Case Law Details
Sanjay Punamchand Kothari Vs ACIT (ITAT Pune)
Sanjay Punamchand Kothari Vs. ACIT (ITAT Pune): Admissions in Search or Survey Cases and the Invalidity of Assessment Orders Lacking DIN
In the realm of income tax assessments, the case of Sanjay Punamchand Kothari vs. ACIT (Income Tax Appellate Tribunal, Pune) sheds light on two crucial aspects. Firstly, it highlights the significance of admissions made by the searched party during a search or survey operation. Secondly, it underscores the consequences of an assessment order that lacks the Document Identification Number (DIN) and Order number, rendering it invalid. This article provides a detailed analysis of this case, examining the arguments, decisions, and implications.
Background of the Case
Sanjay Punamchand Kothari, the assessee, was the subject of scrutiny for two assessment years: 2017-18 and 2018-19. The former assessment year involved twin appeals, IT(SS)A Nos. 12/PUN/2021 and 11/PUN/2022, arising from the orders of the Commissioner of Income Tax (Appeals) [CIT(A)], Pune-11, dated 10.11.2021 and 25.01.2022. These orders pertained to proceedings under Section 154 and Section 143(3) read with Section 153A of the Income Tax Act, 1961 (referred to as “the Act”).
The latter assessment year, 2018-19, saw appeals from both the assessee and the Revenue, filed as ITA Nos. 47 and 59/PUN/2021, respectively. These appeals were directed against the CIT(A)’s order, dated 30.12.2020, concerning proceedings under Section 143(3) of the Act. The central issue in these appeals was the “telescoping” of the addition of Rs. 1,66,40,000/- made by the Assessing Officer under Section 69A for unexplained money.
Admissions in Search or Survey Cases
One of the critical aspects of this case was the relevance of admissions made by the searched party during a search or survey operation. The Revenue argued vehemently in favor of the Assessing Officer’s action, which did not allow the set-off of the unexplained money addition. However, it was crucial to examine whether the admissions made by the assessee during the search had sufficient supporting evidence.
The Income Tax Appellate Tribunal (ITAT) referred to CBDT’s circulars dated 10.03.2003 and 18.12.2004, which emphasized that a searched party’s admissions or confessions during a search or survey operation hardly carry any significance in the absence of supportive evidence. In this case, the seized material provided no clear entries suggesting payments or receipts involving the assessee. Consequently, the ITAT accepted the assessee’s pleadings and dismissed the Revenue’s cross-appeal, emphasizing the need for supporting evidence to validate admissions during a search or survey.
Invalidity of Assessment Orders Due to Lack of DIN and Order Number
Another critical issue in this case was the validity of assessment orders. The ITAT observed that the assessment orders for the former assessment year 2017-18 lacked the essential Document Identification Number (DIN) and Order number, as mandated by CBDT’s circulars. The circulars explicitly stated that any communication without these details “shall be treated as invalid and shall be deemed to have never been issued.”
The Assessing Officer later provided the DIN and Order number in an intimation dated 29.12.2019. However, the ITAT found no merit in the Revenue’s argument supporting the assessment. It cited a precedent where a similar argument had been rejected, asserting that such defaults in allotting DIN and Order number could not be condoned by subsequent intimation. Consequently, the ITAT quashed the assessment and the Assessing Officer’s section 154 rectification.
Conclusion
The case of Sanjay Punamchand Kothari vs. ACIT offers valuable insights into two crucial aspects of income tax assessments. It reinforces the principle that admissions made during a search or survey operation must be supported by substantial evidence to carry weight in the assessment process. Additionally, it serves as a reminder of the strict adherence required to CBDT circulars regarding the inclusion of DIN and Order numbers in assessment orders.
In conclusion, this case exemplifies the importance of both the substantiation of admissions in search or survey cases and the adherence to procedural requirements outlined in CBDT circulars. Taxpayers and tax authorities alike can learn from this case about the significance of supporting evidence and procedural compliance in income tax assessments.
