Income Tax Appellate Tribunal - Delhi
Vipul Goel, Faridabad vs Acit, Meerut on 22 May, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "D", NEW DELHI
BEFORE SH.BHAVNESH SAINI, JUDICIAL MEMBER
AND
SH.L.P.SAHU, ACCOUNTANT MEMBER
ITA No.5739 & 5740/Del/2014
[Assessment Year: 2002-03 & 2003-04]
Vipul Goel, vs ACIT,
579, Sector-17, Faridabad. Central Circle,
PAN-ADCPG2917R Meerut.
(Appellant) (Respondent)
ITA No.1018/Del/2014
[Assessment Year: 2005-06]
DCIT, vs Vipul Goyal,
Central Circle, 579, Sector-17, Faridabad.
Meerut. PAN-ADCPG2917R
(Appellant) (Respondent)
C.O.No.-297/Del/2014
(In ITA No.1018/Del/2014)
[Assessment Year: 2005-06]
Vipul Goel, vs DCIT,
H. No.579, Sector-17, Faridabad. Central Circle,
PAN-ADCPG2917R Meerut.
(Appellant) (Respondent)
C.O.No.-298/Del/2014
(In ITA No.1019/Del/2014)
[Assessment Year: 2006-07]
Vipul Goel, vs DCIT,
H. No.579, Sector-17, Faridabad. Central Circle,
PAN-ADCPG2917R Meerut.
(Appellant) (Respondent)
Assessee by Sh. Ved Jain, Adv. & Sh. Ashish Goel,
Sh. Ashish Chadha, CA
Department by Sh. Vijay Varma, CIT DR
ITA No.10 & 11/Del/2015
[Assessment Year: 2005-06 & 2006-07]
Vipul Goel, vs ACIT,
579, Sector-17, Faridabad. Central Circle,
PAN-ADCPG2917R Meerut.
(Appellant) (Respondent)
ITA No.170/Del/2015
[Assessment Year: 2005-06]
ACIT, vs Vipul Goel,
Central Circle, 579, Sector-17, Faridabad.
Meerut. PAN-ADCPG2917R
(Appellant) (Respondent)
Appellant by Sh. Ved Jain, Adv.
Respondent by Sh. Amit Jain, Sr. DR
Date of Hearing 08.05.2018
Date of Pronouncement 22.05.2018
ORDER
PER BHAVNESH SAINI, JUDICIAL MEMBER
This order shall dispose of above cross appeals/C.Os. We have heard both parties and perused material on record.
ITA No.5739/Del/2014 [Assessment Year: 2002-03]
2. This appeal by the assessee has been directed against the order of Ld.CIT(A), Meerut dated 14.05.2013 for AY 2002-03.
3. Earlier this appeal was dismissed on default which is restored by allowing the MA by the assessee. The appeal is time barred by 436 days. The assessee filed application for condonation of delay in which it was explained that order of First Appellate Authority was inadvertently mixed in the office with other files. The same could not be brought to the notice of the Ld. Counsel who was handling the taxation work. The cross-objection in the case of the assessee was being filed for the AY 2004-05 to 2007-08 wherein the Department has filed the appeal before the Tribunal. When the cross- objections being prepared, facts of the appellate orders for assessment year under appeal came to the light. It was, therefore, submitted that delay in filing the appeal may be condoned which is inadvertent omission on the part of the Page | 2 assessee. Affidavit in support of the application is filed. Ld. Counsel for the assessee reiterated the facts stated in the application for condonation of delay and submitted that the assessee in the present appeal, has challenged the charging of interests u/s 234A & 234B of the Income Tax Act, 1961 (in short "Act") and that the additions have been made without recovery of incriminating material. Therefore, the assessee has a prima facie case for inference in the orders of the authorities below. The assessee prayed for condonation of delay. Ld. CIT DR, however, objected to the same and submitted that the delay may not be condoned.
3.1. After considering rival submissions, we are satisfied that the assessee could not file the appeal due to inadvertent mistake within the period of limitation. The assessee would not gain anything in delaying the filing of appeal when he has prima facie case. Therefore, the delay in filing the appeal is condoned.
4. The assessee in the present appeal has challenged the orders of the authorities below in charging interests u/s 234A & 234B of the Act. It is also stated that no addition could have been made in assessment u/s 153A of the Act since the assessment had already become final and had not abated. As a matter of fact, no incriminating material was found and seized during the course of search.
5. Briefly the facts of the case are that the search operation was carried out on residential premise of the assessee situated at 579, Sector-17, Faridabad on 15.02.2008. Subsequently, search warrants in respect of Locker No.99, OBC, Secto-17, Faridabad and Locker No.32, OBC, Rajpur Road, Dehradun in the name of the assessee was also issued and the said lockers were searched.
