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Income Tax Appellate Tribunal, MUMBAI BENCH “C”, MUMBAI
Before: SHRI PRASHANT MAHARISHI & SHRI KULDIP SINGH
Per : Kuldip Singh, Judicial Member: Since common question of law and facts have been raised in these inter-connected appeals, the same are being disposed of by way of composite order to avoid repetition of discussion.
2. The appellant, Asst. Commissioner of Income Tax, Central Circule-2(1), Mumbai (hereinafter referred to as ‘the Revenue’) by filing present appeals, sought to set aside the impugned orders dated 06.06.2022 passed by Commissioner of Income Tax (Appeals), Mumbai [hereinafter referred to as the CIT(A)] qua the & ors. 2 Mr. Pratap Uttam Purohit assessment years 2012-13, 2013-14, 2014-15, & 2016-17 on identically worded grounds except the difference in figure of additions (grounds from appeal bearing for A.Y. 2012-13 are taken for the sake of brevity) on the grounds inter-alia that :- “1. Whether on the facts and circumstances of the case and in law, the Ld CIT(A)-48. Mumbai is right in holding that no incriminating material was found to sustain the addition.
Whether on the facts and circumstances of the case and in law, the Ld. CIT(A)-48, Mumbai is right in deleting the entire additions of Rs.6,79,16,278/- made in the assessment order only on the ground that no incriminating material was found to sustain the addition without appreciating the facts that the assessment order was passed after carefully analysing the seized material.”
Briefly stated facts necessary for consideration and adjudication of the issues at hand are : the assessee being a proprietary concern in the name and style of M/s. Dev Engineers who is a major partner in the same to the extent of 80% shares in the firm covered under the search and seizure operation carried out under section 132 of the Income Tax Act, 1961 (for short ‘the Act’) in case of Pratap Uttam Purohit group on 16.02.2017. During the search and seizure operation, statement of assessee was recorded under section 132(4) of the Act on the basis of which satisfaction note was recorded in case of M/s. Dev Engineers and thereafter notice under section 153C was issued. In response to the notice issued under section 153A the assessee filed return declaring total income of Rs.19,56,32,830/-, Rs.5,47,08,170/-, Rs.3,07,69,430/- & Rs.63,23,660/- for A.Y. 2012-13, 2013-14, 2014-15, & 2016-17 respectively. Thereafter, notices under section 142(1) along with questionnaire were served upon the assessee to which the assessee has duly responded by filing written replies and other details & ors. 3 Mr. Pratap Uttam Purohit through its representative. Assessing Officer (AO) on the basis of books of account of the assessee in a soft copy as well as several loose papers and documents pertaining to partnership firm M/s. Dev Engineers seized vide annexure-A of panchnama dated 20.02.2017 reached conclusion that the assessee has indulged in booking bogus bills of purchases and sub-contracts in his books of account in his proprietorship concerned of M/s. Dev Engineers as well as in the books of partnership firm of M/s. Dev Engineers and that the assessee has also made huge cash expenses in the form of site expenses and conveyance expenses for Pratap Uttam Purohit group and after declining the contentions raised by the assessee the AO computed the total income of the assessee for A.Y. 2012-13 (a lead case) as under: Computation of Total Income Particulars Amount (Rs.) Amount (Rs.) Total income as per 19,56,36,030 order giving effect to the order of the Hon'ble ITAT dated 18.12.2018 Add: Cash expenses 7,29,075 Add: u/s. 68 on account 1,73,025 of unexplained agricultural income Add: u/s. 68 on account 5,95,53,125 of unexplained long term capital gain Add: u/s. 69C on 17,86,594 account of unexplained expenditure for LTCG Add: u/s. 69C on 1,52,691 account of bogus purchases expenditure Add: u/s. 69C on 55,21,768 account of bogus labour payments Total income 26,35,52,308 Rounded off to 26,35,52,310 & ors. 4 Mr. Pratap Uttam Purohit
Revised Agricultural 12,00,000 income and thereby framed the assessment under section 153A read with section 143(3) of the Act.
The assessee carried the matter before the Ld. CIT(A) by way of filing appeals who has deleted the addition on technical ground that no incrimination material was found to sustain the addition by dismissing the same. Feeling aggrieved with the impugned orders passed by the Ld. CIT(A) the Revenue has come up before the Tribunal by way of filing present appeals.
