Case Law Details
DCIT Vs M/s Chandigarh Developers Pvt. Ltd. (ITAT Chandigarh)
We find no reason to interfere in the order of the CIT(Appeals) who has deleted the additions made in the impugned case on finding that the same was not based on any incriminating material found during the course of search and assessment for the impugned year had not abated. The fact that no incriminating material was found has been admitted at Bar by the Ld. DR before us. The only document pointed out by the Revenue, we find, is a Balance Sheet that too pertaining to the succeeding year and which throws no light absolutely on the facts leading to additions made in the impugned year on account of share application money of Rs.50 lakhs received from M/s RSM Metals and M/s. Octomac Software Pvt. Ltd. The said document, we find, reflects only some unsecured loans taken by the assessee from the two companies that too in the succeeding year only and not in the impugned year. Therefore it is an admitted fact that no incriminating material was found during search conducted on the assessee. The fact that the assessment for the impugned year has not abated is also an undisputed fact. In view of the same we hold that the Ld. CIT(Appeals) has rightly deleted the additions made following the proposition laid down by Hon’ble Delhi high court in case of Kabul Chawla (supra), that no addition to be made in assessment framed u/s 153A of the Act in absence of any incriminating material, where assessments were not abated. The grounds raised by the Revenue to the effect that the decision of the Hon’ble Delhi High Court in the case of Kabul Chawla has been distinguished in the case of Smt. Dayawanti Vs. CIT in ITA No.357/2015 dated 27.10.2016, has been dealt with by ITAT in the case of Bharat Net Technology(supra), wherein it has been noted that the decision in the case of Dayawanti (supra |) had been discussed in the subsequent decision of the Hon’ble Delhi High Court in the case of Pr CIT v/s Meeta Gutgutia Proprietor M/s. Fern ‘N’ Petals ITA NO. 306/2017 and others dated 25.05.2017, wherein it was observed that incriminating material was found in that case, however in the case of Meeta Gutgutia (supra), no incriminating material was found and hence additions made were not justified. The same has remained uncontroverted before us.
FULL TEXT OF THE ITAT JUDGEMENT
The present appeal has been filed by the Revenue against the order of Commissioner of Income Tax(Appeals)-3, Gurgaon [hereinafter referred to as CIT(Appeals)], dated 31.03.2017, relating to assessment year 2010-11.
2. The Department is aggrieved by the action of the Ld.CIT(Appeals) in deleting the addition made by the Assessing Officer on account of unsecured loans of Rs.1 crore, as unexplained credit under section 68 of the Income Tax Act, 1961 (in short ‘the Act’).
3. Briefly stated, search & seizure operation, under section 132 of the Act, was carried out at the premises of the assessee on 04.10.2012. In the assessment framed thereafter ,pursuant to the search carried out at the assessee’s premises, addition u/s 68 of the Act was made of Rs. 1 crore, received as share application money from M/s RSM Metals Ltd. and M/s Octamac Software Private Ltd., being Rs.50 lacs each, treating the same as unexplained. The CIT(Appeals) deleted the additions so made for the reason that no incriminating material was found during the course of search. The Ld.CIT (Appeals) held that at the time of search proceedings, assessments for the impugned year were not pending and had, therefore, not abated. He further found that no incriminating material or evidence was found and seized during the course of search, nor any addition made emanating out of the search proceedings. Therefore, relying on various judicial decisions, the Ld.CIT(Appeals) held that the impugned additions could not have been made in the facts of the present case in the order passed u/s 153A of the Act. The Ld.CIT(Appeals) relied upon the decision of the Coordinate Bench of the Tribunal in the case of M/s Mala Builders Pvt. Ltd. Vs. ACIT in ITA Nos.433 to 437/Chd/2017 ,wherein the Tribunal had further relied upon the decision of the Hon’ble Bombay High Court in the case of CIT Vs. M/s Murli Agro Products Pvt. Ltd. in ITA No.36 of 2009 and in the case of CIT Vs. Kabul Chawla, 234 Taxman 300 (Delhi) in which the Hon’ble High Court had unanimously held that in the absence of any incriminating material found during the course of search action, when there was no pending assessment which could be said to have abated on the date of search, the addition could not have been made.
