Income Tax Appellate Tribunal - Chandigarh
Dcit, Cc-Ii, Chandigarh vs M/S Chandigarh Developers Pvt. Ltd., ... on 24 September, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
DIVISION BENCH 'A', CHANDIGARH
BEFORE MS.DIVA SINGH, JUDICIAL MEMBER
AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER
ITA No.994/Chd/2017
(Assessment Year : 2010-11)
The D.C.I.T., Vs. M/s Chandigarh Developers Pvt. Ltd.,
Central Circle-II, SCO 49-50, Sector 26,
Chandigarh. Chandigarh.
PAN: AADCC6359G
(Appellant) (Respondent)
Appellant by : Shri Gulshan Raj, CI T DR
Respondent by : Shri Ashwani Kumar, CA
Date of hearing : 09.08.2018
Date of Pronouncement : 24.09.2018
O RDE R
PER ANNAPURNA GUPTA, A.M.:
Th e p r e s e n t a p p e a l h a s b e e n f i l e d b y t h e R ev e n u e a g a i n s t th e o r der o f C om m i s s i on e r o f I n c o m e Ta x ( A p p e a l s) - 3 , G u r g a on [ h e re i n a f t e r r e f e rr e d t o a s CI T( A p p ea l s ) ] , da t ed 3 1 . 0 3 . 2 0 17 , r e l at i n g t o a s s e s s men t y e a r 20 1 0 - 1 1.
2. Th e Department is aggrieved by the action of the L d . CI T( A p p e a l s ) in d e l et i n g th e a d d i ti o n m ad e by t he A s s e s s i n g O f f i cer o n a c c ou n t o f u n s e c u r ed l o a ns o f R s . 1 c r o r e , a s u ne x p l a i n e d cr e d i t u n de r s e c ti o n 68 o f t h e I n co m e Ta x A c t , 1 9 6 1 ( i n s h o r t ' th e A c t' ) .
3. Briefly s t a te d , search & s e i z ur e o p e r a t i o n, under s e c t i o n 1 3 2 o f th e A c t , w a s c a r ri e d o u t a t t h e pr e m i s e s of t h e a s s e ss e e o n 0 4 . 1 0 . 2 01 2 . I n t h e a s se s s m en t f r a m ed 2 ITA No.994/Chd/2017 A.Y. 2010-11 t h e r e a f t er , p u r su a n t to the s ea r c h carried ou t at the a s s e s s e e 's p r e mi s e s , a d d i ti o n u /s 6 8 o f t h e A c t w a s m a d e o f R s . 1 c r o r e , r ec e i v e d a s s h a r e a p p l i c a t i o n m o n e y f r o m M / s R S M M e t a l s L t d . a n d M / s O ct am a c S o f t w ar e P ri v a t e L t d. , b e i n g R s . 5 0 l a cs e a c h , t r e a t i n g t h e s a m e a s u n e x p l a i n ed . Th e C I T( A p p e a l s) d e l e t e d t h e ad d i t i o n s so m ad e f o r t h e r e a s o n t h a t n o i n c r i m i n a ti n g m at e r i a l w a s f o un d d u r i n g t h e c o u r s e o f s e a r ch. Th e L d . CI T( A p pe a l s ) h el d t h a t at t h e t i m e o f s e a r ch p r o ce ed i n g s , as s e s s men t s f o r t h e i m pu g n e d y e ar w e r e n ot p e nd i n g a n d ha d , th e r e fo r e , n ot a b at e d . H e f u r th er f o u n d t h a t no i nc r i m i n a ti n g m a t er i a l o r e v i d e n c e w a s f o u nd a n d s e i z e d d u r i n g t h e c o u r s e of s e a r c h , n o r an y a d d i t i on m a d e e m a n a t i ng o u t o f t h e s e a r c h p r o c e e d i n gs . Th e r e f o r e , r e l y i n g o n va r i ou s j u d i c i al d e c i s i o n s , t h e Ld . CI T( A p p e a l s ) h e l d t h a t t h e i mp u g n e d a d d i t i o ns c o u l d n o t h a v e b e e n m a d e i n t h e f a c t s o f t h e p r es e n t c a se i n th e or d e r p a s s e d u/ s 153A of the Ac t . Th e L d . C I T( A p p e a l s ) r el i e d upon the d e c i s i o n o f t h e Co o r d i n a t e B e n c h o f t h e Tr i b u n a l i n t h e c a se o f M / s M a l a B u i l d e r s P v t. L t d . Vs . A CI T i n I TA N o s . 4 3 3 to 4 3 7 / C h d / 20 1 7 ,wherein the Tr i b u n a l h a d f u r th e r r e l ie d u p o n t h e d e ci s i on o f t h e H o n ' bl e B o m b a y H i gh C ou r t i n t h e c a s e o f CI T V s . M / s M u r l i Ag r o P r o d u c t s Pv t . L td . i n I TA N o . 3 6 o f 2 0 0 9 a nd i n t h e c a s e o f C I T V s . K a b u l Ch a w l a , 2 34 Ta x m a n 3 0 0 ( D e l h i ) i n w h i c h t he H o n ' b l e H i g h C o u r t h a d u n a n i m o u sl y h e l d t h a t i n t h e a bs e n c e o f an y i n cr i m i n a t i ng m a t e r i a l fo u n d d u r i n g t h e co u rs e o f s e a r c h act i o n , w h e n t h e r e w a s n o p en d i n g a s s es s m en t w h i c h co u l d b e s a i d t o 3 ITA No.994/Chd/2017 A.Y. 2010-11 h a v e a b a t e d o n t h e d a t e o f s e a rc h , t h e a d d i t i o n c o u l d n o t have been made.
