Income Tax Appellate Tribunal - Jaipur
Pallavi Tomar, Jaipur vs Assistant Commissioner Of Income Tax, ... on 24 July, 2018
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IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR
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BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM
vk;dj vihy la-@ITA. No. 1028/JP/2017
fu/kZkj.k o"kZ@Assessment Years : 2013-14
Smt. Pallavi Tomar cuke ACIT,
B-4, Govind Marg, Vs. Central Circle-1,
Adarsh Nagar, Jaipur. Jaipur
LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: ACQPT 5720 L
vihykFkhZ@Appellant izR;FkhZ@Respondent
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s Assessee by : Shri G. M. Mehta (CA)
jktLo dh vksj ls@ Revenue by : Shri Varinder Mehta (CIT)
lquokbZ dh rkjh[k@ Date of Hearing : 03/07/2018
mn?kks"k.kk dh rkjh[k@Date of Pronouncement : 24/07/2018
vkns'k@ ORDER
PER: VIKRAM SINGH YADAV, A.M. This is an appeal filed by the assessee against the order of ld. CIT(A)-4, Jaipur dated 03.10.2017 for Assessment Year 2013-14 wherein the assessee has taken the following grounds of appeal:
"(1) That Ld. CIT(A) has erred in law and on facts in sustaining addition of Rs. 6,86,686/- by presuming it as undisclosed purchase price of society plot No. B-148, Shivaji Nagar, Nevta, Jaipur ignoring the following facts:2 ITA No. 1028 /JP/2017
Smt. Pallavi Tomar, vs. ACIT
(i) That Rs. 6,86,686/- is the value adopted by Jaipur Development Authority (JDA) in the month of March 2014 for the purpose of charging regularization, development and other charges and but the same is not the purchase price or DLC rate of impugned plot of land.
(ii) During the course of action u/s 132 of IT Act at the residence of assessee and other relatives, no incriminating material or other documents evidencing any payment over and above the purchase price of said society plot No. B-148 was found;
(j) That the said plot of society was sold after conversion for Rs. 3,75,000/- on 10.10.2016 (DLC rate Rs. 3,18,825/-) whereas the said society plot was purchased in 1997 which is out of block period.
(k) That without prejudice to above sub-ground ld. CIT(A) was not justified in not allowing benefit under section 48 of IT Act for cost inflation."
2. Briefly stated, the facts of case are that a search and seizure operation under section 132(1) of the IT Act was carried out on 30.10.2014 at the various business and residential premises of NIMS Group and the assessee is part of the said group. Thereafter, the AO issued notice under section 153A of the Act and in response the assessee filed her return of income under section 153A declaring total income of Rs. 26,26,510/- as against total income of Rs. 24,73,160/- declared earlier in her original return of income filed under section 139(1) of the Act on 23.01.2014. The assessment was completed under section 143(3) r.w.s. 153A wherein the Assessing Officer has interalia 3 ITA No. 1028 /JP/2017 Smt. Pallavi Tomar, vs. ACIT made an addition towards undisclosed investment in the plot of land amounting to Rs. 6,86,686/-. The assessee challenged the action of the AO before the ld. CIT(A) objecting to the addition made by the AO without referring to any incriminating material found and seized during the course of search however, the ld. CIT(A) has confirmed the action of the AO while passing the impugned order. Now, the assessee is in appeal before us.
3.1 Before us, the ld. AR of the assessee has submitted that the assessee has purchased an unapproved society plot No. B-148, Shivaji nagar, Village Newta, Tehsil Sanganer, Jaipur in the year 1997 thereafter the same was converted into urban plot of land through JDA and registration on re-allotment of said plot of land was done through Sub-Registrar in March, 2014. In this regard, the assessee has incurred following expenses/payments in getting it converted into urban plot of land:
S.No. Date/Year Head of payment Amount (Rs) 1. 1997-98 Cost of plot (to housing society) 17,437/- 2. 05.03.2014 Regularization etc to JDA 14,667/- 3. 05.03.2014 Lease deed stamps to JDA 27,480/- 4. 14.03.2014 Registration charges 9,928/- 5. 2012-15 Other expenses & cost 5,000/- Cost/payments in conversion of plot into urban plot 74,512/- 3.2 It was submitted that without finding any incriminating material
or other information during the course of search on 30.10.2014 evidencing any unrecorded investments in purchase of above referred 4 ITA No. 1028 /JP/2017 Smt. Pallavi Tomar, vs. ACIT plot of land, both the lower authorities made/sustained addition of Rs. 6,86,686/- in avoidance of the following facts:
(1) As per the procedure for conversion of unapproved plot of land into urban plot of land, it is first surrendered to JDA. After payment of regularization and lease money by the owner, same plot is re-allotted to the same persons by JDA through registration in the office of Sub-registrar.
