Income Tax Appellate Tribunal - Chandigarh
Dcit, Cc-Ii, Chandigarh vs M/S Dhg Marketing Pvt. Ltd., Chandigarh on 9 May, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
DIVISION BENCH 'A', CHANDIGARH
BEFORE MS DIVA SINGH, JUDICIAL MEMBER
AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER
ITA No.990/Chd/2017
(Assessment Year : 2010-11)
The D.C.I.T., Vs. M/s DHG Marketing Pvt. Ltd.,
Central Circle-II, SCO 49-50, Sector 26,
Chandigarh. Chandigarh.
PAN: AADCD1364Q
(Appellant) (Respondent)
Appellant by : Shri Gulshan Raj, CIT DR
Respondent by : Shri Ashwani Kumar, CA
& Ms. Kanika Gupta, CA
Date of hearing : 02.05.2018
Date of Pronouncement : 09.05.2018
O RDE R
PER ANNAPURNA GUPTA, A.M.:
Th e present a pp e a l has been preferred by t he Revenue a g a i ns t the o r d er passed by learned C o m m i s s i o n e r o f I nc o m e Ta x ( A p pe a l s ) - 3 , G u r g a o n d a t ed 3 1 . 3 . 2 0 1 7, r el a t i n g t o a s s e ss m e nt y e a r 2 0 1 0- 1 1 de l e t i n g the addition ma d e by the AO pursuant to s e a r ch c o n d u c t e d o n t he a s s e ss e e an d a s s e s s m e nt f ra me d u / s 1 5 3 A o f t h e A c t, f o r t h e r e a s o n t h a t n o i n c r i m i n a t i ng m a t e r i a l w a s fo un d d u r i n g s e a r ch.
2. B r i e f f a c t s a r e th a t a s e a r ch a n d s e i z u re o pe r a t i on u /s 1 3 2 o f t h e I n c om e Ta x A c t , 1 9 6 1 ( i n s h o r t ' t he | A c t ' ) , w a s c a r r i e d o u t o n th e a s s es s e e . Th e r e a f t e r s t a t ut o r y n o t i c e u /s 1 5 3 A o f t h e A c t w a s i s su e d to t he a s s e s se e , i n r es p o n s e to w h i c h t h e a s s e ss e e f i l e d i t s r et ur n o f i n c om e d ec l a r i n g Ni l income. S u b s equ e n t l y n o t i c es u/s 143(2) and 1 4 2( 1 ) 2 a l o n g w i t h q u e s t i o n n a i r e w er e i ss u e d t o t h e a s se s s e e , in r e s p o n s e t o w h i ch d u e r e pl y w a s f i l e d b y t h e a ss es s e e . A f te r c o n s i d e r i n g t h e r e p l i e s f i l ed b y t h e a s s e s s e e , a dd i t i o n u /s 6 8 o f t h e A c t , o n a c c o u n t o f u n e xp l a i n e d c r ed i t s re l a t i n g to s h a r e c a p i t a l r e ce i v e d b y t he a s se s s e e d u r i n g t h e i m p u g n ed y e a r w a s m a d e am o u n t i n g t o R s .4. 1 5 c r o r es .
3. Th e matter was carried in ap p e a l b e f o re t he Ld. C I T( A p p e al s ) , wh e r e the a s s e ss e e contended that the i m p u g n e d a d d i t i o n c o u l d n o t h a ve b e e n m a d e i n t h e p r e s e n t c a s e i n t h e a b se n c e o f a n y i n cr i m i n a t i ng m a t er i a l f o u n d during the c o ur s e of search and further since the a s s e s s m e nt in the present c as e had not a ba t e d . Th e L d . CI T( A p p e a l s ) agreed with the c o n t e n ti on s of t he a s s e s s e e , f i nd i n g t h a t t h e a s s e s sm e n t h av i n g n o t a b a t e d i n t h e p r e s e n t c a se a n d n o i n c r i m i na t i n g m a t e ri a l ha v i n g b e e n f o u n d d u ri n g t he c o u r s e o f s ea rc h h e d el e t e d t he a d d i t i o n made following various decisions of the High Court and the I TA T i n t h i s r eg ar d .
