Income Tax Appellate Tribunal - Pune
Akbani Salim Abdul Gaffar, vs Assessee
IN THE INCOME TAX APPELLATE TRIBUNAL
Pune Bench "B" , Pune
Before Shri G.S. Pannu Accountant Member
and Shri R.S. Padvekar, Judicial Member
ITA No. 873/PN/2008
(Asstt. Yeard : 2005-06)
Akbani Salim Abdul Gaffar ... Appellant
Prop. of M/s. Anwar Oils
Flat No. 3,4,5 & 7, Sanchayani Park,
New Palade Road,
Kolhapur
PAN: AHUPA 4074A
v.
Dy. Commissioner of Income Tax ... Respondent
Central Circle, Kolhapur,
Appellant by : Shri M.K. Kulkarni
Respondent by : Shri Mukulesh Dube
Date of Hearing : 17/7/12
Date of Pronouncement : 31-8-12
ORDER
Per R.S. Padvekar, JM
The assessee has filed this appeal challenging the impugned order of the Ld CIT(A), Kolhapur dated 07/05/2008 for the A.Y. 2005-06. The assessee has taken the following grounds in the appeal :
"1) On the facts and in the circumstances of the case and in law the Ld. C.I.T.(A) - Kolhapur was not justified in confirming the addition of Rs.44,54,950/- made by the A.O. on account of unrecorded loan transactions. The proper explanation were submitted before the Ld. C.I.T.(A) in this regard. The addition be deleted.
2) On the facts and in the circumstances of the case and in law the interest levied u/s. 234-A, 234-B and 234-C be deleted."
2. The assessee has also filed an application seeking the leave of the Tribunal to admit and decide the following additions ground "
"1) On the facts and circumstances of the case and in law the assessment completed under S. 143(3) is bad in law and without jurisdiction since assessment year being the year of search under S.132 of the Act the assessment ought to have been completed under S.153-A rws. 153-B of the Act. It be quashed."2 ITA No.873/PN/2008
Akbani Salim Abdul Gaffar A.Ys. 2005-06 Page of 13
3. On the admission of the additional ground, we have heard the parties. We find that the additional ground raised by the assessee is purely a legal ground and same can be decided on the basis of the record available before us. We, therefore, admit the ground respectively following the legal principles laid down in the case of National Thermal Power Co., 229 ITR 383(SC).
4. We first decide the additional ground taken by the assessee. The main thrust of the argument of the Ld Counsel is that the A.O. has passed the assessment order for the A.Y. 2005-06 u/s. 143(3) of the Act when the A.O was legally bound to pass the assessment order u/s. 153A/153B of the Act. He submits that there was a search and seizure action against the assessee u/s. 132 of the Act on 2.2.2005 and the assessment is framed in consequence of search and seizure operation and hence, the A.O. was legally bound to pass the assessment u/s. 153A of the Act. He submits that Sec. 153B(1)(b) refers to the assessment relevant to the previous year in which search take place and time limit is fixed for completing the assessment. In respect of assessment year relevant to the previous year, in which search is conducted u/s. 132 or requisition is made u/s. 132A, the assessment must be completed within a period of 2 years from the end of the Financial Year in which last of the authorization for search u/s. 132 was executed. He argues that though the Legislature has made the classifications in respect of the assessment year immediately preceding the assessment relevant to the previous year in which the search is conducted or requisition is made and the Assessment Year relevant to the previous year in which the search is conducted or requisition is made u/s. 153A(1)(b) of the Act but as per Clause (b) to Sec. 153B(1), some time limit is fixed and that suggests that even in respect of assessment year relevant to the previous year in which search action is conducted, all the seven assessments must be framed as per the provisions of Sec. 153A. He submits that once the search is conducted, then the Sections 153A, 153B and 153C come into operation and even in respect of the Assessment Year relevant to the previous year in which search warrant is executed, the said assessment also goes along with preceding six assessment years. It is submitted that the non-obstante clause indicated at the beginning of Sec. 153A of the Act brings into existence the independent code in itself. The non-
3 ITA No.873/PN/2008Akbani Salim Abdul Gaffar A.Ys. 2005-06 Page of 13 obstante clause provides that whatever is provided or is contained in Sec. 139, 147, 148, 149, 151 and 153 in the case of a person where search has been initiated u/s. 132 or requisition proceedings u/s. 132A, then all the provisions contained in Sections 153A, 153B and 153C will have the applications. He argued that the essence of said provision is that they are to be considered as exhaustive of provision in respect of which it declares the law. The non-obstante clause at the beginning of Sec. 153A is enacted with a view to give independence to above three Sections, in case of conflicting and overriding provisions of Act mentioned in the non-obstante clause. The Ld. Counsel placed his heavy reliance on the following decisions of the Co-ordinate Benches :
1) Dy CIT Vs. Sushil Kumar Jain, 127 ITD 264 (Indore)
2) M/s. Bahubali Neminath Muttin Vs. ACIT, Belgaum & vice versa, ITA No. 161 & 165(PNJ)/2010 dated 8.7.2011
