Income Tax Appellate Tribunal - Kolkata
Msp Infotech Pvt. Ltd., Kolkata vs Dcit, Cc-3(2), Kolkata, Kolkata on 7 June, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
KOLKATA BENCH "B" KOLKATA
Before Shri Aby.T Varkey, Judicial Member and
Shri Waseem Ahmed, Accountant Member
IT(SS)A No.102/Kol/2015
Assessment Year :2007-08
MSP Infotech Pvt. Ltd. V/s. DCIT, Central Circle-
16/S, Block-A, New 3(2), Aayakar Bhawan
Alipore, Kolkata-700 053 Poorva, 110, Shanti
[P AN No. AACCM 2824 P] Pally, Kolkata-107
अपीलाथ /Appellant .. यथ /Respondent
IT(SS)A No.103/Kol/2015
Assessment Year: 2008-09
Mohit Vyapaar Pvt. Ltd. V/s. DCIT, Central Circle-
131A, Dacres Lane, 5 t h 3(2), Aayakar Bhawan
Floor, Room No. 503, , Poorva, 110, Shanti
Kolkata-700 069 Pally, Kolkata-107
[P AN No. AABCM 9338 B]
अपीलाथ /Appellant .. यथ /Respondent
IT(SS)A No.104/Kol/2015
Assessment Year: 2007-08
Adhunik Gases Ltd., V/s. DCIT, Central Circle-
1,Crooked Lane, 3(2), Aayakar Bhawan
Kolkata-700 069 Poorva, 110, Shanti
[P AN No. AACCA 1027 E] Pally, Kolkata-107
अपीलाथ /Appellant .. यथ /Respondent
आवेदक/ क ओर से/By assessee Shri A.K. Tulsyan, FCA
IT(SS)A No.102-104/Kol/2015 A.Ys. 2007-08 & 2008-09 Page 2
राज व क ओर से/By Revenue Shri Niraj Kumar, CIT-DR
सन
ु वाई क तार ख/Date of Hearing 03-05-2017
घोषणा क तार ख/Date of Pronouncement 07-06-2017
आदे श /O R D E R
PER Waseem Ahmed, Accountant Member:-
These three appeals by different assessee are directed against the different orders of Commissioner of Income Tax (Appeals)-21, Kolkata dated 28.01.2015 & 30.01.2015. Assessments were framed by DCIT, Central Circle- XXX, Kolkata u/s 153A/143(3) of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') vide his orders dated 30.03.2013 & 31.03.2013 for assessment years 2007-08 & 2008-09 respectively.
Shri A.K. Tulsyan, Ld. Authorized Representative appeared on behalf of assessee and Shri Niraj Kumar, Ld. Departmental Representative represented on behalf of Revenue.
2. At the outset, it was observed that all the appeals are filed by the different assessees are involving the common grounds of appeal except variance in amount and therefore for the sake of brevity, we dispose of all the appeals by this consolidated order. All the appeals were argued by the single Authorized Representative of the assessees.
3. Grounds raised by assessee per its appeals are reproduced below:-
IT(SS) No. 102/Kol/2015 for A.Y.07-08:-
"1) That the Ld. CIT(A) erred in holding that under the provisions of sec. 153A of the Income tax Act, 1961, the AO is empowered to reassess the income for the completed assessment even in the cases where nothing incriminating was fund in the course of search. Sec. 153A neither empowers the AO to re-
assess income of the completed assessment without any seized material or asset to that effect nor does in relation to allow the AO to review the assessment already completed. As such, the additions made in the order u/s. 153A and confirmed by the Ld. CIT(A) is bad in law and need to be deleted.
2) That under the facts & circumstances of the case and in law, the Ld. CIT(A) erred in confirming the addition of Rs.40,00,000/- being the share application money received by the assessee, under sec. 68 of the Income Tax Act, 1961, IT(SS)A No.102-104/Kol/2015 A.Ys. 2007-08 & 2008-09 Page 3 based on the statement of Mr. Naresh Chhaparia. The addition needs to be deleted.
3) That the petitioner craves leave to add, alter amend or withdraw any ground/s of appeal before or at the time of hearing.
