Income Tax Appellate Tribunal - Delhi
M/S. Primus Real Estates Pvt. Ltd., New ... vs Dcit, New Delhi on 19 February, 2016
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCHES : F : NEW DELHI
BEFORE SHRI N.K. SAINI, AM & SMT. BEENA A. PILLAI, JM
ITA Nos.5760 & 5761/Del/2013
Assessment Years : 2007-08 & 2008-09
Primus Real Estates Pvt. Ltd., Vs. DCIT,
910, Ansal Bhawan, Central Circle-14,
KG Marg, New Delhi.
New Delhi.
PAN: AADCP7747B
(Appellant) (Respondent)
Assessee By : Shri Somil Agrawal &
Shri Tarun Kumar, Advocates
Department By : Shri O.P. Meena, CIT, DR
Date of Hearing : 17.12.2015
Date of Pronouncement : 19.02.2016
ORDER
PER BEENA A. PILLAI, JM:
These appeals by the assessee arise out of the orders passed by the CIT(A)-XXXIII, New Delhi on 26.7.2013 in relation to the assessment years 2007-08 & 2008-09 on the following grounds:- ITA No.5760/Del/2013
1. On the facts and in the circumstances of the case, the Learned CIT(A) erred in upholding the validity of ITA No.5761 & 5760/Del/2013 order passed by the Assessing Officer u/s 153A on 20.07.2012.
2. On the facts and in the circumstances of the case, the Learned CIT(A) erred in partly allowing the appeal as he ought to have fully allowed the appeal.
3. On the facts and in the circumstances of the case, the Learned CIT(A) erred in holding that "Wherever the land is shown as work in progress, to extent of disallowance u/s 40A(3), will reduce. This view is in conformity with the decision of hon'ble Supreme Court in case of Attar Singh.
In case where land is shown as investment, however, subsequently it is converted into stock-in-trade, to the extent of disallowance u/s 40A (3) value of work-in- progress would reduce at the time of conversion."
4. The appellant may kindly be allowed to raise any additional ground in the course of hearing of the appeal. ITA No.5761/Del/2013
1. On the facts and in the circumstances of the case, the Learned CIT(A) erred in upholding the validity of order passed by the Assessing Officer u/s 153A on 20.07.2012.
2. On the facts and in the circumstances of the case, the Learned CIT(A) erred in partly allowing the appeal as he ought to have fully allowed the appeal.
3. On the facts and in the circumstances of the case, the Learned CIT(A) erred in holding that "Wherever the land is shown as work in progress, to extent of disallowance u/s 40A(3), will reduce. This view is in 2 ITA No.5761 & 5760/Del/2013 conformity with the decision of hon'ble Supreme Court in case of Attar Singh.
In case where land is shown as investment, however, subsequently it is converted into stock-in-trade, to the extent of disallowance u/s 40A (3) value of work-in- progress would reduce at the time of conversion."
4. The appellant may kindly be allowed to raise any additional ground in the course of hearing of the appeal.
2. The brief facts of the case as recorded by the ld.AO are as under;
2.1. It is engaged in the business of real estate. A search and seizure operation was conducted u/s.132 of the Act on 23.03.2011 in the case of Group. Consequent upon search and seizure operations under Section 132 of the Income-tax Act, 1961 (for short "the Act") on the Amtek Group, the assessee was covered u/s.132(1) of the Act. A notice u/s.153A was issued to the assesssee on 14.10.2011. In response to the notice, the assessee filed its return of income declaring NIL income on 24.11.2011. Accordingly, the assessment under Section 143 r.w.s. 153A of the Act was completed vide order dated 20.07.2012 Rs.30,94,214/- for assessment year 2007-08 and at a total income of Rs. Rs.50,058/- for assessment 3 ITA No.5761 & 5760/Del/2013 year 2008-09. The assessed income in both the assessment years were on account of addition made under Section 40A(3) of the Act. 2.2. Aggrieved by the order of the ld.AO, assessee preferred appeals for both the assessment years before the ld. CIT(A). The ld.CIT(A) confirmed the addition vide order dated26.07.2013., while confirming the addition, directed the Assessing Officer to reduce the amount of addition from the closing work-in-progress. The relevant extract from the order of the ld.CIT(A) is as under;
"Therefore, in my view disallowance u/s 40A(3) is proper. Now, coming to the facts of the case, there is so sale of land or its development. Hence, income has not accrued to the assessee. In that circumstances if disallowance is made u/s 40A(3) & added back to the income, if would amount to taxing the income without any accrual. Therefore, in my view, wherever the land is shown as work in progress, to the extent of disallowance u/s 40A(3), the value of work in progress will reduce. This view is in conformity with the decision of Hon'ble Supreme Court in case of Attar Singh. In case where the land is shown as investment, however, subsequently it is converted into stock-in-trade, to the extent of disallowance u/s 40A(3) value of work-in-progress would reduce at the time of conversion."