Page | 3 During search, cash & jewellery were found and seized. Notice u/s 153A was issued on 13.03.2009 and 29.07.2009. Return was filed on 22.10.2009. From the details of income from other sources, it was noticed that the assessee had declared gross interests received amounting to Rs.1,76,557/- on loan given by him to M/s Vipul Real Estate Pvt. Ltd. From this gross interest received, the assessee had deducted same amount of Rs.1,76,557/- as interests paid on borrowings and thus, has shown net interest received at Rs.NIL. The AO, however, had not allow deduction of amount in terms of section 57 of the Act and, accordingly, made the addition. Interest u/s 234A, 234B and 234C was charged.
6. The assessee challenged the charging of the interest u/s 234A & 234B of the Act before Ld.CIT(A). However, the appeal of the assessee has been dismissed.
7. The assessee on Ground No.3 submitted that no addition could have been made in assessment made u/s 153A of the Act since the assessment had already became final and had not abated. As a matter of fact, no incriminating material was found and seized during the course of search.
8. Ld. Counsel for the assessee submitted that the AO has disallowed interests, therefore, there is no seized material much less incriminating material found during the course of search during the year under consideration. He has submitted that the assessee has filed original return of income on 31.03.2004 (P.B 3, 4). Accordingly, the AO cannot make any addition in reassessment proceedings u/s 153A of the Act. The assessment of this year stood completed much before the search and was not pending on the date of search. He has relied upon the orders of Jurisdictional Chandigarh Page | 4 ITAT in the case of Mala Builders P.Ltd. vs ACIT [2016] 51 ITR (Trib.) 272 in which it was held that in the absence of incriminating material found during the course of search and the assessment proceedings having not abated, at the time of search, the AO has no jurisdiction to make the addition u/s 153A of the Act. He has relied upon the judgement of the Hon'ble Delhi High Court in the case of CIT (Central)-III vs Kabul Chawla [2015] 380 ITR 573 (Delhi) in which it was held that:
"On a conspectus of section 153A(l), read with the provisos thereto, and in the light of the law explained in various decisions, the legal position that emerges is as under:
(i) Once a search takes place under section 132, notice under section 153A(1) will have to be mandatorily issued to the person searched requiring him to file returns for six assessment years immediately preceding the previous year relevant to the assessment year in which the search takes place.
(ii) Assessments and reassessments pending on the date of the search shall abate. The total income for such assessment years will have to be computed by the Assessing Officers as a fresh exercise.
(iii) The Assessing Officer will exercise normal assessment powers in respect of the six years previous to the relevant assessment year in which the search takes place. The Assessing Officer 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 assessment years '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 Assessing Officer 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 Page | 5 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 153A is relatable to abated proceedings (i.e., those pending on the date of search) and the word 'reassess' to complete 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 assessment year on the basis of the findings of the search and any other material existing or brought on the record of the Assessing Officer.
(vii) Completed assessments can be interfered with by the Assessing Officer 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. [Para 37] The present appeals concern assessment years 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.[para 38] The revenue's appeals are accordingly dismissed."
9. He has also relied upon the decision of Hon'ble Delhi High Court in the case of Pr. CIT, Central-2, New Delhi vs Meeta Gutgutia Prop. M/s Ferns 'N' Petals 395 ITR 526 in which it was held that :-
69. "What weighed with the Court in the above decision was the "habitual' concealing of income and indulging in clandestine operations"
and that a person indulging in such activities "can hardly be accepted to maintain meticulous books or records for long." These factors are absent in the present case. There was no justification at all for the AO to proceed on Page | 6 surmises and estimates without there being any incriminating material qua the AY for which he sought to make additions of franchisee commission.
70. The above distinguishing factors in Dayawanti Gupta (supra), therefore, do not detract from the settled legal position in Kabul Chawla (supra) which has been followed not only by this Court in its subsequent decisions but also by several other High Courts.
71. For all of the aforementioned reasons, the Court is of the view that the ITAT was justified in holding that the invocation of Section 153A by the Revenue for the AYs 2000-01 to 2003-04,was without any legal basis as there was no incriminating material qua each of those AYs.
Conclusion
72. To conclude:
(i) Question (i) is answered in the negative i.e., in favour of the Assessee and against the Revenue. It is held that in the facts and circumstances, the Revenue was not justified in invoking Section 153A of the Act against the Assessee in relation to AYs 2000-01 to AYs 2003 -04."
10. He has also relied upon various other decisions in support of the same propositions. Ld. Counsel for the assessee submitted that the assessee is located at Faridabad and the present AO is Ward-2, Faridabad. He has submitted that the case of the assessee is transferred to DCIT/ ACIT, Circle-2, Faridabad vide transfer order dated 30.06.2015. Copy of which is placed on record. He has submitted that it is settled law that Jurisdictional High Court is that where the situs is of the AO. Further the situs as on date is to be considered as there cannot be two AO of the same assessee. He has submitted that the Jurisdictional High Court in the case of the assessee is not Hon'ble Allahabad High Court.
