filed by asseseee. On appeal by Revenue. It was held that since no material was found during search from the premises of the assessee regarding unaccounted amount u/s 69A received on sale of plot at CIDCO, Aurangabad, the same was not sustainable. Moreso, there was a Memorandum of Understanding (MOU) between Wellworth Securities Ltd. as the first party, the assessee as the second party, and the purchaser as the third party. Here the assessee, who owned the plot, was indebted to banks, and in order to free the plot from bank lien, the party of the first part had lent the assessee a certain amount. Thus, according to the above-mentioned agreement, the seller was to pay Wellworth Securities Ltd., who was the party to the first part, and not to the assessee. Assessee was never to receive the payment, and under the above-mentioned circumstances, the addition could not be made in the hands of the assessee. And it was pertinent to note that the said property was sold in the Assessment Year (AY) 2014-2015 and here the AY in consideration by AO was 2011-2012. Thus, additions was not sustainable as the amount was not received by assessee and that too in the relevant year.
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FULL TEXT OF THE ORDER OF ITAT PUNE
Both the above captioned appeals filed by the Revenue are directed against the order dated 26.09.2023 passed by Ld CIT(A)- 12, Pune for the assessment years 2011-12 and 2013-14 respectively. The assessee is also in Cross Objections bearing C.O. Nos.20 & 22/PUN/2024 against the appeals of the Revenue.
2. First, we shall take up the appeal of the Revenue in ITA 1343/PUN/2023 as well as cross objection of the assessee in C.O. No.20/PUN/2024 for the assessment year 2011-12.
ITA No.1343/PUN/2023, A.Y. 2011-12 :
3. The Revenue has raised the following grounds of appeal :-
“1. Whether on the facts and in the circumstances of the case and in law. the Ld. CIT(A) has erred in law and in facts by quashing proceedings u/s. 153A in respect of abated assessment where the assessee’s case was covered under section 132 of the Act dated 2 0/0 8/2014 also the incriminating material was found during the same search action the residential premises of Shri Sandeep B. Jhaveri and at the office premises of M/s. Jhaveri Flexo India Ltd..
2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT (A) has erred in holding that amount of 3. 79.00,000/- should not be taxed in the A. Y. 2011-12 whereas pagp no. 23 of Annexure -13 which was seized at the office premises of Jhaveri Flexo India Pvt. Ltd. reveals that cash i.e. part of the consideration amount was received from Ambadas V. Mete during financial year 2010-11.
3. Whether on the facts and in the Ld. CIT(A) has erred by relying on the decision of Honorable Supreme Court in the case of Abhisar Ruidlwcll (P.) Ltd. ignoring the fact that same is not applicable to the case of assessee.
4. The appellant craves leave to add, alter, modify, delete and amend any of the grounds, as per the circumstances of the case.”
4. The facts of the case, in brief, are that the assessee is a private limited company engaged in the business of manufacturing & trading of dies & pigments but no business activity was carried out during the period under consideration. A search and seizure action u/s 132 of IT Act was conducted on 20-08-20 14 at the business & residential premises of different members/ associate concern of the Jhaveri Group at Mumbai/ Aurangabad & their directors & business concern. The search warrant was issued u/s 132 of the IT Act in the name of the assessee & its directors namely Sandeep Jhaveri & K K Sadani. A notice u/s 153A of the IT Act was issued on 21.08.20 15. In response to the above notice, the assessee furnished return of income on 0 1.12.2016 declaring total income at Rs.Nil. During the course of assessment proceedings under consideration, the Assessing Officer made addition of Rs.3,79,00,000/- on the basis of page no.8 of bundle no.1 found & seized during the course of search action at the residence of K K Sadani. The Assessing Officer passed the assessment order u/s 143(3) r.w.s. 153A on 29.12.2016 determining total income at Rs.3,79,00,000/- as against NIL income declared by the assessee.
5. Being aggrieved with the above assessment order dated 29.12.20 16, an appeal was filed before the Ld. CIT(A), who vide impugned order dated 26.09.2023 allowed the appeal of the assessee.
6. Being aggrieved with the above first appeal order, the Revenue is in appeal before this Tribunal.
7. LD DR submitted before us that LD CIT(A), Pune erred in allowing the appeal of the assessee. LD DR argued at length & furnished two paper books in support of his contention & requested to set-aside the order passed by LD CIT(A) & further requested to sustain the additions made by the AO.
