Income Tax Appellate Tribunal - Delhi
Best Infrastructure (India) Pvt. Ltd., ... vs Dcit, New Delhi on 8 February, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH 'A
'A': NEW DELHI
BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND
SHRI KULDIP SINGH,
SINGH, JUDICIAL MEMBER
ITA Nos
Nos.2739/Del/2014, 2740/Del/2014, 2741/Del/2014 & 2742/Del/2014
Assessment Years
Years : 2005-
2005-06, 2006-
2006-07, 2007
2007-08 & 2008-
2008-09
M/s Best Infrastructure Vs. Deputy Commissioner of
(India) Pvt.Ltd., Income Tax,
No.H-8, 1st Floor,
Plot No.H- Central Circle-
Circle-11,
Best Plaza, New Delhi.
Netaji Subhash Place,
Pitampura,
New Delhi - 110 034.
PAN : AACCB5568R.
(Appellant) (Respondent)
ITA Nos.2743/Del/2014
Nos.2743/Del/2014 and 2744/Del/2014
Assessment Years
Years : 2007-
2007-08 & 2008-
2008-09
M/s Best City Developers Vs. Deputy Commissioner of
India Pvt.Ltd., Income Tax,
No.H-8, 1st Floor,
Plot No.H- Central Circle-
Circle-11,
Best Plaza, New Delhi.
Netaji Subhash Place,
Pitampura,
New Delhi - 110 034.
PAN : AACCB5568R.
(Appellant) (Respondent)
Appellants by : Shri Ved Jain, Mrs. Rano Jain,
Advocates and
Shri Ashish Jain, CA.
Respondent by : Shri Ravi Jain, CIT-DR.
Date of hearing : 19.01.2017
Date of pronouncement : 08.02.2017
ORDER
PER G.D. AGRAWAL, VP :-
These appeals by the assessees for the assessment years 2005- 06 to 2008-09 are directed against the orders of learned CIT(A)-XXXI, New Delhi dated 28th February, 2014 and 11th March, 2014.
ITA-2739 to 2744/Del/2014 2 ITA No.2739/Del/2014 - Best Infrastructure (India) Pvt.Ltd. - AY : 2005- 2005-06 :-
:-
2. In this appeal, the assessee has raised the following grounds of appeal :-
"1. The ld. AO has erred in law and in facts of the case in making additions in the assessment framed u/s 153A, which is not based upon any incriminating material found during the course of the search and the ld.AO has further erred in making the assessment in view of the fact that the assessment was not pending as on the date of the search, which is incorrect, unjustified, bad in law and void-ab-initio.
2. The ld.AO has erred both on facts and in law in making the addition of Rs.2,46,00,000/- u/s 68 on account of share capital issued by the assessee company and held the same to be undisclosed income of the assessee company, which is arbitrary, contrary to the facts and bad in law.
3. The ld.AO has erred in law & facts of the case in adding Rs.5,53,500/- u/s 69C on account of alleged payment of commission for obtaining accommodation entries, which is highly arbitrary, unjustified, bad in law, uncalled for and merely on presumption of the ld.AO.