3. Dr. Mansukh Kanjibhai Shah Vs. ACIT, ITA No. 1358/PN/2007 dt.
13.8.2011
5. We have also heard the Ld CIT D.R. who extensively argued the issue by interpreting provision of Sec. 153A and 153B of the Act.
6. In the case of Sushil Kumar Jain (Supra), there was a search and seizure operation u/s 132(1) of the Act against the assessee on 25/9/2003. The identical issue came for consideration before the Co- ordinate Bench in the said case whether as per the provisions of Sec. 153A or 153C in which 6 years preceding the assessment year relevant to the previous year in which search has been conducted is covered and therefore, for the A.Y. 2004-05, the assessment could be made only in accordance with the provisions of Sec. 143(3)/144 or as per the provisions of Sec. 153A. The Tribunal held as under :
"13. Thus, there can be three situations for making an assessment under section 153A, i.e, firstly, the reassessment of all completed assessments falling under the period of six assessment years, secondly, there could be pending assessment or reassessment of any assessment year falling in such period and in that case, such pending assessment shall abate and the assessee would be required to file a fresh return under section 153A and assessment or reassessment of such year shall be done under section 153A; thirdly, assessment for the year in which search is conducted 4 ITA No.873/PN/2008 Akbani Salim Abdul Gaffar A.Ys. 2005-06 Page of 13 (which has been disputed in the present appeal). As far as first two aspects are concerned, the provisions are absolutely clear. However, the scope of operation of the provisions of section 153A, may be different in first two situations, because in the case of completed assessment/reassessment, the reassessment would be limited in scope having regard to the fact that jurisdiction under section 153A in such situation is a result of an action as per the provisions of sections 132 and 132A, i.e., the income already assessed plus undisclosed income/undisclosed assets pertaining to a specific year would become the total income for such year. In the second situation i.e., in the case of proceedings in relation to an abated assessment, the scope of provisions of section 153A would be little wider in a sense that there has to be one assessment/reassessment for such year and, therefore, in addition to the undisclosed income/assets, the other claims of the assessee, which may normally fall within the scope of provisions of section 143, section 143 read with section 144 or section 143 read with section 147, would also be covered. Similarly,, the scope of assessment under section 153A for the assessment year relevant to the previous year in which search took place or requisition was made would be wider, i.e., it would also cover the matters of section 143 of the Act. Thus, in nut-shell, section 153A can be summarized as a combination of section 143, section 147 and factually for assessment or reassessment of total income in respect of cases covered by section 132 or section 132A.
14. It is further pertinent to note that new scheme of assessment in respect of search conducted after May 31, 2003, is materially different from special procedure of search assessment contained in Chapter XIV-B which was abandoned as to controversies sprung up questioning treatment of particular income as undisclosed and whether there Was any material found during the course of search relatable thereto. In this background, when we read, the provisions of section 153A, it is noted that it starts with a non-obstante clause overriding the provision of section 139, 147, 148, 149, 150, 151 and 153. It is also noted that return under section 153A has to be in prescribed form. The other important effect of provision of section 153A(1) is that it gives a jurisdiction to the Assessing Officer to initiate assessment proceedings by issuing notice under 5 ITA No.873/PN/2008 Akbani Salim Abdul Gaffar A.Ys. 2005-06 Page of 13 this section. This section also creates an outer limit of the six back assessment years for which an assessment / reassessment could be done under this section in case of search/requisition made under section 132/132A. However, in our view, there cannot be a mandatory jurisdiction for six back years, even for those entities, which were not in existence in all such six years and which is also so because of the fact that jurisdiction under section 153A is for assessment or reassessment of total income of each year falling in such period. Thus, scope of section 153A, if viewed in this manner, cannot be interpreted to mean that assessment in respect of previous year in which search was conducted or requisition was made, cannot be made in accordance with provisions of section 153A read with section 153B or 153C as contended by the assessee. It is further noteworthy that concept of broken period in the year of search applicable for block assessment is not present under the new scheme, hence, the Assessing Officer has to wait to exercise the assessment powers after the relevant financial year during which search took place and such procedure, in fact, provides an opportunity to assessee to disclose unexplained assets/income in such return and avoid penalty. It is also pertinent to mention here that notice under section 153A requiring the assessee to file return for such is, generally, not to be issued for the previous year of search in normal course and, in case of failure of the assessee to do so, the Assessing Officer can issue notice under section 142(1) of the Act to file the return under section 139(4).