8. LD AR submitted before us that the order passed by LD CIT(A), Pune is correct & requested to confirm the same & consequently requested to dismiss the appeal of the revenue. In addition LD AR also furnished paperbook containing copy of written submissions furnished earlier.
9. We have heard LD counsels from both the sides & perused the material available on record. We find that a search was conducted on 20-08-2014 at the premises of the assessee at Aurangabad and also at the premises of its director Mr. Sandeep Jhaveri & Mr. K K Sadani at Bombay & also at the premises of Jhaveri Flexo India Pvt. Ltd. The AO made impugned additions of Rs.3,79,00,000/- on the basis of documents seized from the residence of director Mr. K K Sadani, which were deleted by LD CIT(A) by giving specific finding for granting relief and are subject matter of present appeal.
10. As regards to the ground nos.1 & 3, we find that LD CIT(A) has quashed the assessment passed u/s 153A of the IT Act as per the discussion given in para 6.5.2 of page no.19 of the impugned order, the relevant discussion is reproduced as under :-
“6.5.2 The 2nd ground of appeal is against framing of assessment under section 153A on issues which are neither the subject matter of search proceedings nor on the basis of any material found during search at the premises of the appellant. It is undisputed that the loose papers /documents found and seized from the residence of K.K. Sadani and not the appellant. However, the fact remains that no evidence is found from the premises of the appellant that any income is received by the appellant. As per the provisions of S. 153A, as on the date of search, the original assessment was completed and not pending. Therefore the original assessment had not abated. Though u/s 153A, the assessment for 6 years prior to the date of search can be completed, although in respect of unabated assessments, the same can be done only on the basis of evidence or incriminating material found during the course of search and not otherwise. In the present case, as held above, the substantive addition of Rs. 2.37 Cr. and protective addition of Rs. 1.4 Cr. on account of unaccounted amount of Rs. 3.79 Cr is not based on any evidence found as a result of search at the premises of the appellant and therefore, any action u/s 153A in the case of the appellant does not survive. This view has been taken in the case of Continental Warehousing Corporation Ltd. (supra) which has been fortified by the recent decision of the Hon ’ble Supreme Court in the case of Abhisar Buildwell (P.) Ltd. (149 taxmann.com 399 (SC) ) Wherein the court held as under:
“11. As per the provisions of Section 1 53A, 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 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. ”
In view of the above findings, this ground of appeal is allowed and the action of the AO in initiating proceedings u/s 153A in respect of abated assessment where no incriminating material is found from the appellant is quashed and set aside.”
11. As regards above finding of LD CIT(A) regarding quashing of assessment passed u/s 153A of the IT Act & applicability of Hon’ble Supreme Court’s judgement in the case of Abhisar Buildwell (P.) Ltd. ( 149 Taxmann.com 399), we find that the addition is in respect of an unabated assessment. The assessment was not pending on the date of search which took place on 20.08.2014 and the period for issue of notice u/s 143(2) had expired by that time. No material of incriminating nature was found during the course of search from the assessee but the material found from Mr. K.K. Sadani as that is the only material referred to in the assessment order. The addition made is dehors the material found from the premises of the assessee. Therefore, even if search is conducted in the case of the assessee as also in the case of Mr. K.K. Sadani as per the warrant of authorization cited by ld. DR, the addition cannot be made dehorse the seized material found from the assessee. Since no material is found during search from the premises of the assessee regarding unaccounted amount u/s 69A in respect of unaccounted amount received on sale of plot no.6 at CIDCO, Aurangabad, the same is not sustainable. Thus, the finding given by the CIT(A) in para 6.5.2 does not call for any interference & hence the ground no.1 & 3 of appeal raised by revenue in this regard is dismissed.
12. As regards to the ground no.2 we find that Ld. CIT(A) has deleted the addition of Rs.3,79,00,000/- as per the discussion given in para 6.5.4 of page no.21 of the impugned order, the relevant discussion is reproduced as under –
“6.5.4 The next grounds of appeal viz. Ground Nos. 4 & 5 are against making addition of Rs. 3.79 Crores in respect of sale of plot no. 6 at CIDCO, Aurangabad even though the appellant has not received any such sum of Rs. 3.79 Crores and there is no evidence that such amount is received in this year and subsequent years. The next grounds of appeal viz. Ground No. 6 & 7 are against addition of Rs. 2.37 Crs on substantive basis and Rs. 1.42 Crs on protective basis made u/s 69A of the act without any evidence in the alleged seized material. The AO has relied upon the loose materials / documents found at the premises of K.K. Sadani and as per the reply submitted by the appellant company during the assessment proceedings and stated that the MOU which was entered on 03.08.2011 is without authorization of the company hence it is not binding on the company. But the fact is that the MOU of 03.08.2011 was signed by one of the directors of the company Mr. K.K. Sadani. As the company is an artificial judicial body it cannot sign or enter into agreement by itself. But, in this case, Shri K.K. Sadani was one of the directors who entered into agreement to sale the plot at the consideration of Rs. 4.11 Crs. As the assessment is already quashed and set aside in the first ground, these grounds do not require separate adjudication. However, even on merits the appellant gets a relief for the discussion made hereunder.”
