Income Tax Appellate Tribunal - Ahmedabad
Shri Rajesh A. Sompura,, Ahmedabad vs The Dy. Cit, Central Circle-2(2),, ... on 16 May, 2017
आयकर अपील य अ धकरण, अहमदाबाद यायपीठ 'बी', अहमदाबाद ।
IN THE INCOME TAX APPELLATE TRIBUNAL
" B " BENCH, AHMEDABAD
सव ी द प कुमार के डया, लेखा सद य एवं महावीर साद, या यक सद य के सम ।
BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER &
SHRI MAHAVIR PRASAD, JUDICIAL MEMBER
आयकर (ss) अपील सं./I.T(ss).A. Nos.12, 13 and 14/Ahd/2014
( नधा रण वष / Assessment Years:2005-06,2006-07&2009-10)
Rajesh A.Sompura बनाम/ The DCIT
G-3, Baleshver Avenue Vs. Central Cir-2(2)
Opp. Rajpath Club, Ahmedabad
SG Highway, Bodakdev
Ahmedabad
थायी ले खा सं . /जीआइआर सं . / PAN/GIR No. : AKUPS 3814 Q
(अपीलाथ& /Appellant) .. ( 'यथ& / Respondent)
अपीलाथ& ओर से / Appellant by : Shri Gaurav Nahta, AR
'यथ& क) ओर से/Respondent by : Shri Jagadish, CIT-DR
ु वाई क) तार ख /
सन Date of Hearing 26/04/2017
घोषणा क) तार ख /Date of Pronounce ment 16/ 05 /2017
आदे श / O R D E R
PER PRADIP KUMAR KEDIA, AM:
The present bunch of appeals filed by the assessee are directed against the order of the common order of the Commissioner of Income Tax (Appeals)-III, Ahmedabad [CIT(A) in short] dated 10/10/2013 for the Assessment Years (AYs) 2005-06, 2006-07 and 2009-10.
IT(ss)A Nos.12,13&14/Ahd/2014 Rajesh A.Sompura vs. DCIT Asst.Years - 2005-06, 2006-07& 2009-10 -2-
2. Since the issues involved in these appeals are common and based on broadly similar facts, we deem it appropriate to adjudicate all the three appeals by the consolidated order.
IT(SS) No.12/Ahd/2014 - AY 2005-06 - Assessee's appeal
3. The substantive grounds of appeal raised by the assessee read as under:
1. The Ld.CIT(Appeals)-III Ahmedabad has erred in law and on facts in confirming the disallowance made under assessment framed u/s.153A in spite of no evidence of unaccounted income was found during search proceeding.
2. The Ld.CIT Appeals III Ahmedabad has erred in law and on facts in passing appellate order dated 10/10/2013 for A.Y. 2005-06 in the case of appellant by confirming the disallowance made of Rs.572341/- invoking the provision of section 40(a)(ia).
4. Briefly stated, the assessee is an individual. A search action under s.132 of the Income Tax Act, 1961 (hereinafter referred to as "the Act") was carried out in the assessee and its group on 21/04/2010. As a consequence, proceedings under s.153A of the Act were initiated against the assessee. Prior to the search, the assessee has filed its return for AY 2005-06 on 29/10/2005. The return was duly accepted under s.143(1) of the Act and the time limit for completion of regular assessment is exhausted. Accordingly, no assessment is pending on the date of IT(ss)A Nos.12,13&14/Ahd/2014 Rajesh A.Sompura vs. DCIT Asst.Years - 2005-06, 2006-07& 2009-10 -3- initiation of search under s.132 as contemplated in second proviso to section 153A of the Act. In other words, the return filed prior to search has attained finality.
5. Consequent upon search under s.132 on the assessee, proceedings under s.153A were initiated for various assessment years including the impugned assessment year in respect of the assessee herein. Consequent upon notice under s.153A, a return of income was filed by the assessee under s.153A declaring total income at Rs.1,08,55,147/-. Assessment was made under s.153A r.w.s. 143(3) of the Act vide order dated 19/03/2013. In the aforesaid assessment pursuant to search, an addition of Rs.5,72,341/- was made by invoking section 40(a)(ia) of the Act for non-deduction of TDS on payment to clearing and forwarding agent. The CIT(A) sustained the action of the AO.