15.Thus, absence of requirement of issue of notice under section 153A for the year of search, in our opinion, does not result into an inference that assessment of previous year of search is to be made as per the normal provisions of the Act, specially when state of provisions of section 153A is not different from scope of provisions of section 143 for making assessment of total income of such year. We may further add that, in case, any notice under section 153A is issued in case of such previous year, the same should be construed as issued under section 142(1) as the scope object of these two provisions on the aspect of requiring the assessee to file the:return is same. Even otherwise, under the new scheme, total income has 6 ITA No.873/PN/2008 Akbani Salim Abdul Gaffar A.Ys. 2005-06 Page of 13 to be computed as per the normal provisions of the Act and tax, interest and penalty also is to be levied as per the general provisions of the Act applicable to such assessment year, hence. there cannot be any prejudice to the assessee merely because an Assessing Officer proceeds to make an asessment in case of year of search as per the provisions of section 153A read with section 153B;part:icularly.,when time limit of service of notice under section 143(2), subject to provisions of section 153B, would also be applicable (reasons on this aspect are given later in this order).
16. We also find that as per Explanation(i),time limit prescribed under.section 153B for completion of assessment under section 153A is· to override the time limit provided for completion of assessment under section 143 or 144 in section 153 of the Act. We further find that the heading of section 153B is "Time limit for completion of assessment under section 153A". It is a settled · principle that heading of a particular section also indicates about nature and scope of such provision and if viewed in this perspective, then, it would again be clear that assessment of the previous year, in which search took place, is required to be completed as per the provisions of section 153A read with section 153B of the Act. In this regard, memorandum explaining the Finance Bill,· 2000 as reported in 260 ITR (St.) 219 -221, also mentions that provisions of sections 153A, 153B and 153C were inserted to provide for assessment in the case of search or m:aking requisition.
17. The learned CIT DR has also contended that as against the- literal construction, the construction which resulted into atttainment of the objects of the, Act has to be preferred. In this regard, we are of the view that the settled position of law is that if there is no ambiguity then, literal construction should be given effect as such although which may result into hardship. 'Howwever, in the context of present dispute, in our humble opinion, the provisions of law do not appear so dear or unambiguous as is evident from the discussion made hereinbefore. In this regard, we may further point out that ,if the assessee's view that the assessment for the financial year wherein such search under section 132 took place or 7 ITA No.873/PN/2008 Akbani Salim Abdul Gaffar A.Ys. 2005-06 Page of 13 requisition was made under section 132A, has to be completed as per the normal provisions of the Act, then provisions of section 153B(1)(b) would become redundant Further, there would also arise 'a possibility of such assessrnent being treated as time-barred under section 153B(1)( b) because as per the provisions of section 153, the time limit for compIetion. of assessment under sectio~ 143(3) is more than the normal time limit available to the Assessing Officer for completing the assesment under section 153A read with section 153B of the Act. Further, if the assessment, of search year is to be completed under section 143 as such, then, there appears no reason as to why such assessment should be completed within the time limit prescribed under section 153B(I)(b) andnotwithin the time limit prescribed und.er section 153. Accordingly, we agree with ld. CIT DR that a purposive and harmonious construction of these provisions should be done.
