Income Tax Appellate Tribunal - Kolkata
Dcit, Cen Cir-1(1), Kolkata, Kolkata vs M/S Bircort Vincom Pvt. Ltd., Kolkata on 7 July, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL "A" BENCH : KOLKATA
[Before Hon'ble Sri A.T.Varkey, JM & Shri M.Balaganesh, AM ]
I.T.(SS)A Nos. 89 to 91/Kol/2015
Assessment Years : 2008-09 to 2010-11
D.C.I.T., Central Cirlce-1(1) -vs.- M/s. Bircort Vincom Pvt.Ltd.
Kolkata Kolkata
[PAN : AABCB 0568 Q]
(Appellant) (Respondent)
For the Appellant : Shri R.S.Biswas, CIT
For the Respondent : Shri S.K.Saha, FCA
Date of Hearing : 13.06.2017.
Date of Pronouncement : 07.07.2017
ORDER
Per M.Balaganesh, AM
1. These appeals of the revenue arise out of the orders of the Learned Commissioner of Income Tax (Appeals) -20 , Kolkata [ in short the ld CITA] in Appeal Nos. 132 - 134/CIT(A)-20/CC-1(1)/2014-15/Kol. dated 23.03.2015 against the orders passed by the D.C.I.T., Central Circle-III, Kolkata [ in short the ld AO] under section 143(3) r.w.s.153A of the Income Tax Act, 1961 (hereinafter referred to as 'Act ') dated 28.03.2014 for the Asst Years 2008-09, 2009-10 and 2010-11 respectively. Since the issue in all the three appeals are identical they are taken up together and disposed off by a common order for the sake of convenience.
2. The only common issue to be decided in these appeals of the revenue is as to whether the ld CITA was justified in deleting the addition made u/s 68 of the Act in the search assessments framed u/s. 153A of the Act in the absence of any incriminating material found during the course of search to that effect. The facts of Asst Year 2008-09 are taken up for adjudication and the decision rendered thereon would apply with equal 2 IT(SS)Nos.89 to 91/Kol/2015 M/s. Bircort Vincom Pvt. Ltd.
A.Yrs.2008-09 to 2010-11 force to Asst Years 2009-10 and 2010-11 also except with variance in figures , date of filing returns and the name of the subscribers.
3. The brief facts of this issue is that there was a search and seizure operation conducted u/s. 132 of the Act on 17.11.2011 in the various business premises as well as residence in Kolkata & other places in respect of Emars Mine Group and Others. In the process, search and seizure operation u/s 132 of the Act was conducted among others, at the office of Bircort Vincom Private Limited at 2C & 2D, Green Acres, 2 Nazar Ali Lane, Beck Bagan, Kolkata - 700019 and accordingly notice u/s 153A of the Act dated 4.2.2013 was issued and duly served on the assessee. In response thereto, the assessee filed its return disclosing total income of Rs. 9,65,756/- for the Asst Year 2008-09. The ld AO observed from the copy of the Balance Sheet along with the schedules filed which were on record, that assessee had during the relevant period increased its share capital including share premium thereon by an amount of Rs 2,41,00,000/-. In order to verify the same, notices u/s 133(6) of the Act were issued to the alleged subscribers to the Share Capital wherein they were asked to furnish the details of source of investment in share capital of the assessee company within 3 days. None of the alleged subscribers replied to the said notices. Accordingly, the ld AO observed that the amounts found credited in the books of accounts were not satisfactorily explained and hence brought the share capital and premium amount to tax as unexplained cash credit u/s 68 of the Act and completed the assessment u/s 153A read with section 143(3) of the Act on 28.3.2014.
4. Before the ld CITA, the assessee objected to the making of additions u/s. 68 of the Act in the assessments framed u/s. 153A of the Act inasmuch as there was absolutely no incriminating material found during the course of search which would enable the ld AO to draw an adverse inference with regard to the veracity of the share capital received by the assessee in Asst Year 2008-09. The assessee pleaded that the time limit for issuing notice u/s 143(2) of the Act had expired for the Asst Year 2008-09 on 30.9.2008 and no 2 3 IT(SS)Nos.89 to 91/Kol/2015 M/s. Bircort Vincom Pvt. Ltd.
A.Yrs.2008-09 to 2010-11 assessment was framed thereafter and hence on the date of search, it was a concluded proceeding. It was pleaded that without having any incriminating material found in the course of search relatable to Asst Year 2008-09, the income determined already u/s 143(1) of the Act cannot be disturbed in section 153A assessment. The ld CITA accepted to this legal plea of the assessee and by placing reliance on various decisions held that no addition towards share capital and share premium could be made in the section 153A assessments without having any incriminating material relatable to the same found in the course of search. He also gave a categorical finding that even on merits, there is no case for making any addition u/s 68 of the Act in respect of the share capital and share premium.
