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Income Tax Appellate Tribunal, IN THE INCOME TAX APPELLATE TRIBUNAL,
Before: BEFORE SHRI GEORGE MATHANMANISH AGARWAL
Assessment Year : 2013-14 Asst. Asst. Commissioner Commissioner of of Vs. Rajendra Rajendra Prasad Prasad Gupta, Gupta, Income Tax, Central Cir Income Tax, Central Circle, 1/15, 1/15, Civil Civil Township, Township, Sambalpur Rourkela-769004 769004 PAN/GIR No. No.ABDPG 9284 G (Appellant (Appellant) .. ( Respondent Respondent) Assessee by Assessee by : Shri Firoze Andhyarujina, Nikhil Jangid and Sudarshan Firoze Andhyarujina, Nikhil Jangid and Sudarshan Padhi, Advs Revenue by : Shri Sanjay Kumar, CIT Sanjay Kumar, CIT DR Date of Hearing : 19/9/202 24 Date of Pronouncement : 19/9/20 024 O R D E R Per Bench
This is an appeal filed by the revenue an appeal filed by the revenue against the order of against the order of the ld CIT(A), CIT(A), Bhubaneswar Bhubaneswar-2 2 dated dated 27.5.2024 27.5.2024 in in Appeal Appeal No.CIT(A), No.CIT(A), Bhubaneswar-2/10104/2012 2/10104/2012-13 for the assessment year 2013 2013-14.
Shri Sanjay Kumar, ld CIT DR appeared for the revenue and Shri Shri Sanjay Kumar, ld CIT DR appeared for the revenue and Shri Shri Sanjay Kumar, ld CIT DR appeared for the revenue and Shri Firoze Andhyarujina, Nikhil Jangid and Sudarshan Padhi, ld ARs appeared Firoze Andhyarujina, Nikhil Jangid and Sudarshan Padhi, ld ARs Firoze Andhyarujina, Nikhil Jangid and Sudarshan Padhi, ld ARs for the assessee. .
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It was submitted by ld CIT DR that there was a search at the premises of the assessee on 25.9.2014. The impugned assessment year is 2013-14. The notice u/s.153A had been issued and the assessment had been completed making addition u/s.68 of the Act. It was the submission that on appeal, the ld CIT(A) applied the principles laid down by the Hon’ble Supreme Court in the case of Pr. CIT vs Abhisar Buildwell (P) Ltd., (2023) 454 ITR 212 (SC) and had annulled the assessment on the ground that for the impugned assessment year, assessee’s case was completed/unabated assessment and as no incriminating material had been found and the addition has not been made on the basis of any material collected during the search, the Assessing Officer did not have jurisdiction u/s.153A of the Act to assess the assessee for the impugned assessment year and, therefore, quashed the assessment. It was the submission that this is not a case of completed or unabated assessment insofar as for the impugned assessment year being 2013-14, when the search was made on the assessee on 25.9.2014, there was still time left for issuance of notice u/s.143(2) of the Act. It was the submission that the decision of the ld CIT(A) is liable to be reversed and that of the Assessing Officer restored.
In reply, ld Sr. Advocate drew our attention to the decision of the Hon’ble Supreme Court in the case of Abhisar Buildwell (P) Ltd.,(supra). He also read through paras 13 & 14 of the decision of the Hon’ble Supreme Court to submit that the decision of the Hon’ble Delhi High Court in the case
P a g e 2 | 14 of Kabul Chawla, 380 ITR 573 (Del) as also the decision of the Hon’ble Gujarat High Court in the case of Saumya Construction, 387 ITR 529 (Guj) and the decisions of other Hon’ble High Courts taking the view that no addition can be made in respect of completed assessment in the absence of any incriminating materials. He further submitted that the conditions mentioned in para 14 of the decision of the Hon’ble Supreme Court were also not complied and, therefore, as no incriminating material has been used for the purpose of assessment for the impugned assessment year in view of the decision of the Hon’ble Supreme Court in the case of Abhisar Buildwell (P) Ltd.,(supra), the assessment order was liable to be quashed and ld CIT(A) has rightly quashed the same. Ld Sr. Advocate also drew our attention the order of the ld CIT(A). ld Sr Advocate relied upon para 5.1 onwards of the order of the ld CIT(A) to explain as to how the ld CIT(A) has rightly quashed the assessment. It was the submission that originally the return in the case of the assessee for the impugned assessment year had been filed on 30.3.2014 and the time limit for issuance of notice u/s.143(2) expired on 30.9.2014 whereas the search was made on 25.9.2014. It was the submission that the Assessing Authority was at Sambalpur whereas search in the assessee’s case was at Rourkela and when the search was done, the Assessing Officer of the assessee had no knowledge of such search happening and the arguments of ld CIT DR that there was time for issuance of notice u/s.143(2) of the Act was only a technical arguments