IT(SS) No.103/Kol/2015 for A.Y. 08-09:-
"1) That the Ld. CIT(A) erred in holding that under the provisions of sec. 153A of the Income tax Act, 1961, the AO is empowered to reassess the income for the completed assessment even in the cases where nothing incriminating was fund in the course of search. Sec. 153A neither empowers the AO to re-
assess income of the completed assessment without any seized material or asset to that effect nor does in relation to allow the AO to review the assessment already completed. As such, the additions made in the order u/s. 153A and confirmed by the Ld. CIT(A) is bad in law and need to be deleted.
2) That under the facts & circumstances of the case and in law, the Ld. CIT(A) erred in confirming the addition of Rs.25,00,000/- being the share application money received by the assessee, under sec. 68 of the Income Tax Act, 1961, based on the statement of Mr. Naresh Chhaparia. The addition needs to be deleted.
3) That the petitioner craves leave to add, alter amend or withdraw any ground/s of appeal before or at the time of hearing.
IT(SS) No.104/Kol/2015 for A.Y. 07-08:-
1) That the Ld. CIT(A) erred in holding that under the provisions of sec. 153A of the Income tax Act, 1961, the AO is empowered to reassess the income for the completed assessment even in the cases where nothing incriminating was fund in the course of search. Sec. 153A neither empowers the AO to re-
assess income of the completed assessment without any seized material or asset to that effect nor does in relation to allow the AO to review the assessment already completed. As such, the additions made in the order u/s. 153A and confirmed by the Ld. CIT(A) is bad in law and need to be deleted.
2) That under the facts & circumstances of the case and in law, the Ld. CIT(A) erred in confirming the addition of Rs.90,00,000/- being the share application money received by the assessee, under sec. 68 of the Income Tax Act, 1961, based on the statement of Mr. Naresh Chhaparia. The addition needs to be deleted.
3) That the petitioner craves leave to add, alter amend or withdraw any ground/s of appeal before or at the time of hearing.
First we take up IT(SS) No.102/Kol/2015 for A.Y.07-08.
4. The preliminary issue to be decided in all these appeals except variation of amounts in ground No. 1 is as to whether in respect of unabated assessments (no pending proceedings) as on the date of search, the Ld. Assessing Officer could frame the search assessment u/s 153A of the Act by IT(SS)A No.102-104/Kol/2015 A.Ys. 2007-08 & 2008-09 Page 4 making certain additions without having found any incriminating materials during the course of search.
5. The brief facts appearing in this case are that there was a search and seizure operation conducted u/s 132(1) of the Act at the various premises/ offices of the group of assessee on 06.10.2010. The assessee is a private limited company and engaged in the business of shares dealing. The assessee had originally filed its return of income for the assessment year under consideration on 01.11.2007. For the year under consideration, the maximum time limit for issuance of notice u/s 143(2) of the Act expired on 30.09.2008. Accordingly, as on the date of search on 06.10.2008, the impugned assessment year became unabated. Thus, the assessee has challenged the validity of the assessment proceedings u/s 153A/143(3) of the Act on the ground that no incriminating materials were found during the search proceedings pertaining to the aforesaid AYs.
5.1 The assessment was framed u/s 153A/143(3) of the Act by adding share application money of Rs. 40 lacs u/s 68 of the Act on the basis of statement of Shri Naresh Chhaparia who is an entry operator. Shri Naresh Chhaparia was a Director in various companies and found providing accommodation entries through these companies in the guise of share capitals in lieu of commission. The premises of the companies belonging to Shri Naresh Chhaparia were surveyed u/s 133A of the Act dated 07.10.2010. At the time of survey, the statement of Shri Naresh Chhaparia was recorded where it was admitted that its companies have provided accommodation entries to MSP group of companies during the financial years 2004-05 to 2010-11 including the assessee. The AO during assessment proceedings issued notice for recording the statement u/s 131 of the Act and for cross examination of the facts to the assessee. But Shri Naresh Chhaparia did not appear for the same and assessee also failed to produce Shri Naresh Chhaparia. Therefore the addition was made by the AO u/s 68 of the Act. IT(SS)A No.102-104/Kol/2015 A.Ys. 2007-08 & 2008-09 Page 5
6. Aggrieved assessee preferred an appeal to ld. CIT(A) who has confirmed the order of AO by observing that in the identical case of M/s Mohit Vyappar Pvt. ltd. of the group company where the similar additions were confirmed.