4. Before us, the Ld. counsel for assessee placed copy of the order passed by ITAT Chandigarh Bench in the case of DCIT Vs. M/s Bharat Net Technology Ltd. in ITA Nos.983 & 984/Chd/2017 dated 13.11.2017, and stated that the present appeal is squarely covered by the aforesaid decision of the Tribunal wherein the facts were identical and even identical grounds had been raised by the Revenue in its appeal.
5. The Ld. DR when confronted with the findings of the CIT(Appeals), fairly admitted that no incriminating material was found during the search and the original assessment proceedings stood completed on the date of search. The Ld. DR was asked to confirm from the concerned Assessing Officer as to what incriminating material was found during search. In response the Ld. DR filed copy of the reply received from the Assessing Officer dated 29.3.2018 as under:
Kindly refer to your office letter No. CIT(DR)/ITAT02/2017-18/1609 dated 15.03.2018 on the above cited subject.
2. Brief facts of the case are that pursuant to search 8s seizure operation u/s 132 of the I.T. Act, 1961 carried out on the assessee on 04.10.2012, the assessment was completed u/s 153A(l)(b) r.w.s. 143(3) of the I.T.Act,1961vide assessment order dated 23.03.2015 at an income of Rs. 1,00,00,000/- against nil returned income.
3. Addition of Rs.1,00,00,000/- was made u/s 68 of the I.T. Act,1961 as it was found that the Steel Strips Group was resorting to systematic re-introduction of unaccounted black money into the regular books of accounts in the form of share capital, share premium and unsecured loan. The group created companies controlled by its employees as directors, the assessee is one of such companies. The assessee received huge share capital, share premium and loans from a third layer of entry Provider Company which did not have the wherewithal and the economic reasons prudence to invest heavy amounts in paper companies. The assessee had received credits in its bank account totaling to Rs.1,00,00,000/- from M/s RSM Metals Ltd. and M/s Octomac Softwares Pvt. Ltd. (after layering through Shri Shaman Jindal, an employee of Steel Strips Group) respectively. These companies had received share capital including share premium from paper companies.
5. M/s RSM Metals Ltd. came into existence during the year with the employees of the group like Shri H.K. Sehgal, Bhag wan Dass Sharma, Sharman Jindal and Bhavnesh Gupta as directors. M/s Apoorva Leasing Finance Company Ltd. and M/s Sunita Securities Pvt. Ltd. purchased 4000 shares of the company at a premium of Rs.499 per share. M/s Apoorva Leasing Finance Company Ltd. had shown its registered office as the address of Shri S.K. Jain, a known entry provider. A search was conducted on Shri S.K. Jain on 14.09.2010, wherein on the basis of incriminating documents found, it could be reasonably concluded that M/s Apoorva Leasing Finance Company was only a paper concern involved in providing accommodation entries in the form of share capital and share premium.
6. M/s Octomac Softwares Pvt. Ltd. also came into existence during the year with the employees of the group like Shri M.L. Jain, Shri B.D. Sharma and Bhavnesh Gupta as directors. This company had also introduced unaccounted money of Steel Strips Group through issue of shares at a huge premium to paper concerns M/s Porter Buildcon Pvt. Ltd. and M/s Abhay Holdings Pvt. Ltd. Shri Shaman Jindal received money from M/s Octomac Softwares Pvt. Ltd., which was introduced in the books of the assessee through him.
7. The balance sheet of the assessee for the A.Y.2012-13wasseizedfromthe premises of M/s Steel Strips Wheels Ltd., SCO 49-50, Sector 26D, Chandigarh (Page 26 to 40 of AnnexureA-6), copy of the same is enclosed herewith. The said balance sheet shows loans of Rs.1,30,10,000/- from M/s RSM Metals Ltd. Thus, this is an incriminating document showing transaction in the books of the company from M/s RSM Metals Ltd.
8. Further, a survey was conducted u/s 133A of the I.T. Act, 1961 on Shri Bhavnesh Gupta on 04.10.2012. He is a director in M/s RSM Metals Ltd. and M/s Octomac Softwares Pvt. Ltd. His statement was recorded on oath on 04. 10.2012, wherein he has admitted that these companies are suitcase companies with dummy directors and dummy registered office and it is also controlled by promoter director of the Steel Strips Group through their trusted aides.