P a g e 3 | 14 insofar as no such notice has been issued by the Assessing Officer in respect of original return. It was the further submission that on the return filed by the assessee and intimation u/s.143(1) of the Act had been issued by the department on 26.7.2014. It was the submission that the Hon’ble Gauhati High Court in the case of M/s. Shyama Power India Ltd., in in an order dated 2.8.2023 had categorically upheld the order of the Tribunal, wherein, it had been held that the proceedings u/s.143(1) of the Act is an assessment, which is concluded and unabated and it cannot be disturbed as ledger/books of account and statement recorded during the course of search did not constitute incriminating material. It was the submission that the Hon’ble Gauhati High Court in the case of M/s. Shyama Power India Ltd (supra) had also considered the decision of the Hon’ble Delhi High Court in the case Kabul Chawala (supra) as also then decision of the Hon’ble Supreme Court in the case of Abhisar Buildwell (P) Ltd.,(supra). Ld Sr Advocate further relied upon the decision of the Hon’ble Bombay High Court in the case of M/s. SKS Ispat & Power Ltd., reported in Income Tax Appeal No.1874 of 2014 with Income tax Appeal No.2015 order dated 12.7.2017 to support his arguments that on perusal of provisions of section 153A does not make any distinction between the assessment conducted u/s.143(1) and 143(3) of the Act. It was the further submission that the Hon’ble Bombay High Court had gone on to refer to the decision of Hon’ble Bombay High Court in the case of Gurinder Singh Bawa (2016) 386 ITR
P a g e 4 | 14 483(Bom) to hold that where an assessment u/s.143(1) of the Act was done, the scope of assessment after search under section 153A would be limited to the incriminating evidence found during the search and no further. Ld Sr Advocate also drew our attention to the instruction issued by 23rd CBDT in No.1 of 2023 dated August, 2023, wherein, in para 7.2, it has been directed as follows:
“7.2 Completed/unabated assessments: In respect of cases that were unabated/completed at the time of issue of notices under section 153A/153C and assessments made, the following scenarios will emerge: 7.2.1 In the lead and all the tagged cases necessary action u/s 148/147 need to be taken in the situation stated by the Court in the para 14(iv) of the said order in view of section 150 of the Act. The AO will be required to reopen the cases following the currently applicable procedure for reopening i.e., following the procedure prescribed under section 148A of the Act as inserted by Finance Act, 2021 in accordance with the law laid down by Hon’ble Supreme Court by its order dated 04.05.2022 in Union of India v. Ashish Agarwal case (2022 SSC Online SC 543). In view of the specific provisions of section 153(6) of the Act, all the cases reopened u/s 147/148 of the Act will be required to be completed by 30th April, 2024. 7.2.2 Cases where appeal is pending (filed either by the Department or assessee or both).
Appellate CIT(A) ITAT High Court level Action to The said The departmental The Standing be taken judgement is representative Counsel should required to be should bring the bring the said brought to the said judgment to judgment to the notice of CIT(A) the notice of the notice of the High ITAT in the cases Court in the cases covered by the covered by the judgment. judgment
P a g e 5 | 14 . Further, as and when the appeals are disposed of by the appellate authorities, action might be required to be taken by AO in appropriate cases under sections 147/148 of the Act read with section 150 of the Act. It is reiterated that the AO will be required to reopen the cases following the currently applicable procedure for reopening as given in para 7.2.1, above. 7.2.3 In all cases where the decisions of appellate authorities rendered after the Apex Court judgement in the Abhisar Buildwell case dated 24.04.2023 are inconsistent with the same necessary action may be taken to file Miscellaneous Application (MA) and Notice of Motion (NoM) to the ITAT and High Court, respectively, requesting the review of the decision in line with the Abhisar judgement, with a prayer of condonation of delay, wherever necessary. It is brought to attention that the time limit for filing Miscellaneous Application before ITAT is 6 months from the end of the month in which order is passed by the ITAT, as per section 254 of the Act. On receipt of the decision of the Hon’ble ITAT/High Court, as the case may be, necessary action as per law and extant instruction should be taken. Suggestive template for Miscellaneous Application and Notice of Motion is attached for reference purpose. The facts of the case will be required to be mentioned in the Miscellaneous Application or Notice of Motion.”