4. A g g r i e v e d b y t h e s a m e , t h e re v e nu e h a s c o m e i n ap p e a l b e f o r e a s r a i s i n g t h e f o l l o w i n g g ro u n d s :
i) "Whether on the facts and circumstances of the case the CIT(A) was right in concluding that there was a difference in scope of proceeding under section 153A of the Income Tax Act, 1961 for an abated assessment and for a completed assessment?
ii) Whether on the facts and circumstances of the case the CIT(A) was right in holding that no addition can be made u/s 153A in respect of completed assessment of no incriminating material is found during search?
iii) Whether there is any restriction on the powers of the Assessing officer under section 153A of the Income Tax Act, 3 1961 to confine only to the "incriminating material found during the search", even though such words or conditions are not mentioned in the section per se?
iv) Whether on the facts and circumstance of the case the CIT(A) was correct in interpreting section 153A which started with a non-obstinate clause stating therein that the operation of section 139,147, 148, 149, 151 & 153 was deposed.
Meaning thereby that in search cases the Assessing officer is duty bound to take up the assessment u/s 153A and that the above mentioned sections cannot be invoked. Therefore, even if incriminating material is not found during search, but if ant escaped income or underassessed income undisclosed income has to be assessed for such completed assessment, then it has to be done in the proceeding u/s 153A in search cases?
v) Whether on the facts and circumstanced of the case the CIT(A) was right to bring in special procedure of block assessment as laid in chapter XIV B into the new procedure of search assessment u/s 153A introduced by Finance Act, 2003, w.e.f. 1.06.2003, when chapter XIV B was scrapped to reduced litigation and dispute regarding treatment of a particular income as undisclosed and whether it is relatable to material found during search (Finance bill 2003 under head "
Assessment in search cases- abolition of the special procedure in Chapter XIV-B and introduction of new provisions")
vi) Whether on the facts and circumstances of the case the CIT (A) was right in ignoring the basic difference in search assessment u/s 153A and chapter XIVB being that in section 153A the "total income" has to be assessed or reassessed in six separate A.Vs., as opposed to assessing the "undisclosed income" in the scraped Chapter XIV B for block period in a single assessment?
vii) whether on the facts and circumstanced of the case the CIT(A) was right in following Delhi High Court decision in the case of CIT vs. Kabul Chawla (61 taxman.com 412) when the Hon'ble HC itself admits in para 37 (iv) the "Although Section 153A does not say that additions should strictly made on the basis of evidence found in course of search........ " there by interpreting the statute in the manner which were never worded or intended by the legislature?
viii) Whether on the facts and circumstanced of the case the CIT(A) has erred in ignoring the Principle of Strict interpretation of statues when the words used on the statue i.e. sec 153(1)(b) of the IT Act, 1961 are Assess or Reassess the "Total Income"
ix) Whether on the facts and circumstances of the case the CIT(A); right in not following the Hon'ble SC judgment on interpretation of statue in the case of Smt. Tarulata Shyam & Others vs. CIT (108 ITR 345), Keshavji Ravji And Co vd CIT (183 ITR 1). Padamsundara Rao (Deed.) & others vs 4 State of Tamil Nadu 255 ITR 147, Prakash Nath Khanna & Others vs CIT 266 ITR 1, Institute of Charted Accountants of India vs. Price water House 93 Taxman 588?
x) Whether on the facts and circumstances of the case the CIT(A) is right in not following the Hon'ble HC judgment on the issue of additions in search case u/s 153A in the case of CIT vs. Anil Kumar Bhatia 352 ITR 493 (Delhi HC), Madugula Venu vs. DIT 49 Taxman.com 200 (Delhi HC), CIT vs. Raj Kumar Arora 367 ITR 517 (Allahabad HC), canara Housing Developmen Company vs. DCIT 49 taxman.com98 (Karnataka HC), Filatex India Ltd. vs. CIT 229 Taxman 555 (Delhi HC) Sunny Jacob Jewellers and wedding centre, 362 ITR 664 (Kerala HC) and CIT vs. Continental Warehousing Corporation 64 taxman.com 34(SC)?"
xi) Whether the Hon'ble CIT(A) was justified in following the decision of the Hon'ble Delhi High Court dated 28.05.2015 in the case of CIT Vs Kabul Chawla, when the said decision was distinguished in the Revenue favoring judgment of the Hon'ble Delhi High Court dated 27.10.2016 in the case of Smt. Dayawanti through Smt. Sunita Gupta (L/H) Vs CIT."