6. The assessee is in appeal against the order of the CIT(A).
7. The Ld.AR for the assessee Mr.Gaurav Nahta, at the outset, submitted that the addition/disallowance made in the assessment under S.153A pursuant to search is not founded upon any incriminating material. The AO has merely proceeded to make robbing enquiries in the search assessment de hors any objectionable material in the possession of the revenue and embarked making additions/disallowances IT(ss)A Nos.12,13&14/Ahd/2014 Rajesh A.Sompura vs. DCIT Asst.Years - 2005-06, 2006-07& 2009-10 -4- as per the normal and machinery provisions of the Act. The Ld.AR submitted that jurisdiction reassessing the completed assessment under s.153A is limited to search related materials and events. No additions have been made in the instant case with reference to any incriminating material found in the course of search per se. The assessment for the impugned AY 2005-06 stands concluded in law and is not pending at the time of search. The Ld.AR therefore contended that notwithstanding absence of any incriminating material, the completed assessment has been sought to be abated. The additions/disallowances made by the AO under s.153A of the Act was thus alleged to be opposed to law. It was thus asserted that the issues already concluded are sought to be assessed under s.153A of the Act regardless of the fact that no incriminating material has been found. The Ld.AR contended that in view of several decision holding the field, the AO is not entitled to indulge in making additions/disallowances in the course of 153A proceedings without showing nexus to some incriminating material. No material has been found which would implicate the assessee towards any undisclosed income in any manner. In the circumstances, it was contended that the case of the assessee is clearly covered by the decision of the Hon'ble Jurisdictional High Court in the case of Pr.CIT vs. Saumya Construction Pvt.Ltd. reported at 387 ITR 529 (Guj.) and host of other decisions. The Ld.AR accordingly contended that additions/disallwoances made under IT(ss)A Nos.12,13&14/Ahd/2014 Rajesh A.Sompura vs. DCIT Asst.Years - 2005-06, 2006-07& 2009-10 -5- s.153A of the Act are bad in law and consequently the order of the CIT(A) upholding the action of AO requires to be struck down.
8. The Ld.DR, on the other hand, supported the orders of the AO and the CIT(A) and submitted that the additions/disallowances under s.153A need not be restricted or limited to the incriminating material found during the course of search. The Ld.DR relied upon the decision of Hon'ble Kerala High Court in the case of E.N. Gopakumar vs. CIT (Central) reported at 390 ITR 131 (Ker.) for the proposition that the provisions of section 153A nowhere makes it conditional that Department has to unearth some incriminating material to conclude against the interest of the assessee in assessment pursuant to search. It was submitted that once the proceedings are initiated under s.153A, the legal effect is that even in a case where the assessment order is concluded under the normal provisions of the Act, it stands reopened and the AO is entitled to redo the assessment of income already disclosed prior to search, income unearthed and any other income. He accordingly concluded that the Revenue is not hamstrung by the presence or otherwise of any incriminating material. The Ld.DR, accordingly, asserted with vehemence that no fault can be envisaged in the order of CIT(A).
IT(ss)A Nos.12,13&14/Ahd/2014 Rajesh A.Sompura vs. DCIT Asst.Years - 2005-06, 2006-07& 2009-10 -6-
9. We have carefully considered the rival submissions. The substantive issue that arises for consideration in the present appeal is whether the proceedings undertaken as terms of S.153A, should necessarily be based on incriminating material found in the course of search, where the return filed prior to search already stands concluded under s.143(1) on account of estoppel due to bar of limitation. In the instant case, the assessment was framed the assessment was framed in furtherance of search as contemplated under S.153A of the Act. The assessment so made seeks to encompass regular items of additions/disallowances independent of incriminating material. It is also admitted position in the instant case that the assessment was concluded prior to search under s.143(1) and thus do not stand abated in terms of second proviso to sub-section (1) of s.153A.