Being aggrieved by the order of ld. CIT(A) the assessee is in second appeal before us.
7. The Ld. AR before us filed a paper book which is running from pages 1 to 71 of the paper book and argued in respect of assessment year under consideration being unabated assessments, the AO has made disallowance, for which absolutely no incriminating materials were found during the course of the search. Hence, he prayed for deletion of addition made by the AO. He placed reliance on the decisions of the Hon'ble Calcutta High Court in the case of Commissioner of Income-tax Kolkata -III Vs. Veerprabhu Marketing Ltd. [2016] 73 taxmann.com 149 (Cal) & in the judgment of Hon'ble Delhi High Court in ITA No. 707, 709 & 7013 of 2014 CIT Central-III vs. Kabul Chawla.
The Ld. AR further argued that Shri Naresh Chhaparia has retracted from his statement dated 11.10.2010 in an affidavit duly notarized before the Notary Public, Kolkata which was filed before the ld. CIT(A) vide dated 03.11.2014. The addition was made only on the basis of statement recorded at the time of survey in the premises of the companies belonging to Shri Naresh Chhaparia which after retraction has no cognizable value.
The ld. AR before us also submitted that in the identical issue of the group companies of the assessee, the Hon'ble ITAT in the case of M/s Mohit Vyapaar Pvt. Ltd. in ITA No.53/Kol/2015 for A.Y 2010-11 dated 05.04.2017 has decided the issue in favour of assessee.
IT(SS)A No.102-104/Kol/2015 A.Ys. 2007-08 & 2008-09 Page 6 The Ld. DR, on the other hand, argued vehemently on the validity of the assessment completed u/s 153A/143(3) of the Act and placed reliance on the orders of the subordinate authorities. The Ld. DR submitted that the AO had conducted necessary enquiry and there was existence of incriminating materials. The ld. DR also submitted that the statement made by Shri Naresh Chhaparia was retracted as dated 11.10.2010 as mentioned in the affidavit but the same was filed after the period of 4 years i.e. 3.11.2014. Therefore, the retraction statement should not be considered as its value lapsed after the expiry of 4 years. ld. DR vehemently supported the order of authorities below.
8. We have heard the rival contentions of the parties and perused the materials available on record as well as perused the case record, analyzed the facts and circumstances of the case including the judicial pronouncements cited and placed reliance upon. We find that the legal grounds raised by the assessee go into the very crux of the matter and does not involve any fresh investigation of facts. Therefore, we find that it would be necessary to address the preliminary issue, whether assessment could be framed u/s 153A of the Act in respect of concluded proceeding without the existence of any incriminating material found during the course of the search. The scheme of the Act provides for abatement of pending proceedings as on date of search. It is not in dispute that the assessment year consideration falls under the ambit of unabated assessment as on the date of search. There was no differentiation as found in the intent of the legislature to differentiate whether the assessments were originally framed u/s 143(1) or 143(3) or 147 of the Act. Therefore, if any incriminating material is not found during the course of search related to those concluded years, the Act does not confer any power upon the Assessing Officer to disturb the finding given thereon and income determined thereon as finality has already been reached and no proceedings were pending on the date of search.
IT(SS)A No.102-104/Kol/2015 A.Ys. 2007-08 & 2008-09 Page 7 8.1 We find that the decision of the Hon'ble Delhi High Court in the case of CIT Central-III vs. Kabul Chawla reported in (2016) 380 ITR 570 (Del) has duly considered various decisions and decided the issue in favour of assessee. We also find that the Hon'ble Jurisdictional High Court recently in the case of Principal Commissioner of Income Tax vs M/s. Salasar Stock Broking Ltd. in G.A. No. 1929 of 2016 I.T.A.T. No. 264 of 2016 dt. 24.08.2016 has endorsed the judgment of Hon'ble Delhi High Court in the case of CIT Central-III vs. Kabul Chawla (supra) and also placed reliance on its own decision in the case of Commissioner of Income-tax Kolkata -III Vs. Veerprabhu Marketing Ltd. (supra). We find that provision of Section 132 of the Act relied upon by the division bench would be relevant only for the purpose of conducting search action. Once the proceedings u/s 153A of the Act is initiated which are special proceedings, the legislature provides different treatments for abated and unabated assessments.
