Income Tax Appellate Tribunal - Amritsar
M/S Bhagwati Lacto Vegetarian Exports ... vs Dy. Commissioner Vof Income Tax Central ... on 22 July, 2019
IN THE INCOME TAX APPELLATE TRIBUNAL
AMRITSAR BENCH, AMRITSAR
BEFORE SH. VIKRAM SINGH YADAV, ACCOUNTANT MEMBER AND
SH. N.K.CHOUDHRY, JUDICIAL MEMBER
ITA Nos.143 & 145(Asr)/2019
Assessment Years:2011-12 & 2010-11
M/s. Bhagwati Lacto Vs. Dy. CIT,
Vegetarian Exports Pvt. Ltd. Central Circle-1,
Shop No.18-1/2, Anaj Mandi, Jalandhar.
Ferozepur Cantt.
[PAN:AADCB 4295Q]
(Appellant) (Respondent)
Appellant by : Sh. Ashray Sarna (Ld. CA)
Respondent by : Sh. Charan Dass (Ld. DR)
Date of hearing : 11.06.2019
Date of pronouncement: 22.07.2019
ORDER
PER N.K.CHOUDHRY, JM:
These appeals have been preferred by the Assessee against the composite order dated 16/01/2019 relevant for the Asst. Years, 2010-11 & 2011-12, passed by the Ld. CIT(A)-5, Ludhiana u/s. 250 (6) of the Income Tax Act, 1961 (hereinafter called as the 'Act') whereby the Ld. CIT(A) affirmed the Assessment order framed u/s 153 r.w.Sec.144 of the Act, as ex- parte.
2. In both the appeals, the issues involved are common in nature and based on the composite order passed by the Ld. CIT(A), hence, for the sake of brevity, have been taken for adjudication simultaneously and facts of ITA No.143(Asr)/2019 2 ITA Nos.143 & 145/Asr/2019 (A.Y.2011-12 & 2010-11) M/s. Bhagwati Lacto Vegetarian Exports Pvt. Ltd. vs. Dy. CIT shall be taken into consideration and the result of the same shall also be applicable mutatis mutandis to ITA No.145(Asr)/2019.
3. The brief facts of the case are that a search operation u/s 132 of the Income Tax Act, 1961 has been carried out at the business premises of the assessee on 11/02/2016 along with search operation in the other concerns/persons of Bhagwati Group of Ferozepur. Accordingly, the proceedings u/s 153A of the Act have been initiated by issuing a notice dated 13/06/2017, against which the Assessee filed its return of income on dated 26/10/2017 disclosing total income at Rs.10,54,190/-. After the date of search, information was received from Regional Economic Intelligence Committee, Amritsar to the effect that the State Vat Authorities during the VAT assessment, noticed that there was understatement of production result of milling of paddy by the assessee during the relevant financial years. Accordingly, a copy of the relevant order was obtained from the Assistant Excise and Taxation Commissioner, Ferozepur and thereafter the comparison was made between the yield chart as per order of State Vat Authorities and the yield disclosed by the Assessee. The Assessee though claimed that it has filed appeal against the said order and still no order has been passed, however the AO did not consider the said fact and proceeded to rely upon the order of State Vat Authorities and on noticing certain discrepancies, added the amount of Rs.66,12,057/- in the income of the assessee on account of suppression in production. The Assessing Officer also added Rs.45,83,574/- on account of disallowance of interest expenses u/s 36(1)(iii) of the Act and further reduced 3 ITA Nos.143 & 145/Asr/2019 (A.Y.2011-12 & 2010-11) M/s. Bhagwati Lacto Vegetarian Exports Pvt. Ltd. vs. Dy. CIT Rs.3,00,000/- from the donations expenses of Rs.6,00,000/-. The assessee challenged the addition of Rs.66,12,057/- on account of suppression in production converted into sales and the addition of Rs.45,83,574/- disallowed u/s 36(1)(iii) of the Act. The Ld. CIT(A) though decided the appeal of the Assessee as ex-parte, however touched upon the merit of the case and dismissed the appeals of the Assessee by holding as under:
"3. The maxim 'vigilontibus non-dermientibus jurasubvenunt i.e. the law assists those who are vigilant and not those who sleep over their rights, is applicable in this case. The Hon'ble ITAT, Chandigarh in ITA no. 1025- 1027/Chandigarh/2005 for the A.Y 2002-03 in the case of M/s Chhabra Land and Housing Ltd, following the decision of the Hon'ble Supreme Court in the case of B.N. Bhattachargee, 118 17R 461 (SC), has held that appeal does not mean merely filing of the appeal but rather, effectively pursuing it. The notices sent to the appellant by post were not received back from the Postal Authorities indicating that these have been served upon the appellant. The delivery of the last notice dated 13.12.2018 on the assessee as per speed post tracking was made by the postal department on 18.12.2018. It is apparent that the appellate is not interested in pursuing the appeal. Further, apart from the Grounds of Appeal, the appellant has not filed any 'Facts of the case' and it has been mentioned in the column as "As per Assessment Record".