13. As regards the merits of addition of unexplained amount received by the assessee on sale of plot no.6 is concerned, we find the same is based on material being page no.4 of bundle no.1 seized from residence of Mr. K.K. Sadani referred in the assessment order, the same does not refer to any dates much less the dates pertaining to the year under appeal. The fact in this regard is that as per MOU dated 3rd August 2011 between Wellworth Securities Ltd. as party of first part, the assessee being party of the second part and the purchaser being party of the third part, since the assessee who owns the plot was indebted to banks and to release the plot from bank lien, the party of first part has lent an amount to assessee to get the plot released. The seller was to make the payment to the party of the first part, namely Wellworth Securities Ltd. and not the assessee as per clause 1 of the said agreement. Therefore, by any stretch of imagination, the assessee was never to receive the payment. In such circumstances, the addition could not have been made in the hands of the assessee. Also, the said plot no.6 was sold during F.Y relevant to A.Y 20 14- 15 wherein the same has been shown as income under the head capital gain and same is assessed accordingly. Even the material referred in the paper-book at page no.11 and 12 referred by ld. DR found from relating to payment for plot no.6 in relevant F.Y. to appeal, the same does not form part of total payment referred in the assessment order. These facts are not disputed by any authority or Ld. DR. Thus on either count, the addition cannot be made in the hands of the assessee.
14. Ld. CIT(A) in para 6.5.4 has noted all such facts and given the finding that the amount not being received by the assessee and that too in the relevant year, the addition is to be deleted. Since particular income can be taxed only in relevant year and no other, the same is rightly deleted by LD. CIT(A). We therefore are of considered opinion that there is no infirmity in the order passed by LD CIT(A) & the same is confirmed by us, consequently the 2nd ground of appeal raised by the Revenue in this regard is dismissed.
15. In the result, the appeal filed by the Revenue in ITA No.1343/PUN/2023 for A.Y. 2011-12 stands dismissed.
C.O. No.20/PUN/2024, A.Y. 2011-12 :
16. Since the appeal filed by the Revenue has been dismissed by us in the foregoing paragraphs, the cross objection filed by the assessee becomes infructuous and, therefore, the same is dismissed.
17. In the result, the Cross Objection filed by the assessee in O. No.20/PUN/2024 for A.Y. 2011-12 stands dismissed.
18. Now, we come to the appeal of the Revenue in ITA 1344/PUN/2023 as well as cross objection of the assessee in C.O. No.22/PUN/2024 for the assessment year 2013-14.
ITA No.1344/PUN/2023, A.Y. 2013-14 :
19. The Revenue has raised the following grounds of appeal :-
“1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT (A) has erred in law and in facts by quashing proceedings u/s. I53A in respect of abated assessment where the assessee ’s case was covered under section 132 of the Act dated 2 0/0 8/2014 also the incriminating material was found during the same search action at the factory premises of M/s. Jhaveri Flexo India Ltd.
2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT (A) has erred in holding that amount of Rs.2.25.00,000/- should not be taxed in the A.Y. 2013-14 whereas as per page no. 106 to 108 of bundle no. 1 of Annexure -A6, the 1st MOU was signed on 06.11.2012 to assign the lease hold rights between the assessee and Meghna Sameer Mehta and Dr. Uday Shriram
3. Whether on the facts and in the Ld. CIT(A) has erred by relying on the decision of Honorable Supreme Court in the case of Abhisar Buildwell (P.) Ltd. ignoring the fact that same is not applicable to the case of assessee.
4. The appellant craves leave to add, alter, modify, delete and amend any of the grounds, as per the circumstances of the case.”