4. The assessee craves the right to add, amend or modify any ground of appeal."
3. At the time of hearing before us, it is stated by the learned counsel that this is the second round of assessment u/s 153A of the Income-tax Act, 1961. He pointed out the search and seizure action took place at the assessee's premises second time on 28th March, 2011. A notice u/s 153A was issued on 12th March, 2012, in response to which, assessee filed the return of income declaring loss of `43,287/- on 9th March, 2012. The Assessing Officer completed the assessment at `6,19,20,213/-, in which, apart from taking the assessed ITA-2739 to 2744/Del/2014 3 income as per order u/s 153A dated 30th December, 2010, he made the following additions :-
(i) Addition on account of unexplained cash credit u/s 68 of the I.T. Act Rs.24600000/-
(ii) Addition on account of unexplained
expenditure 69C of the IT Act Rs.553500/-
4. The same is sustained by the learned CIT(A). He stated that
Hon'ble Jurisdictional High Court in the case of CIT Vs. Kabul Chawla -
[2016] 380 ITR 573 (Delhi) and CIT Vs. RRJ Securities Ltd. - [2016] 380 ITR 612 (Delhi) have taken the view that in the absence of incriminating material, no addition u/s 153A can be made. That, as per Revenue, pages 70 to 74 of Annexure A-1 is the incriminating document which gives the details of transfer of shares by the initial allottees to the promoter group company at 10% of the cost. He submitted that pages 70 to 74 of Annexure A-1 is the annexure to the copy of the annual return filed with the Registrar of Companies. In the annual return to be furnished before the Registrar of Companies, the assessee has to furnish the details of the transfer of shares during the year under consideration. Since there is not sufficient space to mention the details of all the transfer of shares taken place during the relevant year, such details were typed in separate list and annexed with the said annual return filed before search with R.O.C. This annexure was found and seized during the course of search and marked as Annexure A-1 pages 70 to 74. That this document is dated 10th March, 2011 and in the list, there is detail of transfer of shares of the assessee company. The shares have been transferred by and between two independent persons. He referred to item No.1 and pointed out that shares have been transferred by Gauri Shanker Paints ITA-2739 to 2744/Del/2014 4 & Chemicals to Best Realtors (India) Pvt.Ltd. The assessee has neither transferred the shares nor acquired the shares. The assessee neither received a single Rupee nor paid a single Rupee. Thus, there was no financial transaction by or between the assessee by virtue of the transfer of shares. That a document which is only an annexure to an annual return filed with the Registrar of Companies cannot be said to be incriminating document. Moreover, by virtue of such document, no financial transaction by the assessee company is indicated and the said document pertains to financial year 2010-11 and not to the year under consideration. In view of the above, he stated that the decisions of Kabul Chawla (supra) and RRJ Securities Ltd. (supra) would be squarely applicable. He, therefore, requested that the addition for unexplained share capital as well as alleged commission on the above share capital should be deleted.
5. Learned CIT-DR, on the other hand, relied upon the orders of authorities below and he stated that this document indicated that the shares have ultimately been transferred to the company of same group and, therefore, learned CIT(A) as well as Assessing Officer has rightly taken the view that the document found and seized during the course of search was incriminating document and Section 153A was applicable. During the assessment proceedings, the assessee could not satisfactorily discharge the onus of proving the share capital and therefore, the addition for the same has been rightly made and sustained by the learned CIT(A).
6. We have carefully considered the rival submissions and have perused the material placed before us. The facts of the case are that for the year under consideration, the assessee filed the return of income declaring loss of `43,287/- on 27th October, 2005. The same was accepted u/s 143(1). The search and seizure operation was ITA-2739 to 2744/Del/2014 5 carried out at the assessee's business premises on 15th September, 2008. Proceedings u/s 153A were initiated and assessment u/s 153A was completed on 30th December, 2010 in which, the addition of `3,60,00,000/- for unexplained cash credit was made. The ITAT, vide order dated 31st December, 2016 in ITA No.1698/Del/2014 and others, deleted the addition following the decision of Hon'ble Jurisdictional High Court in the case of Kabul Chawla (supra) and RRJ Securities Ltd. (supra). Another search u/s 132A took place at the assessee's business premises on 28th March, 2011. Again, notice u/s 153A was issued and in pursuance thereto, assessment was completed u/s 153A on 28th March, 2013 in which, the Assessing Officer made the addition of `2,46,00,000/- for unexplained cash credit which is sustained by learned CIT(A), hence, this appeal by the assessee.
7. The scope of assessment u/s 153A is defined by Hon'ble Jurisdictional High Court in the case of Kabul Chawla (supra), wherein, Hon'ble Delhi High Court, after considering the decisions of other High Courts and Tribunal, has summarized the position in paragraph Nos.37 & 38 of their decision, which is reproduced below :-
"Summary of the legal position.
37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under:-
i. Once a search takes place under Section 132 of the Act, notice under Section 153A(1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place.
ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise.
ITA-2739 to 2744/Del/2014 6 iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO 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 AYs "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 AO 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 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 completed 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 AY on the basis of the findings of the search and any other material existing or brought on the record of the AO.
vii. Completed assessments can be interfered with by the AO 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.
Conclusion
38. The present appeals concern AYs 2002-03, 2005-06 and 2006-07. On the date of the search the said assessments already stood completed. Since no ITA-2739 to 2744/Del/2014 7 incriminating material was unearthed during the search, no additions could have been made to the income already assessed."
