Gujarat High Court
The Principal Commissioner Of Income ... vs Birju Chhotalal Shah on 1 August, 2023
Author: Biren Vaishnav
Bench: Biren Vaishnav
NEUTRAL CITATION
C/TAXAP/375/2023 ORDER DATED: 01/08/2023
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/TAX APPEAL NO. 375 of 2023
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THE PRINCIPAL COMMISSIONER OF INCOME TAX (CENTRAL), SURAT
Versus
BIRJU CHHOTALAL SHAH
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Appearance:
MR.VARUN K.PATEL(3802) for the Appellant(s) No. 1
for the Opponent(s) No. 1
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CORAM:HONOURABLE MR. JUSTICE BIREN VAISHNAV
and
HONOURABLE MR. JUSTICE DEVAN M. DESAI
Date : 01/08/2023
ORAL ORDER
(PER : HONOURABLE MR. JUSTICE DEVAN M. DESAI) [1] The appellant has preferred this Tax Appeal under Section 260A of the Income Tax Act, 1961. This Tax Appeal is arising out of the order dated 13.07.2022 passed by the Income Tax Appellate Tribunal in IT(SS)A No.135/Ahd/2021 for the Assessment Year 2012-13.
[2] Heard learned Senior Standing Counsel Mr.Varun Patel for the appellant.
[3] Learned advocate for the appellant has submitted that, a search under Section 132 of the Page 1 of 18 Downloaded on : Sat Sep 16 23:43:49 IST 2023 NEUTRAL CITATION C/TAXAP/375/2023 ORDER DATED: 01/08/2023 undefined Income Tax Act, 1961, was initiated in cube group cases on 12.02.2015. A search was also conducted at the premises of the assessee on 12.02.2015. Thereafter, notice under Section 153A of the Income Tax Act, 1961, (hereinafter referred to as 'the Act') came to be issued on 05.10.2015.
3.1 The assessee filed its return of income under Section 153A of the Act on 15.12.2015 declaring total income at Rs.67,42,910/-. A notice under Section 143(2) of the Act, came to be issued on 16.12.2015, and thereafter notice under Section 142(1) of the Act alongwith a detailed questionnaire was issued to the assessee on 07.10.2016.
3.2 On verification of details of income from Long Term Capital Gain, it was noticed by the Revenue that the assessee had claimed Long Term Capital Gain of Rs.22,89,898/- for the sale of shares of M/s. Karma Industries Ltd. (formerly known as M/s. Scana Colour India Ltd.).
3.3 Vide order dated 27.12.2016, the Assessing Officer added Rs.22,89,898/- in the total income and thus, the total assessed income as per the Assessment Order was Rs.90,32,808/-.
Page 2 of 18 Downloaded on : Sat Sep 16 23:43:49 IST 2023NEUTRAL CITATION C/TAXAP/375/2023 ORDER DATED: 01/08/2023 undefined 3.4 Against the order of the Assessing Officer, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals)-12, Ahmedabad, in addition to Rs.22,89,898/- made by the Assessing Officer on account of bogus Long Term Capital Gain. Vide order dated 13.07.2022, appeal of the assessee was partly allowed and exemption claimed by the assessee under Section 10(38) of the Act was granted.
3.5 Against the said order, the Revenue preferred an appeal before the Income Tax Appellate Tribunal, Ahmedabad. The said appeal of the Revenue was decided on 13.07.2022, against which, the present Tax Appeal has been preferred by the Revenue.
[4] Learned advocate for the appellant has proposed the following substantial questions of law for consideration of this Court:
"2(a) Whether in the facts and circumstances of the case and in law, the Hon'ble ITAT has erred in dismissing the appeal of the Revenue, by holding that any addition/disallowance during the assessment under section 153A has to be confined to the incriminating material found during the course of search under section 132(1) of the Act, even though there is no stipulation in section 153A of the Act?Page 3 of 18 Downloaded on : Sat Sep 16 23:43:49 IST 2023
NEUTRAL CITATION C/TAXAP/375/2023 ORDER DATED: 01/08/2023 undefined
(b) Whether in the facts and circumstances of the case and in law, the Hon'ble ITAT has erred in not appreciating that Section 153A requires a notice to be issued requiring the assessee to furnish his return of income in respect of each assessment year falling within six assessment years and to assessee or re-assess the total income of those six assessment years, and that the scheme of assessment or re-assessment of the total income of a person searched could be brought to tax, if no addition is allowed to be made for those six assessment years in the absence of any seized incriminating material?