20. The facts of the case, in brief, are that the assessee is a private limited company engaged in the business of manufacturing & trading of dies & pigments but no business activity was carried out during the period under consideration. A search and seizure action u/s 132 of IT Act was conducted on 20-08-20 14 at the business & residential premises of different members/ associate concern of the Jhaveri Group at Mumbai/ Aurangabad & their directors & business concern. The search warrant was issued u/s 132 of the IT Act in the name of the assessee & its directors namely Sandeep Jhaveri & K K Sadani. A notice u/s 153A of the IT Act was issued on 21.08.20 15. In response to the above notice, the assessee furnished return of income on 30.11.2016 declaring total income at Rs.2,26,98,320/-. During the course of assessment proceedings, the Assessing Officer made addition of Rs.2,25,00,000/- on the basis of page no.4 of bundle no.1 found & seized during the course of search action at the residence of K K Sadani. The Assessing Officer passed the assessment order u/s 143(3) r.w.s. 153A on 29.12.2016 determining total income at Rs.4,51,98,320/- as against Rs.2,26,98,320/- income declared by the assessee.
21. Being aggrieved with the above assessment order dated 29.12.20 16, an appeal was filed before the Ld. CIT(A), who vide impugned order dated 26.09.2023 allowed the appeal of the assessee.
22. Being aggrieved with the above first appeal order, the Revenue is in appeal before this Tribunal.
23. LD DR submitted before us that LD CIT(A), Pune erred in allowing the appeal of the assessee. LD DR argued at length & furnished two paper books in support of his contention & requested to set-aside the order passed by LD CIT(A) & further requested to sustain the additions made by the AO.
24. LD AR submitted before us that the order passed by LD CIT(A), Pune is correct & requested to confirm the same & consequently requested to dismiss the appeal of the revenue. In addition LD AR also furnished paper book containing copy of written submissions furnished earlier.
25. We have heard LD counsels from both the sides & perused the material available on record. We find that a search was conducted on 20-08-2014 at the premises of the assessee at Aurangabad as also at the premises of its director Mr. Sandeep Jhaveri & Mr. K K Sadani at Bombay & also at the premises of Jhaveri Flexo India Pvt. Ltd. The AO made impugned additions of 2,25,00,000/- on the basis of documents seized from the residence of director Mr. K K Sadani, which were deleted by LD CIT(A) by giving specific finding for granting relief and are subject matter of present appeal.
26. Ground no.1 & 3 relates to the quashing of assessment proceedings u/s 1 53A of the IT Act. Since the present issue is identical to the ground no.1 & 3 for the earlier assessment year 2011-12 and we have adjudicated the same in the foregoing paragraphs of this order after detailed discussion, therefore, our decision in ITA No.1343/PUN/2023 for A.Y. 2011-12 shall apply mutatis mutandis to the ground no.1 & 3 for the assessment year 2013-14. Thus, the ground of appeal no.1 & 3 for the assessment year 2013-14 stands dismissed.
27. As regards to the ground no.2, we find that Ld. CIT(A) has deleted the addition of Rs.2,25,00,000/- as per the discussion given in para 13 of the impugned order, the relevant discussion is reproduced as under :-
“13. The grounds of appeal are in respect of making addition of Rs.225,00,000/- in respect of sale of plot no 21D and 22 at CIDCO, Aurangabad. I have carefully considered the order appealed against, the seized material referred to by the AO, the written submissions and the copy of documents being MOU dt. 06-11-2012. I have also considered the oral submissions made during the course of hearing. The appellant has challenged the addition of Rs. 2.25 crores u/s 69 A of the Act. It is an undisputed fact that the plot no. 22 at CIDCO referred to in the seized material as also in the MOU dt. 06-11-2012 belongs to the appellant. The appellant itself has declared the capital gain on sale of very same plot in A. Y. 2014-1 5 which is also noted by the AO in the impugned order. The AO has not ascribed any reason as to how the income of 2.25 crores is assessable in the year under appeal. However, the appellant has contended that there is no evidence that firstly, the amount is received by the appellant and secondly that the amount is received during the relevant financial year. For this purpose, I have carefully examined the seized material extracted by the AO in the impugned order as also the MOU dt. 06-11-2012.
As far as the seized material is concerned, it nowhere gives the date of actual payment. Page no 4 of bundle no. 1 seized from residence of Shri Sadani extracted by AO on page 9 of the impugned order refers to various amounts in cash. The description against cash is “thro cash sadaniji” only. However it does not depict the date of such payments received. Only against cheques of Rs. 25 lacs and Rs. 85.49 lacs date is mentioned to be 1 5-03-2013 and 09-04-2013 respectively. So far as this sums are concerned, the appellant has not denied and on the contrary offered the said amount as income as total sale consideration during F.Y. 2013-14 relevant to A.Y 2014-15. However for all other payments, noted in the said page, nowhere refers to any date therein.