8. Similar view is expressed by their Lordships in the case of RRJ Securities Ltd. (supra). In this case, in paragraph 21, their Lordships held as under :-
"In respect of such assessments which have abated, the AO would have the jurisdiction to proceed and make an assessment. However, in respect of concluded assessments, the AO would assume jurisidciton to reassess provided that the assets/documents received by the AO represent or indicate any undisclosed income or possibility of any income that may be remained undisclosed in the relevant assessment years. This Court in Commissioner of Income Tax (Central)-III v. Kabul Chawla : ITA 707/2014, decided on 28th August, 2015 has held that completed assessments could only be interfered with by the AO on the basis of any incriminating material unearthed during the course of the search or requisition of the documents. In absence of any incriminating material, the AO does not have any jurisdiction to interfere in concluded assessments."
9. Thus, their Lordships have clearly held that "Obviously an assessment has to be made under this Section only on the basis of seized material. In the absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made". Therefore, the basic question before us is to examine whether the pages 70 to 74 of Annexure A-1 can be said to be incriminating material for the purpose of Section 153A. Admittedly, pages 70 to 74 of Annexure A-1 are the list giving the details of transfer of shares during the financial year 2010-11. The assessee has filed before us the copy of annual return furnished by it before the Registrar of Companies on 10th March, 2011. In Part VI of the annual return, the assessee is required to furnish the details of shares/debentures transfers since the date of last AGM. In the return, ITA-2739 to 2744/Del/2014 8 the assessee mentioned "As per list attached". Then, in the list, the assessee has given the required details. The copy of the said list is annexed herewith as Annexure-
Annexure-A to this order. From this list, we find that it gives the details of date of share transfer, type of transfer, number of shares transferred, amount per share, ledger folio of transfer, transferor's name and transferee's name. At the outset, we find that this list pertains to shares transferred between financial year 2010-11. Therefore, this document is relevant to financial year 2010- 11 i.e., assessment year 2011-12. Admittedly, the appeals before us are of assessment years 2005-06 to 2008-09 and therefore, this document does not pertain to the year under appeal. On this ground alone, it can be said that no incriminating documents relevant to assessment year under consideration were found. However, we are also of the opinion that this document cannot be said to be incriminating document. A copy of an annexure to the annual return already furnished by the assessee with the Registrar of Companies before the date of search as a part of the annual return which is to be furnished in the statutory form can never be said to be an incriminating document. Moreover, the shares are transferred by one person to another. The assessee is neither transferor nor the transferee. So far as the assessee is concerned, no financial transaction took place by the assessee even during the financial year 2010-11. In view of the above, we hold as under :-
(i) Pages 70 to 74 of Annexure A-1 cannot be said to be incriminating document.
(ii) These papers are pertaining to financial year 2010-11 and therefore, not relevant to the assessment year under appeal.
ITA-2739 to 2744/Del/2014 9
10. In view of the above, respectfully following the decision of Hon'ble Jurisdictional High Court in the case of Kabul Chawla (supra) and RRJ Securities Ltd. (supra), we hold that the additions of `2,46,00,000/- and `5,53,500/- are beyond the scope of assessment under Section 153A of the Act. Accordingly, the same are deleted.
ITA No.2740 to 2742/Del/2014 2742/Del/2014 - Best Infrastructure (India) Pvt.Ltd. - AY : 2006- 2006-07, 2007- 2007-08 & 2008- 2008-09 :-
11. At the time of hearing before us, both the parties agreed that the grounds raised and the facts in these years are identical to the facts and grounds raised in the assessment year 2005-06. Similar additions for share capital as well as alleged payment of commission are made in these years also, the details of which are as under :-
ITA No. AY Addition for unexplained Addition for alleged share capital expenditure on commission 2740/Del/2014 2006-07 3,70,05,000/- 8,32,612/- 2741/Del/2014 2007-08 4,84,50,000/- 10,90,125/- 2742/Del/2014 2008-09 1,11,50,000/- 2,50,875/-
12. We have already decided the appeal of the assessee for assessment year 2005-06 above vide ITA No.2739/Del/2014 and, for the detailed discussion therein, we hold that there was no incriminating material relating to assessment year 2006-07, 2007-08 & 2008-09 so as to justify the addition for unexplained share capital as well as addition for alleged expenditure on commission. Accordingly, we delete both the above additions and allow the appeals of the assessee.