4. D u r i n g t h e c o u rs e o f h e a r i n g be f o r e u s L d . D R f i l e d w r i t t e n s ub m i s s i o n o n t h e i ss u e d a t e d 0 1 / 05 / 2 0 18 s t a t i ng t h e r e i n t h at t he C I T( A p p e al s ) h a d e r r e d i n de l e t i n g t he addition m e r el y for the r e a so n that no i n cr i m i n a t i ng m a t e r i a l w a s f ou n d d u r i n g t he c o u r s e of s e ar c h s i n c e t h e C I T( A p p e al s ) had f a i l ed to verify the c o n t en t i o n of the a s s e s s e e . I t w a s c o n t e n d e d b y t h e L d . D R i n t he s ub m i s s i o n s t h a t i t w a s th e d u t y o f t h e CI T( A p p e a l s ) to b r i ng o n r e c o r d t h e a b o v e s a i d cl i n c h i n g f a c t s . Th e c o n t e nt s o f th e w r i t te n s u b m i s s i on a s fi l e d b e f o r e u s i s re p r o d u c e d h e r e u n d e r :
"The search was conducted on M/s Steel Strips Group of cases on 04.10.2012. An addition of Rs.20 lacs was made by the AO on account of unexplained share application money u/s 68 of the Act. The case law M/s Mala Builders Pvt Ltd vs ACIT ITA No.433 to 437/Chad/2017 relied upon by the CIT(A) is on different footings i.e. related to section 24(b) of the Act. Moreover, the CIT(A) has failed to verify the contention of the Assessee that no incriminating documents have been found and seized during search. It was his duty to bring on record the above said clinching facts.5
2. In the above case, it is humbly submitted that the following decisions may kindly be considered with regard to validity of proceedings u/s 153A:
1. E.N. Gopakumar Vs CIT [(2016) 75 taxmann.com 215 (Kerala))! (Copy Enclosed) where Hon'ble Kerala High Court held that assessment proceedings generated by issuance of a notice under section 153A(1)(a) can be concluded against interest of assessee including making additions even without any incriminating material being available against assessee in search under section 132 on basis of which notice was issued under section 153A(1)(a). The above order has been passed after considering cases of (i) CIT v. Kabul Chawla 120161 380 ITR 573/[2015J 234 Taxman 300/61 taxmann.com 412 (Delhi) (para 4),
(ii) CIT v. Continental Warehousing Corpn. (Nhava Sheva) Ltd. [2015] 374 ITR 645/232 Taxman 270/58 taxmann.com 78 (Bom.) (para 4),
(iii) Principal CIT v. Kurele Paper Mills (P.) Ltd. [2016] 380 ITR 571 (Delhi) (para 4),
(iv) CIT v. Lancy Constructions [2016] 383 ITR 168/237 Taxman 728/66 taxmann.com 264 (Kar.) (para 4),
(v) CIT v. ST. Francies Clay Decor Tiles [2016] 240 Taxman 168/70 taxmann.com 234 (Ker.) (para 5) and
(vi) CIT v. Promy Kuriakose [2016] 386 ITR 597 (Ker.) para 5).