(c) Whether in the facts and circumstances of the case and in law, the Hon'ble ITAT has erred in dismissing the appeal of the Revenue and affirmed the decision of the Ld.CIT(A) wherein the Ld.CIT(A) in his appeal order has stated that no disallowance of the exemption of LTCG could be made as the same was part of the books of accounts and no incriminating material to the same was found during the course of search and relied upon the judicial pronouncement in the case of Pr.CIT Vs. Saumya Construction Pvt. Ltd., despite the fact that Department has not accepted the decision and Review Petition filed by the Department before the Hon'ble Supreme Court is still pending?
(d) Whether in the facts and circumstances of the case and in law, the Hon'ble ITAT has erred in deleting the addition of Rs.22,89,898/- made on account of claim of bogus LTCG u/s 10(38) of the Act, by erroneously observing that no incriminating Page 4 of 18 Downloaded on : Sat Sep 16 23:43:49 IST 2023 NEUTRAL CITATION C/TAXAP/375/2023 ORDER DATED: 01/08/2023 undefined materials was found during the course of search and without appreciating the fact that the department is in possessing of the information regarding such accomodation entry in form of LTCG arranged by the assessee from the Kolkata based entry providing company viz. M/s. Karma Industries Ltd., which was accepted by Shri Ramesh Kumar Kaithan, one of the directors of the entry providing company i.e. M/s. Karma Industries Ltd. before the Investigation Wing?
[5] Learned advocate for the appellant has taken us through the impugned decision of the learned Tribunal and has submitted that the learned Tribunal has gravely erred in not allowing the appeal of the Revenue and further submitted that the learned Tribunal has erred by holding that any addition/disallowance during the assessment under Section 153A of the Act has to be confined to the incriminating material found during the course of search under Section 132(1) of the Act.
[6] It is further submitted by the learned advocate for the appellant that the learned Tribunal has erred in not appreciating that Section 153A requires a notice to be issued requiring the assessee to furnish his return of Page 5 of 18 Downloaded on : Sat Sep 16 23:43:49 IST 2023 NEUTRAL CITATION C/TAXAP/375/2023 ORDER DATED: 01/08/2023 undefined income in respect of each assessment year falling within Six Assessment Years, and to assess or reassess the total income of those Six Assessment Years, if no addition is allowed to be made for Six Assessment Years in the absence of any seized incriminating material.
[7] We have perused the impugned decision of the learned Tribunal as well as learned CIT(A) has taken into consideration the decision rendered by this Court in the case of CIT Vs. Saumya Construction Pvt. Ltd (Tax th Appeal No.24 of 2016) dated 14 March, 2016, wherein it is observed that in absence of incriminating material, no addition can be made in the Assessment Order. It has also observed that no disallowance of exemption of Long Term Capital Gain could be made as the same was part of books of accounts and return of income. It has also been observed by the learned CIT(A) that no addition could be made on the basis of the statement of third party and without having incriminating documents found during the course of search at the place of assessee. The learned Tribunal has observed that there was no assessment pending and no abatement of the assessment originally completed for the year under consideration.
Page 6 of 18 Downloaded on : Sat Sep 16 23:43:49 IST 2023NEUTRAL CITATION C/TAXAP/375/2023 ORDER DATED: 01/08/2023 undefined [8] There is a concurrent findings of fact regarding non discriminating material/documents found during the course of search place of the assessee.
[9] So far as the present case on hand is concerned, this Court would consider the decisions of the Hon'ble Supreme Court as well as the Co-ordinate Bench of this Court in the case of Principal Commissioner of Income-tax, Central-3 Vs. Abhisar Buildwell (P) Ltd. reported in (2023) 149 taxmann.com 399 (SC) and in the case of Principal Commissioner of Income Tax, Vadodara-3 Vs. Narmada Chematur Petrochemicals Ltd in Tax Appeal No.165 of 2021 decided on 14.07.2021.
[10] In the case of Principal Commissioner of Income- tax, Central-3 Vs. Abhisar Buildwell (P) Ltd., the Hon'ble Supreme Court has observed in para-7 as under:-
"7. At the outset, it is required to be noted that as such various High Courts, namely, Delhi High Court, Gujarat High Court, Bombay High Court, Karnataka High Court, Orissa High Court, Calcutta High Court, Rajasthan High Court and the Kerala High Court have taken the view that no addition can be made in respect of completed/unabated assessments in absence of any incriminating material. The lead judgment is by the Delhi High Court in the case of Kabul Chawla (supra), which has been subsequently followed and Page 7 of 18 Downloaded on : Sat Sep 16 23:43:49 IST 2023 NEUTRAL CITATION C/TAXAP/375/2023 ORDER DATED: 01/08/2023 undefined approved by the other High Courts, referred to hereinabove. One another lead judgment on the issue is the decision of the Gujarat High Court in the case of Saumya Construction (supra), which has been followed by the Gujarat High Court in the subsequent decisions, referred to hereinabove. Only the Allahabad High Court in the case of Pr. Commissioner Of Income Tax v. Mehndipur Balaji, 2022 SCC OnLine All 444 : (2022) 447 ITR 517 has taken a contrary view.