11. Ld. CIT DR, however, submitted that this ground was not pressed before Ld.CIT(A) and new ground is raised before the Tribunal which requires Page | 7 verification of the fact. Ld.CIT DR submitted that the issue is decided against the assessee by Hon'ble Allahabad High Court in the case of CIT vs Raj Kumar Arora [2014] 367 ITR 517 (Allahabad) in which it was held that "in the light of the aforesaid, the reasons given by the Tribunal that no material was found during the course of search cannot be sustained. Since the AO has the power to re-assess the return of the assessee not only for the undisclosed income found during the course of search operation but also with regard to the material that was available at the time of original assessment." Other decision on same point urged. He has also relied upon the order of ITAT, Delhi Bench in the case of Parag Dalmia vide order dated 26.02.2018 in ITA No.5499/Del/2017 in which documents were received by the Government of India from a sovereign country containing information regarding the undisclosed foreign accounts were received prior to the search and confronted to assessee during search was held to constitute incriminating material. Ld. Counsel for the assessee, however, submitted that this ground is legal in nature and arise out of the orders of the authorities below, therefore, same may be adjudicated.
12. We have considered rival submissions and material on record. Hon'ble Punjab & Haryana High Court in the case of VMT Spinning Co. Ltd. vs CIT & Another [2016] 389 ITR 326 (P&H) held as under:-
"The Tribunal could decide the appeal on a ground neither taken in the memorandum of appeal nor by seeking its leave. The only requirement was that the Tribunal could not rest its decision on any other ground unless the party who might be affected had sufficient opportunity of being heard on that ground. Therefore, the Tribunal ought to have exercised its discretion in view of the fact that the assessee intended raising only a legal argument without reference to any disputed questions of fact. Since there were no additional evidence required for the decision on the new Page | 8 ground raised by the assessee and such question arose from the facts which were already on the record of the assessment proceedings and since a decision upon the new ground raised by the assessee would only help in determining the assessee's correct tax liability, the matter could be remanded to the Tribunal for adjudicating upon the additional ground on its merits. [Matter remanded]."
13. Hon'ble Delhi High Court in the case of Pr. CIT vs Nilkanth Concast P. Ltd. [2016] 387 ITR 568 (Delhi) relying upon the decision of the Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd. vs CIT [1998] 229 ITR 383 (SC) held as under:-
"The powers of the Tribunal are wide enough to consider a point which may not have been urged before the Commissioner (Appeals) as long as the question requires to be examined in the interest of justice.
Held accordingly, that the Tribunal had not exceeded its jurisdiction in examining the question whether the Assessing Officer was justified in extending the time of the auditor nominated under section 142(2C) of the Income Tax Act, 1961, to submit the audit report."
14. Considering the facts of the case and in the light of the above decisions, it is clear that the issue involved on Ground No.3 of the appeal of the assessee is legal in nature and arise out of the orders of the authorities below. No new facts shall have to be considered. There is no need to consider additional evidences. The issue is adjudicated in the interest of justice. In this case, search was conducted on the assessee and the AO on the basis of the record produced by the assessee found that the assessee has shown income from other sources against which expenditure have been claimed u/s 57 of the Act. The AO disallowed the deduction of the expenditure u/s 57 of the Act and computed the income of the assessee. It is, therefore, clear from the facts mentioned in the assessment order that no incriminating material was found Page | 9 during the course of search against the assessee to make any addition. The issue is legal in nature and sufficient opportunity of being heard has been granted to the Revenue to counter the claim made by the assessee. Merely because this issue was not contested before Ld.CIT(A), is not ground to reject the prayer of the assessee. Hon'ble Delhi High Court in the case of Pr. CIT vs Nilkanth Concast P. Ltd. (supra) held that the powers of the Tribunal are wide enough to consider the point which may not have been urged before the Commissioner (Appeals) so long as the question request to examine in the interests of justice. In this case, the issue is covered in favour of the assessee by the judgement of Hon'ble Delhi High Court in the case of Kabul Chawla and Meeta Gutgutia Prop. M/s Ferns 'N' Petals (supra), therefore, the contention of the Ld. CIT DR is rejected that this ground may not be adjudicated. Ld. Counsel for the assessee filed the transfer order in the case of the assessee to show that the case of the assessee has been transferred to DCIT, Circle-2, Faridabad on 30.06.2015. The assessee is situated at Faridabad, therefore, the Jurisdictional High Court in the case of the assessee would be Hon'ble Punjab & Haryana High Court. The assessee, therefore, rightly relied upon the decision of the ITAT, Chandigarh Bench in the case of Mala Builders P.Ltd. (supra) in which the point in issue has been decided in favour of the assessee. No other contrary decision of Hon'ble Punjab & Haryana High Court have been cited by the Ld.CIT DR. Therefore, the decision of the Hon'ble Allahabad High Court in the case of Raj Kumar Arora (supra) cannot be given preference. The other decisions cited by Ld.CIT DR, therefore, would not support the case of the Revenue. Considering the totality of the facts and circumstances of the case and the fact that original assessment stands completed on the date of the Page | 10 search and no incriminating material was found during the course of search, therefore, no addition could have been made to the income of the assessee which is already assessed. It is well-settled law that completed assessment can be interfered with by the AO by making assessment u/s 153A only on the basis of some incriminating material unearthed during the course of search which was not produced or not already disclosed or made known in the course of original assessment. Therefore, no addition could be made against the assessee. In view of the above decisions, we set aside the orders of the authorities below and delete all the additions.