(2) The payments made to JDA and other capital expenses incurred by assessee in making the plot as urban plot of land in March 2014 (which is cost of improvement) were ignored but amount of Rs. 6,86,686/- fixed by JDA in re-allotment of same plot after conversion in March 2014 was made basis of addition. (3) assessee was already the owner of same plot of land but it was surrendered to JDA for conversion of urban plot of land.
After payment of regularization and other sums, it was re-allotted through registration in office of Sub-registrar by JDA in name of the assessee for which price fixed was Rs. 6,86,686/- on which stamp duty of Rs. 9,928/- was paid.
(4) The price fixed for re-allotment of same plot of land through the office of Sub-registrar was of March 2014 whereas addition was in hands of assessee in A.Y. 2013-14.
3.3 The ld AR has further contended that when no incriminating material was found indicating any undisclosed income pertaining to the years under consideration then, the Assessing Officer cannot make addition in the return of income declared by the assessee. In support of his contention, he has relied upon the decision of Hon'ble Rajasthan 5 ITA No. 1028 /JP/2017 Smt. Pallavi Tomar, vs. ACIT High Court in case of Jai Steel India vs ACIT 259 CTR 281 as well as decision of Hon'ble Delhi High Court in case of CIT v. Kabul Chawla 380 ITR 573 and submitted that the Hon'ble High Court has held that in case where nothing incriminating material is found, though section 153A would be triggered an assessment or reassessment to ascertain total income is required to be done, the same would not result in any addition and the assessment made earlier may have to be reiterated. Harmonious construction of the provisions of section 153A of the Act would lead to an irresistible conclusion that the word 'assess' has been used in the context of abated proceedings and 'reassess' has been used for completed assessment proceedings which do not abate as they are not pending on the date of initiation of search or making of requisition and can be tinkered with only on the basis of incriminating material found during the course of search or requisition of documents. Therefore, the Hon'ble High Court has held that it is not open to the assessee to seek deduction or claim relief not claimed by it in the original assessment which already stands completed in an assessment u/s 153A in pursuant to search or requisition. Hence, the ld. AR has submitted that in view of the various decisions on this point and when no proceedings in respect of the assessment year under consideration were pending before the AO then, the AO did not have jurisdiction to make an addition without referring to any incriminating material seized during the course of search.
3.4 It was further submitted by the ld. AR that similar additions have been made in the hands of Dr. (Miss) Surabhi Tomar, Dr. Eshan Sharma, Amit Rana for A.Y. 2013-14 and in the absence of any 6 ITA No. 1028 /JP/2017 Smt. Pallavi Tomar, vs. ACIT incriminating material found during course of search, the additions made by the AO have been deleted by the ld. CIT(A). It was accordingly submitted that the additions so made by the AO be directed to be deleted.
4. On the other hand, ld DR has relied upon the authorities below and submitted that once a search u/s 132 is carried out, it is incumbent upon the AO to assess or reassess the income of the assessee in respect of 6 assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made. The AO had no discretion but to assess or reassess the total income of the assessee as per the provisions of Section 153A of the Act.