CIT Vs Raj Kumar Arora r2014] 52 taxmann.com 172 (Allahabad)/r2014l 367 ITR 517 (Allahabad) where Hon'ble Allahabad High Court held that Assessing Officer has power to reassess returns of assessee not only for undisclosed income found during search operation but also with regard to material available at time of original assessment
3. CIT Vs Kesarwani Zarda Bhandar Sahson Alld. flTA No. 270 of 2014] (Allahabad) where Hon'ble Allahabad High Court held that Assessing Officer has power to reassess returns of assessee not only for undisclosed income found during search operation but also with regard to material available at time of original assessment
4. CIT Vs St. Francis Clav Decor Tiles (385 ITR 624) (Copy Enclosed) where Hon'ble Delhi Kerala Court held that notice issued under section 153A -return must be filed even if no incriminating documents discovered during search 6
5. Smt Davawanti Vs CIT T20161 75 taxmann.com 308 (Delhi)/r20171 245 Taxman 293 (Delhi)/f20171 390 ITR 496 (Delhi)/[2016l 290 CTR 361 (Delhi) (Though Staved by the Apex Court) where Hon'ble Delhi High Court held that Where inferences drawn in respect of undeclared income of assessee were premised on materials found as well as statements recorded by assessee's son in course of search operations and assessee had not been able to show as to how estimation made by Assessing Officer was arbitrary or unreasonable, additions so made by Assessing Officer by rejecting books of account was justified
6. CIT Vs Anil Kumar Bhatia (24 taxmann.com 98. 211 Taxman 453, 352 ITR 493) (Copy Enclosed) where Hon'ble Delhi High Court held that jurisdiction of AO under 153A is to .assess total income for the year and not restricted to seized material. Post search reassessment in respect of all 6 years can be made even if original returns are already processed u/s 143(1)(a) - Assessing Officer has power u/s 153A to make assessment for all six years and compute total income of assessee, including undisclosed income, notwithstanding that returns for these years have already been processed u/s 143(1)(a). Even if assessment order had already been passed in respect of all or any of those six assessment years, either under section 143(1)(a) or section 143(3) prior to initiation of search/requisition, still Assessing Officer is empowered to reopen those proceedings under section 153A without any fetters and reassess total income taking note of undisclosed income, if any, unearthed during search.
7. Filatex India Ltd Vs CIT (49 taxmann.com 465) (Copy Enclosed) where Hon'ble Delhi High Court held that during assessment under section 153A, additions need not be restricted or limited to incriminating material, found, during course of search."
5. Th e r e a f t e r L d . DR placed re l i a nc e on a n u mbe r of d e c i s i o n s o f t he H i g h C o u rt s t a ti n g t h a t ev e n i n th e a b s e n ce o f a n y i n c ri m i na t i n g m a t er i a l fo u n d d u r i ng t h e c o u r s e of s e a r c h a d d i t i o n u / s 1 5 3 A c o u l d b e m a d e i n th e c a s e o f c o m p l e t e d a s s e ss m e n t a l so . A t th i s j u n c tu r e t h e L d . D R w as a s k e d to p l a c e o n r e c or d wh a t i n c r i m i n at i n g ma t e r i a l w as f o u n d d u r i n g t he c o u r s e o f s e a rc h . I n r es p o n s e L d . D R f i l ed 7 a letter of t he Deputy C o mm i s s i o n e r of income t a x, C h a n d i g a rh , t h e A s s e s s i n g O f f i ce r i n t h e p r es e nt c a s e , t h e c o n t e n t s o f w h i ch a r e r e pr o d u c ed h e r e u n de r :
GOVERNMENT OF INDIA INCOME TAX DEPARTMENT Office of the Deputy Commissioner of Income Tax, Central Circle-II,- Room No. G02, C.R Building, Sector 17-E, Chandigarh [email protected] No. DCIT/CC-II/CHD/2018-19/75 Phone :0172-2701548 Dated 05.04.2018 To The Income Tax officer(Hq) O/o Commissioner of Income Tax (DR) Chandigarh Sir, Subject: Appeals in the case of M/s DHG Marketing Pvt. Ltd., SCO 49-50, Sec-26, Chandigarh-A.Y. 2010-11- Reg Kindly refer to your office letter no. CIT-DR/ITAT-02/2017- 18/1578-1579 dated 08.03.2018.
2. Brief facts of the case are that pursuant to search & seizure operation u/s 132 of the I.T. Act, 1961 carried out on the assessee on 04.10.2012, the assessment was completed u/s 153A(l)(b) r.w.s.
143(3) of the I.T. Act, 1961 vide assessment order dated 23.03.2015 at an income of Rs.4,15,00,000/- against nil returned income. As per the assessment order, enquiries revealed that the companies from whom money was received by the assessee existed only on paper and were simply entry providers. These companies had minimal or negligible returned income. The shareholders did not have any business of their own. All credits appearing in their bank accounts originated from other accounts..