15. In the result, Ground No.3 is allowed.
16. On the Ground Nos. 1 & 2, the assessee challenged the charging of interests u/s 234A and 234B of the Act. Ld. Counsel for the assessee submitted that as per section 234A(3) of the Act, interests is to be charged starting from the month following expiry of time allowed to file return u/s 153A and the date of filing of the return. In the present case, AO has issued notice on 13.03.2009 to file the return within 20 days i.e. 03.04.2009 (P.B 5). The return was filed on 22.10.2009, thus, the default was 07 months only. Hence, interests u/s 234A(3) will be for 07 months and not for 20 months i.e 01.08.2002 to 31.03.2004 on the basis of the original return charged by the AO. He has further submitted that consequent to the search carried out on 15.02.2008 whereby cash of Rs.27 lakhs was seized and hence available to the Department. The AO has given credit of this cash seized on 08.06.2010 when he made adjustment of cash seized against the demand created. The AO charged interests u/s 234B of the Act for the period 15.02.2008 till 29.12.2008. Thus, charging of interest is incorrect as the amount was Page | 11 available with the Department. He has submitted that the issue is covered in favour of the assessee by the judgement in the case of Sudhakar M Shetty vs ACIT 2008(3) TMI 692-ITAT Mumbai in which it was held that "as per amended provisions of law, there is no requirement to seek any request from the assessee for adjustment". The AO was directed to adjust the remaining cash seized by Department from the date of seizure. Copy of the order of ITAT, Mumbai Bench is filed.
17. After considering rival submissions, we find the submissions of the Ld. Counsel for the assessee to be correct because submission of assessee is not rebutted by Department. Ld. DR relied upon the judgement of the Hon'ble Delhi High Court in the case of Prannoy Roy & Anr. vs Commissioner Of Income Tax [2002] 254 ITR 755 in which it was held that "interests u/s 234A would be payable only in a case where tax had not been deposited prior to the date of filing of the return. In this judgement, the amended provision inserted in section 234A(3) w.e.f. 01.06.2003 have not been considered. Therefore, this decision would not support the case of the Revenue. The charging of interest u/s 254A is to be restricted to 07 months only and cash seized to be adjusted against demand u/s 234B as discussed above. However, the same issue does not require detailed discussion because legal issue has already been decided in favour of the assessee that entire addition would stand deleted, therefore, this ground is left for academic discussion only. These grounds are accordingly allowed in terms above.
18. In the result, the appeal of the assessee is allowed.
Page | 12 ITA No.5740/Del/2014 [Assessment Year: 2003-04]
19. This appeal by the assessee has been directed against the order of Ld.CIT(A), Meerut dated 14.05.2013 for AY 2003-04 challenging the charging of interests u/s 234A & 234B of the Act and the addition of Rs.10 Lakhs u/s 68 of the Act. It is also stated that the re-assessment became final before the date of search had not abated, therefore, no addition could be made u/s 153A of the Act.
20. This appeal is also time barred by 436 days. The reasons are same as have been explained in ITA No.5739/Del/2014. Following the reasons for AY 2002-03 (supra), the similar delay in filing the appeal is condoned. In this case, the assessee has filed original return of income at Rs.50,000/- on 31.03.2005 (P.B. 1 & 2), therefore, assessment was completed on the date of search. It is admitted fact that no incriminating material was found during the course of search to make any addition against the assessee. The AO made addition of Rs.10 Lakhs on perusal of Bank statement and bank book in respect of the credit entry in the bank account. However, addition was made of Rs.50,000/- on account of unexplained source of purchase of the shares. Ld. Representatives of both the parties submitted that the issues are same as are considered in ITA No.5739/Del/2014 (supra). Since no incriminating material was found during the course of search qua above addition and the assessment was completed on the date of search and there is no abatement of the assessment, therefore, the issues covered in the case of the assessee in ITA No.5739/Del/2014. Therefore, all the additions stand deleted. The issue of charging of 234A & 234B, interest is also covered by the order of Tribunal for AY 2002-03 (supra). No incriminating material was found in search for making Page | 13 addition of Rs.10 Lakhs. P.B.20 is reply of the assessee in which it is explained that assessee is in business of real estate. Advance was taken against which deed is executed. It was received through banking channel. Assessee did not retain pay in slip and after 07 years, it was difficult to produce details. But it is not a case of no explanation. The addition is liable to be deleted. The explanation of the assessee is accepted, however no further reasons are required in view of finding on Ground No.3. All Grounds are allowed.
