Income Tax Appellate Tribunal - Delhi
Dcit, Dehradun vs M/S. Citimates Builders & Promoters (P) ... on 18 May, 2018
1 ITA No. 3169/Del/2015
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: 'B' NEW DELHI
BEFORE SHRI R. S. SYAL, VICE PRESIDENT
AND
MS SUCHITRA KAMBLE, JUDICIAL MEMBER
I.T.A .No. 3169/DEL/2015
(ASSESSMENT YEAR-2006-07)
DCIT Vs Citimates Builders &
Central Circle, Aayakar Bhawan Promoters (P) Ltd.
13-A, Subhash Road C-389, Defence Colony
Dehradun New Delhi
(APPELLANT) AABCC6369G
(RESPONDENT)
C.O .No. 482/DEL/2015
(ASSESSMENT YEAR-2006-07)
Citimates Builders & Promoters (P) Vs DCIT
Ltd. Central Circle, Aayakar
C-389, Defence Colony Bhawan
New Delhi 13-A, Subhash Road
AABCC6369G Dehradun
(APPELLANT)
(RESPONDENT)
Appellant by Ms. Rachna Singh, CIT DR ,
Respondent by Dr. Rakesh Gupta, Adv. &
Sh. Somil Agarwal, Adv
Date of Hearing 16.05.2018
Date of Pronouncement 18.05.2018
ORDER
PER SUCHITRA KAMBLE, JM
These appeal and cross objection are filed by the Revenue and assessee against the order dated 26/02/2015 passed by CIT(A)-Dehradun for Assessment Year 2006-07.
2 ITA No. 3169/Del/20152. The grounds of appeal are as under:-
1. "That on the facts and circumstances of the case, Ld. CIT(A) was not justified in law and on facts in holding that the addition u/s 68 and section 36(l)(iii) of the I.T. Act, 1961 cannot be made in assessment completed u/s 153A unless some incriminating material was found during the course of search thus ignoring provisions of law as contained in proviso (b) of sub-
section (1) of section 153A which require the A.O. to assess and reassess the total income of assessee as defined in section 2(45) of the I.T. Act, 1961.
2. That Ld. CIT(A) has erred in law and facts in not following the ratio laid down by the jurisdictional High Court in case of CIT vs R.K. Arora vide appeal No. ITA 56 of 2011 wherein the Hon Tile High Court has held that in a proceedings u/s 153 A entire assessment is open before the A.O. (Annexure 'A)
3. That the order of the Ld. CIT(A) being erroneous in law and on facts which needs to be vacated and the order of the A.O. be restored.
4. That the appellant craves leave to add or amend any one or more of the ground of the appeal as stated above as and when need for doing so may arise.
C.O No. 482/Dle/20151. That in facts and circumstances of the case, CIT(A) has rightly deleted the additions from the assessment order passed u/s 153A, in the absence of any incremental material brought on record during the course of search, assessment and remand report by the AO. The assessee case is fully covered by the order of CIT vs. Kabul Chawla 1TA No. 709/2014 dated 28.08.2015.
2. It is unlawful on the part of the AO to adjudicate the Appellate Authority to follow Non - Judicial Allahabad High Court in the case of CIT vs. R.K. Arora, ITA No. 56 of 2011 whereas the assessee office and Residence is at New Delhi, the case was transferred to Dehradun u/s 127 as the Director resides at Dehradun, Uttarakhand and whereas series of subsequent cases of numerous High Court were available before CIT(A).
3. That in the facts and circumstance of the case, the CIT(A) has erred both in law and on facts in confirming the proceedings the absence of any incriminating material belonging to the assessee being found during the course of search
4. That the appellant craves leave to add or amend any one or more of the ground of the appeal as stated above as and when need for doing so may arise.