We have heard the Ld. Authorised Representatives of the parties to the appeal, perused the orders passed by the Ld. Lower Revenue Authorities and documents available on record in the light of the facts and circumstances of the case and law applicable thereto.
Undisputedly in the aforesaid appeals for A.Y. 2012-13, 2013-14 & 2015-16 assessment was already framed under section 143(3) of the Act. It is also not in dispute that on the basis of search and seizure operation carried out in case of assessee on 16.02.2017 notice under section 153A was served upon the assessee and in response thereto the assessee filed return of income declaring the same income as filed in the original return of income. It is also not in dispute that for A.Y. 2012-13, 2013-14 & 2014-15 the Ld. CIT(A) has deleted the addition by deciding the additional legal ground raised
by the assessee that in the absence of any & ors.
5. Mr. Pratap Uttam Purohit “incriminating material” in these cases no addition is sustainable particularly in case of completed assessment.
In the backdrop of the aforesaid undisputed facts the Ld. D.R. for the Revenue challenging the impugned order passed by the Ld. CIT(A) contended that the Ld. CIT(A) for A.Y. 2012-13, 2013-14 & 2015-16 in his statement Shri Pratap Uttam Purohit, the assessee in this case, recorded during search and seizure operation admitted the fact that cash expenses were booked to inflate the expenses as rightly stated by Shri Sandip Jain and as such admission made by the assessee for preparing/booking false expenses is itself an “incriminating material” and relied upon the decision rendered by the Hon’ble High Court of Madras in case of B. Kishore Kumar vs. Dy. CIT (2014) 52 taxmann.com 449 (Madras), Hon’ble High Court of Delhi in case of CIT vs. Jansampark Advertising & Marketing (P.) Ltd. (2015) 56 taxmann.com 286 (Delhi), Hon’ble Supreme Court of India in case of V. Jaganmohan Rao vs. CIT (1970) 75 ITR 373 (SC) and the order passed by the co-ordinate Bench of the Tribunal in case of Skyway Infra Projects Pvt. Ltd. in & ors. order dated 28.02.2023.
However, on the other hand, the Ld. A.R. for the assessee in order to repel the argument addressed by the Ld. D.R. for the Revenue relied upon the order passed by the Ld. CIT(A) and contended that in case of completed assessment as in case of A.Y. 2012-13, 2013-14 & 2015-16 no addition can be made in the absence of “incriminating material” and relied upon the decision rendered by the Hon’ble Bombay High Court in case of CIT vs. & ors. 6 Mr. Pratap Uttam Purohit Continental Warehousing Corporation 374 ITR 0645, Hon’ble Delhi High Court in case of PCIT vs. Shiv Kumar Agarwal (2022) 143 taxmann.com 55 (Delhi) and PCIT vs. Best Infrastructure India Pvt. Ltd. (2017) 397 ITR 82 (Delhi).
It is an admitted fact on record that no “incriminating material” was found during search and seizure operation qua the year under assessment i.e. A.Y. 2012-13, 2013-14 & 2015-16 qua which assessment was already completed under section 143(3) prior to the date of search i.e. 16.02.2017.
The Ld. CIT(A) deleted the addition while deciding the legal ground that in the absence of “incriminating material” no addition can be made in case of completed assessment by relying upon the decision rendered by Special Bench of the Tribunal in case of Alcargo Global Logistics Ltd. vs. DCIT 2012-TIOL-391-ITAT- MUM-SB which was subsequently upheld by the Hon’ble Jurisdictional Bombay High Court and order passed by the co- ordinate Bench of the Tribunal in case of Gurinder Singh Bawa vs. DCIT (2012) 28 Taxmann.com 328 (Mumbai-Trib) and the decision rendered by the Hon’ble Rajasthan High Court in case of Jai Steel (India) Ltd. vs. ACIT (2013) 36 taxmann.com 523 (Rajasthan).