21. In the result, the appeal of the assessee is allowed. ITA No.1018/Del/2014 & C.O.No.-297/Del/2014
[Assessment Year: 2005-06]
22. The Revenue's appeal as well as cross objection by the assessee are directed against the order of Ld.CIT(A), Meerut dated 29.11.2013 for AY 2005-
06. The AO passed the assessment order u/s 153A/143(3) of the Act on 29.12.2009. The assessee filed return of income declaring income of Rs.3,90,800/-. The AO made an addition on account of income from undisclosed sources which were based on the record produced by the assessee. The AO made addition of Rs.1,09,38,880/- on account of unexplained credit u/s 68 of the Act which was based upon the material produced by the assessee at the assessment stage. The AO made an addition of Rs.1,50,000/- u/s 69 of the Act on account of unexplained investment for purchase of FDs. An addition of Rs.27,000/- was made on account of unexplained expenditure for purchase of Samsung Air Conditioner. An addition of Rs.3,00,000/- was made on premium earned on cancellation of land deal. The assessee produced additional evidences before Ld.CIT(A). The assessee explained before Ld.CIT(A) that during the assessment proceedings due to inadequacy of time, the Page | 14 evidences could not be produced, therefore, additional evidences were filed. The submissions and additional evidences were forwarded to the AO for filing Remand Report. The AO objected to the admission of the additional evidences. The assessee explained that the AO issued questionnaire for the first time on 23.11.2009 fixing the case for hearing on 30.11.2009 and the assessment was concluded on 29.12.2009. Thus, there was little time available with the assessee to obtain relevant documents from the party. Ld.CIT(A), accordingly, admitted the additional evidences. The Revenue is in appeal on Ground No.1. Ld.CIT(A) considered the issue of credit of Rs.50 Lakhs received from Eros City Developers. It was explained that the assessee has received Account Payee Cheque dated 14.07.2004 as repayment of advance given by the assessee. This advance was given vide cheque dated 26.11.2003 drawn by the assessee on its Saving Bank Account for the booking of two plots in the project at Faridabad. Copies of the forwarding letter with bank statements were filed alongwith confirmation, complete address and PAN. The assessee filed confirmation and explained amount was returned on request of assessee with compensation of Rs.3 Lakhs. Ld.CIT(A) accepted the submissions of Ld.CIT(A) and deleted the addition. It is, therefore, a claim of the assessee that refund of the earlier amount was received and Rs.3,00,000/- was received on account of cancellation of the deal which have been shown as income. The Revenue on Ground No.2 has challenged the deletion with this addition. The Revenue further raised Ground No.3 for deletion of addition of Rs.7,00,000/- u/s 68 of the Act. It was explained at the appellate stage that amount has been received and credited to the bank account and this credit was reversed as the party issued the cheque (Sh. M.C.Gupta) had insufficient fund in the bank account.
Page | 15 Copy of the relevant bank account was filed. Ld.CIT(A), accordingly, deleted the addition.
23. On Ground No.4, the Revenue challenged the deletion of addition of Rs.50,000/- and Rs.18,800/-. The assessee filed confirmation in this regard. Copies of the bank statement was filed. It was explained that partly refund of Rs.50,000/- was made by that party which have been credited to the bank account of the assessee on 25.08.2004. Besides interests of Rs.18,880/- was also paid by the party which was credited to the bank account of the assessee but the cheque was not honoured on account of insufficient fund, therefore, equivalent amount was debited. Ld.CIT(A), accordingly deleted the addition.
24. On Ground No.5, Revenue challenged the deletion of addition of Rs.1,50,000/- for short term deposit/cumulative deposit favouring wife and daughter of the assessee. It was found that such deposit was not in the name of the assessee. It was in the name of the daughter of the assessee in which wife of the assessee was nominee, therefore, the addition was deleted. Revenue raised Ground No.6 for deletion of Rs.27,000/- for investment in Air Conditioner which were deleted by Ld.CIT(A) where investment was made by the wife and only general query was made by the AO in this regard. It would, therefore, show that on these additions, no incriminating material was found during the course of search.
24.1. Ld. CIT DR relied upon the order of the AO. On the other hand, Ld. Counsel for the assessee relied upon the order of Ld.CIT(A). After considering rival contentions, we do not find error in order of Ld.CIT(A) in deleting all additions on which Department filed appeal. The assessee explained AO issued notice on 23.11.1999 for 30.11.1999 and assessment completed in 29.12.1999 Page | 16 so little time available for assessee to file required details. Assessee has sufficient cause for not filing details before the AO. Ld.CIT(A) correctly admitted additional evidences. The assessee explained that he received back Rs.50 Lakhs through banking channel from Eros City Developers with compensation of Rs.03 Lakhs which is declared as income. Documentary evidences were filed to explain and support contentions. Ld.CIT(A) rightly deleted addition. Rs. 07 Lakhs was reversed in Bank A/c as cheque of Sh. M.C.Gupta dishonoured. No addition could be made of such entry. Same is position of addition of Rs.50,000/- and Rs.18,800/-. Assessee filed confirmation and Bank Statement. The cheque of party dishonoured. Assessee explained entries. Ld.CIT(A correctly deleted the additions. The FD/ Term Deposits were found not in the name of the assessee. It was in the name of daughter of the assessee and his wife was nominee. So, it cannot be added in the hands of the assessee. Investment in air-conditioner was found made by wife of the assessee. Ld.CIT(A)then correctly deleted all additions. No material produced to rebut the findings of facts recorded by Ld.CIT(A). Departmental appeal fails and dismissed.