As regards to the MOU dt. 06-11-2012, I have considered the same carefully. It is an MOU between Vaishali pigments Pvt Ltd. through Shri Vijay Joshi, the appellant (Vaishali or the party of the first part) and Meghna w/o Samir Mehta and Dr. Uday Annapure (purchasers or the parties of the second part). It is an MOU recording that Vaishali had agreed to sale plots no. 21D and 22 at CIDCO for a total sale consideration of Rs. 6 crores for which advance sum of Rs. 25 lacs has been paid by each parties. Balance sum was to be paid by Meghna after obtaining bank loan against plot no. 21D. There is no reference to actual amount paid. There is no reference to who paid the sum to whom. The MOU also records that the balance amount will be paid within not later than four months. Vaishali will hand over possession on receipt of balance consideration. Thus, even the MOU does not lead to any inference that the appellant had received any sum during the year under consideration.
It is a settled law that each assessment year is separate and only income accruing and arising in a particular year can be taxed in that year. Income of one year cannot be taxed in another year at the will of the assessee or the revenue. This is also the mandate of s. 4 of the Act. In the present case, if one goes by the date of MO U it falls in the F. Y. 2012-13, relevant to A. Y. 2013-14 according to which the amount is yet to be paid. If one goes by the date of final sale deed, it falls within F. Y. 2013-1 4 relevant to A. Y. 2014-15. If the income is assessable as capital gain u/s 45, the same will only be in the year of transfer. As regards to the addition u/s 69A made by the AO, it has to be in the year when the appellant is found to be owner of any money, bullion jewellery etc. The appellant herein is not found to be owner of any such money etc during the relevant financial year. None of the material leads to tax the cash component in the year under appeal i.e. A.Y. 2013-14. In the circumstances, the addition of Rs.2.25 crores on substantive basis is not taxable for the year under appeal. The same is, therefore, deleted.”
28. As regards merits of addition of unexplained amount received by the assessee on sale of plot no. 22, the same is based on material being page no. 4 of bundle no. 1 seized from residence of Mr. K.K. Sadani referred in the assessment order, the same does not refer to any dates much less the dates pertaining to the year under appeal. The fact in this regard is that as per MOU dt. 6th November 2012 between the assessee being party of the first part and two purchasers being party of the second part, the assessee agreed to sale plot no. 21D and plot no. 22 at CIDCO, Aurangabad. The sale consideration agreed was 6 crores for both the plots. Initial payment was stated to be Rs. 50 lacs and balance amount was shown payable on clearances required but did not refer to actual payment made. Also, the said plots were actually sold during F.Y. relevant to A.Y. 2014-15 wherein the same has been shown as income under the head capital gain and same is assessed accordingly. So far as sale of plot no 21D, the same was sold for 2.25 crores and same is accepted as such and no addition is made in this regard in any year. The material referred in assessment order for making the addition of Rs.2.25 crores is based on said loose paper found from Mr. K.K. Sadani does not show any dates pertaining to year under appeal. These facts are not disputed by any authority or Ld. DR. Thus on either count, the addition cannot be made in the hands of the assessee.
29. CIT(A) in para 13 has noted all such facts and given the finding that the amount not being received by the assessee and that too in the relevant year, the addition is to be deleted. Since particular income can be taxed only in relevant year and no other, the same is rightly deleted by LD. CIT(A). We therefore are of considered opinion that there is no infirmity in the order passed by LD CIT(A) & the same is confirmed by us, consequently the 2nd ground of appeal raised by the Revenue in this regard is dismissed.
30. In the result, the appeal filed by the Revenue in ITA 1344/PUN/2023 for A.Y. 20 13-14 stands dismissed.
C.O. No.22/PUN/2024, A.Y. 2013-14 :
31. Since the appeal filed by the Revenue has been dismissed by us in the foregoing paragraphs, the cross objection filed by the assessee becomes infructuous and, there fore, the same is dismissed.
32. In the result, the Cross Objection filed by the assessee in O. No.22/PUN/2024 for A.Y. 20 13-14 stands dismissed.
33. To sum up, both the appeals filed by the Revenue as well as both the Cross Objections filed by the assessee stand dismissed, as
Order pronounced in the open Court on 12th August, 2024.
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