ITA-2739 to 2744/Del/2014 10 ITA No.2743 No.2743/Del/2014 43/Del/2014 & 2744/Del/2014 - Best City Developers India Pvt.Ltd. - AY 2007- 2007-08 & 2008- 2008-09 :-
13. In both these appeals also, a similar ground has been raised challenging the following additions in the assessment framed u/s 153C on the ground that no incriminating material was found :-
ITA No. AY Addition for unexplained Addition for alleged share capital expenditure on commission 2743/Del/2014 2007-08 83,00,000/- 1,86,750/- 2744/Del/2014 2008-09 7,17,00,000/- 16,13,250/-
14. At the time of hearing before us, the learned counsel for the assessee has pointed out that learned CIT(A) in his common order for both the years has discussed the material found and seized from pages 6, 7 & 8 of his order and has come to the conclusion that none of the above papers is incriminating material, but, if they are read with pages 70 to 74 of Annexure A-1 found in the case of M/s Best Infrastructure (India) Pvt.Ltd., then only the documents considered in the case of the assessee i.e., M/s Best City Developers (India) Pvt.Ltd., would be incriminating documents. Both the parties therefore agreed that, in effect, these appeals are consequential because, if documents at pages 70 to 74 of Annexure A-1 are held to be incriminating material in the case of M/s Best Infrastructure (India) Pvt.Ltd., the documents found in the case of the assessee would be incriminating material, otherwise not.
15. We have carefully considered the submissions of both the sides and perused the material placed before us. For ready reference, we deem it proper to reproduce the relevant paragraphs of learned CIT(A)'s order wherein he has discussed the seized material in the case of the assessee :-
ITA-2739 to 2744/Del/2014 11 "
Details of seized documents pertains to parties other than parties which has been searched u/s 132 of the IT Act, 1961 Best City Developers A-1 Page-59, 60, 61 A-2 A-3 Page-41, 42, 43, 64, 66 A-4 Page-72, 73 4.2.2 I have gone through the pages of seized Annexures referred to in the aforesaid section note.
The relevant pages of the seized annexures referred to in the satisfaction note of the AO while initiating proceedings u/s 153C are as follows :
Best City Developers India Private Limited
1. Annexure-A-1 a. Page 59 - This is a challan of Ministry of Corporate Affairs (G.A.R. 7) for payment of fees for form 66 for the F.Y. 2009-10 of Rs.5000/- paid into ICICI bank CP branch New Delhi.
b. Page 60 - is a challan of Ministry of Corporate Affairs (G.A.R. 7) for payment of fees for form 23AC for the F.Y. 2009-10 of Rs.5000/- paid into ICICI bank CP branch New Delhi.
c. Page 61 - is a challan of Ministry of Corporate Affairs (G.A.R. 7) for payment of fees for form 20B for the F.Y. 2009-10 of Rs.5000/- paid into ICICI bank CP branch New Delhi.
2. Annexure-A-3 a. Pages 41, 42, 43 - are bank statements of the appellant's account No.629805 019802 for the months of January, February and March 2011 respectively maintained with ICICI Bank, Rohini, Delhi.
b. Page 64 - This is RTGS Transaction Request Form of Axis Bank Ltd dated 28/02/2011 for transfer of Rs.1 crore from Best Cyber City India Private Limited to the appellant company.
ITA-2739 to 2744/Del/2014 12 c. Page 66 - This is a letter of the appellant requesting The Branch Manager, ICICI Bank Ltd, Rohini, Delhi to transfer funds (1.3 crores) from their account to the account of best city developers India private limited.
3. Annexure-A-4 a. Page 72 - this is the ledger account of Diksha Sales private limited for the period 01/04/2006 to 09/11/2010 in the books of the appellant company which contains the transaction of value Rs.10 lacs towards share application and its allotment.
b. Page 73 - this is an undated letter of Diksha Sales Private Limited addressed to ACIT, Room No.318, Income Tax Office, Jhandewalan Extension, written in response to notice u/s 133(6) for A.Y. 2007-08 confirming that they have invested Rs.10 lakh in the share capital of the appellant company.