25. The assessee on Ground No.1 in the cross objection has challenged the addition of Rs.12,80,000/-, Rs.32,90,000/- and Rs.6,00,000/-. Ld.CIT(A) sustained the addition of Rs.12,80,000/- because details of the creditors was not explained. The addition of Rs.32,90,000/- was sustained where no confirmation was filed during the course of assessment proceedings. As regards of Rs.6 Lakhs, no confirmation was filed for the amount received from Sh. Narendra. Ld. Counsel for the assessee referred to P.B. 11 which is copy of the bank account to show that Rs.31,70,000/- was given to M/s Ansal Page | 17 Township & Land Development Ltd. on 21.07.2004 and the assessee received back Rs.50,000/-, Rs.30 Lakhs and Rs.2,40,000/- on 06.10.2004 i.e. Rs.32,90,000/-. Therefore, there is an excess of Rs.1,20,000/- which could have been added to the income of the assessee as against addition of Rs.32,90,000/-. As regards, addition of Rs.12,80,000/-, the details could not be explained but it was explained that it was paid by Demand Draft. Cheque of Rs.6,00,000/- was received on 28.02.2005 from Sh. Narender and in AY 2007- 08, Ld.CIT(A) deleted the addition in respect of same person and Department is not in appeal. Ld. CIT DR, however, submitted that no confirmations have been filed by these parties. It was also explained by Ld. Counsel for the assessee that these additions were made without bringing incriminating material during the course of search against the assessee. Ground No.2 of the cross-objection is general in nature and Ground No.3 is with regard to telescoping which were not pressed. Ground No.4 of the Cross Objection is for charging of interest u/s 234A & 234B of the Act which is similar as decided in ITA No.5739/Del/2014. Ground No.5 of the Cross Objection is that no addition could be made in the assessment u/s 153A of the Act because the assessment had become final and had not abated. No incriminating material was found and seized during the course of search qua these additions. Ld. Counsel for the assessee pointed out that P.B 1 is original return of income filed on 31.03.2006 and the assessment stood completed on the date of search. Since no incriminating material was found during the course of search to make additions, therefore, all additions are liable to be deleted.
Page | 18
26. Ld.CIT DR reiterated the submissions made above and rely on order of the AO and on the issue of validity of proceedings u/s 153A rely on submission made in ITA No.5740/Del/2014.
27. After considering rival submissions, we find that this issue is same as has been considered in ITA No.5739 & 5740/Del/2014 (supra). Following the reasons for decision, we set aside the orders of the authorities below and delete the entire addition because on the date of search assessment stood completed and no incriminating material was found during the course of search qua additions.
28. Ground No.5 of the Cross-Objection of the assessee is allowed. The remaining Grounds in Cross-Objection are left with academic discussion only, however, the same are discussed in brief.
29. On merit, the assessee is not able to explain addition of Rs.12,80,000/- which is liable to be sustained. The assessee, however, explained addition of Rs.32,90,000/-. The assessee gave advance of Rs.31,70,000/- to Ansal which is supported by Bank statement and received back Rs.32.90,000/- thus excess of Rs.1,20,000/- shall have to be taxed as against addition of Rs.32,90,000/-. On addition of Rs.06 Lakhs, it was received from Sh. Narender on 28.02.2005 though cheque (P.B-12 Bank statement). In AY 2007-08, Ld.CIT(A) deleted similar addition and Department did not challenge deletion of addition before ITAT, therefore, no addition could be made. Order of authorities below are set aside partly on Ground No.1 of C.O and additions are restricted to Rs.12,80,000/- and Rs.1,20,000/- only. Changing of interest u/s 234A & 234B are covered by order of ITAT in ITA No.5739/Del/2014 (supra).
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30. In the result, the appeal of Revenue is dismissed and Cross-Objection of the assessee is allowed in terms above.
C.O.No.-298/Del/2014 (In ITA No.1019/Del/2014) [Assessment Year: 2006-07]
31. This cross-objection by the assessee has been directed against the order of Ld.CIT(A), Meerut dated 29.11.2013 for AY 2006-07. It is stated that Department appeal has been dismissed separately for low tax effect. The assessee filed return of income of Rs.77,930/-. The AO made similar additions u/s 68 & 69 of the Act and also disallowed the interests u/s 36(1)(iii) of the Act. The assessee challenged these additions in the cross-objection, charging of interests u/s 234A & 234B are also challenged. The assessee raised legal ground on Ground No.7 of cross- objection that no addition can be made u/s 153A of the Act because assessment stood completed and no incriminating material was found during the course of search to make these additions. Admittedly, the original return of income was filed on 30.09.2006 and assessment was completed on the date of search. The AO made the addition on merit based on record and details and documents produced by the assessee at the assessment stage. Admittedly, no incriminating material was found so as to make the above additions under challenge. Therefore, the issue is covered in favour of the assessee in the case of the same assessee in ITA No.5739/Del/2014 (supra). We, accordingly, set aside the orders of the authorities below and delete all the additions. Ground No.7 of C.O. is allowed.