In both the years, the AO has disallowed interest u/s 36(1)(iii) since loans were given to M/s. Bhagwati Lacto Foods Pvt. Ltd. and M/s. Guru Nanak Milk Products without any business interests. As per the AO, the assessee has not been able to prove the nexus between interest free funds available with it with the interest free loans given by the assessee. The AO by relying upon the judgment of Hon'ble Punjab & Haryana High Court in the case of CIT vs. Kudu Industries (in HA No, 388 of 2014 dated 31.07.2015) applied average rate at which the assessee has availed the advances. The appellant has not submitted anything during the appellate proceedings in support of 4 ITA Nos.143 & 145/Asr/2019 (A.Y.2011-12 & 2010-11) M/s. Bhagwati Lacto Vegetarian Exports Pvt. Ltd. vs. Dy. CIT the grounds of appeal and the findings of the AO have not been rebutted, hence the disallowance made by the AO on this account is liable to be upheld for both the years.
For assessment year 2010-11, addition has also been made on account of suppression of sales which was based upon information received from State VAT Authorities. The AO has mentioned that assessee's representative has agreed to the percentage yield before the AETC and the resultant suppression of yield. It is also mentioned that in the appeal filed before DETC (Appeals), Ferozepur Division, the assessee has not challenged the production results and only raised the issue of reversal of ITC and penalty etc. Therefore, based upon the order of State VAT Authorities, the yield percentage and the resultant suppression of yield by the assessee have been adopted by the AO for making addition during the assessment proceedings. The total suppression of yield of rice @ 0.53% has been calculated at 1771.21 quintal and by applying the average rate of Rs. 3,733.08, the total suppression of sale comes to Rs.66,12,057/-. During the present appellate proceedings, nothing has been stated and hence the addition made by the AO is upheld.
The additions made by the AO and challenged by the assessee are found as per law. Hence the grounds of appeal raised by the assessee against these additions are not found sustainable in both the years.
4. In the result, both the appeals are dismissed."
4. The Assessee being aggrieved against the order of the Ld. CIT(A) preferred the instant appeal on the following grounds.
"1. That the order passed by the Ld. Assessing Officer dated 29.12.2017 is against the law and facts of the case.
2. That having regard to the facts and circumstances of the case, Ld. AO has erred in law and on facts in addition of Rs.66,12,057/-, on account of suppression in production converted into sales, without considering the submissions of the assessee and without observing the principles of natural justice.5 ITA Nos.143 & 145/Asr/2019
(A.Y.2011-12 & 2010-11) M/s. Bhagwati Lacto Vegetarian Exports Pvt. Ltd. vs. Dy. CIT
3. That having regard to the facts and circumstances of the case, Ld. AO has erred in law and on facts in disallowing interest expenses amounting to Rs.45,83,574/- u/s 36(l)(iii) of the Act without considering the submissions of the assessee and without observing the principles of natural justice.
4. That in any case and without prejudice to the above grounds, additions made in the impugned order are beyond jurisdiction and illegal also for the reason that these could not have been made since no incriminating material has been found as a result of search warranting impugned addition."