4.2.3 From the above seized documents it is seen that the documents available in Annexure A-4 are relating to the share capital introduced by Diksha Sales Pvt.Ltd. These are the documents which have connection with the share capital of the appellant. They have to be read with another important document at pages 70-74 of seized Annexure A- 1 (based on which proceedings u/s 153A in the case of Best Infrastructure (India) Pvt.Ltd. are being upheld). Only then the documents in Annexure-4 become incriminating documents."
16. From the above, it is evident that pages 60 and 61 of Annexure A-1 considered in the case of the assessee is the challan for payment of the fees paid by the assessee to Ministry of Corporate Affairs. Admittedly, these papers cannot be said to be incriminating material. Annexure A-3 pages 41, 42 & 43 are bank statement of the appellant's account maintained with ICICI Bank, Rohini, Delhi. Page 64 of Annexure A-3 is RTGS transaction request from Axis Bank Ltd. and page 66 is also a letter of the appellant requesting the Branch Manager, ICICI Bank for transfer of funds from their account. Admittedly, none of the above documents is incriminating material.
ITA-2739 to 2744/Del/2014 13 Annexure A-4 page 72 is the ledger account of Diksha Sales Private Limited in the books of the assessee. Page 73 is the letter sent by Diksha Sales Private Limited addressed to ACIT written in response to notice u/s 133(6) for assessment year 2007-08. Learned CIT(A) is of the opinion that the above two documents i.e., page 72 & 73 of Annexure A-4 can be held to be incriminating material if they are read with pages 70 to 74 of Annexure A-1 found in the case of M/s Best Infrastructure (India) Pvt.Ltd. We have already considered pages 70 to 74 of Annexure A-1 in the case of M/s Best Infrastructure (India) Pvt.Ltd. and have found that the said documents are neither incriminating in nature nor relevant to the assessment years under appeal. Even otherwise, the document considered in the case of the assessee is a copy of account of one party in the books of the assessee and a confirmation letter written by the said party to the Assessing Officer in response to notice issued u/s 133(6). We are unable to find any good reason to consider the above document as incriminating material. How a copy of account of some party in the books of the assessee can be considered to be an incriminating material? Similarly, how a reply given by the said party to the Assessing Officer in response to summons u/s 133(6) can be held to be incriminating material. We are unable to find any logic to hold these documents as incriminating material even if these documents are considered along with pages 70 to 74 of seized Annexure A-1 in the case of M/s Best Infrastructure (India) Pvt.Ltd.
17. In view of the above, we hold that no incriminating material was found in the case of the assessee and therefore, the decision of Hon'ble Jurisdictional High Court in the case of Kabul Chawla (supra) and RRJ Securities Ltd. (supra) would be squarely applicable. Respectfully following the same, we direct that the additions of `83,00,000/- on account of unexplained share capital and `1,86,750/-
ITA-2739 to 2744/Del/2014 14 for expenditure on commission made in assessment year 2007-08 and of `7,17,00,000/- on account of unexplained share capital and `16,13,250/- for expenditure on commission made in assessment year 2008-09 be deleted.
18. In the result, all the appeals of the assessees are allowed.
Decision pronounced in the open Court on 08.02.2017.
Sd/- Sd/-
(KULDIP SINGH)
SINGH) (G.D. AGRAWAL)
AGRAWAL)
JUDICIAL MEMBER VICE
VICE PRESIDENT
VK.
Copy forwarded to: -
1. Appellant : M/s Best Infrastructure (India) Pvt.Ltd. and
M/s Best City Developers India Pvt.Ltd.,
No.H-8, 1st Floor, Best Plaza,
Plot No.H-
Netaji Subhash Place, Pitampura,
New Delhi - 110 034.
2. Respondent : Deputy Commissioner of Income Tax, Central Circle-
Circle-11, New Delhi.
3. CIT
4. CIT(A)
5. DR, ITAT Assistant Registrar .....Enclosure - Annexure-A (5 pages) ITA-2739 to 2744/Del/2014 15 ITA-2739 to 2744/Del/2014 16 ITA-2739 to 2744/Del/2014 17 ITA-2739 to 2744/Del/2014 18 ITA-2739 to 2744/Del/2014 19