5. We have considered the rival submissions as well as purused the material available on record. A search and seizure action was carried out in case of the assessee's group on 30.10.2014. The original return of income for the assessment year was filed u/s 139(1) on 23.01.2014 and the last day of issuing notice section 143(2) had expired on 30.09.2014 before the date of search i.e. 30.10.2014. Thus, it is clear assessment proceedings were not pending on 30.10.2014 i.e. the date of search. As per section 153A of the Act, once a search and seizure action is carried out, the AO has to assess or reassess the total income of the assessee in respect of 6 years immediately preceding the assessment year relevant to the previous year in which a search is conducted or requisition is made. In case the assessment is pending on the date of search the same shall be abated as per proviso to section 7 ITA No. 1028 /JP/2017 Smt. Pallavi Tomar, vs. ACIT 153A(1) of the Act and the AO is free to assess the income of the assessee as regular assessment. However, in case of completed assessment and not abated due to initiation of search u/s 132 or making of requisition u/s 132A the AO has to reassess the total income of the assessee and therefore, the assessment already completed can be tinkered with or distrusted until and unless incriminating material is found and seized during the course of search or requisition as case may be indicating undisclosed income of the assessee. Therefore, the scope and jurisdiction of the AO to reassess the total income of the assessee u/s 153A is limited only to the extent of the income disclosed by the incriminating material found and seized during the search and seizure action. The Assessing Officer has reassessed the income of the assessee by making addition on account of undisclosed investment without making any reference to any incriminating material found during the course of search. The AO has referred to the disclosure in the financial statements of the assessee and the subsequent enquiries conducted during the course of assessment proceedings and had made the addition. Therefore, the addition made by the AO for the assessment year completed u/s 153A is undisputedly not based on any incriminating material found or seized during the course of search and seizure action u/s 132 of the Act. Once, the Assessing Officer has completed the assessment u/s 153A without any reference to the incriminating material found then, no addition cannot be made to the returned income of the assessee.
8 ITA No. 1028 /JP/2017Smt. Pallavi Tomar, vs. ACIT
6. The Hon'ble Delhi High Court in case of CIT v. Kabul Chawla vide while considering an identical issue has held in para 37 and 39 as under:-
"37. 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 153 A(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 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 9 ITA No. 1028 /JP/2017 Smt. Pallavi Tomar, vs. ACIT 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 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.
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39. The question framed by the Court is answered in favour of the Assessee and against the Revenue."
7. A similar view has been taken by the Hon'ble Jurisdiction High Court in case of Jai Steel India v ACIT (supra) wherein it has been held in para 22 to 30 as under:-
"22. In the firm opinion of this Court from a plain reading of the provision along with the purpose and purport of the said provision, which is intricately linked with search and requisition under Sections 132 and 132A of the Act, it is apparent that:
(a) the assessments or reassessments, which stand abated in terms of II proviso to Section 153A of the Act, the AO acts under his original jurisdiction, for which, assessments have to be made;
(b) regarding other cases, the addition to the income that has already been assessed, the assessment will be made on the basis of 10 ITA No. 1028 /JP/2017 Smt. Pallavi Tomar, vs. ACIT incriminating material and
(c) in absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made.
Though such a claim by the assessee for the first time under Section 153A of the Act is not completed, the case in hand, has to be considered at best similar to a case where in spite of a search and/or requisition, nothing incriminating is found. In such a case though Section 153A of the Act would be triggered and assessment or reassessment to ascertain the total income of the person is required to be done, however, the same would in that case not result in any addition and the assessments passed earlier may have to be reiterated.
23. The reliance placed by the counsel for the appellant on the case of Anil Kumar Bhatia (supra) also does not help the case of the assessee. The relevant extract of the said judgment reads as under:--
"19. Under the provisions of Section 153A, as we have already noticed, 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. Another significant feature of this Section is that the Assessing Officer is empowered to assess or reassess the "total income" of the aforesaid years. This is a significant departure from the earlier block assessment scheme in which the block assessment roped in only the undisclosed income and the regular assessment proceedings were preserved, resulting in multiple assessments. Under Section 153A, however, the Assessing Officer has been given the power to assess or reassess the 'total income' of the six assessment years in question in separate assessment orders. This means that there can be only one assessment order in respect of each of the six assessment years, in which both the disclosed and the undisclosed income would be brought to tax.