18. Further, the provisions of section 153C(2) also provide for completion of assessment in respect of the person other than the person referred to in section 153A in the manner provided in section 153A. No doubt; the provisions of section153C(2) provide for specific situations wherein the assessment in respect of the assessment year relating to the previous year in which search is conducted under section 132 or requisition is made underseccdon 132A has to be made in the manner provided in section 153A. However, in our opinion, where Assessing Officer having jurisdiction over such other person receives' the books of account or documents, etc. before the due date of furnishing the return of income for such assessment year, then also; the assessment would be completed in the manner provided under section 153A of the Act because in that case, the Assessing Officer can assess/ reassess under section 153C(1) in routine course. We are, 'accordingly, of the view that if under specific circumstances as provided under section 153C(2) assessment of a person covered under section 153C has to be completed in the manner provided in section 153A of the Act, then, there should not be any no doubt that the assessment in case of a searched person tor the year of search has to be completed under section 153A read with section 153B of the Act .8 ITA No.873/PN/2008
Akbani Salim Abdul Gaffar A.Ys. 2005-06 Page of 13
19. In view of the above discussion, we hold that the ld. CIT(A) was not correct in law in holding that assessment for the previous year in which search took place or requisition was made had to be completed under the normal provisions of the Act."
7. The above decision has been followed by the ITAT Panjim Bench in the case of M/s. Bahubali Neminath Muttin Vs. ACIT (Supra) by the ITAT "B" Bench, Pune in the case of M/s. Giridhan & Sons (Supra). In the case of Dr. Mansukh Kanjibhai Shah Vs. ACIT (Supra), the Tribunal has examined the applicability of Sec. 153A by holding that before evoking the provisions of Sec. 153A of the Act, it will be necessary to comply with the provisions containing in Sec. 132(1) of the Act. The Tribunal has further held that considering Sec. 153A particularly read with sub-clause
(b), it is clear that not only initiation of the search is mandatory but conduct of the search is also material.
8. We find that the contention of the Ld. Counsel is well supported by the decision in the case of Shri Sushil Kumar Jain (Supra) as well as M/s. Bahubali Neminath Muttin (Supra). In the case of Shri Sushil Kumar Jain which is the lead case and has held by the co-ordinate Bench even in respect of the assessment relevant to the previous year in which the warrant of authorization is executed, should also to be made in compliance with the provisions of Sec. 153A and 153B.
9. In the assessment order, Section 143(3) is mentioned, can it be said that the assessee's assessment is not in conformity as contemplated in the provisions 153A, 153B and 153C ? So far as the time limit for assessment is concerned, it is provided in Sec. 153B(1)(b). The Ld Counsel fairly admitted that the assessment is completed as per the time limit as povided in the said proviso i.e. within the period of 2 years from the end of F.Y. 2004-05 as admittedly, the assessment is completed on 29.12.2006. Hence, the A.O has made the compliance of the mandatory condition in completing the assessment as provided u/s. 153B(1)(b) of the Act.
10. Then next question which arises for consideration is whether the A.O has considered the seized material found during the course of search for framing the assessment of the assessee or not. We find that the A.O has considered the seized material found during the course of search and the assessment is not merely based on the books of account and record 9 ITA No.873/PN/2008 Akbani Salim Abdul Gaffar A.Ys. 2005-06 Page of 13 produced by the assessee during the course of the assessment proceedings. What is to be seen in the substance of the assessment order and not merely format of an order. In our opinion, merely because Sec. 143(3) is typed by the A.O but otherwise, the substance of the assessment is in conformity that the assessment as contemplated u/s 153A & 153B, the assessment order cannot be said to be unlawful. We, therefore, hold that the assessment order, as it is based on the seized material as well as as per post search enquiry, there is no infirmity in the assessment order. We, accordingly, dismiss the additional ground raised by the assessee.