5. That the Departmental appeal my please be dismissed and due relief in law may please be granted.
3 ITA No. 3169/Del/20153. A search u/s 132 of the Income Tax Act, 1961 was initiated and took place in the business and residential premises of the assessee on 21/10/2010 in the M. L. Juyal Group of cases. Accordingly, notice u/s 153A(1) (a) of the Income Tax Act, 1961 was issued to the assessee on 26/09/2012 for the assessment year 2006-07, and was served upon the assessee requiring it to furnish the return of income on or before 08/10/2012. In response to notice u/s 153A(1)(a), the assessee submitted the return of income on 10.12.2012 declaring income of Rs. 18,21,244/-. Accordingly, notice under section 143(2) was issued to the assessee on 17/01/2.013. A questionnaire along with notice under section 142(1) of the Income Tax Act, 1961 was issued to the assessee on 23/11/2012. In response to these notices, authorized person attended the proceedings on behalf of the assessee from time to time and filed written explanation. The assesse company is in the business of construction and development of properties under collaboration and after completion it is sold. It enters into collaboration agreements with the sellers of the properties and then demolishes the existing building at its own expenses. Thereafter, it develops, reconstructs and completes the fresh building at the said property after getting the plans sanctioned from the MCD. The shares of the fresh building are then divided between the owner and the company as per the agreement along with proportionate undivided, indivisible and impartible share of ownership rights in the land underneath. The company then disposes off its share of property and also makes booking of the said portions falling in its share in whole or in parts to prospective buyers. The method of accounting followed is mercantile system. The cost of construction is carried to next year as work in progress and all direct expenses incurred on the property is charged to that particular property and indirect expenses incurred are allocated to various projects . Accounting method followed is AS9 for revenue recognition at the time of transfer of goods to the buyer for a consideration.
4. During the year under consideration, the assessee company has received unsecured loans of Rs. 61,70,730/- vide Cheques from S.K. Land 4 ITA No. 3169/Del/2015 Finance Co. and Rs. 5,00,000/- from Shri Praveen Sethi as well as Rs. 1,00,00,000/- from M/s. Oceanic Homes Pvt. Ltd. The assessee was asked to file the details of loans/ advances received during the year along with supporting evidences to prove the source of these loans. The Assessing Officer observed that despite giving sufficient time and opportunity the assessee only filed confirmations which does not prove either the source of loan, creditworthiness of the party or the genuineness of the transaction. The Assessing Officer further observed that mere filing of confirmation letter is not sufficient proof of the genuineness of the credit entries in his books. Moreover the confirmation had also been deliberately filed just before the completion of scrutiny proceedings so that the Assessing Officer did not get time to conduct independent enquiry for verification of the genuineness of the party and loan received. The Assessing Officer therefore held that since the assessee failed to discharge the onus of proving the source and genuineness of the unsecured loan taken by him and therefore, the amount of Rs.1,65,70,730/- was added as unexplained income in assessee's hand u/s 68 of the Act. There was other additions in respect of interest expense in profit and loss account Section 36(1) (iii) and set off of the carry forward losses of previous year by the Assessing Officer.
5. Being aggrieved by the Assessing Officer, the assessee filed appeal before the CIT (A). The CIT (A) allowed the appeal of the assessee.
6. The Ld. DR submitted that the CIT(A) erred in holding that the addition u/s 68 & Section 36(1) (iii) of the Income Tax Act, 1961 cannot be made in assessment completed u/s 153A, unless some incriminating material was found during the course of search. Thus, the CIT(A) ignored provisions of law as contained in proviso (b) of sub Section 1 of Section 153A which require the A.O to assess re-assess the total income of the assessee as defined in Section 2(45) of the Income Tax Act, 1961. The Ld. DR relied upon the Allahabad High 5 ITA No. 3169/Del/2015 Court decision in case of CIT Vs. Shri Raj Kumar Arora ITA No. 56/2011 order dated 11/7/2014.
7. The Ld. AR submitted that the reliance of the Hon'ble Allahabad High Court decision in case of R. K. Arora by the Ld. DR is not proper as the same is not a Jurisdictional High Court. The Ld. AR submitted that the CIT(A) has rightly decided the issue and there is no need to interfere with the same. The Ld. AR relied upon the decision and the Hon'ble Delhi High Court in case of CIT Vs. Kabul Chawla ITA No. 709/2014 dated 28/8/2015.