4. B e f o r e u s , th e Ld . c o u n se l fo r as s e s s e e p l a c e d co p y of t h e o r de r p as s e d b y I TA T C h a n d i g a r h B en c h i n th e c a s e of D CI T V s . M / s B h a r a t N e t Te c h no l o g y L t d . i n I TA N o s . 9 8 3 & 9 8 4 / C h d / 20 1 7 dated 1 3 . 1 1. 2 01 7 , and s t a t ed that the p r e s e n t a p p e a l i s s q u a re l y co v e re d b y t h e a f o r e sa i d d e ci s i on o f t h e Tr i b u n a l w h e r e i n t h e f a cts w e r e i d e n t i c al a n d e v e n i d e n t i c a l g r o un ds h a d b ee n r ai se d b y t he R e ven u e i n i t s appeal.
5. Th e L d . D R w h e n c o n f r o n t ed w i th t h e f i n d i n g s of t h e C I T( A p p e al s ) , f a i r l y a d mi t t e d t h at n o i n c r i mi n a t i n g m a t er i al w a s f o u n d d ur i ng t h e s e a r c h and t h e o r i g i na l as s e s s m e n t p r o c e e d i ng s s t o od c o m p l e t ed o n th e d a t e o f se a r ch . Th e L d . D R w a s a s k e d t o c o n f i r m f r o m t h e c o n c e r n e d A s s e s s i ng O f f i c e r a s t o w ha t i n c r i m i n at i n g m a t e r i a l w a s f ou n d d u r i ng s e a r c h . I n r e s po n s e t h e L d . DR f i l e d c o p y o f t h e r e p l y received f r om the Assessing Of f i c e r dated 2 9 .3 . 2 0 1 8 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 4 ITA No.994/Chd/2017 A.Y. 2010-11 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, Bhagwan 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, 1961on Shri Bhavnesh Gupta on 5 ITA No.994/Chd/2017 A.Y. 2010-11 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 o a t h o n 0 4 . 1 0 . 2 0 1 2 , wh e r e i n h e h a s a d m i t t e d t h a t t h e s e c o m p a n i e s a r e suitc ase co mpanies with dummy direc tors and du mmy registered off ice 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 t o t h e s a m e t he L d . DR s t a t e d t h a t t he o n l y i n c r i m i n at i n g ma t e r i a l f o un d wa s Balance S h ee t of the assessee r e l a ti ng to as s e s s men t year 2 0 1 2 -1 3 , i . e the s u c c e e d i ng A.Y, showing loan received from M/s RSM Metals. Th e case was t h e r e a f te r heard on 1 0 / 0 4 / 1 8 . Th e r e af t e r t he c a se w as f i x e d f o r s e e k i n g f u r t her c l a r i f i ca t i o n f r om t h e L d. D R a s t o h o w th e d o c um e n t s t at e d by the AO in his l e tt e r d t . 2 0 - 0 3- 1 8 , c o n s t i t ut e d i n c r i m i n at i n g material in the present c a se . 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 6 ITA No.994/Chd/2017 A.Y. 2010-11 h e h a d g on e t hr o u g h a l l t h e do c u m e n t s r e l a t i n g t o t he inquiries made by t he A s ses s i n g Of f i c e r during the a s s e s s m e nt p r oc e e d i n g s a nd f ou n d no r e f e r e nc e to any d o c u m e n t u n e a rth e d d u r i n g s ea r ch r e l a ti n g to t h e i s s u e o n w h i c h a d di t i o n h a d b e e n m a d e & w h i c h w a s c on f r o n t e d to t h e a s s e s s ee . A t t h e s a m e t h e Ld . D R a g r e e d t ha t t h o u g h t h e i s s u es s t o o d c o v e r e d by t h e o r d e r o f th e I . T.A . T. i n t h e c a s e o f M / s B h ar a t N e t Te c h n o l og y ( s u p r a ) , h e r e l i e d o n h i s s u b m i s s i on s o n th e i s s u e m a d e i n w r i t i n g a s u n de r :
"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.com 215 (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 taxmann.com 412 (Delhi) (para 4),
(ii) CIT v. Continental Warehousing Corpn. (Nhava Sheva) Ltd. [2015] 374 ITR 645/232 Taxman 270/58 taxmann.com 78 (Bom.) (para 4) 7 ITA No.994/Chd/2017 A.Y. 2010-11
(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 taxmann.com 264 (Kar.) (para 4),
(v) CIT v. ST. Francies Clay Decor Tiles [2016] 240 Taxman 168/70 taxmann.com 234 (Ker.) (para 5) and
(vi) CIT v. Promy Kuriakose [2016] 386 ITR 597 (Ker.) (para 5).