10. We note that the law has been clearly laid down on the issue by the Hon'ble Gujarat High Court in the case of Saumya Construction(supra) referred to and relied upon by the assessee. The Hon'ble Gujarat High Court after making reference to the hosts of the decisions rendered in this regard by various High Courts and after making reference to the provisions of the statute explained the legislative fiat in this regard. Hon'ble High Court held that in exercise of powers outlined under s.153A of the Act towards completed assessments, additions or disallowances in section 153A proceedings ought to be made with IT(ss)A Nos.12,13&14/Ahd/2014 Rajesh A.Sompura vs. DCIT Asst.Years - 2005-06, 2006-07& 2009-10 -7- reference to incriminating material found in the course of search. The relevant para of the judgement is extracted for ready reference hereunder:-
"18. In this case, it is not the case of the appellant that any incriminating material in respect of the assessment year under consideration was found during the course of search. At the relevant time when the notice came to be issued under section 153A of the Act, the assessee filed its return of income. Much later, at the fag end of the period within which the order under section 153A of the Act was to be made, in other words, when the limit for framing the assessment as provided under section 153 was about to expire the notice has been issued in the present case seeking to make the proposed addition of Rs.11,05,51,000/- on the basis of the material which was not found during the course of search, but on the basis of a statement of another person in the opinion of this court, in a case like the present one, where an assessment has been framed earlier and no assessment or reassessment was pending on the date of initiation of search under section 132 or making of requisition under section 132A, while computing the total income of the assessee under section 153A of the Act, additions or disallwoances can be made only on the basis of the incriminating material found during the search or requisition in the present case, it is an admitted position that no incriminating material was found during the coure of search, however, it is on the basis of some materil collected by the Assessing Officer much subsequent to the search, that the impugned additions came to be made.
19. On behalf of the appellant, it has been contended that if any incriminating material is found, notwithstanding that in relation to the year under consideration, no incriminating material is found, it would be permissible to make additions and disallowance in respect of all the six assessment years. In the opinion of this court, IT(ss)A Nos.12,13&14/Ahd/2014 Rajesh A.Sompura vs. DCIT Asst.Years - 2005-06, 2006-07& 2009-10 -8- the said contention does not merit acceptance, inasmuch as, the assessment in respect of each of the six assessment years is a separate and distinct assessment. Under section 153A of the Act, an assessment has to be made in relation to the search or requisition, namely, in relation to material disclosed during the search or requisition. If in relation to any assessment year, no incriminating material if found, no addition or disallowance can be made in relation to that assessment year in exercise of powers under section 153A of the Act and the earlier assessment shall have to be reiterated. In this regard, this court is in complete agreement with the view adopted by the Rajasthan High Court in the case of Jai Steel (India), Jodhpur v. Assistant Commissioner of Income Tax (supra). Besides, as rightly pointed out by the learned counsel for the respondent the controversy involved in the present case stands concluded by the decision of this court in the case of Commissioner of Income-tax-1, v. Jayaben Ratilal Sorathia (supra) wherein it has been held that while it cannot be disputed that considering section 153A of the Act, the Assessing Officer can reopen and/o9r assess the return with respect to six preceding years; however, there must be some incriminating material available with the Assessing Officer with respect to the sale transactions in the particular assessment year."
11. On facts, it is admitted position that no incriminating material has been found with reference to additions/disallowances which are subject matter of present appeal. Thus, the action of the revenue is directly at odds with the judicial wisdom. The reliance was placed on the decision of Hon'ble Kerala High Court in the case of E.N. Gopakumar (supra) on behalf of the Revenue for the proposition that the AO is continued to retain original jurisdiction as well as jurisdiction conferred on him under IT(ss)A Nos.12,13&14/Ahd/2014 Rajesh A.Sompura vs. DCIT Asst.Years - 2005-06, 2006-07& 2009-10 -9- s.153A in the assessment proceedings pursuant to search. We are not persuaded by the aforesaid plea of Revenue in the light of decision of the Hon'ble Jurisdictional High Court governing by the identical issue which seeks limit the scope of assessment under s.153A. In the circumstances, we are of the view that impugned additions/ disallowances made by the AO in assessment under s.153A Act are clearly beyond the scope of authority vested under statute owing to absence of any incriminating material or evidence detected as a result of search. It is pertinent to note that no reference to any incriminating material unearthed in search is found in the orders of the AO or CIT(A) for the purpose of making impugned addition/disallowance under challenge. Accordingly, we find that the order of the CIT(A) confirming the addition/disallowance in appeal cannot be sustained in law.