7.1 In the case of Kabul Chawla (supra), the Delhi High Court, while considering the very issue and on interpretation of Section 153A of the Act, 1961, has summarised the legal position as under:
Summary of the legal position
38. 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 Page 8 of 18 Downloaded on : Sat Sep 16 23:43:49 IST 2023 NEUTRAL CITATION C/TAXAP/375/2023 ORDER DATED: 01/08/2023 undefined 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 153 A 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 completed 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 153 A only on the basis of some incriminating material unearthed during the course of search or Page 9 of 18 Downloaded on : Sat Sep 16 23:43:49 IST 2023 NEUTRAL CITATION C/TAXAP/375/2023 ORDER DATED: 01/08/2023 undefined 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."
7.2 Thereafter in the case of Saumya Construction (supra), the Gujarat High Court, while referring the decision of the Delhi High Court in the case of Kabul Chawla (supra) and after considering the entire scheme of block assessment under Section 153A of the Act, 1961, had held that in case of completed assessment/unabated assessment, in absence of any incriminating material, no additional can be made by the AO and the AO has no jurisdiction to re-open the completed assessment. In paragraphs 15 & 16, it is held as under:
"15.On a plain reading of section 153A of the Act, it is evident that the trigger point for exercise of powers thereunder is a search under section 132 or a requisition under section 132A of the Act. Once a search or requisition is made, a mandate is cast upon the Assessing Officer to issue notice under section 153A of the Act to the person requiring him to furnish the return of income in respect of each assessment year falling within six assessment years immediately preceding the' assessment year relevant to the previous year in which such search is conducted or requisition is made and assess or reassess the same. Since the assessment under section 153A of the Act is linked with search and requisition under sections 132 and 132A of the Act, it is evident that the object of the section is to bring to tax the undisclosed income which is found during the course of or pursuant to the search or requisition. However, instead of the earlier regime of block assessment whereby; it was only the undisclosed income of the block period that was assessed, section 153A of the Act seeks to assess the total income for the Page 10 of 18 Downloaded on : Sat Sep 16 23:43:49 IST 2023 NEUTRAL CITATION C/TAXAP/375/2023 ORDER DATED: 01/08/2023 undefined assessment year, which is clear from the first proviso thereto which provides that the Assessing Officer shall assess or reassess the total income in respect of each assessment year, falling within such six assessment years. The second proviso makes the intention of the Legislature clear as the same provides that assessment or reassessment, if any, relating to the six assessment years referred to in the sub-section pending on the date of initiation of search under section 132 or requisition under section 132A, as the case may be, shall abate. Sub-section (2) of section 153A of the Act provides that if any proceeding or any order of assessment or reassessment made under sub-section (1) is annulled in appeal or any other legal provision, then the assessment or reassessment relating to any assessment year which had abated under the second proviso would stand revived. The proviso thereto says, that such revival shall cease to have effect if such order of annulment is set aside. Thus, any proceeding of assessment or reassessment falling within the, six assessment years prior to the search or requisition stands abated and the total income of the assessee is required to be determined under section 153A, of the Act. Similarly, sub- section (2) provides for revival of any assessment or reassessment which stood abated, if any proceeding or any order of assessment or reassessment made under section 153A of, the Act is annulled in appeal or any other proceeding.
