Income Tax Appellate Tribunal - Delhi
Jakson Engineers Ltd., New Delhi vs Assessee on 29 April, 2008
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH 'D': NEW DELHI
BEFORE SHRI I. C. SUDHIR, JUDICIAL MEMBER AND
SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER
I.T.A.Nos.349 & 350/Del/2013
Assessment Years: 2006-07 & 2007-08
Jakson Engineering Ltd. vs. ACIT
626, 6th Floor, Tower-A, Central Circle-25,
DLF Tower, Jasola,
New Delhi. New Delhi.
PAN: AAACJ1625K.
(Appellant) (Respondent)
I.T.A.Nos.351 & 352/Del/2013
Assessment Years: 2005-06 & 2006-07
Jakson Ltd. vs. ACIT
626, 6th Floor, Tower-A, Central Circle-25,
DLF Tower, Jasola,
New Delhi. New Delhi.
PAN: AAACJ5347C
(Appellant) (Respondent)
I.T.A.Nos.660 & 661/Del/2013
Assessment Years: 2005-06 & 2006-07
ACIT vs. Jakson Engineers Ltd.
Central Circle-25, Room No.331 102, Ratan Jyoti Building,
ARA Centre, Jhandewalan Extn. 18, Rajendra Place
New Delhi. New Delhi.
PAN: AAACJ1625K
(Appellant) (Respondent)
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Appellant by : Shri Ved Jain & Rano Jain, CA
Respondent by : Shri D. K. Mishra, (CIT) DR.
ORDER
PER BENCH The grievance of the assessee against the first appellate order is that the Ld. CIT (A) has erred in rejecting the contention of the assessee that the assessment order framed u/s 153A is bad and thus is liable to be quashed as the same has been framed consequent to a search which itself was unlawful and invalid in the eyes of law (Ground Nos. 1 to 5). In ground no.6 & 7, the assessee has questioned first appellate order whereby Ld. CIT (A) has sustained the disallowance of Rs.7,83,005/- u/s 14A of the Act and disallowance of expenditure to the extent to 2.08% of the total expenditure.
2. The Revenue on the other hand has impugned the first appellate order whereby the Ld. CIT (A) has deleted the addition of Rs.10,69,882/- out of disallowance of Rs.18,52,887/- in assessment year 2006-07 and Rs. 10,69,882/- out of disallowance of Rs.29,39,302/- in assessment year 2007- 08 under the provisions of Rule 8D of I T Rules, 1962 (Ground no.2) and in directing the Assessing Officer to allow depreciation on WDV of computer software expenditure(ground no.3).
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3. Ground no.1 is general in nature. Since the issue involved in ground nos. 1 to 5 of the appeals preferred by the assessee questioning the validity of assessment framed u/s 153A is legal in nature and goes to the root of the matter, we preferred to hear the parties on this issue first and it is being accordingly adjudicated upon before proceeding to other grounds.
4. The facts in brief are that the assessee is engaged in the business of manufacturing and trading of panels, canopies and parts of DG sets, was subjected to search and seizure operations on 10.02.2010. During the course of which undisclosed income of Rs.19.94 crores was found and was surrendered by Shri S. K. Gupta. In response to notice issued u/s 153A it filed return of income at Rs.3,75,75,260/- and assessment was framed at Rs.3,95,03,150/- including the addition of Rs.18,52,887/- on account of disallowance of expenses relating to exempt income and a further disallowance of Rs.75,000/- out of vehicle running and maintenance expenses on account of personal use of directors.
5. Before the Ld. CIT (A), the assessee questioned the validity of assessment order framed u/s 153A of the Act but could not succeed. The Ld. CIT (A) has however given some other relief out of disallowances/ additions resulting in cross appeals before the Tribunal.