5. Aggrieved, the revenue is in appeal before us on the following ground:-
"The Ld. CIT(A)-20, Kolkata erred in deleting the addition made u/s 68 in respect of the alleged subscriptions to shares issued when the beneficiary assessee had not been able to establish the creditworthiness of the subscribers to the shares issued before the assessment was completed. "
6. The ld. AR reiterated the submissions made before the ld. CITA with regard to framing of additions in section 153A assessments without any incriminating material found thereon. Reliance was placed on the following decisions in support of his contentions:--
1. CIT vs Veerprabhu Marketing Ltd reported in (2016) 73 taxmann.com 149 (Cal HC)
2. CIT vs Kabul Chawla reported in (2016) 380 ITR 573 (Del)
3. CIT vs Continental Warehousing Corpn (Nhava Sheva) Ltd reported in (2015) 374 ITR 645 (Bom)
4. Principal CIT vs Devangi alias Rupa reported in (2017) 394 ITR 184 (Guj) He argued that admittedly there was absolutely no incriminating materials found during the course of search for making addition towards share capital and share premium.3 4
IT(SS)Nos.89 to 91/Kol/2015 M/s. Bircort Vincom Pvt. Ltd.
A.Yrs.2008-09 to 2010-11
7. In response to this, the ld. DR argued that the expression 'incriminating material' is not found in the provisions of the Act and it is only the Hon'ble Courts which had imported those words while rendering the decisions. He stated that the Hon'ble Courts are divided on this issue and placed reliance on the decision of the Hon'ble Karnataka High Court in the case of Canara Housing Development Co. v. Dy. CIT [2014] 49 taxmann.com 98 wherein it was held that search assessments could be framed even without the existence of incriminating materials found in the course of search. With regard to assessment framed u/s. 143(1) of the Act, he argued that no assessment could be treated to have been framed by the ld. AO u/s. 143(1) of the Act. He argued that the basic foundation for conducting the search is governed by the provisions of section 132 of the Act which has to be read harmoniously with section 153A of the Act. There are three conditions based on which a search action could be initiated u/s. 132 of the Act on an assessee. They are :--
Section 132(1) - If the concerned authority has in consequence of information in his possession, has reason to believe that -
(a) where a person fails to produce the books of account and other documents in response to notice u/s. 142(1) or summons issued u/s. 131(1) of the Act ; or
(b) where a person fails to comply with the requirements of summons issued u/s.
131(1) of the Act ; or
(c) where a person is in possession of any money, bullion, jewellery or other valuable article or thing and such assets represents either wholly or partly income or property which has not been, or would not be, disclosed for the purposes of the Act (hereinafter referred to as the undisclosed income or property);
then the officer, so authorized could conduct a search and proceed as per the requirements laid down in the said section. He argued that the aforesaid three primary 4 5 IT(SS)Nos.89 to 91/Kol/2015 M/s. Bircort Vincom Pvt. Ltd.
A.Yrs.2008-09 to 2010-11 conditions for invoking search proceedings cannot be given a go-by while framing section 153A assessments and the instant case falls under section 132(1)(c ) of the Act.
The provisions of section 153A of the Act use the expression 'assess or reassess total income' and hence the search assessment could be framed u/s. 153A of the Act irrespective of any incriminating materials. In support of his proposition that section 143(1) is not an assessment, he placed reliance on the following decisions :--
Tata Metaliks Ltd. v. CIT [2014] 368 ITR 643/231 Taxman 655/52 taxmann.com 480 (Cal.) Dy. CIT v. Zuari Estate Development & Investment Co. Ltd. [2015] 373 ITR 661/[2016] 236 Taxman 1/63 taxmann.com 177 (SC)
8. We have heard the rival submissions and gone through facts and circumstances of the case. We find it would be necessary to address the preliminary issue of whether the addition could be framed u/s. 153A of the Act in respect of a concluded proceeding without the existence of any incriminating materials found in the course of search. The scheme of the act provides for abatement of pending proceedings as on the date of search. It is not in dispute that the assessment for the Asst Year 2008-09 was originally completed u/s. 143(1) of the Act and the notice for issuing section 143(2) notice had expired on 30.9.2008 and hence it falls under concluded proceeding, as on the date of search. The assessment for the Asst Years 2009-10 & 2010-11 were completed u/s 143(1) of the Act and time limit for issuance of notice u/s 143(2) of the Act thereon had expired on 30.9.2009 and 30.9.2010 respectively and hence it falls under concluded proceedings , as on the date of search. Once the return is processed u/s. 143(1) of the Act and no notice u/s. 143(2) of the Act has been issued, then it becomes a completed/concluded proceeding. Thereafter if a search happens, then that asst year where 143(1) was made, would fall under the ambit of concluded assessment as admittedly no proceeding was pending on the date of search to get abated. Hence the legislature does not differentiate whether the assessments originally were framed u/s.