Hon’ble Bombay High Court in case of Continental Warehousing Corporation (supra) has dealt with the identical issue and held that when the assessment has already attained finality the same cannot be disturbed by the AO by passing assessment order under section 153A of the Act unless some “incriminating material” has come on record qua the years under consideration. It is & ors. 7 Mr. Pratap Uttam Purohit contended by the Ld. D.R. for the Revenue that since SLP filed by the Department in case of Continental Warehousing Corporation (supra) has already been admitted by the Hon’ble Supreme Court the same cannot be relied upon. However, we are of the considered view that when the operation of the decision rendered by the Hon’ble Bombay High Court has not been stayed it is binding on one and all. This issue has also been decided in case of Alcargo Global Logistics Ltd. (supra) by the Special Bench of the Tribunal that unless there is independent “incriminating material” qua the years under consideration particularly when assessment is already completed no addition can be made in the absence of any incriminating material found during the search and seizure operation.
The Ld. D.R. for the Revenue by relying upon the decision of the co-ordinate Bench of the Tribunal in case of Skyway Infra Projects Pvt. Ltd. (supra) contended that any evidence found during search and seizure operation whether oral or documentary, which indicates evasion of taxable income can be treated as “incriminating material” and further contended that voluntary admission of the assessee qua undisclosed income is also “incriminating material” as has been held by the Hon’ble Madras High Court in case of B. Kishore Kumar (supra).
In the entire assessment order there is no reference or discussion if any specific incriminating material was found during the search, even in the remand report no such “incriminating material” found during the search has brought on record so as to connect the same with the addition made in the assessment years & ors. 8 Mr. Pratap Uttam Purohit under consideration. Merely on the basis of the fact that the assessee when confronted with facts disclosed by one Shri Sandip Jain particularly question No.26 in search proceedings in his statement recorded on 19.02.2017, he has agreed that these expenses are booked to inflate expenses, this is not sufficient to fasten the liability of the assessee while framing assessment under section 153A of the Act, particularly when there is no incriminating material found during the search operation.
So far as question of applicability of order passed by the co- ordinate Bench of the Tribunal in case of Skyway Infra Projects Pvt. Ltd. (supra) is concerned on the face of decision rendered by the Special Bench of the Tribunal in case of Alcargo Global Logistics Ltd. (supra) subsequently confirmed by the Hon’ble Bombay High Court, decision rendered by the Hon’ble Bombay High Court in case of Continental Warehousing Corporation (supra) these findings are not applicable to the facts and circumstances of the case.
Similarly the case of B. Kishore Kumar (supra) is also not applicable to the facts and circumstances of the case because none of the books of accounts in soft copy as well as alleged loose papers mentioned in satisfaction note for issuance of notice under section 153C in case of M/s. Dev Engineers in & ors. order dated 23.09.2022 has been discussed or relied upon while making the addition during the years under consideration whereas in case of B. Kishore Kumar (supra) there was specific finding that loose sheets and notings on telephone diaries concerning assessee were found during the search on the basis of which the assessee has & ors. 9 Mr. Pratap Uttam Purohit admitted unaccounted income. Whereas in the cases at hand none of such “incriminating material” has been brought on record by the assessee during the assessment as well as remand proceedings.
Hon’ble Delhi High Court in case of PCIT vs. Shiv Kumar Agarwal (2022) 143 taxmann.com 55 (Delhi) has held that addition solely made by relying on the disclosure made by the MD of a company the addition is not justified. Hon’ble Delhi High Court in case of Best Infrastructure India Pvt. (supra) discussed at length the decision rendered in case of PCIT vs. Meeta Gutgutia (2017) 82 taxmann.com 287 (Delhi) and Smt. Dayawanti Gupta vs. CIT (2016) 390 ITR 496 (Delhi) and further relying on the decision of CIT vs. Kabul Chawla (2016) 380 ITR 573 (Delhi) and CIT vs. Continental Warehousing Corpn. (Nhava Sheva) Ltd. 374 ITR 645 (Bom.) and held that statement recorded under section 132(4) of the Act do not by themselves constitute incriminating material, as has been relied by the AO in the instant case.
Co-ordinate Bench of the Tribunal in case of Brahmaputra Finlease Pvt. Ltd. in order dated 29.12.2017 has reached the conclusion that the statement recorded under section 132(4) of the Act does not constitute an “incriminating material”.