In respect of abated assessments, fresh assessments are to be framed by the AO u/s 153A of the Act which would have a bearing on the determination of the total income by considering all the aspects, wherein existence of incriminating material does not have any relevance. However, in respect of unabated assessments the legislature has conferred powers on the AO to just follow the assessments already concluded unless there is an incriminating material found in the course of search.
Therefore, for the reasons stated above and on basis of various judicial pronouncements, we hold that the impugned addition was made for the assessment year under consideration merely on the basis of the statement recorded at the time of survey which was subsequently retracted by way of filing the affidavit. Thus the impugned statement has no evidentiary value, so the AO erred in making the addition on the basis of statement. In this connection we rely in the case CIT Vs. S. Khader Khan Son reported in 352 ITR 480 where the Hon'ble Supreme Court has held that :
"Section 133A does not empower any IT authority to examine any person on oath, hence, any such statement has no evidentiary value and any admission made during such statement cannot, by itself, be made the basis for addition"
IT(SS)A No.102-104/Kol/2015 A.Ys. 2007-08 & 2008-09 Page 8 Similarly we find that the party i.e. Shri Naresh Kumar Chhaparia also did not appear for the cross examination in spite of the notice under section 131 of the Act was issued. In the absence of the cross examination of the statement the impugned addition cannot stand as held by the Hon'ble Supreme Court in the case of Anadaman Timber Industries in civil appeal no. 4228 of 2006. The relevant extract of the judgment reads as under :
"According to us, not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the Adjudicating Authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross-examination of the said dealers could not have brought out any material which would not be in possession of the appellant themselves to explain as to why their ex-factory prices remain static. It was not for the Tribunal to have guess work as to for what purposes the appellant wanted to cross-examine those dealers and what extraction the appellant wanted from them.
As mentioned above, the appellant had contested the truthfulness of the statements of these two witnesses and wanted to discredit their testimony for which purpose it wanted to avail the opportunity of cross-examination. That apart, the Adjudicating Authority simply relied upon the price list as maintained at the depot to determine the price for the purpose of levy of excise duty. Whether the goods were, in fact, sold to the said dealers/witnesses at the price which is mentioned in the price list itself could be the subject matter of cross-examination. Therefore, it was not for the Adjudicating Authority to presuppose as to what could be the subject matter of the cross-examination and make the remarks as mentioned above. We may also point out that on an earlier occasion when the matter came before this Court in Civil Appeal No. 2216 of 2000, order dated 17.03.2005 was passed remitting the case back to the Tribunal with the directions to decide the appeal on merits giving its reasons for accepting or rejecting the submissions. In view the above, we are of the opinion that if the testimony of these two witnesses is discredited, there was no material with the Department on the basis of which it could justify its action, as the statement of the aforesaid two witnesses was the only basis of issuing the Show Cause We, thus, set aside the impugned order as passed by the Tribunal and allow this appeal."
IT(SS)A No.102-104/Kol/2015 A.Ys. 2007-08 & 2008-09 Page 9 Therefore, in view of the above the assessments which were unabated/concluded assessments as on date of search cannot be made in the search assessments in the absence of any incriminating material found in the course of search and accordingly all those additions are directed to be deleted.