32. Briefly grounds on merits are also considered. On Ground No.1 of the Cross-Objection, the assessee challenged the addition of Rs.07 Lakhs u/s 68 of the Act in the name of Sh. M.C.Gupta. The AO mentioned in the assessment Page | 20 order that there were credits in the bank accounts of the assessee on account of payments received from Sh. M.C.Gupta. The assessee filed confirmed copy of the account. But the confirmation did not bear the assessment particulars of the parties. The AO, accordingly, made the addition. Ld.CIT(A) confirmed the addition. Ld. Counsel for the assessee submitted that during the year under consideration, the assessee received a payee's account cheque No.5825 for Rs.07 Lakhs from Sh. M.C.Gupta being refund of the amount already outstanding from him as on 31.03.2005 which is shown under the head "Loans and advances" in AY 2005-06. It was submitted before authorities below that an amount of Rs.07 Lakhs was outstanding as debit in the account of the party as on 31.03.2005 which is mentioned in the balance sheet of AY 2005-06. The credit entry in the bank account represented refund of the outstanding amount already due from him. Sh. M.C.Gupta was not a creditor of the assessee. The amount was given in AY 2005-06 have not been doubted. The assessee relied upon the order of ITAT, Delhi Bench on 07.12.2010 in the case of ITO, Ward- 10(1), New Delhi vs Decent Foods Pvt. Ltd. in ITA No.2471/Del/2010 wherein it was held that "the parties which refunded advance to the assessee were not creditors of the assessee and the assessee did not take any loan from them." On the other hand, Ld. DR relied upon the orders of the authorities below. The addition is wholly unjustified. The assessee has given amount in earlier year 2005-06 which was refund of the amount in question. Copy of the balance sheet is filed in AY 2005-06 which support the explanation of the assessee. Therefore, no addition could be made against the assessee. This ground of Cross-objection is allowed.
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33. On Ground Nos.2 to 5 of the cross-objection, the assessee challenged the addition of Rs.2,27,185/- on account of disallowance of interests u/s 36(1)(iii) of the Act. The assessee contested the action of the AO before Ld.CIT(A) in taxing notional interests of Rs.2,07,185/- and on second issue challenged the disallowance of interests. The AO noted that the assessee claimed to have paid interests to 06 parties aggregating to Rs.2,07,185/-. The AO observed that the assessee had taken loan/advances on interests whereas on the other hand, he has advanced these amounts to other persons as loans/advances but has not charged any interests thereon. Interest has been paid by the assessee on loans of Rs.83 Lakhs. But the assessee has given loan/advances/debts totaling to Rs.89,19,030/- on which no interest has been declared. The AO, therefore, computed notional interests of Rs.2,22,637/- on interest free advances and made the addition. It was explained before Ld.CIT(A) that in the nature of business carried on by the assessee there were no practice of charging interest on loan/advances. Further, the explanation has been given in respect of certain parties as to why interest was not charged from them and moreover, it could not be disputed that the assessee had not actually charged any interest. The assessee, therefore, claimed that no notional interest should be charged and no addition should be made on hypothetical income. The assessee relied upon the decision of Hon'ble Supreme Court in the case of Shoorji Vallabhdas 36 ITR 144. In the second limb of the arguments, it was contended that interest bearing funds used for making investment which have yielded income, therefore, interest should be allowed deduction. Ld.CIT(A) accepted the explanation of the assessee that addition on account of notional interest cannot be sustained, addition was Page | 22 accordingly deleted. However, as regards, the claim of deduction of interests, Ld.CIT(A) noted that this is an additional claim made and fresh exercise has to be done, therefore, additional ground was dismissed. There is no ground of appeal by the Department for deletion of addition of Rs.2,07,185/-. The assessee on Ground No.5 stated that actually the addition was of Rs.2,22,637/- but Ld.CIT(A) deleted the addition of Rs.2,07,185/-. The assessee contended that it is the duty of the AO to apply relevant provision of law for the purpose of determining true income of the assessee and relied upon the decision of Hon'ble Supreme Court in the case of CIT vs Mahalaxmi Sugar Mills Pvt. Co. Ltd. [1986] 160 ITR 920 and National Thermal Power Co. Ltd. vs CIT [1998] 229 ITR 383 (SC). On the other hand, Ld. DR relied upon the orders of the authorities below.