16. Section 153A bears the heading "Assessment in case of search or requisition". It is well settled as held by the Supreme Court in a catena of decisions that the heading of the, section can be regarded as a key to the interpretation of the operative portion of, the section and if there is no ambiguity in the language or if it is plain and clear, then the heading used in the section strengthens that meaning From the heading of section 153, the intention of the Legislature is clear, viz, to provide for assessment in Page 11 of 18 Downloaded on : Sat Sep 16 23:43:49 IST 2023 NEUTRAL CITATION C/TAXAP/375/2023 ORDER DATED: 01/08/2023 undefined case of search and requisition. When, the very purpose of the provision is to make assessment in case of search or requisition, it goes without saying that the assessment has to have relation to the search or requisition. In other words, the assessment, should be connected with something found during the search or requisition, viz., incriminating material which reveals undisclosed income Thus, while in view of the mandate of sub-section (1) of section 153A of the Act, in every case where there is a search or requisition, the Assessing Officer is obliged to issue notice to such person to furnish returns of income for the six years preceding the assessment year relevant to the previous year in which the search is conducted or requisition is made, any addition or disallowance can be made only on the basis of material collected during the search or requisition. In case no incriminating material is found, as held by the Rajasthan High Court in the case of Jai Steel (India) v. Asst. CIT (supra), the earlier assessment would have to be reiterated. In case where pending assessments have abated, the Assessing Officer can pass assessment orders for each of the six years determining the total income of the assessee which would include income declared in the returns, if any, furnished by the assessee as well as undisclosed income, if any, unearthed during the search or requisition. In case where a pending reassessment under section 147 of the Act has abated, needless to state that the scope and ambit of the assessment would include any order which the Assessing Officer could have passed under section 147 of the Act as well as under section 153A of the Act."
[11] In the case of Principal Commissioner of Income Tax, Vadodara-3 Vs. Narmada Chematur Petrochemicals Ltd, Page 12 of 18 Downloaded on : Sat Sep 16 23:43:49 IST 2023 NEUTRAL CITATION C/TAXAP/375/2023 ORDER DATED: 01/08/2023 undefined in paras 7 & 8, this Court has observed as under:-
7. In view of the above, the issue having already been duly considered by the ITAT following the decision of the Full bench of this Court, the Court is of the opinion that the question proposed by the appellant in the present Appeal could not be said to be substantial question of law within the meaning of Section 260A of the said Act. It may be noted that the Appeal under Section 260A could be admitted only on the High Court being satisfied that the case involves a substantial question of law.
The Supreme Court in the case of M. Janardhana Rao versus Joint Commissioner of Income Tax reported in (2005) 2 SCC 324, while dealing with the scope of Section 260A of the Income Tax Act, 1961, observed as under : -
"14. Without insisting on the statement of substantial question of law in the memorandum of appeal and formulating the same at the time of admission, the High Court is not empowered to generally decide the appeal under Section 260A without adhering to the procedure prescribed under Section 260A. Further, the High Court must make every effort to distinguish between a question of law and a substantial question of law. In exercise of powers under Section 260A, the findings of fact of the Tribunal cannot be disturbed. It has to be kept in mind that the right of appeal is neither a natural nor an inherent right attached to the litigation. Being a substantive statutory right, it has to be regulated in accordance with law in force at the Page 13 of 18 Downloaded on : Sat Sep 16 23:43:49 IST 2023 NEUTRAL CITATION C/TAXAP/375/2023 ORDER DATED: 01/08/2023 undefined relevant time. The conditions mentioned in Section 260A must be strictly fulfilled before an appeal can be maintained under Section 260A. Such appeal cannot be decided on merely equitable grounds.
15. An appeal under Section 260A can be only in respect of a 'substantial question of law'. The expression 'substantial question of law' has not been defined anywhere in the statute. But it has acquired a definite connotation through various judicial pronouncements. In Sir Chunilal V. Mehta & Sons Ltd. v. Century Spinning & Mfg. Co. Ltd., AIR (1962) SC 1314, this court laid down the following tests to determine whether a substantial question of law is involved. The tests are: (1) whether directly or indirectly it affects substantial rights of the parties, or (2) the question is of general public importance, or (3) whether it is an open question in the sense that issue is not settled by pronouncement of this Court or Privy Council or by the Federal Court, or (4) the issue is not free from difficulty, and (5) it calls for a discussion for alternative view.
There is no scope for interference by the High Court with a finding recorded when such finding could be treated to be a finding of fact."
8. Again the Supreme Court in case of Vijay Kumar Talwar versus Commissioner of Income Tax in (2011) 330 ITR 1 considered the issue of substantial question in context of Section 260A of the IT Act and observed as under:
"18. It is manifest from a bare reading of the Section that an appeal to the High Court from a Page 14 of 18 Downloaded on : Sat Sep 16 23:43:49 IST 2023 NEUTRAL CITATION C/TAXAP/375/2023 ORDER DATED: 01/08/2023 undefined decision of the Tribunal lies only when a substantial question of law is involved, and where the High Court comes to the conclusion that a substantial question of law arises from the said order, it is mandatory that such question(s) must be formulated. The expression "substantial question of law" is not defined in the Act. Nevertheless, it has acquired a definite connotation through various judicial pronouncements. In Sir Chunilal V. Mehta & Sons, Ltd. Vs. Century Spinning and Manufacturing Co. Ltd., AIR 1962 SC 1314 a Constitution Bench of this Court, while explaining the import of the said expression, observed that:
"The proper test for determining whether a question of law raised in the case is substantial would, in our opinion, be whether it is of general public importance or whether it directly and substantially affects the rights of the parties and if so whether it is either an open question in the sense that it is not finally settled by this Court or by the Privy Council or by the Federal Court or is not free from difficulty or calls for discussion of alternative views. If the question is settled by the highest Court or the general principles to be applied in determining the question are well settled and there is a mere question of applying those principles or that the plea raised is palpably absurd the question would not be a substantial question of law."