11. Now we decide the original ground taken by the assessee in which addition of Rs. 44,54,950/- is made by the A.O on account of unrecorded loan transaction has been challenged. The A.O has observed that on perusal of pag Nos. 7 to 19 of inventory No. 36 to Annexure of Panchnama dt. 18.12.2005, it was seen that the transaction of cash inward and cash outward were recorded on those papers. The said transactions were for the period from 1.5.2004 to 12.7.2004 with separate page for each day. Those transactions were not recorded in the books of account of the assessee. The details of the transactions as noted by the A.O in the assessment order are as under :
S/No. Date Amount Description
1 12-07-2004 200,000 Kadri
2 07-07-2004 185,000 Anil Patil
3 07-07-2004 80,000 Anil Patil
4 13-07-2004 600,000 Kadri
5 13-07-2004 100,000 Gurudeo Patil
6 13-07-2004 90,000 Gurudeo Patil
7 15-07-2004 240,000 Patil
8 10-07-2004 50,000 Hitesh Bhai
9 17-07-2004 60,000 Kadri
10 17-07-2004 700,000 Kadri
11 21-07-2004 1,000,000 Kadri Canvasing
12 21-07-2004 67,000 Kadri Canvasing
10 ITA No.873/PN/2008
Akbani Salim Abdul Gaffar
A.Ys. 2005-06
Page of 13
13 24-07-2004 800,000 Kadri Canvasing
14 30-06-2004 200,000 Vikas
15 03-07-2004 82,950 Hitesh Bhai
Total .. 4,454,950
12. The A.O. sought explanation of the assessee in respect of those transactions. The assessee contended that as regards the cash inward transactions mentioned on page Nos. 7 to 19 of the inventory No. 36, the various persons mentioned there have merely acted as postman to bring the cash from MIDC office to Shahupuri office of the assessee. The A.O asked the assessee to give the addresses of all the above persons who were allegedly acted as merely postman carrying cash from MIDC to Shahupuri office. As noted by the A.O, the assessee gave the addresses of two persons, namely Kadri and Anil Patil to whom the A.O issued summons on the addresses given by the assessee. The summons issued to Shri Anil Patil could not be served because the address was not correct. So far as Shri Kadri is concerned, his statement was recorded u/s. 131 and said Shri Kadri denied that he had carried cash from MIDC office to Shahupuri office as claimed by the assessee. The statement of Shri Kadri recorded u/s. 131 was provided to the assessee and assessee's explanation was sought why the entire cash of Rs. 44,54,950/- should not be treated as assessee's unrecorded loans/advances from the above parties for the A.Y. 2005-06.
13. The assessee replied to the show cause notice of the A.O vide his letter dated 7.12.2006. The assessee stated that the mill and godown of the assessee are situated at MIDC, Gokul Shirgaon, Kolhapur on National High Way which is 10 to 12 Kms. from the city. The city office and assessee's Bank is located at heart of the city i.e. Shahupuri. The cash collected at godown, mill and Konkan area has to be sent frequently at city office for depositing in Bank. The assessee used to send the collected cash from the mills/godown/MIDC office to the city office through the visitors/customers or other person visiting the assessee's MIDC office/mill. When the persons referred to here are not employees of the assessee but are his acquaintances but have their office located near the office of the assessee, they used to drop the cash in assessee's Shahupuri 11 ITA No.873/PN/2008 Akbani Salim Abdul Gaffar A.Ys. 2005-06 Page of 13 office and the confirmation of the cash received by the office is taken on telephone. No loans or deposits have been taken from those persons whose names are appearing in the seized papers.
14. The A.O. rejected the explanation of the assessee. As observed by the A.O, the persons whose names are appearing in seized documents are not the employees of the assessee. On date-wise verification, it was seen that the collection of MIDC office which has been brought to Shahupuri office was marked with the words "A.O," but sometimes more than once on the same day. The A.O., therefore, rejected the explanation that there was no reason to send the collection through the third parties/persons. The A.O has also observed that many of the sale transactions are shown on the name of the same persons. In sum and substance, the A.O. pointed out inconsistency in the statement of the assessee. The A.O also held that as per the computerized cash book maintained by the assessee in respect of M/s. Anwar Oils and M/s. Al- Habib Enterprises as on 17-7-2004, it was noticed that on that day, the receipt side was less than the payment side. The A.O has also observed that there was no reason for the assessee to bring cash from residence to MIDC, Gokul Shirgaon and again bring the same cash all the way from Gokul Shirgaon by hands of some third party. The A.O. treated the entire cash transactions found in the seized material was treated as recovery from un-recorded loans/advances from the above mentioned parties by the assessee for the A.Y. 2005-06.