3. Further, as per the assessment order the assessment is not based on any incriminating document found during search.
Yours faithfully, Sd/-
(Bandana Diwedi)"
6. L d . D R r e f e rr i n g t o t h e a b o v e f ai r l y c o n c e d ed t ha t n o i n c r i m i n at i n g ma t e r i a l was f o un d during t he course of s e a r c h . L d . co un s e l f o r t h e a ss e s s e e o n t h e ot h e r h a nd s u p p o r t e d t h e o rd e r o f t h e CI T( ap p e a l ) . L d c o u n se l f o r t he a s s e s s e e f u r t h er r e l i e d on t h e o rd e r o f t he I TA T C h a n d i g a r h 8 bench in the case of D C I T v s M / s S C M F i n t r ad e p r i v a te limited in I TA No. 981 & 98 2 / C h a n d i g a r h /2 0 1 7 d a t ed 0 5 . 0 1 . 1 8 a n d s ta t e d t h a t t h e i ss u e i n t h e s a i d c a s e w a s i d e n t i c a l to t h a t i n t h e p r e s e n t c a s e a s a l s o t h e g r o u n d s r a i s e d by t h e r ev e n u e . Ld . c ou ns e l f o r t h e a s s es s e e d r e w o u r a t t e n t i o n t o t h e f i n d i n g s o f th e I TA T i n t h e s a i d c a s e a s under:
"5. We have heard the contentions of both the parties. We do not f ind any merit in the present a p p e a l f i l e d b y t h e R e v e n u e . T h e f ac t s v i s - à - v i s b o t h t h e a p p e a l t h a t s e a r c h a c t i o n wa s c a r r i e d out on the assessee on 4.10.2012 and at the time o f s e a r c h a c t i o n n o a s s e s s me n t o r r e - a s s e s s me n t p r o c e e d i n g s we r e p e n d i n g i s u n d i s p u t e d . It is also not disputed that no incriminating d o c u me n t s o r r e c o r d o r a n y o t h e r e v i d e n c e wa s found or seized during the course of search p r o c e e d i n g s wh i c h r e s u l t e d i n a n y a d d i t i o n i n t h e case of the assessee. Theref ore, the L d . C IT ( A p p e a l s ) , we h o l d , h a s r i g h t l y d e l e t e d t h e addition made f o l l o wi n g various judicial p r o n o u n c e me n t s i n t h i s r e g a r d . F u r t h e r we d o n o t f i n d a n y me r i t i n t h e c o n t e n t i o n o f t h e L d . D R that the decision of the Hon'ble Delhi High Court i n t h e c a s e o f K a b u l C h a wl a ( s u p r a ) h a s b e e n d i s t i n g u i s h e d i n t h e c a s e o f S m t . D a y a wa n t i V s . C I T i n n IT A N o . 3 5 7 / 2 0 1 5 & O t h e r s d a t e d 2 7 . 1 0 . 2 0 1 6 , s i n c e we f i n d t h a t e v e n t h i s a s p e c t h a s b e e n d e a l t wi t h b y t h e I T A T C h a n d i g a r h Bench in the case of M/s Bharatnet Technology L t d . ( s u p r a ) i n wh i c h i t wa s o b s e r v e d t h a t t h e c a s e o f S m t . D a y a wa n t i ( s u p r a ) w a s s u b s e q u e n t l y discussed by the Hon'ble Delhi High Court in the c a s e o f P r i n c i p a l C IT V s . M e e t a G u t g u t i a P r o p . M/s Ferns 'N' Petals in ITA No.306/2017 & Other decision vide order dated 25.5.2017, wh e r e i n i t w a s h e l d t h a t i n t h e c a s e o f S m t . D a y a wa n t i (supra) incriminating material was f ound during s e a r c h a c t i o n , h o we v e r , i n t h e c a s e o f P r i n c i p a l CIT Vs. Meeta Gutgutia Prop. M/s Ferns 'N' P e t a l s n o i n c r i m i n a t i n g m a t e r i a l wa s f o u n d during search action and hence addition made w a s n o t j u s t i f i e d . I n v i e w o f t h e a b o v e , we d o not f ind any inf irmity in the order of the L d . C IT ( A p p e a l s ) wh i l e d e l e t i n g t h e i m p u g n e d additions in both the appeals f iled by the Revenue."9
7. L d . C o u n s e l f o r t h e a s s e s s e e s ta t e d t h a t t h e p re s e n t c a s e w a s c o v e r ed b y t h e af o r e s ai d d e c i s i o n.