8. We have heard both the parties and perused the material available on record. The CIT(A) in his order mentioned that the Assessing Officer in remand report categorically admitted that there is no incriminating material with relation to the transactions with the parties mentioned therein found during the search. The CIT(A) has given categorical finding in Para 9 as under:-
"9. Similarly with regard to the addition made u/s 68 on account of loans received from S. K. Land & Finance, Shri Prveen Sethi and Ms Oceanic Homes Pvt. Ltd the Assessing Officer was asked to clarify as to whether any incriminating material had been found and has categorically admitted that no incriminating materials with relation to the t r a n s a c t i o n s with these parties were found during the search. It is also clear that all the loans have been repaid before the search through account payee cheques. That being the case the additions made by the assessing officer on this count, without there being any "mating material found during search are hit by the by the judgement of the Special Bench in All Cargo Global Logistics 137 ITD 287 (Mum)(SB) and the judgement of Gurinder Singh Bawa vs. DCIT 28 taxmann.com 328 (Mumbai) ITAT and fit to be deleted. This view -as also been upheld by the Rajasthan High Court in the case of Jai Steels(India) vs ACIT 1103) 259 CTR (Raj)281 and been followed by the jurisdictional tribunal in a number of cases, sutli as Kusum tsnatia, Asha Kataria, Sanjay Agarwal, Manoj Narain Agarwal, MGF Automobiles Ltd. etc. The Assessing Officer has submitted that the assesse could not prove the creditworthiness during the scrutiny proceedings but since no incriminating materials were found during the search, the assessing officer lacked the jurisdiction to scrutinize the assessee's return on these points in an assessment under section 153A.
6 ITA No. 3169/Del/2015Therefore the addition made by her on issues that stood finalized before search and in respect of which no incriminating material has been found, is liable to be quashed for want of jurisdiction alone in view of the judgement in the case of All Cargo (supra). Accordingly the same are deleted.
10. Similarly since the carried forward losses emanate from the original return and no incriminating material has been found in the search to disallow them, the assesse is allowed the benefit of setting off the carried forward losses of Rs 142,726/- in the present year.
11. In the result the appeal is allowed."
The search under Section 132(1) took place in M. L. Guyal Group of cases and the Assessment Order was passed under 153A r.w.s. Section 143(3) of the Act. In case of Kabul Chawla (supra), Hon'ble Delhi High Court held in para 37 and para 38 as under:
"37. On a conspectus of Section 153A(1) of the Act, read with the proviso 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 7 ITA No. 3169/Del/2015 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 the absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assesss' in Section 153A 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 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.
Conclusion
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 ITA No. 3169/Del/2015The Hon'ble High Court held that "obviously an assessment has to be made under this Section only on the basis of seized material". In clause (v), the same is reiterated by holding "In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made". In clause (vii), it is stated "Completed assessments can be interfered with by the AO while making the assessment under Section 153A only on the basis of some incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be reiterated and the abated assessment or reassessment can be made". In clause (vii), it is stated "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. It is further to note that the reliance upon the decision of CIT vs. Sri. Raj Kumar Arora (supra) by the Ld. DR will not be appropriate in the present case as the Hon'ble Delhi High Court has categorically stated that 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. Thus, there is no need to interfere with the findings of the CIT(A) as the issue herein is already covered in favour of the assessee by the Hon'ble Delhi High Court decision of Kabul Chawla. The appeal of the Revenue is dismissed and cross objection filed by the assessee is allowed.
9. In result, the appeal of the Revenue is dismissed and cross objection of the assessee is allowed.
Order pronounced in the Open Court on 18th May, 2018.
Sd/- Sd/- (R. S. SYAL) (SUCHITRA KAMBLE) VICE PRESIDENT JUDICIAL MEMBER Dated: 18/05/2018 R. Naheed * 9 ITA No. 3169/Del/2015 Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI Date 1. Draft dictated on PS 16.05.2018 2. Draft placed before author PS 16.05.2018 3. Draft proposed & placed before .05.2018 JM/AM the second member 4. Draft discussed/approved by JM/AM Second Member. 5. Approved Draft comes to the PS/PS Sr.PS/PS 18.05.2018 6. Kept for pronouncement on PS 7. File sent to the Bench Clerk PS 18.05.2018 8. Date on which file goes to the AR 9. Date on which file goes to the Head Clerk. 10. Date of dispatch of Order. 10 ITA No. 3169/Del/2015