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6. In support of the ground nos. 1 to 5 of the appeals of assessee, the Ld. AR while reiterating the submissions made before the Ld. CIT (A) contended that no incriminating material was found during the course of search and the original assessment order u/s 143(3) was framed after thorough scrutiny including the issue of disallowance u/s 14A of the Act before the date of search. The Ld. AR referred to the original proceedings completed u/s 143(3) of the Act made available at page no.55 of the paper book. He submitted that the Assessing Officer issued questionnaire and in response thereof, the assessee had filed explanation on disallowance of expenditure u/s 14A vide letter dated 29.04.2008, a copy has been made available at page no.39 of the paper book. He pointed out that a further clarification was filed vide letter dated 29.04.2008, placed at page no.42 of the paper book, wherein the details of exempt income being dividend on shares were filed. He submitted that again vide letter dated 12.05.2008 made available at page nos.47 and 48 of the paper book, details of dividend earned were again provided. The details of the interest paid was also provided vide letter dated 16.05.2008 made available at page 50 of the paper book. Further clarification was submitted vide letter dated 21.05.2005 on disallowance of expenditure u/s 14A.
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7. The Assessing Officer thereafter passed the order u/s 143(3). Thus the issue of disallowance of expenditure u/s 14A was subject matter of verifications by the Assessing Officer in the original proceedings. He also referred the contents of the assessment order in question to support his contention that no incriminating material was found during the course of search, as the Assessing Officer has also made disallowance on the basis of original return only without referring to any incriminating material being found in the case of the assessee. Thus the order passed by the Assessing Officer is review to its earlier order which is not permissible in the law, submitted the Ld. AR. He argued that it is now a settled law that no addition can be made in a proceeding u/s 153A in the absence of any incriminating material being found during the course of the search. In this regard he placed reliance on the following case laws:
i) Kusum Gupta vs. DCIT reported in ITA No.4873/Del/2009 dated 28.03.2013.
ii) ACIT vs. Asha Katarial reported in ITA No. 3105/De/2011 dated 20th May, 2013.
iii) CIT vs. LachmanDass Bhatia reported in 77 DTR 17 (Del) Dt. 07.05.2012.
iv) Gurinder Singh Bawa vs. DCIT reported in ITA No.4214/Del/2011 dated 28.06.2013.
v) MGF Automobiles Ltd. vs. ACIT reported in ITA No.4214/Del/2011 dated 28.06.2013.
vi) ACIT vs. Pratibha Industries Ltd. reported in 141 ITD 151 dated 19.12.2012.
vii) ACIT vs. PACL India Ltd. ITA no. 2637/Del/2010 dated 20.06.2013 6
viii) SSP Aviation Ltd. vs. DCIT reported in 346 ITR 177 (Del) dated 20.03.2012.
8. The Ld. CIT, Departmental Representative on the other hand, tried to justify the orders of the authorities below on the issue of validity of the assessment framed u/s 153A of the Act. He submitted that there is no requirement of finding of incriminating material during the course of search to initiate proceedings u/s 153A of the Act and framed assessment there under in furtherance thereof. Any objection to the validity of proceedings initiated u/s 153A should have been raised by the assessee at the first available opportunity but the assessee in the present case has not raised such objection before the Assessing Officer and participated in the assessment proceedings. Thus there is no question of raising such issue at the appellate stage of the proceedings. He contended that the only requirement for initiation of proceedings u/s 153A is conduction of search which fact has not been denied in the present case. Under the provisions of section 153A, the Assessing Officer is bound to issue notice to the assessee to furnish returns for each assessment year falling within the six assessment years immediately preceding the assessment year relevant to the previous year in which the search or requisition was made. He submitted that the proceedings u/s 153A are different from block assessment which was the undisclosed income and the regular assessment proceedings were reserved, resulting in multiple 7 assessments. U/s 153A, however the Assessing Officer has the power to assess or reassess the total income of the six assessment years in question in separate assessment orders. He placed reliance on the following case laws:
i) Gopal Lal Badruka vs. DCIT (2012) 346 ITR 106 (AP)
ii) Anil Bhatia: 352 ITR 493(Del) & Ors.