15. So far as transactions of cash outward are concerned, the A.O. referred to page Nos. 17 to 19 of inventory No. 36. Those recorded transactions were also not reflected in the regular books of account of the assessee. The assessees stated that the cash has been deposited by him in the Bank as the same was given to him by the said persons for depositing in their bank accounts and also for giving it to some other persons. The A.O has given details of the 29 persons in respect of which transactions of cash outward aggregating Rs. 37,97,500/- are found. As noted by the A.O, the summons were issued to those persons and their statements recorded u/s. 131 of the Act. Those persons, as noted by the A.O, denied to have given any cash to the assessee for depositing in their Bank on the above dates.
16. The assessee was firm on his statement. He stated that assessee's staff or one of his brother regularly goes to customers cities at Konkan 12 ITA No.873/PN/2008 Akbani Salim Abdul Gaffar A.Ys. 2005-06 Page of 13 for collection of payment , for booking orders and the customers are having bank accounts in the Kolhapur city. The assessee's brother was requested by those customers to do them favour by depositing their cash in their own bank account. Most of the time it was done so as to make a cheque payment from the Bank in which the said cash was deposited. The assessee also stated before the AO that the customer visiting the MIDC mill or office godown is to hand over cash to the assessee with request to deposit their cash in their bank account in Kolhapur city. The assessee filed account statement of one Shri D.G. Govekar showing the reconciliation of the payments of Rs. 2,20,000/- found recorded on 12.7.2004 out of which, said party issued the cheque of Rs. 2,16,619/-. The assessee also filed the account statement of M/s. R.S. Masurkar to demonstrate that the outward cash recorded on 14.7.2004 of Rs. 1,12,000/- was deposited in his bank account at Gadhinglaj Bank and cash was paid of Rs. 1,05,150/-. The assessee also filed some few statements to demonstrate the transactions in respect of 29 persons to show that in fact, the cash was given by those persons for depositing in their Bank Account.
17. The A.O has observed that in the statement recorded u/s. 131 of the Act, all the above persons were specifically asked about of the date- wise entries as mentioned in the seized loose paper but none of the persons admitted to have given any cash to the assessee on the dates as mentioned on those loose papers. The A.O. considered the receipt as well as payment side of the un-recorded transactions i.e. the receipt and outflow of the cash found recorded in the seized loose papers and made the addition of Rs.44,54,960/- by holding that to be fair and objective as the two transactions of cash inward and cash outward for same period, it is considered that source of loan given of Rs. 37,97,500/- as recovery of cash loans of Rs. 44,54,960/-. The assessee carried the issue before the Ld CIT(A), but without success as the addition was confirmed.
18. We have heard the rival submissions of the parties and perused the record. The Ld Counsel pleaded for giving the benefit of the peak. We find that the Ld CIT(A) has considered the plea of the assessee on the issue of considering the addition on the peak. As per the statement of the assessee, the cash inwards were related to the sales but the cash outwards were in respect of the money given by the assessee's customers for deposing the same in their Bank Account. As per the own explanation of the assessee, the outward entries of the cash which have 13 ITA No.873/PN/2008 Akbani Salim Abdul Gaffar A.Ys. 2005-06 Page of 13 the different nature of the transactions. We find that the A.O issued summons to the persons and recorded their statements but the person whose names were appearing denied having either brought cash from MIDC office of the assessee to his city office or the persons who were allegedly given cash to the assessee for depositing the same in their bank account. The Ld CIT(A) has rightly held that nature of the transactions are totally different and having no nexus with each other, the benefit of the peak cannot be given. So far as the merits are concerned, the evidence is against the assessee. Nothing has been placed before us to show that there was no denial by those parties in respect of claim of the assesse. In our opinion, no interference is called for in the order of the Ld CIT(A). Accordingly, the addition is confirmed.
19. In the result, assessee's appeal is dismissed.
The order is pronounced in the open Court on 31st August 2012.
Sd/- Sd/-
(G.S. PANNU) (R.S.PADVEKAR )
ACCOUNTANT MEMBER JUDICIAL MEMBER
Pune, dated the 31st August, 2012
US
Copy of the order is forwarded to :
1. The Appellant
2. The Respondent
3. The CIT - I/II, Kolhapur, CIT (Central), Pune
4. The CIT(A), Kolhapur
5. The D.R. "B" Bench, Pune
6. Guard File /- true copy-/ By order Senior Private Secretary Income Tax Appellate Tribunal Pune