20. A question may arise as to how this is sought to be achieved where an assessment order had already been passed in respect of 11 ITA No. 1028 /JP/2017 Smt. Pallavi Tomar, vs. ACIT all or any of those six assessment years, either under Section 143(1)(a) or Section 143(3) of the Act. If such an order is already in existence, having obviously been passed prior to the initiation of the search/requisition, the Assessing Officer is empowered to reopen those proceedings and reassess the total income, taking note to the undisclosed income, if any, unearthed during the search. For this purpose, the fetters imposed upon the Assessing Officer by the strict procedure to assume jurisdiction to reopen the assessment under Sections 147 and 148, have been removed by the non obstante clause with which sub-section (1) of Section 153A opens. The time-limit within which the notice under Section 148 can be issued, as provided in Section 149 has also been made inapplicable by the non obstante clause. Section 151 which requires sanction to be obtained by the Assessing Officer by issue of notice to reopen the assessment under Section 148 has also been excluded in a case covered by Section 153A. The time-limit prescribed for completion of an assessment or reassessment by Section 153 has also been done away with in a case covered by Section 153A. With all the stops having been pulled out, the Assessing Officer under Section 153A has been entrusted with the duty of bringing to tax the total income of an assessee whose case is covered by Section 153A, by even making reassessments without any fetters, if need be.
21. Now there can be cases where at the time when the search is initiated or requisition is made, the assessment or reassessment proceedings relating to any assessment year falling within the period of the six assessment years mentioned above, may be pending. In such a case, the second proviso to sub-section (1) of Section 153A says that such proceedings "shall abate". The reason is not far to seek. Under Section 153A, there is no room for multiple assessment orders in respect of any of the six assessment years under consideration. That is because the Assessing Officer has to determine not merely the undisclosed income of the assessee, but also the 'total income' of the assessee in whose case a search or requisition has been initiated. Obviously there cannot be several orders for the same assessment year determining the total income of the assessee. In order to ensure this state of affairs namely, that in respect of the six assessment years preceding the assessment year relevant to the year in which the search took place there is only one determination of the total income, it has been provided in the second proviso of sub-Section (1) of Section 153A that any 12 ITA No. 1028 /JP/2017 Smt. Pallavi Tomar, vs. ACIT proceedings for assessment or reassessment of the assessee which are pending on the date of initiation of the search or making requisition "shall abate". Once those proceedings abate, the decks are cleared, for the Assessing Officer to pass assessment orders for each of those six years determining the total income of the assessee which would include both the income declared in the returns, if any, furnished by the assessee as well as the undisclosed income, if any, unearthed during the search or requisition. The position thus emerging is that the search is initiated or requisition is made, they will abate making way for the Assessing Officer to determine the total income of the assessee in which the undisclosed income would also be included, but in case where the assessment or reassessment proceedings have already been completed and assessment orders have been passed determining the assessee's total income and such orders subsisting at the time when the search or the requisition is made, there is no question of any abatement since no proceedings are pending. In this latter situation, the Assessing Officer will reopen the assessments or reassessments already made (without having the need to follow the strict provisions or complying with the strict conditions of Sections 147, 148 and 151) and determine the total income of the assessee. Such determination in the orders passed under Section 153A would be similar to the orders passed in any reassessment, where the total income determined in the original assessment order and the income that escaped assessment are clubbed together and assessed as the total income. In such a case, to reiterate, there is no question of any abatement of the earlier proceedings for the simple reason that no proceedings for assessment or reassessment were pending since they had already culminated in assessment or reassessment orders when the search was initiated or the requisition was made." (Emphasis supplied)
24. The said judgment also in no uncertain terms holds that the reassessment of the total income of the completed assessments have to be made taking note of the undisclosed income, if any, unearthed during the search and the income that escaped assessments are required to be clubbed together with the total income determined in the original assessment and assessed as the total income. The observations made in the judgment contrasting the provisions of determination of undisclosed income under Chapter XIVB with determination of total income under Sections 13 ITA No. 1028 /JP/2017 Smt. Pallavi Tomar, vs. ACIT 153A to 153C of the Act have to be read in the context of second proviso only, which deals with the pending assessment/reassessment proceedings. The further observations made in the context of de novo assessment proceedings also have to be read in context that irrespective of the fact whether any incriminating material is found during the course of search, the notice and consequential assessment under Section 153A have to be undertaken.
25. The argument of the learned counsel that the AO is also free to disturb income, expenditure or deduction de hors the incriminating material, while making assessment under Section 153A of the Act is also not borne out from the scheme of the said provision which as noticed above is essentially in context of search and/or requisition. The provisions of Sections 153A to 153C cannot be interpreted to be a further innings for the AO and/or assessee beyond provisions of Sections 139 (return of income), 139(5) (revised return of income), 147 (income escaping assessment) and 263 (revision of orders) of the Act.
