Case Law Details
Smt. Sanjana Mittal Vs DCIT (ITAT Amritsar)
In a case where no assessment proceedings are pending on the date of the search and seizure proceedings, the assessment under section 153A can be carried out only on the basis of seized material. In a case, where no incriminating material is unearthed during the course of search proceedings and the assessment proceedings remain unabated as on the said date, no additions can be validly made in the hands of the assessee. Our aforesaid view is fortified by the judgment of the Hon’ble High Court of Delhi in the case of CIT vs. Kabul Chawla (2016) 380 ITR 573 (Del). Apart therefrom, a similar view had also been taken by the Hon’ble High Court of Bombay in the case of CIT vs. Murli Agro Product (ITA No. 36/2009) (Bom) and Commissioner Of Income-tax Vs. Continental Warehousing Corporation (2015) 374 ITR 645 (Bom). In the aforementioned cases, it has been observed by the High Court that as on the date of the initiation of search and seizure proceedings under section 132 of the IT Act, as no proceedings for the year under consideration were pending, therefore, in the absence of any incriminating evidence found during the course of search and seizure proceedings no addition/disallowance could have been made in respect of the unabated assessment of the assessee for the said year. In the backdrop of the aforesaid settled position of the law, we are of the considered view that as on the date of the search and seizure proceedings no assessment proceedings were pending in the case of the assessee, therefore, in the absence of any incriminating material having been found in the course of such proceedings no addition could have been validly made in the hands of the assessee. We thus not being able to persuade ourselves to subscribe to the view taken by the CIT(A) who had upheld the order of the A.O, thus set aside his order and vacate the addition of Rs.1,00,000/- that was sustained by him.
FULL TEXT OF THE ITAT JUDGEMENT
The present appeal filed by the assessee is directed against the order passed by the CIT(Appeals)-5, Ludhiana, dated 27.07.2018, which in turn arises from the assessment order passed by the A.O under Sec. 153A r.w.s.143(3) of the Income Tax Act, 1961 (for short ‘I.T. Act’), dated 29.12.2017 for A.Y. 2014-15. The assessee assailing the order of the CIT(A) has raised before us the following grounds of appeal :
1. (a) That having regard to the facts and circumstances of the case, Hon’ble CIT(A) has erred in law and on facts in confirming the action of Ld. AO in assuming jurisdiction and framing the impugned assessment order u/s 153A/143(3) of the Act is bad in law and against the facts and circumstances of the case and is not sustainable on various legal and factual grounds.
(b) That in any case and in any view of the matter, additions made in the impugned order are beyond jurisdiction and illegal also for the reason that these could not have been made since no incriminating material has been found as a result of search warranting impugned addition.
2. (a) That having regard to the facts and circumstances of the case, Hon’ble CIT(A) has erred in law and facts in confirming the action of Ld. AO in making addition of Rs. 1,00,000/- as deemed dividend u/s 2(22)(e) of the Act without considering the submissions of the assessee and without observing the principles of natural justice
(b) That having regard to the facts and circumstances of the case, Hon’ble CIT(A) has erred in law and on facts in confirming the action of Ld. A.O in making addition u/s 2(22)(e) of the Act without considering the fact that payment is made out of the running account of assessee in the books of M/s Bhagwati lacto Vegetarian Exports Pvt. Ltd.
(c) That having regard to the facts and circumstances of the case, Hon’ble CIT(A) has erred in law and on facts in confirming the action of Ld. A.O in making addition u/s 2(22)(e) of the Act without considering the fact that the alleged transaction is purely a commercial transaction in the nature of commission paid to the assessee.
3. That the appellant craves to leave to add, modify, amend or delete any of the grounds of appeal at the time of hearing and all the above grounds are without prejudice to each other.
2. Briefly stated, search and seizure proceedings under section 132(1) of the I.T Act, were carried out at the residential premises of the assessee on 11.02.2016. Apart therefrom, search operations were also carried out in the case of other concerns/persons of Bhagwati Group, Ferozepur. Notice under section 153A of the I.T Act was issued to the assessee on 13.06.2017. In compliance, the assessee filed her ‘return of income’ on 09.07.2017, disclosing total income at Rs. 4,57,530/-.
3. During the course of the search and seizure proceedings carried out at the business premises of M/s Bhagwati Lacto Vegetarian Exports Pvt. Ltd., Ferozepur Cantt. and M/s Bhagwati Lacto Foods Pvt. Ltd., certain incriminating documents in the shape of typed balance sheets/trial balances etc. in the computers installed at the respective premises of the aforementioned concerns were found and seized. On a perusal of the seized documents, it was observed that most of the figures of raising of funds as per the seized documents did not tally with the audited ‘balance sheets’ of the said respective companies. Further, it was observed by the A.O that the assessee was a substantive shareholder in the aforementioned companies. It was noticed by the A.O that the assessee had raised a fresh loan of Rs. 1,00,000/- from M/s Bhagwati Lacto Vegetarian Exports Pvt. Ltd. In the backdrop of the aforesaid facts the A.O called upon the assessee to explain as to why the aforesaid loan of Rs. 1,00,000/- may not be assessed as ‘deemed dividend’ as per the provisions of Section 2(22)(e) of the I.T Act in her hands. The explanation tendered by the assessee in her attempt to persuade the A.O to conclude that no addition under section 2(22)(e) was called for in her hands, however did not find favour with him. The A.O holding a conviction that the assessee has received a loan from a company in which she had substantial interest, thus made an addition of Rs. 1,00,000/- under section 2(22)(e) of the IT Act.