9. Having gone through the orders of the authorities below, material available on record as well as the decisions relied upon, we find that in the assessment order there is no any reference of incriminating material found during the course of search on the issue of disallowance of expenditure u/s 14A or other disallowances have been made in the assessment order framed u/s 153A read with section 143(3) of the Act. An identical issue on the validity of notice issued u/s 153A and assessment framed there under in absence of any incriminating material during the course of search, was referred to for the adjudication by the special bench of the Tribunal in the case of All Cargo Global Logistic vs. DCIT reported in 137 ITRD 287(SB). In that case it was held that any assessment that are abated, the Assessing Officer retains the original jurisdiction as well as that is conferred on him u/s 153A for which assessment shall be made for each assessment year separately. In other cases in addition to the income that have already been 8 assessed the assessment u/s 153A will be made on the basis of incriminating material which in the context of relevant provisions means:
i) Books of account, and other documents found in the course of search but not purchased in the course of original assessment.
ii) Undisclosed income or property discovered during the course of search.
10. Following the decision of Special Bench, the Delhi Bench of the Tribunal has also decided the issue in favour of the assessee in the cases of Kusum Gupta vs. DCIT (Supra). The Delhi bench of the Tribunal in the above cited cases was having occasion to discuss the decisions relied upon by the Ld. Departmental Representative including the decision of the Hon'ble Delhi High Court in the case of Anil Bhatia (Supra). Thus when in the present case the original assessment was already framed u/s 143(3) of the Act before the date of search and no incriminating material was found connected to the assessee during the course of search, the Assessing Officer was not justified in initiating proceedings u/s 153A of the Act and framing assessment there under in furtherance thereof.
11. The decision relied upon by the Ld. CIT, Departmental Representative having distinguishable facts are not helpful to the Revenue. In the case of Gopal Lal Bhadruka vs. DCIT (Supra) during the course search and seizure operations it came to light that Mr. Gopal had obtained a general power of 9 attorney to develop the Sikand property dealing to two persons and it was revealed that the sale consideration as per the sale deed did not tally with the actual payments made by the purchasers.
12. Like wise in the case of Anil Bhatia (Supra) before the Hon'ble jurisdictional Delhi High Court, the Hon'ble Delhi High Court did not agree with the finding of the Tribunal that the unsigned paper (undertaking/ agreement) found during the course of search was not the document much less incriminating material since it was not signed by the parties. The Hon'ble High Court was pleased to hold that the said paper containing the details of transaction connected with the assessee was in the category of document/ incriminating material even though, the paper is not signed by the parties thereto but was sufficient to give information regarding the undisclosed transaction. However in the present case before us, no document was found during the course of search revealing some undisclosed transaction or income.
13. We thus decide the issue of validity of initiation of proceedings u/s 153A of the Act and the assessment framed there under in furtherance to the said notice in favour of the assessee. In result we hold that the notice issued u/s 153A in absence of incriminating material was invalid and accordingly the assessment framed in furtherance thereto is held null and void and is 10 quashed. The related grounds no.1 to 5 are thus allowed in favour of the assessee.
14. In view of the above finding whereby the very assessment framed u/s 153A read with section 143(3) of the Act has been held invalid and quashed, the other grounds of the appeals preferred by the parties on the issues of justification of disallowances/ additions made in the said assessment order sustained/ deleted by the Ld. CIT (A) have become infructuous. The remaining grounds of the appeals are accordingly disposed off as not maintainable being turning in a academic only. In result appeal s preferred by the assessee are allowed on the issue of validity of notice issue u/s 153A and assessment framed thereunder and those preferred by the Revenue questioning the relief granted by the Ld. CIT (A) on the issue of disallowances /additions, are dismissed.
The order pronounced in the open court on 11th .04.2014.
Sd/- Sd/-
(Shamim Yahya) (I. C. Sudhir)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 11th April, 2014.
*S. Sinha*
Copy of the order forwarded to:-
1. Appellant
2. Respondent
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3. CIT
4. CIT(A)
5. DR
By Order
Deputy Registrar, ITAT.