5. At the time of hearing, the Ld. AR submitted that admittedly in the search operation, no incriminating material has been found which could be resulted into impugned addition. Further the Ld. CIT(A) has passed an order without giving adequate opportunity of being heard and even the additions made by the Assessing Officer and affirmed by the Ld. CIT(A) are based upon non-consideration of the facts and without observing the principle of nature justice. The Ld. AR also relied upon the order passed by the Co-ordinate Bench in the case of Smt. Sanjana Mittal vs. DCIT, Central Circle-2, (ITA No.487/Asr/2018 decided on 11/03/2019 by Amritsar Bench, Jalandhar Camp) and submitted that in the said case, no incriminating material has been found and no assessment proceedings were pending on the date of search proceedings, therefore, it was held by the bench that in a case, where no incriminating materiel is found during the course of search proceedings and the assessment proceedings remained un- abated as on the said date, no additions can be validly made in the hands of the assessee. As the facts and circumstances of the instant case are exactly same to the facts of the decision 6 ITA Nos.143 & 145/Asr/2019 (A.Y.2011-12 & 2010-11) M/s. Bhagwati Lacto Vegetarian Exports Pvt. Ltd. vs. Dy. CIT rendered by the Co-ordinate Bench at Jalandhar Camp therefore, no addition is sustainable.
Having considered the orders passed by the authorities below and the decision passed by the Co-ordinate Bench in the case of Smt. Sanjana Mittal vs. DCIT (Supra). The finding of the order passed by the Co-ordinate Bench is reproduced herein below for the sake of brevity.
"7. We have heard the authorized Representatives for both the parties, perused the orders of the lower authorities and the material available on the record. The Ld. D.R on a specific query by the bench, had categorically stated that the loan of Rs.1,00,000/- that was raised by the assessee from M/s Bhagwati Lacto Vegetarian Exports Pvt. Ltd., Ferozepur was duly recorded in the latters audited 'balance sheet' for the year under consideration and the addition of Rs. 1 lac towards 'deemed dividend' under Sec. 2(22)(e) of the IT Act was not based on any incriminating material found during the course of the search & seizure proceedings.
8. We find from the perusal of the order passed by the ld. CIT(A) that the assessee was a 'debtor' of the aforementioned company viz. M/s Bhagwati Lacto Vegetarian Exports Pvt. Ltd., Ferozpur in the Financial year 2012-13. Rather, a perusal of the ledger account of the assessee as appearing in the 'books of accounts' of the aforesaid company viz., M/s Bhagwati Lacto Vegetarian Exports Pvt. Ltd., Ferozpur reveals that she had received an amount of Rs. 1,00,000/-, vide Cheque No. 367197 drawn on CC A/c No. 65041938456 of the company with State Bank of Patiala, Ferozpur Cantt. Apart therefrom, a perusal of the order passed by the A.O fortifies the fact that no incriminating material was found during the course of search and seizure proceedings.
9. We have deliberated at length on the issue under consideration, and find that our indulgence in the present appeal has been sought for adjudicating as to whether in the case of the assessee where the assessment proceedings had not abated at the time when the search and seizure proceedings were conducted, any addition could validly be made in the absence of 7 ITA Nos.143 & 145/Asr/2019 (A.Y.2011-12 & 2010-11) M/s. Bhagwati Lacto Vegetarian Exports Pvt. Ltd. vs. Dy. CIT any incriminating material found during the course of the search and seizure proceedings. Admittedly, in the case before us no incriminating material was found during the course of the search and seizure proceedings conducted under section 132 of the I.T. Act on 11.02.2016. Apart therefrom, the fact that the assessment proceedings in the case of the assessee were not abated at the time when the search and seizure proceedings were conducted has also not been controverted by the learned D.R in the course of the proceedings before us.
10. We have deliberated at length on the issue under consideration, and are of the considered view that in a case where no assessment proceedings are pending on the date of the search and seizure proceedings, the assessment under section 153A can be carried out only on the basis of seized material. In a case, where no incriminating material is unearthed during the course of search proceedings and the assessment proceedings remain unabated as on the said date, no additions can be validly made in the hands of the assessee. Our aforesaid view is fortified by the judgment of the Hon'ble High Court of Delhi in the case of CIT vs. Kabul Chawla (2016) 380 ITR 573 (Del). Apart therefrom, a similar view had also been taken by the Hon'ble High Court of Bombay in the case of CIT vs. Murli Agro Product (ITA No. 36/2009) (Bom) and Commissioner Of Income-tax Vs. Continental Warehousing Corporation (2015) 374 ITR 645 (Bom). In the aforementioned cases, it has been observed by the High Court that as on the date of the initiation of search and seizure proceedings under section 132 of the IT Act, as no proceedings for the year under consideration were pending, therefore, in the absence of any incriminating evidence found during the course of search and seizure proceedings no addition/disallowance could have been made in respect of the unabated assessment of the assessee for the said year. In the backdrop of the aforesaid settled position of the law, we are of the considered view that as on the date of the search and seizure proceedings no assessment proceedings were pending in the case of the assessee, therefore, in the absence of any incriminating material having been found in the course of such proceedings no addition could have been validly made in the hands of the assessee. We thus not being able to persuade ourselves to subscribe to the view taken by the CIT(A) who had upheld the order of the A.O, thus set aside his 8 ITA Nos.143 & 145/Asr/2019 (A.Y.2011-12 & 2010-11) M/s. Bhagwati Lacto Vegetarian Exports Pvt. Ltd. vs. Dy. CIT order and vacate the addition of Rs.1,00,000/- that was sustained by him.