26. The plea raised on behalf of the assessee that as the first proviso provides for assessment or reassessment of the total income in respect of each assessment year falling within the six assessment years, is merely reading the said provision in isolation and not in the context of the entire section. The words 'assess' or 'reassess' have been used at more than one place in the Section and a harmonious construction of the entire provision would lead to an irresistible conclusion that the word 'assess' has been used in the context of an abated proceedings and reassess has been used for completed assessment proceedings, which would not abate as they are not pending on the date of initiation of the search or making of requisition and which would also necessarily support the interpretation that for the completed assessments, the same can be tinkered only based on the incriminating material found during the course of search or requisition of documents.
27. The Allahabad High Court in Smt. Shaila Agarwal's (supra) has held as under:--
"19. The second proviso to Section 153A of the Act, refers to abatement of the pending assessment or re-assessment proceedings. The word 'pending' does not operate any such 14 ITA No. 1028 /JP/2017 Smt. Pallavi Tomar, vs. ACIT interpretation, that wherever the appeal against such assessment or reassessment is pending, the same along with assessment or reassessment proceedings is liable to be abated. The principles of interpretation of taxing statutes do not permit the Court to interpret the Second Proviso to Section 153A in a manner that where the assessment or reassessment proceedings are complete, and the matter is pending in appeal in the Tribunal, the entire proceedings will abate.
20. There is another aspect to the matter, namely that the abatement of any proceedings has serious causes and effect in as much as the abatement of the proceedings, takes away all the consequences that arise thereafter. In the present case after deducting bogus gifts in the regular assessment proceedings, the proceedings for penalty were drawn under Section 271(1)(c) of the Act. The material found in the search may be a ground for notice and assessment under Section 153A of the Act but that would not efface or terminate all the consequence, which has arisen out of the regular assessment or reassessment resulting into the demand or proceedings of penalty." (Emphasis supplied) The said judgment which essentially deals with second proviso to Section 153A of the Act also supports the conclusion, which we have reached hereinbefore.
28. It has been observed by the Hon'ble Supreme Court in K.P. Varghese v. ITO [1981] 131 ITR 597/7 Taxman 13 that "it is well recognized rule of construction that a statutory provision must be so construed, if possible that absurdity and mischief may be avoided."
29. The argument of the counsel for the appellant if taken to its logical end would mean that even in cases where the appeal arising out of the completed assessment has been decided by the CIT(A), ITAT and the High Court, on a notice issued under Section 153A of the Act, the AO would have power to undo what has been concluded up to the High Court. Any interpretation which leads to such conclusion has to be repelled and/or avoided as held by the Hon'ble Supreme Court in the case of K.P. Varghese (supra).
30. Consequently, it is held that it is not open for the assessee to seek deduction or claim expenditure which has not been claimed in the original assessment, which assessment already stands 15 ITA No. 1028 /JP/2017 Smt. Pallavi Tomar, vs. ACIT completed, only because a assessment under Section 153A of the Act in pursuance of search or requisition is required to be made."
8. Accordingly, in the facts and circumstances of the case when the assessment has been completed u/s153A without any reference to the incriminating material evidencing any investment over and above disclosed in the financial statements and in light of the binding precedents as cited above, the addition made by the AO is not sustainable, the same is deleted.
In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open Court on 24/07/2018.
Sd/- Sd/-
¼fot; iky jko½ ¼foØe flag ;kno½
(Vijay Pal Rao) (Vikram Singh Yadav)
U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member
Tk;iqj@Jaipur
fnukad@Dated:- 24/07/2018.
*Santosh
vkns'k dh izfrfyfi vxzfs 'kr@Copy of the order forwarded to:
1. vihykFkhZ@The Appellant- Smt. Pallavi Tomar, Jaipur
2. izR;FkhZ@ The Respondent- ACIT, Central Circle-1, Jaipur
3. vk;dj vk;qDr@ CIT
4. vk;dj vk;qDr@ CIT(A)
5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur.
6. xkMZ QkbZy@ Guard File { ITA No. 1028/JP/2017} vkns'kkuqlkj@ By order, lgk;d iathdkj@Asst. Registrar