12. Since we find that the impugned addition/disallowance made by the AO is not permissible in law at the threshold, we do not consider it expedient to examine the merits of the addition/disallowance.
13. In the result, the appeal of the assessee in IT(SS)A No.12/Ahd/2014 for AY 2005-06 stands allowed.
IT(SS)A No.13/Ahd/2014 - AY 2006-07 IT(ss)A Nos.12,13&14/Ahd/2014 Rajesh A.Sompura vs. DCIT Asst.Years - 2005-06, 2006-07& 2009-10
- 10 -
14. The grievances raised by the assessee in the captioned appeal is identical to IT(SS)A No.12/Ahd/2014 for AY 2005-06. The facts and issues are involved in the captioned appeal being analogous to IT(SS)A No.12/Ahd/2014 wherein the grounds raised have been discussed in earlier para in great length. Accordingly, our observations made in IT(SS)A No.12/Ahd/2014 for AY 2005-06(supra) shall apply mutatis mutandis to the captioned appeal.
15. For parity of reasons, we allow the captioned appeal of the assessee in IT(ss)A No.13/Ahd/2014 for AY 2006-07.
IT(SS)A No.14/Ahd/2014 - AY 2009-10
16. The grounds of appeal raised by the assessee read as under:-
1. The Ld.CIT Appeals III Ahmedabad has erred in law and on facts in confirming the disallowance made under assessment framed u/s.153A in spite of no evidence of unaccounted income was found during search proceeding.
2. The Ld.CIT(Appeals) III Ahmedabad has erred in law and on facts in passing appellate order dated 10/10/2013 for A.Y. 2009-10 in the case of appellant by confirming the disallowance made of Rs.191430/- invoking the provision of section 40(a)(ia).
IT(ss)A Nos.12,13&14/Ahd/2014 Rajesh A.Sompura vs. DCIT Asst.Years - 2005-06, 2006-07& 2009-10
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17. In this appeal, the facts are at variance with the earlier appeals. In this case, the return for AY 2009-10 was filed on 06/08/2009. As noted, the search was conducted on 21/04/2010. Therefore, at the time of initiation of search, the time limit for completion of regular assessment had not expired. Thus, the present appeal stands on a somewhat different footing than that of earlier appeals inasmuch as the assessment for Ay 2009-10 (subject matter of appeal) was pending on the date of initiation of search under s.132 and thus stands abated as contemplated by second proviso to section 153A of the Act. Therefore, the action of the AO to examine various issues on merits cannot be said to be in conflict and contradiction to the scope of assessment section 153A of the Act. In short, we hold that the scope of assessment under s.153A encompasses additions/disallowances regardless of any incriminating material found during the course of search in case where the assessment, at the time of search, is pending and consequently abated in terms of second proviso to section 153A of the Act.
18. In the result, ground No.1 of the assessee is dismissed.
19. Ground No.2 of the assessee's appeal concerns disallowance of Rs.1,91,430/- on merits by invoking the provisions of section 40(a)(ia) of the Act.
IT(ss)A Nos.12,13&14/Ahd/2014 Rajesh A.Sompura vs. DCIT Asst.Years - 2005-06, 2006-07& 2009-10
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20. The Ld.AR for the assessee submitted at the outset that major reasons cited by the AO for making disallowance was summarized by the CIT(A) in para No.11 of its order. The Ld.AR adverted our attention to the reasons so listed by the CIT(A) and submitted that the assessee has made payments in the nature of Railway freight and reimbursement of expenses. In these situations, the TDS is not deductible. The ld.AR further submitted that payments to the railway agency were made in small sum over the period towards railway freight. The Ld.AR referred to provisions of section 194C and submitted that railway freight is excluded from its applicability. It was further submitted that total sum paid to the agency from time to time was lesser than the threshold for deduction of TDS and therefore the assessee was not deducted TDS and thus no non-compliance of TDS provisions can be envisaged.