9. Needless to add that as has been mentioned in the assessment order, incriminating documents were found during the course of search on an entry provider Shri S.K. Jain, which indicated that companies managed by him including M/s Apoorva Leasing and Finance was a paper company.
10. In view of the facts stated above, the addition has been made on the basis of incriminating documents found during search.
11. As desired, the revised grounds of appeal are also enclosed herewith.”
6. Referring to the same the Ld. DR stated that the only incriminating material found was Balance Sheet of the assessee relating to assessment year 2012-13,i.e the succeeding A.Y, showing loan received from M/s RSM Metals. The case was thereafter heard on 10/04/18.Thereafter the case was fixed for seeking further clarification from the Ld.DR as to how the document stated by the AO in his letter dt.20-03-18, constituted incriminating material in the present case. Further opportunity was given to the Ld. DR to make submissions in this regard when finally on 09-08-18, the Ld. DR categorically stated at Bar that he had gone through the assessment records of the assessee pertaining to the impugned year and was unable to find any document ,other than Balance Sheet of the assessee for the succeeding year as referred by the Assessing Officer in the above letter. The Ld. DR stated that he had gone through all the documents relating to the inquiries made by the Assessing Officer during the assessment proceedings and found no reference to any document unearthed during search relating to the issue on which addition had been made & which was confronted to the assessee. At the same the Ld. DR agreed that though the issues stood covered by the order of the I.T.A.T. in the case of M/s Bharat Net Technology(supra), he relied on his submissions on the issue made in writing as under :
“The search u/s 132 was conducted on the premises of M/s Steel Strips Group of Cases on 04.10.2012. Additions were made by the AO under the head Unexplained Credits u/s 68 of the Act. The CIT (A) has dealt with this issue at Paras 5 Pages 24 to 31 of his order. The case law M/s Mala Builders Pvt Ltd vs ACIT ITA No.433 to 437/Chad/2017 relied upon by the CIT (A) is on different footings i.e. related to section 24(b) of the Act. Moreover, the CIT(A) has failed to verify the contention of the Assessee that no incriminating documents have been found and seized during search. It was his duty to bring on record the above said clinching facts.
2. In the above case, it is humbly submitted that the following decisions may kindly be considered with regard to validity of proceedings u/s 153A:
1. E.N. Gopakumar Vs CIT [F(2016) 75 taxmann.com215 (Kerala)) (Copy Enclosed)(PAGE NO.1 TO 4 OF ANNEXURE)
where Hon’ble Kerala High Court held that assessment proceedings generated by issuance of a notice under section 153A(1)(a) can be concluded against interest of assessee including making additions even without any incriminating material being available against assessee in search under section 132 on basis of which notice was issued under section 153A(1)(a).
The above order has been passed after considering cases of
(i) CIT v. Kabul Chawla [2016] 380 ITR 573/[2015l 234 Taxman 300/61 com412 (Delhi) (para 4),
(ii) CIT v. Continental Warehousing Corpn. (Nhava Sheva) Ltd. [2015] 374 ITR 645/232 Taxman 270/58 com78 (Bom.) (para 4)
(iii) Principal CIT v. Kurele Paper Mills (P.) Ltd. [2016] 380 ITR 571 (Delhi) (para 4),
(iv) CIT v. Lancy Constructions [2016] 383 ITR 168/237 Taxman com264 (Kar.) (para 4),
(v) CIT v. ST. Francies Clay Decor Tiles [2016] 240 Taxman 168/70 com234 (Ker.) (para 5) and
(vi) CIT v. Promy Kuriakose [2016] 386 ITR 597 (Ker.) (para 5).