It is a fact that in the instant case, no incriminating material has been found in the course of search operation u/s 132 of the Act, however the Assessing Officer relied upon the information received from 3rd party after the date of search and on the basis of which, made the additions under challenge. The decision rendered by the Co-ordinate Bench, is based upon the view expressed by Delhi High Court in the case of Commissioner of Income Tax (Central-III) v. Kabul Chawla (2016) 380 ITR 573 (Del) to the effect that if on the date of search, the assessments already stood completed and no incriminating material was unearthed during the search, then no additions can be made to the income already assessed, which stands confirmed by the Apex Court in Principal CIT vs. Meeta Gutgutia (2017) 395 ITR 526 (Delhi), wherein the SLP filed before the Apex Court was dismissed vide its order dated 2nd July, 2018 and facts of the instant case and of the decision referred above of co-ordinate bench seems to be identical, however at this juncture, we are not going into the merits of the case because the Assessee did not get the opportunities to represent its case before the Ld. CIT(A) and even the decision relied upon by the Assessee was not available before the Ld. CIT(A) therefore the consideration of the aforesaid judgment left to the decision of Ld. CIT(A). It reflects from the impugned order that though the Assessee through its Ld. AR initially appeared and sought the adjournment however, later on did not appear before the Ld. CIT(A) and in that eventuality it was observed by the Ld. CIT(A) that it is apparent that the appellant is not interested in pursuing the appeals and therefore 9 ITA Nos.143 & 145/Asr/2019 (A.Y.2011-12 & 2010-11) M/s. Bhagwati Lacto Vegetarian Exports Pvt. Ltd. vs. Dy. CIT while proceeding ex-parte order the Ld. CIT(A) on the basis of assessment order, affirmed the action of the Assessing Officer and dismissed the appeal of the Assessee. The Ld. AR has submitted that the assessee sought adjournment at the initial stage however, did not receive the notice for hearing on dated 29/08/2018 and subsequent dates thereafter and therefore, could not appear before the Ld. CIT(A) and could not get the adequate opportunities of being heard. At this juncture, we are not inclined to go into the controversy qua appearance/non-
appearance of the assessee before the Ld. CIT(A) but intents to observe that the Assessing Officer has passed an order u/s 153A r.w.Sec.144 of the Act and the Ld. CIT(A) has also passed the impugned order as ex-parte, where the assessee remained un- heard due to the reasons stated above, hence, considering the peculiar facts and circumstances, we are inclined to give the opportunities to the assessee to represent its case before the Ld. CIT(A) and to direct the Ld. CIT(A) to decide the appeals afresh, suffice to say while affording reasonable opportunities of being heard to the assessee and while considering the observations made above, in addition to any other considerations as per wisdom of the Ld. CIT(A).
6. In the result, the appeals filed by the Assessee are allowed for statistical purposes.
Order pronounced in the open Court on 22.07.2019.
Sd/- Sd/-
(VIKRAM SINGH YADAV) (N.K.CHOUDHRY)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 22.07.2019
/PK/ Ps.
10 ITA Nos.143 & 145/Asr/2019
(A.Y.2011-12 & 2010-11)
M/s. Bhagwati Lacto Vegetarian Exports Pvt. Ltd. vs. Dy. CIT Copy of the order forwarded to:
(1) M/s. Bhagwati Lacto Vegetarian Exports Pvt. Ltd.
Shop No.18-1/2, Anaj Mandi, Ferozepur Cantt (2) The Dy. CIT, Central Circle-1, Jalandhar (3) The CIT(A)-5, Ludhiana (4) The CIT concerned (5) The SR DR, I.T.A.T., Amritsar True copy By order