It was thus the submission that assessment u/s.143(1) of the Act is completed prior to the search. No incriminating documents or evidences were found during the course of search or relied upon by the department and the decision of the Hon’ble Supreme Court in the case of Abhisar Buildwell (P) Ltd.,(supra) squarely covers the facts in assessee’s case. It was the further submission that when department has not issued notice u/s.143(2) of the Act prior to the search and only four days after the date of search was available to the department for issuance of notice u/s.143(2) of the Act and thus the case was one of completed assessment as assessment
P a g e 6 | 14 u/s.143(1) of the Act has been passed as early as on 26.7.2014 even much before the search.
We have considered the rival submissions. A perusal of the facts of the present case clearly shows that the ld CIT (A) has extracted from the assessment order in para 5.3 of his order. The extraction admittedly is verbatim from the assessment order. A perusal of the said extraction more so what is mentioned by the Assessing Officer in the assessment order shows that during post search investigation, financial statement and also bank statement of the assessee as well as the aforesaid companies were examined at length by the Investigation Wing of the Department. The issue in the assessment is the loans received from two companies. Admittedly, in the course of search, it was found that the Directors of the loan companies were mostly employees of the group companies of the assessee. The above companies were managed by the family members of the assessee from the office premises of the group companies of the assessee. We are not going into the 3rd and 4th issue raised by the Assessing officer as it is in regard to merits of the addition. A perusal of the provisions of section 132 of the Act, which is in regard to search says that search is normally conducted when there is suspicion that the person would not produce or cause to be produced such details as are required by the department for the purpose of assessment. This is one of the reasons why the search u/s.132 of the Act is conducted. Admittedly, in the case of the assessee, the return,
P a g e 7 | 14 balance sheet, bank accounts and documents in connection with the assessee would be very well before the Assessing Officer but the details in respect of loan companies would not, being the issue raised by the Assessing Officer being that the Directors of the said companies are mostly employees of the group companies of the assessee and that the concerns were managed by the family members of the assessee from the office premises of the group companies of the assessee would never come out. Here, it would also be worthwhile to mention here that in the assessment order, the Assessing Officer specifically mentions that in the course of investigation and post search investigation, the assessee was given sufficient opportunities to explain the nature and source of payments received from the above concerns but he failed to establish the same. The balance portion of the assessment order admittedly is in regard to addition on merits which were not before the Tribunal, therefore, we refuse to make any mention on that. Thus, from the above itself, it is clear that incriminating materials had been found in the course of search. A perusal of the decision of the Hon’ble Supreme Court in the case of Abhisar Buildwell (P) Ltd.,(supra) says that in para 14(iii), the Hon’ble Supreme Court has categorically held that in case any incriminating material is found/unearthed, even, in case of unabated/completed assessments, the Assessing Officer would assume the jurisdiction to assess or reassess the ‘total income’ taking into consideration the incriminating material unearthed
P a g e 8 | 14 during the search and the other material available with the Assessing Officer including the income declared in the returns.
Now coming to the question, what is the meaning of incriminating material? Incriminating material is not restricted to only physical documents or assets. Many a times, information is recovered in the course of search which goes to the unearthing of undisclosed assets/income. The Hon’ble Supreme Court in the case of Abhisar Buildwell (P) Ltd.,(supra) has categorically and specifically used the term ‘incriminating material’ and has never used the term ‘incriminating documents’. Therefore, the claim that no incriminating materials were found in the course of search or that no incriminating materials were used in the course of assessment would no more stand to reason. This is not a case where assessment has been done exclusively on the basis of return filed by the assessee without reference to any information/evidence/document found in the course of search. The Assessing Officer has categorically referred to the incriminating materials in the form of financial statement and bank statements of the loan companies, which were found in the course of search. It must be mentioned that opportunities had been given to the assessee to rebut the presumption/give explanation in regard to the nature of transaction but the assessee failed to establish the same.
On perusal of the decision of the Hon’ble Supreme Court in the case of Abhisar Buildwell (P) Ltd.,(supra) would also show that the Hon’ble P a g e 9 | 14 Supreme Court has referred to the summary of the legal position in the case of Kabul Chawla (supra) at para 7.1 of its order and in para 38(ii) of the order in the case of Kabul Chawla (supra), which has been categorically mentioned that the assessments and reassessments pending on the date of search shall abate. The total income of such assessment years will have to be computed by the Assessing officer(s) as a fresh exercise.