21. The Ld.AR further submitted that certain payments as reflected in the ledger account are in the nature of reimbursement to the party and thus do not form part of the trading receipts of the clearing and forwarding agent and therefore on this score also, the assessee was not allowable for deduction of TDS. The Ld.AR accordingly submitted in conclusion that there is no legal justification for pressing section 40(a)(ia) into survice. He accordingly pleaded that disallowance of Rs.1,91,430/- under s.40(a)(ia) of the Act requires to be cancelled.
IT(ss)A Nos.12,13&14/Ahd/2014 Rajesh A.Sompura vs. DCIT Asst.Years - 2005-06, 2006-07& 2009-10
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22. The Ld.DR, on the other hand, relied upon the order of the CIT(A).
23. We have carefully considered the rival submissions and perused the records. We find, at the outset, that the case of the assessee is covered by the exclusion provided in Explanation-4 to Section 194C of the Act. As per the Explanation, 'work' shall include carriages of goods or passengers by mode of transport other than by railways. It implies that 'work' as contemplated under s.194C does not envisage payments towards carriages of goods by railways. This being so, we find merit in the plea of the assessee that its case do not fall within the four corners of section 194C of the Act. Coupled with this, the assessee has also made out a case that a payment is made lesser than the threshold limit as well as a part of the payment is in the nature of reimbursement. In these circumstances, we are of the view that provisions of section 40(a)(ia) do not set into motion. Thus the disallowance made for alleged default of s.194C requires to be reversed.
24. In the result, ground No.2 of assessee's appeal is allowed.
25. Consequently, assessee's appeal in IT(SS)A No.14/Ahd/2014 for AY 2009-10 is partly allowed.
IT(ss)A Nos.12,13&14/Ahd/2014 Rajesh A.Sompura vs. DCIT Asst.Years - 2005-06, 2006-07& 2009-10
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26. In the combined result, IT(SS)A Nos.12/Ahd/2014 - AY 2005-06 and 13/Ahd/2014 - AY 2006-07 are allowed, whereas IT(SS)A No.14/Ahd/2014 for AY 2009-10 is partly allowed.
This Order pronounced in Open Court on 16/ 05 /2017
Sd/- Sd/-
(महावीर साद) ( द प कुमार के डया)
या यक सद य ले खा सद य
( MAHAVIR PRASAD ) ( PRADIP KUMAR KEDIA )
JUDICIAL MEMBER ACCOUNTANT MEMBER
Ahmedabad; Dated 16/ 05 /2017
ट .सी.नायर, व. न.स./T.C. NAIR, Sr. PS
आदे श क त"ल#प अ$े#षत/Copy of the Order forwarded to :
1. अपीलाथ& / The Appellant
2. 'यथ& / The Respondent.
3. संबं6धत आयकर आयु8त / Concerned CIT
4. आयकर आयु8त(अपील) / The CIT(A)-III, Ahmedabad
5. 9वभागीय त न6ध, आयकर अपील य अ6धकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाड फाईल / Guard file.
आदे शानुसार/ BY ORDER, स'या9पत त //True Copy// उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad
1. Date of dictation .. 27.4.17 (dictation-pad pages attached at the end of this appeal-file)
2. Date on which the typed draft is placed before the Dictating Member ...01.5.17
3. Other Member...
4. Date on which the approved draft comes to the Sr.P.S./P.S.................
5. Date on which the fair order is placed before the Dictating Member for pronouncement......
6. Date on which the fair order comes back to the Sr.P.S./P.S.......
7. Date on which the file goes to the Bench Clerk.....................
8. Date on which the file goes to the Head Clerk..........................................
9. The date on which the file goes to the Assistant Registrar for signature on the order..........................
10. Date of Despatch of the Order..................