2. CIT Vs Rai Kumar Arora F20141 52 com172 Allahabad)/r20141 367 ITR 517 (Allahabad) (PAGE NO.5 TO 17 OF ANNEXURE)
where Hon’ble Allahabad High Court held that Assessing Officer has power to reassess returns of assessee not only for undisclosed income found during search operation but also with regard to material available at time of original assessment
3. CIT Vs Kesarwani Zarda Bhandar Sahson A lld. [ITA No. 270 of 20141 (Allahabad)(PAGE NO.18 TO 23 OF ANNEXURE)
where Hon’ble Allahabad High Court held that Assessing Officer has power to reassess returns of assessee not only for undisclosed income found during search operation but also with regard to material available at time of original assessment
4. CIT Vs St. Francis Clay Decor Tiles (385 ITR 624) (Copy Enclosed) (PAGE NO.24 TO 31 OF ANNEXURE)
where Hon’ble Delhi Kerala Court held that notice issued under section 153A -return must be filed even if no incriminating documents discovered during search
5. Smt Davawanti Vs CIT F20161 75 com308 (Delhi)/[2017/ 245 Taxman 293 (Delhi)/[2017] 390 ITR 496 (Delhi)/[20161 290 CTR 361 (Delhi) (Though Stayed by the Apex Court) (PAGE NO.32 TO 44 OF ANNEXURE)
where Hon’ble Delhi High Court held that Where inferences drawn in respect of undeclared income of assessee were premised on materials found as well as statements recorded by assessee’s son in course of search operations and assessee had not been able to show as to how estimation made by Assessing Officer was arbitrary or unreasonable, additions so made by Assessing Officer by rejecting books of account was justified
6. CIT Vs Anil Kumar Bhatia (24 com98, 211 Taxman 453, 352 ITR (493) (Copy Enclosed) (PAGE NO.45 TO 56 OF ANNEXURE)
Where Hon’ble Delhi High Court held that jurisdiction of AO under 153A is to assess total income for the year and not restricted to seized material. Post search reassessment in respect of all 6 years can be made even if original returns are already processed u/s 143(1)(a) – Assessing Officer has power u/s 153A to make assessment for all six years and compute total income of assessee, including undisclosed income, notwithstanding that returns for these years have already been processed u/s 143(1)(a). Even if assessment order had already been passed in respect of all or any of those six assessment years, either under section 143(1)(a) or section 143(3) prior to initiation of search/requisition, still Assessing Officer is empowered to reopen those proceedings under section 153A without any fetters and reassess total income taking note of undisclosed income, if any, unearthed during search.
7. Filatex India Ltd Vs CIT (49 com465) (Copy Enclosed) (PAGE NO.57 TO 61 OF ANNEXURE)
where Hon’ble Delhi High Court held that during assessment under section 153A, additions need not be restricted or limited to incriminating material, found during course of research.”
7. We have heard the rival contentions. We find no reason to interfere in the order of the CIT(Appeals) who has deleted the additions made in the impugned case on finding that the same was not based on any incriminating material found during the course of search and assessment for the impugned year had not abated. The fact that no incriminating material was found has been admitted at Bar by the Ld. DR before us. The only document pointed out by the Revenue, we find, is a Balance Sheet that too pertaining to the succeeding year and which throws no light absolutely on the facts leading to additions made in the impugned year on account of share application money of Rs.50 lakhs received from M/s RSM Metals and M/s. Octomac Software Pvt. Ltd. The said document, we find, reflects only some unsecured loans taken by the assessee from the two companies that too in the succeeding year only and not in the impugned year. Therefore it is an admitted fact that no incriminating material was found during search conducted on the assessee. The fact that the assessment for the impugned year has not abated is also an undisputed fact. In view of the same we hold that the Ld. CIT(Appeals) has rightly deleted the additions made following the proposition laid down by Hon’ble Delhi high court in case of Kabul Chawla (supra), that no addition to be made in assessment framed u/s 153A of the Act in absence of any incriminating material, where assessments were not abated. The grounds raised by the Revenue to the effect that the decision of the Hon’ble Delhi High Court in the case of Kabul Chawla has been distinguished in the case of Smt. Dayawanti Vs. CIT in ITA No.357/2015 dated 27.10.2016, has been dealt with by ITAT in the case of Bharat Net Technology(supra), wherein it has been noted that the decision in the case of Dayawanti (supra |) had been discussed in the subsequent decision of the Hon’ble Delhi High Court in the case of Pr CIT v/s Meeta Gutgutia Proprietor M/s. Fern ‘N’ Petals ITA NO. 306/2017 and others dated 25.05.2017, wherein it was observed that incriminating material was found in that case, however in the case of Meeta Gutgutia (supra), no incriminating material was found and hence additions made were not justified. The same has remained uncontroverted before us.
In view of the above we do not find any infirmity in the order of the CIT(Appeals) in deleting the impugned additions. The grounds of appeal raised by the Revenue are, therefore, dismissed.
8. In the result, the appeal of the Revenue is dismissed.
Order pronounced in the open court.