In the present case, admittedly, an intimation u/s.143(1) of the Act has been issued by the CPC in respect of returns filed by the assessee. The intimation is dated 26.7.2014. The last date of issuance of notice u/s.143(2) of the Act is 30.9.2014 and admittedly, search was conducted on 25.9.2014. The Tribunal, admittedly is a creature of Statute. It does not have power to hold that the limitation of four days available for issuance of notice u/s.143(2) of the Act can be discarded to say that the assessment is completed.
Coming to the issue that the intimation u/s.143(1) of the Act is to be treated as assessment, we are unable to accept the same because the Hon’ble Supreme Court in the case of Rajesh Jhaveri Stock Brokers Pvt. Ltd, 291 ITR 500 (SC) has categorically held that the intimation u/s.143(1) of the Act is not an assessment order. It may be a proforma assessment order as alleged by the ld.Sr. Advocate for the assessee but it is not an assessment order. Further, perusal of the decision of the Hon’ble Delhi High court in the case of Kabul Chawla (supra) in para 38(vii) goes on hold that the completed assessment can be P a g e 10 | 14 interfered with by the Assessing Officer while making the assessment u/s.153A of the Act only on the basis of some incriminating material unearthed during the course of search or requisition or 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.
In the present case, clearly, information has been unearthed in the course of search, the information has been processed and opportunities had been given to the assessee. The reliance placed by ld Sr Advocate to the decision of Hon’ble Gauhati High Court in the case of Shyam Power India Ltd., (supra) would not support the claim of the assessee insofar as in para 13 of the said order of the Hon’ble Gauhati High Court, the Hon’ble High Court has categorically held “it is not in dispute that the assessment for the assessment year 2011-12 was originally completed u/s.143(1) of the Act and the time limit for issuance of notice u/s.143(2) had expired and hence, it falls under concluded proceedings as on the date of search. In the present case, being the impugned appeal, the facts are different insofar as time limit for issuance of notice u/s.143(2) of the Act was still available. Similarly, the decision of the Hon’ble Bombay High Court in the case of M/s. SKS Ispat & Power ltd (supra) as also in the case of Gurinder Singh Bawa (supra) would not apply insofar as in para 3 of the decision, the Hon’ble Bombay High Court admittedly relied upon by Hon’ble Bombay High Court in SKS Ispat & Power Ltd(supra) has categorically found that “return of income filed by the respondent-assessee was processed u/s.143(1) of the Act but admittedly, no notice u/s.143(2) was issued.” In the impugned appeal, admittedly time for issuance of notice u/s.143(2) of the Act was very well available even though it was P a g e 11 | 14 only four days. The decision relied upon by ld Sr Advocate referring to the decision of the Hon’ble Gauhati High Court in the case of Shyam Power India Ltd (supra) and the decision of Hon’ble Bombay High Court in the case of SK Ispat & Power ltd., (supra) and Gurinder Singh Bawa (supra) does not apply to the facts of the assessee’s case.
Coming to the instruction No.1 of 2023 issued by CBDT, same are only procedural and are not binding on the Tribunal. Thus, clearly ld CIT(A) has in para 7 of his order erred in taking the stand that there was no incriminating material found in the course of search. A perusal of para 5.8 of the order of the ld CIT(A) clearly shows that the principles laid down by the Hon’ble Supreme Court in the case of Abhisar Buildwell (P) Ltd.,(supra) has been clearly explained by the ld CIT(A) insofar as he has recorded that (i) the impugned material must be collected during the search and (ii) the impugned material must be incriminating. Unfortunately, the ld CIT (A) has taken the presumption that materials mean documents. The information has been collected alongwith the documents in regard to loan companies in the course of search and this information was clearly incriminating in nature. This being so, we are of the view that the order of the ld CIT(A) is erroneous insofar as he has wrongly interpreted the decision of the Hon’ble Supreme court in the case of Abhisar Buildwell (P) Ltd.,(supra) as also the decision of the Hon’ble Delhi High Court in the case of Kabul Chawla (supra). Consequently, the order of the ld CIT(A) is set aside.
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Ld AR for the respondent assessee has filed an application in the course of hearing, which reads as follows:
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Considering the application of ld ld AR of the assessee as also the considering the fact that ld CIT(A) has not adjudicated the appeal of the assessee on merits and as we have reversed the order of the ld CIT(A)on the legal issue decided, the issues on merits in the appeal are restored to the file of ld.CIT(A) for adjudication on merits.
In the result, appeal of the revenue stands partly allowed for statistical purposes.