5 6IT(SS)Nos.89 to 91/Kol/2015 M/s. Bircort Vincom Pvt. Ltd.
A.Yrs.2008-09 to 2010-11 143(1) or 143(3) or 147 of the Act. Hence unless there is any incriminating material found during the course of search relatable to those concluded years, the statute does not confer any power on the ld AO to disturb the findings given thereon and income determined thereon, as finality had already been reached thereon, and those proceedings were not pending on the date of search to get themselves abated. The provisions of section 153A of the Act are reproduced hereunder for the sake of convenience :--
"[Assessment in case of search or requisition.77 153A. 78[(1)] Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person79 where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003, the Assessing Officer shall--
(a) Issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139;
(b) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made :
Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years:"
8.1. We find that the Co-ordinate Bench of this Tribunal in the case of Dy. CIT v. Aggarwal Entertainment (P.) Ltd. [2016] 72 taxmann.com 340 (Delhi - Trib.) had addressed this aspect. The relevant headnotes is reproduced below:--
"Section 153A, read with section 143, of the Income-tax Act, 1961-Search and seizure - Assessment in case of (in case of section 143(1) assessment)-Assessment year 2004-05- Whether assessment in respect of which return has been processed under section 143(1), cannot be regarded as pending for purpose of section 153A as Assessing Officer is not required to do anything further about such a return and, thus, said assessment cannot be 6 7 IT(SS)Nos.89 to 91/Kol/2015 M/s. Bircort Vincom Pvt. Ltd.
A.Yrs.2008-09 to 2010-11 reopened in exercise of power of section 153A-Held yes (Paras 10 and 12) (In favour of assessee)."
8.2. We find that the Co-ordinate Bench of this Tribunal in the case of Kanchan Oil Industries Ltd.in ITA No. 725/Kol/2011 dated 9.12.2015 had explained the aforesaid provisions as below:--
"6.4 In our opinion, the scheme of assessment proceedings should be understood in the following manner pursuant to the search conducted u/s. 132 of the Act :-
(a) Notice u/s. 153A of the Act would be issued on the person on whom the warrant of authorization u/s. 132 of the Act was issued for the six assessment years preceding the year of search and assessments thereon would be completed u/s. 153A of the Act for those six assessment years.
(b) In respect of the year of search, notice u/s. 143(2) of the Act would be issued and assessment thereon would be completed u/s. 143(3) of the Act.
(c) In respect of concluded assessments prior to the year of search, no addition could be made in the relevant assessment year unless any incriminating material is found during the course of search with respect to the relevant assessment year.
(d) Pursuant to the search u/s. 132 of the Act, the pending proceedings would get abated. In respect of abated assessments, the total income needs to be determined afresh in accordance with the provisions of section 153A and other provisions of the Act.
6.4.1 The concluded assessments for the purpose of section 153A of the Act shall be -
(i) assessment years where assessments are already completed u/s. 143(1) and time limit for issuance of notice u/s. 143(2) of the Act has expired or;
(ii) assessment years where assessments are already completed u/s. 143(3) of the Act ;
unless they are reopened u/s. 147 of the Act for some other purpose in both the scenarios stated above.
6.4.2 The scheme of assessment proceedings contemplated u/s. 153A of the Act are totally different and distinct from the proceedings contemplated u/s. 147 of the Act and these procedures of assessment operate in different fields and have different purposes to be fulfilled altogether.
7 8IT(SS)Nos.89 to 91/Kol/2015 M/s. Bircort Vincom Pvt. Ltd.
A.Yrs.2008-09 to 2010-11 6.4.3 The expression 'assess or reassess' stated in section 153A(1)(b) has to be understood as below:-
'assess' means assessments to be framed in respect of abated assessment years irrespective of the fact whether there are any incriminating materials found during the course of search with respect to relevant assessment years ;
'reassess' means assessments to be framed in respect of concluded assessment years where incriminating materials were found during the course of search in respect of the relevant assessment year."
8.3. We also find that recently the Hon'ble Delhi High Court in the case of Kabul Chawla (supra) held as under:--
'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 153A(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 153A 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 complete 8 9 IT(SS)Nos.89 to 91/Kol/2015 M/s. Bircort Vincom Pvt. Ltd.
A.Yrs.2008-09 to 2010-11 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 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 153A 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."
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.
8.4. We find that the decision relied upon by the ld DR in the case of CIT v. Anil Kumar Bhatia [2013] 352 ITR 493/[2012] 211 Taxman 453/24 taxmann.com 98 (Delhi) does not in any manner advance the case of the revenue as admittedly the Hon'ble Delhi High Court in para 24 of its order had held as under:--
"24. We are not concerned with a case where no incriminating material was found during the search conducted under section 132 of the Act. We, therefore, express no opinion as to whether Section 153A can be invoked even in such a situation. That question is therefore left open."