8. W e h a v e h e a rd th e c o n te n t i o n s of b o t h t h e p a r t i es . W e do not find me r i t in the p res e n t appeal filed by the R e v e n u e . Th e fa c t t h a t a s e arc h w a s co n d u c te d o n t he a s s e s s e e o n 0 4-1 0 - 1 2 a n d t h e a s s e s s m e nt i n th e p r e s e n t c a s e , p e r t ai n i n g t o a s s e s s m en t ye a r 1 0 - 1 1 w a s no t p e n d i ng o n t h e s a i d d a t e a n d t h u s h ad no t a b a t e d , i s n o t d i s p u t e d . I t i s a l s o a n ad mi t t e d fa c t , a s no te d a b o v e by t h e A s s e s s i n g O f f i c e r of t h e a ss e s s e e , t ha t n o i n c r i m i n a ti n g m at e r i a l w as f o u n d d u ri n g t he c o u r s e o f s e ar ch . I n t he b a c kd ro p o f s uc h f a c t s t h e d ec i s i on o f t h e H o n ' bl e D e l h i H i g h Co ur t i n t h e c a s e o f , K a b ul C h a w l a ( s up r a ) ha s b e e n r i g h tl y f o l l o w e d b y t h e L d .CI T ( a p p ea l ) , h ol d i n g t h a t n o a d d i t i o n c o u l d b e ma d e i n s u c h c i r c um st a n c e s . Th e r e fo re t h e Ld . CI T( ap p e a l ) , w e h o l d , h a s r i g h t l y d e l e t e d t h e ad di t i o n m a d e i n t he p r e s e n t case f o l l o wi n g various judicial p r o n o u n c e m en ts in this r e g a r d . V i s a v i s t h e g r o u n d r a i se d b y t h e r ev e n ue t h a t t he d e c i s i o n o f t h e H o n ' b l e De l h i Hi g h C o u r t i n t he c a s e o f Kabul Chawla has been distinguished in t he case of D a y a w a n t i v s CI T i n I TA N o . 3 57 / 2 0 1 5 a n d o t he r s d a t e d 2 7 / 1 0 / 2 0 1 6, w e f i n d t ha t t h i s as p e c t h a s b e i ng d e a l t w i t h b y t h e I TA T i n t h e c a s e o f M / s S CM F i n t r a d e P r i v at e L i m i t e d ( s u p r a ) w he r e i n i t h a s b e e n h el d th a t t h e c a se o f D a y a w a n t i ( S u p r a ) w a s su bs e q u e n t l y d i s cu ss e d b y t h e H on 'b l e D e l hi High Court in the case of P r. CIT vs Meeta Gutgutia, p r o p r i e t or , M /s F e r n s & P e t a l s i n I TA N o . 3 06 /2 0 1 7 a n d 10 o t h e r s , v i d e o r de r d a t e d 2 5/ 0 5 /2 0 1 7 , w h e re i n i t w a s h e l d t h a t i n th e c a se o f D a y a w an t i ( s up r a ) , i n cr i m i n at i n g m a t e r i a l w a s f o u n d d u r i ng s e a r c h a c t i on w h i l e i n t h e c a s e o f P r . C I T v s M e e t a G ut g ut i a ( s u p r a) n o i nc r i m i n a ti n g m a te r i a l w as f o u n d d u r i n g s ear c h a c t i o n a n d ad d i t i o n w a s n ot j u s t i f i e d i n v i e w o f t h e a b o ve . I n v i e w o f t he a b o v e w e d o n o t f i n d a ny i n f i r m i t y i n t h e o r d e r o f t h e Ld . C I T( a p p e a l ) d el e t i n g t h e impugned addition.
9. In the r e s ul t th e a p p ea l fi l e d by th e re v e nu e is dismissed O r d e r p r on o u n c ed i n t h e o p e n cou r t .
Sd/- Sd/-
(DIVA SINGH) (ANNAPURNA GUPTA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated : 9 t h May, 2018
*Rati*
Copy to:
1. The Appellant
2. The Respondent
3. The CIT(A)
4. The CIT
5. The DR
Assistant Registrar,
ITAT, Chandigarh