8.2 We also find that the Co-ordinate Bench of this Tribunal in the other group of cases of the assessee involving identical issue has decided in favour of assessee in the cases of Adhunik Gases Limited vs. DCIT for the A.Y. 2009-10 in IT(SS)A No.47/Kol/2015; M/s Swagat Trexim Pvt. Ltd. vs. DCIT, CC-XXX in IT(SS)A No.49-51/Kol/2015 for A.Ys. 2006-07 to 2008-09; M/s Shree Vinay Finvest Pvt. Ltd. Vs. DCIT, CC-XXX in IT(SS)A No.52/Kol/2015 for A.Y. 2007-08; M/s MSP Metallics Ltd. Vs. DCIT, CC-XXX in IT(SS)A No.54/Kol/2015 for A.Y. 2005-06; M/s MSP Rolling Mills Pvt. Ltd. Vs. DCIT,CC-XXX in IT(SS)A No.55/Kol/2015 for A.Y. 2007-08; M/s Larigo Investment Pvt. Ltd. Vs. DCIT, CC-XXX in IT(SS)A No.94-95/Kol/2015 for A.Y. 2007-08 and M/s Ravi Business Services Pvt. Ltd. Vs. DCIT, CC-XXX in IT(SS)A No.96/Kol/22015 for A.Y. 2007-08 dated 06.01.2017. The relevant extract of the order reads as under:-
"9. Having heard the rival submissions, perused the material available on record, we are of the view that there is merit in the submissions of the assessee, as the propositions canvassed by the ld. AR for the assessee are supported by the judgments of jurisdictional ITAT and Hon'ble High Courts. Ld. AR has pointed out that no incriminating document was found either during survey or during search procedure. The statement of Shri Naresh Kumar Chhaparia should not be relied on, because he is a double speaking person. The assessment proceedings were completed before the date of search. Besides, the time limit to issue notice u/s. 143(2) was also expired. In order to initiate assessment proceedings u/s. 153A, there should be a new or incriminating document. The assessment which is already completed u/s. 143(3)/143(1) should not be reopened. Therefore, considering the scheme of Section 12 and Section 153A, we are of the view that there should be some new document/incriminating document to invoke the provisions of Section 153A. Ld. DR for the revenue had pointed out that there is a direct nexus among the companies, which has been established by the statement of Mr. Naresh Kumar Chhaparia, which cannot be relied on, as he was a double speaking person. Therefore, considering the factual position and the judgments cited by ld. AR, we are of the view that the additions made by the AO u/s 153A and confirmed by the ld. CIT(A) needs to be deleted. Therefore, we delete the addition.
10. In the result, appeal filed by the assessee on ground No.1 [IT(SS)A No.47,49,50,51,52,54,55,94,96/Kol/2015] is allowed. IT(SS)A No.102-104/Kol/2015 A.Ys. 2007-08 & 2008-09 Page 10 Since the legal issues are addressed, we refrain to give our findings on merits of disallowances under the provisions of the Act. Accordingly ground raised by the assessee in its appeal on technical issue is allowed.
9. In the result, assessee's appeal is allowed.
Coming to IT(SS)A No.103-104/Kol/2015 for A.Y. 08-09 & 07-08.
10. Since the facts are exactly identical, both the parties are agreed whatever view taken in the above appeal in IT(SS)102/Kol/2015 of assessee may be taken in these appeals of assessee also, we hold accordingly.
11. In the result, assessee's appeals are allowed.
12. In combine result, appeals of assessee for A.Ys.-07-08 & 08-09 are allowed.
Order pronounced in the open court 07/06/2017
Sd/- Sd/-
(Aby. T. Varkey) (Waseem Ahmed)
(Judicial Member) (Accountant Member)
Kolkata,
*Dkp
"दनांकः- 07/06/2017 कोलकाता ।
आदे श क त ल प अ े षत / Copy of Order Forwarded to:-
1. आवेदक/Assessee-
2. राज व/ Revenue-DCIT, CC-3(2), Aayakar Bhawan, Poorva, 110, Shanati Pally, Kol-107
3. संब-ं धत आयकर आय/ ु त / Concerned CIT Kolkata
4. आयकर आय/ ु त- अपील / CIT (A) Kolkata
5. 2वभागीय 5त5न-ध, आयकर अपील य अ-धकरण, कोलकाता / DR, ITAT, Kolkata
6. गाड9 फाइल / Guard file. By order/आदे श से, /True Copy/ Sr. Private Secretary, Head of Office/DDO आयकर अपील य अ-धकरण, कोलकाता ।