3. Being aggrieved by the order of CIT(A), the assessee is in appeals for both the assessment years challenging the very jurisdiction of the Assessing Officer to make the assessment under Section 153A in the absence of any seized incriminating material. 4
ITA No.5761 & 5760/Del/2013 3.1. We shall first deal with the very root of jurisdiction of the assessment. The ld. AR contended that there was no seized incriminating material indicating that there were cash payments, attracting the disallowances under Section 40A(3) of the Act. He further submitted that there was no abatement of assessment proceedings, inasmuch as, there is no pending assessment, and when the notice under Section 143(2) of the Act was issued the limitation for issuance of such notice had already expired. 3.2. The ld.AR drew our attention to the assessment, where there was no whisper about any seized incriminating material. Therefore, he submitted that the order of assessment made is null and void in the light of the decision of Hon'ble Jurisdictional High Court in the case of CIT Vs. Kabul Chawla, ITA No. 707/2014, dated 28th August, 2015. He also relied on the decisions of a coordinate bench of ITAT, Delhi Bench in the case of M/s Saraswati Housing & Developers Vs. ACIT, ITA No. 5795/Del/2011, AY 2006-07, dated 1st March, 2013.
4. On the other hand, ld. CIT(DR) relied on the orders of the lower authorities.
5
ITA No.5761 & 5760/Del/2013
5. We heard the rival submissions and perused the material on record. It is undisputed fact that there was no seized incriminating material suggesting any disallowance under the provisions of Section 40A(3) of the Act. A perusal of the assessment orders does not reveal that the impugned additions made in respect of both the assessment years, have neither been based on any incriminating material seized, nor there is any whisper in the assessment orders. 5.1. Now, the law is well settled that, no assessments can be made under Section 153A in the absence of any seized incriminating material. The Hon'ble Delhi High Court after referring to the various precedents on the subject i.e. CIT Vs. Continental Warehousing Corporation (Nhava Sheva) Ltd. [2015] 58 Taxmann.com 78 (Bom.) and the decision of the Hon'ble Bombay High Court in the case of CIT Vs. M/s. Murli Agro Products Ltd., ITA No. 36/2009, dated 29th October, 2010, has summarized the legal position as under:
"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:6
ITA No.5761 & 5760/Del/2013 i. Once a search takes place under Section 132 of the Act, notice under Section 153 A (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.
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 153 A 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 153 A 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 7 ITA No.5761 & 5760/Del/2013 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 153 A 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."
6. Respectfully following the ratio laid down by the Hon'ble Jurisdictional High Court in the above case, we hold that the assessments made under Section 153A of the Act in the present case are also invalid and is therefore we hereby quash as such. Accordingly, the grounds of appeal filed by the assesse for assessment years 2007-08 and 2008-09 are allowed.
9. In the result, the appeals filed by the assessee for assessment years 2007-08 and 2008-09 stands allowed.
The order pronounced in the open court on 19.02.2016 Sd/- Sd/-
[N.K. SAINI] [BEENA A. PILLAI] ACCOUNTANT MEMBER JUDICIAL MEMBER Dated 19.02.2016 dk Copy forwarded to: 8 ITA No.5761 & 5760/Del/2013 1. Appellant 2. Respondent 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI. Date 1. Draft dictated on 29.12.2015 2. Draft placed before the author 3. Draft placed before the 30.12.2015 other Member 4. Approved Draft comes to 19.02.2016 the Sr.PS/PS 5. File sent to the Bench 19.02.2016 Clerk 6. Date on which file goes to the Head Clerk. 7. Date on which file goes to the AR 8. Date of dispatch of Order. 9