ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE - 3, GUWAHATI vs. M/S. ANUPAM NIRMAN PVT. LTD., GUWAHATI

PER DR. MANISH BORAD, ACCOUNTANT MEMBER :

The present appeal is directed at the instance of the revenue against the order of the learned Commissioner of Income Tax (Appeals) – Guwahati-2, Guwahati, (hereinafter the “ld. CIT(A)”) dt. 27/03/2018, passed u/s 250 of the Income Tax Act, 1961 (“the Act’), for Assessment Year 2012-13. 2. The revenue has raised the following grounds of appeal:- “(i) That on the facts and circumstances of the case as well as on the points of law, the Ld. CIT(A) has erred in deleting the addition of Rs. 1,20,77,310/- on account estimation of the net profit @ 7% of total turnover for the year. (ii) That on the facts and circumstances of the case as well as on the points of law, the Ld. CIT(A) erred in deleting the addition of Rs. 49,05,724/- on account of disallowance towards interest expense against loan under section 40(a)(ia) of the Income Tax Act, 1961. (iii) That on the facts and circumstances of the case as well as on the points of law, the Ld. CIT(A) erred in deleting the addition of Rs. 11,26,247/- on Assessment Year: 2012-13 M/s. Anupam Nirman Private Limited

2 account of disallowance towards service tax under section 43B of the Income Tax Act, 1961. (iv) That on the facts and circumstances of the case as well as on the points of law, the Ld. CIT(A) erred in quashing the assessment order for the year. (v) For these and such other grounds that may be urged at the time of hearings, the Hon'ble ITAT may please set aside the order of the Ld. CIT(A) and restore the order of the Assessing Officer.”

3 found during the course of search. So far the estimation of net profit, turnover declared by the assessee has been accepted and only the rate of net profit has been estimated at 7% against 5.47% declared by the assessee. So far the disallowance u/s 40(a)(ia) of the Act is concerned, the same is arising only out of the expenses declared in the regular books of accounts. Similarly, the service tax has been disallowed alleging that the same has not been deposited with the due date. It remains an admitted fact that all these addition have been made only on the basis of financial statements filed by the assessee in the books of accounts regularly maintained and there is no whisper whatsoever, of any incriminating material. Considering the fact, that search u/s 132 of the Act, was carried out on 20/10/2014, return of income was filed on 12/01/2013 and the year under appeal i.e., Assessment Year 2012-13 comes in the category of completed assessment as the time limit for issue of notice u/s 143(2) of the Act i.e., 30/09/2013, stood expired before the date of search and there was no proceedings pending u/s 143(3)/147 of the Act, at the time of conducting of search. Since Assessment Year 2012-13 is a completed non abated assessment, additions could have been made only on the basis of incriminating material. For this proposition, ld. CIT(A) has rightly placed reliance on the judgment of the Hon’ble Delhi DCIT and on the decision of the Hon’ble Calcutta High Court in the case of CIT vs. Veerprabhu Marketing Ltd. (2016) 73 Taxmann.com 149 (Cal).

4 Chawla (supra), which is directly applicable on the issue in dispute before us and the relevant finding of the ld. CIT(A):- “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 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 juri iction 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 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. Assessment Year: 2012-13 M/s. Anupam Nirman Private Limited

5

6 TIOL-2099-HC-KOL-IT] and CIT vs. Gurinder Singh Bawa [(2016) 386 ITR 483 (Bom)]. Reference was also made to the two decisions of that Court in the case of Pr. CIT vs. Mahesh Kumar Gupta [2016-TIOL-2994-HC-Del] and the decision, dated 7th February, 2017 in ITA Nos. 61/2017 and 62/2017 (The Pr. Commissioner of Income Tax-9 vs. Ram Avtar Verma) where the decision in Kabul Chawla (supra) was followed. Also, very recently in the case of Pr. CIT vs. Meeta Gutgutia [in ITA 306/2017 dated 25.05.2017], the same ratio was followed by the Hon'ble Delhi High Court.

आदेश क" ""त"ल"प अ"े"षत/Copy of the Order forwarded to : 1. अपीलाथ" / The Appellant

आदेशानुसार/ BY ORDER,