2. CIT Vs Rai Kumar Arora F20141 52 taxmann.com 172 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 Alld. [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 taxmann.com 308 (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 8 ITA No.994/Chd/2017 A.Y. 2010-11
6. CIT Vs Anil Kumar Bhatia (24 taxmann.com 98, 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 taxmann.com 465) (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 ri val contenti ons. We fi nd no r eason to i nterfere i n th e order of the CI T( Appeal s) who h as del eted the addi ti ons made i n the i mpugn ed case on fi ndi n g that the same was not based on any i ncri mi nati ng materi al found duri ng the cou rse of search and assessment for the i mpugned year had not abated. The fact that no i ncri mi nati ng materi al was found has been admi tted at Bar by the Ld. DR before us. The onl y document poi nted out by the Revenue, we fi nd, i s a Bal anc e Sheet that too pertai ni ng to the succeedi ng year and whi ch thro ws no l i ght absol utel y on the facts l eadi ng to addi ti ons made i n the i mpugned year on account of share appl i cati o n mone y of Rs .50 l akhs recei ved from M/s RSM Metal s and M/s. Octomac Soft ware 9 ITA No.994/Chd/2017 A.Y. 2010-11 Pvt. Ltd. The s ai d document, we fi nd, refl ects onl y some unsecured l oans taken by the assessee from the t wo compani es that too i n the succeedi ng year onl y and not i n the i mpugned year. Therefore i t i s an admi tted fact that no i ncri mi nati ng materi al was foun d duri ng search conducted on the assessee. The fact that the assessment for the i mpugned year h as not abated i s al so an undi sput ed fact. I n vi e w of the sam e we hol d that the Ld. CI T( Ap peal s) has ri ghtl y del eted the addi ti ons made fol l o wi ng the proposi ti on l ai d do wn by H on'bl e Del hi hi g h court i n case of Kabul Cha wl a ( supra) , that no addi ti on to be made i n assessment framed u/s 153A of the Act i n absence of any i ncri mi nati ng materi al , where assessments were not abated. The grounds rai sed by the Re venue to the effe ct that the deci s ion of the Hon'bl e Del hi Hi gh Court i n the case of Kabul Cha wla has been di sti ngui shed i n the case of Smt. Da ya wanti Vs. CI T i n I TA No.357/2015 dated 27.10.20 16, has been de al t wi th by I TAT i n the case of Bharat Net Technol og y( supra) , wherei n i t has been noted that the deci si on i n the case of Da ya wanti ( supra|) had bee n di scussed i n t he subsequent d eci s i on of the Hon'bl e Del hi Hi gh Court i n th e case of Pr CI T v/s Meeta Gutguti a Propri etor M/s. Fern 'N' Petal s I TA NO. 306/2017 and others date d 25.05.2017, w herei n i t was ob served that i ncri mi nati ng materi al was foun d i n that case, ho wever i n the case of Meeta Gutguti a ( supra) , no i ncri mi nati ng materi al was found and hence addi ti ons made were not justi fi ed. The sa me has remai ned uncontroverted before us. 10 ITA No.994/Chd/2017
A.Y. 2010-11 In vi e w of the abov e we do not fi n d any i nfi rmi t y i n the order of the CI T( Appeal s) i n del eti ng the i mpugned addi ti ons. The grounds of a ppeal rai sed by t he Revenue are, therefore, di smi ssed.
8. In the r es u l t , the a p p e al of the R e v e nu e is d i s m i s s e d.
O r d e r p r on o u n c ed i n t h e o p e n cou r t .
Sd/- Sd/-
(DIVA SINGH) (ANNAPURNA GUPTA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated :24 t h September, 2018
*Rati*/PK
Copy to:
1. The Appellant
2. The Respondent
3. The CIT(A)
4. The CIT
5. The DR
Assistant Registrar,
ITAT, Chandigarh