19. Similarly, in Santosh Hazari Vs. Purushottam Tiwari (2001)3 SCC 179 a three Page 15 of 18 Downloaded on : Sat Sep 16 23:43:49 IST 2023 NEUTRAL CITATION C/TAXAP/375/2023 ORDER DATED: 01/08/2023 undefined judge Bench of this Court observed that:
"A point of law which admits of no two opinions may be a proposition of law but cannot be a substantial question of law. To be "substantial" a question of law must be debatable, not previously settled by law of the land or a binding precedent, AIR 1962 SC 1314 (2001) 3 SCC 179 and must have a material bearing on the decision of the case, if answered either way, insofar as the rights of the parties before it are concerned. To be a question of law "involving in the case" there must be first a foundation for it laid in the pleadings and the question should emerge from the sustainable findings of fact arrived at by court of facts and it must be necessary to decide that question of law for a just and proper decision of the case.
An entirely new point raised for the first time before the High Court is not a question involved in the case unless it goes to the root of the matter. It will, therefore, depend on the facts and circumstance of each case whether a question of law is a substantial one and involved in the case, or not; the paramount overall consideration being the need for striking a judicious balance between the indispensable obligation to do justice at all stages and impelling necessity of avoiding prolongation in the life of any lis."
20. In Hero Vinoth (Minor) Vs. Seshammal (2006) 5 SCC 545, 556, this Court has observed that:
"The general rule is that High Court will not interfere with the concurrent findings of the Page 16 of 18 Downloaded on : Sat Sep 16 23:43:49 IST 2023 NEUTRAL CITATION C/TAXAP/375/2023 ORDER DATED: 01/08/2023 undefined courts below. But it is not an absolute rule. Some of the well-recognised exceptions are where (i) the courts below have ignored material evidence or acted on no evidence; (ii) the courts have drawn wrong inferences from proved facts by applying the law erroneously; or
(iii) the courts have wrongly cast the burden of proof. When we refer to "decision based on no evidence", it not only refers to cases where there is a total dearth of evidence, but also refers to any case, where the evidence, taken as a whole, is not reasonably capable of supporting the finding.
21. A finding of fact may give rise to a substantial question of law, inter alia, in the event the findings are based on no evidence and/or while arriving at the said finding, relevant admissible evidence has not been (2006) 5 SCC 545 taken into consideration or inadmissible evidence has been taken into consideration or legal principles have not been applied in appreciating the evidence, or when the evidence has been misread. (See: Madan Lal Vs. Mst. Gopi & Anr. (1980) 4 SCC 855; Narendra Gopal Vidyarthi Vs. Rajat Vidyarthi (2009) 3 SCC 287; Commissioner of Customs (Preventive) Vs. Vijay Dasharath Patel (2007) 4 SCC 118; Metroark Ltd. Vs. Commissioner of Central Excise, Calcutta (2004) 12 SCC 505; West Bengal Electricity Regulatory Commission Vs. CESC Ltd. (2002) 8 SCC 715)"
[12] In view of the totality of the facts and in view Page 17 of 18 Downloaded on : Sat Sep 16 23:43:49 IST 2023 NEUTRAL CITATION C/TAXAP/375/2023 ORDER DATED: 01/08/2023 undefined of the observations made by the Hon'ble Supreme Court as well as this Court in the case of Abhisar Buildwell (P) Ltd. (supra) and Narmada Chematur Petrochemicals Ltd.
(supra), this is not a case whereby any question of law, much less, substantial question of law, is involved. The decision rendered by the learned Tribunal is based on clear factual aspects and hence, as observed earlier, there is no substantial question of law involved. Hence, the Tax Appeal is dismissed at the admission stage. No order as to costs.
(BIREN VAISHNAV, J) (D. M. DESAI,J) MANOJ Page 18 of 18 Downloaded on : Sat Sep 16 23:43:49 IST 2023