In view of what has been discussed above and in view of the decision rendered by Hon’ble Special Bench and confirmed by Hon’ble Jurisdictional Bombay High Court, co-ordinate Bench of the Tribunal discussed in the preceding paras, we are of the considered view that when the AO has failed to bring on record any “incriminating material” during the course of search in case of & ors. 10 Mr. Pratap Uttam Purohit assessment for A.Y. 2012-13, 2013-14 & 2015-16, which were competed assessment under section 143(3) of the Act addition made is not sustainable in the eyes of law on the ground that there was absolutely no “incriminating material” on record. So we find no illegality or perversity in the impugned order passed by the Ld. CIT(A).
So far as addition made by the AO for A.Y. 2016-17 under section 153A read with section 153(1) of the Act deleted by the Ld. CIT(A) on the same ground that in the absence of any “incriminating material” found during search operation no addition can be made, is concerned, it is admitted fact on record that assessment in this case was framed under section 143(1) of the Act on 31.10.2016 and time for issuance of notice for scrutiny qua the year under consideration was up till 30.09.2017 and search in this case was conducted on 16.02.2017, meaning thereby assessment for 2016-17 was pending and the Ld. CIT(A) erred in applying the principle that in the absence of “incriminating material” found during search operation no addition can be made under section 153A of the Act is not applicable. So when the assessment for A.Y. 2016-17 was pending as on date of search the addition can be made on the basis of information given by the assessee in the return of income as well as on any information available with the AO during the course of search. In other words there is no requirement of any “incriminating material” to make the addition, found during the course of search.
For the year under consideration i.e. A.Y. 2016-17 the AO noticed that the assessee has claimed agricultural income to the & ors. 11 Mr. Pratap Uttam Purohit tune of Rs.34,52,932/- qua which specific query was raised by calling the details from the assessee. However, except some detail of the land holding and some cash receipt the assessee has expressed his inability to furnish the information called by the AO. It is a fact on record that assessee’s agricultural land is located in district Jellore, Rajasthan. The AO to decide the issue in question by relying upon the order passed by the AO in assessee’s own case for A.Y. 2014-15 and also considered the agricultural income brought on record by way of field verifications which are not reconciling with the assessee’s details filed during the assessment proceedings. Assessee’s income during the earlier years is as under: S.No. A.Y. Agricultural Income 1 2011-12 16,74,990 2 2012-13 13,73,025 3 2013-14 20,24,900 4 2014-15 34,85,200
The AO by applying the principle of extrapolation laid down by the Hon’ble Supreme Court in case of Eusafali 90 ITR 271 (SC) proceeded to estimate the income in the hands of the assessee and thereby excess income of the assessee of Rs.17,67,596/- has been treated as unexplained income under section 68 of the Act.
Similarly, the AO also made addition of Rs.5,00,00,000/- for making cash payment for purchase of two shops on the basis of certain incriminating documents found during search, which fact has been accepted by the assessee that cash payment of Rs.5,00,00,000/- was made to Sadguru Buildspace Pvt. Ltd. and also brought on record relevant extract of document found as under: & ors. 12 Mr. Pratap Uttam Purohit & ors. 13 Mr. Pratap Uttam Purohit
The AO on the basis of “incriminating document” held the amount of Rs.5,00,00,000/- as unexplained investment made by the assessee for purchase of shop No.1 & 2 from Sadguru Buildspace Pvt. Ltd. and made addition thereof in A.Y. 2016-17. However, the Ld. CIT(A) has erred in deleting the addition made by the AO by deciding the legal ground in favour of the assessee that in the absence of “incriminating material” no addition can be made without thrashing the facts of the case, which principle is not applicable to the year under consideration i.e. A.Y. 2016-17 as discussed in the preceding paras. So the issue is required to be decided by the Ld. CIT(A) on merits after providing opportunity of being heard to the assessee.
In view of what has been discussed above, aforesaid appeal filed by the Revenue for A.Y. 2012-13, 2013-14 & 2015-16 are dismissed. However, appeal filed by the Revenue for A.Y. 2016-17 is hereby allowed for statistical purposes to be decided afresh by the Ld. CIT(A) on merits by providing opportunity of being heard to the assessee. Order pronounced in the open court on 29.08.2023.