FULL TEXT OF THE ORDER OF ITAT PUNE
The instant batch of four appeals pertains to one single assessee Shri Sanjay P. Kothari. Former assessment year 2017-18 herein contains the assessee’s twin appeals IT(SS)A Nos.12/PUN/2021 and 11/PUN/2022 arising against the CIT(A), Pune-11’s separate orders, dated 10.11.2021 and 25.01.2022, passed in case Nos. ITBA/APL/S/250/2021-22/1036818962(1) and ITBA/APL/S/250/2021-22/1039080137(1), in proceedings u/s 154 and 143(3) r.w.s. 153A of the Income Tax Act, 1961, in short „the Act’. Latter assessment year 2018-19 involves assessee’s and Revenue’s cross appeals ITA Nos.47 and 59/PUN/2021 directed against the very CIT(A)’s DIN & order No. ITBA/APL/S/250/2020-21/1029367933(1), dated 30.12.2020 in proceedings u/s 143(3) of the Act.
Heard both the parties. Case files perused.
2. It transpires during the course of hearing that the assessee’s twin appeals IT(SS)A Nos. 12/PUN/2021 and 11/PUN/2022 for former assessment year 2017-18 hardly requires us to delve deeper in the relevant factual matrix. This is for the precise reason that neither the Assessing Officer’s assessment herein dated 27.12.2019 nor his 154 rectification in both these appeals; respectively contain the corresponding “DIN & Order” details as prescribed in CBDT’s twin circular Nos.19/2019 dated 14.08.2019and 27/2019 dated 26.09.2019; respectively. The above former circular rather makes it explicitly clear in para 4 thereof that any communication not containing such DIN and Order number “shall be treated as invalid and shall be deemed to have never been issued”. Faced with the situation, Mr. Jasnani filed the Assessing Officer’s subsequent intimation to the assessee dated 29.12.2019 that he had duly allotted “DIN & Order” number to his assessment order dated 27.12.2019.
We find no merit in the Revenue’s instant vehement argument supporting the assessment herein as once the CBDT circular has clarified that such an order ought to be treated as to have never been issued herein (supra). We conclude that the impugned assessment deserves to be quashed on this count alone. This tribunal’s order in ITA No.625/Bang/2021 in Shri H.K. Suresh vs. PCIT has already rejected the Revenue’s identical contentions that its default in allotting “DIN and Order” number in above terms could not be condoned by way of any subsequent intimation as well. We therefore quash the impugned assessment herein as well as the Assessing Officer’s section 154 rectification dated 04.01.2021 in very terms. These assessee’s twin appeals IT(SS)A Nos.12/PUN/2021 and 11/PUN/2022 stand accepted.
3. This leaves us with the latter assessment year 2018-19 wherein both the assessee as well as the Revenue have filed their respective appeals ITA Nos.47 & 59/PUN/2021; respectively. The sole issue that arises for our apt adjudication in both these appeals is that of “telescoping” of section 69A unexplained money addition of Rs.1,66,40,000/- made by the Assessing Officer which has been partly allowed to be set off in CIT(A)’s order to the extent of Rs.1,18,22,400/- vide following detailed discussion:
The Revenue’s pleadings on the other hand vehemently support the Assessing Officer’s action in entirety not allowing the impugned set off.
4. We have given our thoughtful consideration for vehement rival stands. Learned departmental representative could hardly dispute that the foregoing twin judicial precedents are already in assessee’s support that such a set off could very well be granted even against jewellery items and vice-versa. This is further coupled with the clinching fact that page 41 before us is the seized material against the assessee found during the course of search on 04.11.2017. There is neither any amount mentioned therein nor the sum total thereof so as to draw any presumption of correctness of contents thereof u/s 292C of the Act.
Mr. Jasnani at this stage vehemently argued that the assessee’s search statement had admitted various amounts as per the contents of seized document. We find no merit in the Revenue’s instant argument in light of CBDT’s twin landmark circulars dated 10.03.2003 and 18.12.2004 that a searched party’s admissions or confessions during search or survey hardly carry any significance in the absence of any supportive evidence. We reiterate that the foregoing sole seized document is totally “dumb” as there are no clear-cut entries which could suggest any payments or receipts, as the case may be involving this assessee. Faced with the situation, we accept the assessee’s pleadings as well as the main appeal ITA No.47/PUN/2021 and dismiss the Revenue’s cross appeal ITA No.59/PUN/2021 as the necessary corollary. Ordered accordingly.
5. To sum up, these assessee’s three appeals ITA Nos.47/PUN/2021, IT(SS)A Nos.12/PUN/2021 and 11/PUN/2022 are allowed and Revenue’s cross appeal ITA No.59/PUN/2021 is dismissed in above terms. A copy of this common order be placed in the respective case files.
Order pronounced in the Open Court on 14th February, 2023.