8.5. We find that the decision of Hon'ble Delhi High Court in the case of Kabul Chawla (supra) had duly considered the decisions of Anil Kumar Bhatia (supra); CIT v. Chetan Das Lachman Das [2012] 211 Taxman 61/25 taxmann.com 227 (Delhi - Trib.); Madugula Venu v. DIT [2013] 215 Taxman 298/29 taxmann.com 200 (Delhi); Canara Housing Development Co. v. Dy. CIT [2014] 49 taxmann.com 98 (Kar.); Filatex India Ltd. v. CIT [2014] 229 Taxman 555/49 taxmann.com 465 (Delhi); Jai Steel (India) v. Asstt. CIT [2013] 219 Taxman 223/36 taxmann.com 523 (Raj.); CIT v. Murli Agro 9 10 IT(SS)Nos.89 to 91/Kol/2015 M/s. Bircort Vincom Pvt. Ltd.
A.Yrs.2008-09 to 2010-11 Products Ltd. [2014] 49 taxmann.com 172 (Bom.); CIT v. Continental Warehousing Corpn (Nhava Sheva) Ltd. [2015] 374 ITR 645 and All Cargo Global Logistics Ltd. v. Dy. CIT [2012] 137 ITD 287/23 taxmann.com 103 (Mum.) (SB). Hence it could be safely concluded that the decision of Hon'ble Delhi HC in the case of Kabul Chawla (supra) is the latest one on the impugned issue which had considered the decisions that were quoted by the ld. DR and distinguished the same. We also find that the Hon'ble Gujarat High Court in the case of Principal CIT vs Devangi alias Rupa reported in (2017) 394 ITR 184 (Guj) dated 2.2.2017 on the very same issue had endorsed the view of Kabul Chawla supra .
8.6. We find that the provisions of section 132 of the Act relied upon by the ld DR would be relevant only for the purpose of conducting the search action and initiating proceedings u/s. 153A of the Act. Once the proceedings u/s. 153A of the Act are initiated, which are special proceedings, the legislature in its wisdom bifurcates differential treatments for abated assessments and unabated assessments. At the cost of repetition, we state that in respect of abated assessments (i.e pending proceedings on the date of search), fresh assessments are to be framed by the ld AO u/s. 153A of the Act which would have a bearing on the determination of total income by considering all the aspects, wherein the existence of incriminating materials does not have any relevance. However, in respect of unabated assessments, the legislature had conferred powers on the ld. AO to just follow the assessments already concluded unless there is an incriminating material found in the search to disturb the said concluded assessment. In our considered opinion, this would be the correct understanding of the provisions of section 153A of the Act, as otherwise, the necessity of bifurcation of abated and unabated assessments in section 153A of the Act would become redundant and would lose its relevance. Hence the arguments advanced by the ld. DR in this regard deserves to be dismissed.
10 11IT(SS)Nos.89 to 91/Kol/2015 M/s. Bircort Vincom Pvt. Ltd.
A.Yrs.2008-09 to 2010-11 8.7. In view of the aforesaid findings and respectfully following the judicial precedents relied upon hereinabove, we hold that the additions towards share capital and share premium made in the sums of Rs. 2,41,00,000/- ; Rs. 1,75,00,000/- and Rs 1,00,00,000/- for the Asst Years 2008-09 , 2009-10 and 2010-11 respectively, which were unabated/concluded assessments, on the date of search, deserves to be undisturbed in the absence of any incriminating material found in the course of search. Hence we hold that the ld. AO ought to have only followed the old assessed income either u/s. 143(3) or 143(1) of the Act for the relevant years. Since the issues are addressed on preliminary ground of absence of incriminating materials, we refrain to give our findings on the merits of the additions made towards share capital and share premium. Accordingly the grounds raised by the revenue are dismissed for all the years.
9. In the result, the appeals of the revenue are dismissed.
Order pronounced in the Court on 07.07.2017
Sd/- Sd/-
[A.T.Varkey] [ M.Balaganesh ]
Judicial Member Accountant Member
Dated : 07.07.2017
[RG PS]
Copy of the order forwarded to:
1. M/s. Bircort Vincom Pvt. Ltd., 2C & 2D, Green Acres, 2, Nazar Ali Lane, Back Bagan, Kolkata-700019.
2. D.C.I.T., Central Circle-1(1), Kolkata.
3..C.I.T.(A)-20, Kolkata 4. C.I.T.-Central-I, Kolkata.
5. CIT(DR), Kolkata Benches, Kolkata.
True copy By Order Senior Private Secretary Head of Office/D.D.O., ITAT, Kolkata Benches 11 12 IT(SS)Nos.89 to 91/Kol/2015 M/s. Bircort Vincom Pvt. Ltd.
A.Yrs.2008-09 to 2010-11 12