34. The assessee claimed that interest should be allowed deduction as interest bearing funds have been used to earn taxable income. Therefore, authorities below should have admitted additional ground and should have adjudicated upon the same. We, accordingly, set aside the orders of the authorities below and admit the additional ground of the assessee and restore the same to AO with direction to decide same in accordance with law. Reasonable and sufficient opportunity of being heard be given to the assessee. These Grounds are allowed for statistical purposes. However, in view of the Ground No.7 of the cross-objection is allowed in favour of the assessee. It is left with academic discussion only.
35. On Ground No.6 of the cross-objection, the assessee challenged the charging of interest u/s 234A & 234B of the Act. This Ground is same as has been decided in 2002-03 AY in ITA No.5739/Del/2014. Following the order in Page | 23 that case, we set aside the orders of the authorities below and direct the AO to pass a consequential order. This ground of the cross-objection is allowed accordingly.
36. In the result, the cross-objection filed by the assessee is allowed.
ITA No.10 & 170/Del/2015 [Assessment Year: 2005-06]
37. Both the cross-appeals are directed against the order of Ld.CIT(A), Meerut dated 20.10.2014 for AY 2005-06, challenging the levy of penalty and cancellation of penalty u/s 271(1)(c) of the Act. The AO vide separate order levied the penalty u/s 271(1)(c) of the Act on the addition made in the assessment order. Ld.CIT(A) partly confirmed the additions/sustained in appeal. Ld.CIT(A), therefore, partly allowed the appeal of the assessee and cancelled the part penalty. The assessee is in appeal challenging the penalty order. The Revenue is in appeal challenging the deletion of penalty because the Departmental appeal on merits is pending before the Tribunal. Ld. Counsel for the assessee submitted that quantum order of the Tribunal may be followed in deciding the penalty appeals and also filed copy of the show cause notice dated 29.12.2009 issued for assessment year under appeal before levy of penalty u/s 274 r.w.s 271(1)(c) in which the AO has mentioned "(c) Have concealed the particulars of your income or.................................furnished inaccurate particulars of such income." Ld. Counsel for the assessee, therefore, submitted notice is bad in law and that penalty is not leviable in the matter.
38. On the other hand, Ld. Sr. DR relied upon the orders of the authorities below and relied upon the order of ITAT, Mumbai Bench in the case of Sh. Mahesh M Gandhi vs ACIT in ITA No.2976/Mum/2016 vide order dated Page | 24 27.02.2017. In this case in notice, reasons for penalty were not mentioned. The Tribunal held that the AO has recorded satisfaction in the assessment order in relation to invoking penalty proceedings. Ld. Counsel for the assessee stated the decision cited by Ld. Sr.DR is not applicable to the facts of this case.
39. After considering the rival contentions, we are of the view that penalty is not leviable in the matter. On quantum appeal, we have deleted all the additions in ITA No.1018/Del/2014 & C.O.No.-297/Del/2014, therefore, penalty cannot be levied against the assessee.
40. Further, the AO has issued a show cause notice which is bad in law because it did not specify under which limb of section 271(1)(c), penalty proceedings have been initiated i.e. whether for concealment of particulars of income or furnishing of inaccurate particulars of income. The issue is covered in favour of the assessee by the judgement of Karnataka High Court in the case of CIT vs SSA Emarald Meadows 73 taxmann.com 241 in which similar view was taken and departmental appeal is dismissed. The judgement of Hon'ble High Court is confirmed by the Hon'ble Supreme Court by dismissing the SLP of the Department reported in 73 taxmann.com 248. In view of the above, we set aside the orders of authorities below and cancel the penalty.
41. In the result, the appeal of the assessee is allowed and departmental appeal is dismissed.
ITA No.11/Del/2015
[Assessment Year: 2006-07]
42. This appeal by the assessee has been directed against the order of Ld.CIT(A), Meerut dated 20.10.2014 for AY 2006-07, challenging the levy of penalty u/s 271(1)(c) of the Act. In this case, we have deleted all the additions Page | 25 on merit and allowed cross-objection i.e. C.O.No.-298/Del/2014 (In ITA No.1019/Del/2014) [Assessment Year: 2006-07]. The AO issued similar show cause notice before levy of the penalty as was issued in AY 2005-06 above. The issue is identical as has been considered in AY 2005-06 above in ITA No.11 & 170/Del/2015. Following the reasons for decision for AY 2005-06, we set aside the orders of the authorities below and cancel the penalty.
43. In the result, the appeal of the assessee is allowed.
44. In the final result, the appeals of the assessee and cross objections are allowed whereas departmental appeals are dismissed.
Order pronounced in the open court.
Sd/- Sd/-
(L.P.SAHU) (BHAVNESH SAINI)
ACCOUNTANT MEMBER JUDICIAL MEMBER
*Amit Kumar*
Date:- 22.05.2018
Copy forwarded to:
1. Applicant
2. Respondent
3. CIT
4. CIT(Appeals) concerned
5. DR: ITAT
ASSISTANT REGISTRAR
ITAT NEW DELHI
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