4. Aggrieved, the assessee carried the matter in appeal before the CIT(A). However, the CIT(A) not being persuaded to subscribe to the contentions advanced by the assessee upheld the addition of Rs. 1,00,000/- made by the A.O under section 2(22)(e) of the I.T Act.
5. The assessee being aggrieved with the order of the CIT(A) has carried the matter in appeal before us. The learned Authorised Representative (for short ‘A.R’) for the assessee, at the very outset on the hearing of the appeal submitted that as no incriminating material pertaining to the assessee was found during the course of search and seizure proceedings, therefore, no addition under section 2(22)(e) was called for in the hands of the assessee. It was averred by the ld. A.R that on the date when the search and seizure proceedings were conducted no assessment proceedings were pending in the case of the assessee. In sum and substance, it was the claim of the ld. A.R that in the absence of any incriminating material found during the course of search and seizure proceedings, no addition could have been made in respect of the unabated assessment in the hands of the assessee. In support of the aforesaid contention the learned A.R placed reliance on the judgment of the Hon’ble High Court of Delhi in the case of CIT vs. Kabul Chawla (2016) 380 ITR 573 (Del). Apart therefrom, support was also drawn by him from the order of the ITAT, Delhi in the case of Jackson Ltd., vs. ACIT (ITA No. 6432/Del/2014), dated 27.09.2018. In the backdrop of his aforesaid deliberations, it was submitted by the ld. A.R that the addition of Rs. 1,00,000/- made by the A.O could not be sustained and was liable to be vacated.
6. Per contra, the learned Departmental Representative (for short D.R) relied upon the orders of the lower authorities. It was submitted by the learned D.R that the lower authorities after necessary deliberations had rightly made an addition of Rs. 1,00,000/- in the hands of the assessee.
7. We have heard the authorized Representatives for both the parties, perused the orders of the lower authorities and the material available on the record. The Ld. D.R on a specific query by the bench, had categorically stated that the loan of Rs.1,00,000/- that was raised by the assessee from M/s Bhagwati Lacto Vegetarian Exports Pvt. Ltd., Ferozepur was duly recorded in the latters audited ‘balance sheet’ for the year under consideration and the addition of Rs. 1 lac towards ‘deemed dividend’ under Sec. 2(22)(e) of the IT Act was not based on any incriminating material found during the course of the search & seizure proceedings.
8. We find from the perusal of the order passed by the ld. CIT(A) that the assessee was a ‘debtor’ of the aforementioned company viz. M/s Bhagwati Lacto Vegetarian Exports Pvt. Ltd., Ferozpur in the Financial year 2012-13. Rather, a perusal of the ledger account of the assessee as appearing in the ‘books of accounts’ of the aforesaid company viz., M/s Bhagwati Lacto Vegetarian Exports Pvt. Ltd., Ferozpur reveals that she had received an amount of Rs. 1,00,000/-, vide Cheque No. 367197 drawn on CC A/c No. 65041938456 of the company with State Bank of Patiala, Ferozpur Cantt. Apart therefrom, a perusal of the order passed by the A.O fortifies the fact that no incriminating material was found during the course of search and seizure proceedings.
9. We have deliberated at length on the issue under consideration, and find that our indulgence in the present appeal has been sought for adjudicating as to whether in the case of the assessee where the assessment proceedings had not abated at the time when the search and seizure proceedings were conducted, any addition could validly be made in the absence of any incriminating material found during the course of the search and seizure proceedings. Admittedly, in the case before us no incriminating material was found during the course of the search and seizure proceedings conducted under section 132 of the I.T. Act on 11.02.2016. Apart therefrom, the fact that the assessment proceedings in the case of the assessee were not abated at the time when the search and seizure proceedings were conducted has also not been controverted by the learned D.R in the course of the proceedings before us.
10. We have deliberated at length on the issue under consideration, and are of the considered view that in a case where no assessment proceedings are pending on the date of the search and seizure proceedings, the assessment under section 153A can be carried out only on the basis of seized material. In a case, where no incriminating material is unearthed during the course of search proceedings and the assessment proceedings remain unabated as on the said date, no additions can be validly made in the hands of the assessee. Our aforesaid view is fortified by the judgment of the Hon’ble High Court of Delhi in the case of CIT vs. Kabul Chawla (2016) 380 ITR 573 (Del). Apart therefrom, a similar view had also been taken by the Hon’ble High Court of Bombay in the case of CIT vs. Murli Agro Product (ITA No. 36/2009) (Bom) and Commissioner Of Income-tax Vs. Continental Warehousing Corporation (2015) 374 ITR 645 (Bom). In the aforementioned cases, it has been observed by the High Court that as on the date of the initiation of search and seizure proceedings under section 132 of the IT Act, as no proceedings for the year under consideration were pending, therefore, in the absence of any incriminating evidence found during the course of search and seizure proceedings no addition/disallowance could have been made in respect of the unabated assessment of the assessee for the said year. In the backdrop of the aforesaid settled position of the law, we are of the considered view that as on the date of the search and seizure proceedings no assessment proceedings were pending in the case of the assessee, therefore, in the absence of any incriminating material having been found in the course of such proceedings no addition could have been validly made in the hands of the assessee. We thus not being able to persuade ourselves to subscribe to the view taken by the CIT(A) who had upheld the order of the A.O, thus set aside his order and vacate the addition of Rs.1,00,000/- that was sustained by him.
11. The appeal of the assessee is allowed in terms of our aforesaid observations.
Order pronounced in the open court on 11/03/2019
