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Income Tax Appellate Tribunal, “A” BENCH, AHMEDABAD
Before: SHRI RAJPAL YADAV & SHRI PRADIP KUMAR KEDIA
आदेश/O R D E R , 2405 & 2146/Ahd/08 [Shri Umang H Thakkar] A.Y. 1999-2000 & 2000-01 - 2 -
PER PRADIP KUMAR KEDIA - AM:
The captioned appeals at the instance of assessee & Revenue arise from the respective orders of the Commissioner of Income Tax (Appeals)- III, Ahmedabad (‘CIT(A)’) against respective assessment orders for different assessment years as tabulated below: of AY CIT(A)’s AO’s AO’s order assessee order order under Section dated dated 2404 & Shri 1999- 28.03.2008 29.12.2006 153A(b) of the 2146/Ahd/08 Umang H. 2000 Income Tax Thakkar Act, 1961 2405/Ahd/08 29.12.2006 153A(b) of the -Do- 2000- 28.03.2008 2001 Act
Both assessee and Revenue have filed cross appeals against the order of the CIT(A) dated 28.03.2008 concerning AY 1999-2000. The issue involved being common both the appeals are disposed of by common are as under:
(Revenue’s appeal)
“1 The CIT (A) has erred in law and on facts in admitting the fresh evidence u/s. 46A without considering the A.O’s objection that none of the conditions mentioned under that Rule way-satisfied.
2 The CIT (A) has erred in law and on facts in deleting the additions of Rs.21,46,280/- and Rs.38,52,800/- made on account of unexplained capital and unexplained cash credits respectively without considering the factual position that the assessee failed to prove identity and capacity of the depositors and genuineness of the transactions.
3 The CIT (A) has erred in law and-on facts in deleting the addition of Rs.1,85,634/- made on amount of unverifiable repair expense without considering the findings of the A.O. that the assessee failed to prove thcs.5 expenses by supporting evidence.
4 The CIT (A) has erred in law and on facts in deleting the addition of Rs.66,233/- made on account of disallowance of interest for non-business use of the borrowed funds without considering the fact that borrowed funds were used for non- business purpose.
5 The CIT(A) has erred in law and on facts in restricting the addition of Rs.8,78,756/- to Rs.4,69,849/- made on account of unexplained investment in residential house am hotel building without considering and appreciating the valuation report of District Valuation Officer.”
ITA Nos.2404, 2405 & 2146/Ahd/08 [Shri Umang H Thakkar] A.Y. 1999-2000 & 2000-01 - 3 - - AY 1999-2000- (Assessee’s appeal)
The learned Commissioner of Income Tax (Appeals) has erred in confirming the disallowance of Rs. 49,168/- for the alleged excess depreciation.
2. The learned Commissioner of Income Tax (Appeals) has erred in confirming the disallowance of Rs.6,798/- made by the A.O. @ 20% of the expenses on telephone/ mobile. 3. The learned Commissioner of Income Tax Officer (Appeals) has erred in confirming an addition of Rs.4,69,849/- in respect of Hotel Neeltop .
When the matter was called for hearing, the learned AR for the assessee at the outset adverted to the additional ground filed in relation to raising a legal objection. The additional ground so raised reads as under:
“Appellant craves leave to raise this additional ground of appeal before the Hon'ble ITAT. This is a legal ground and therefore as per the decision of Hon'ble Supreme Court in the case of National Thermal Power (229 TTR 383) it can be raised before the Hon'ble ITAT.
1. Both the lower authorities erred in law and on facts in confirming additions in the assessment under section 143(3) r.w.s. 153A ignoring the fact that no incriminating material was found during course of search for making such additions and hence such additions are required to be deleted. It be so held now.”
4. As per additional ground, the assessee has challenged the jurisdiction usurped by the AO under s.153A of the Act towards additions/disallowances made in the consequent assessment proceedings owing to search operations. In view of the preliminary objection of the assessee which seeks to put question mark over the legitimacy of the additions/disallowances made under s.153A of the Act, we deem it expedient to dispose of the aforesaid preliminary ground at the threshold as it strikes to root of the matter.
5. When the matter was called for hearing, the ld.AR for the assessee, at the outset, submitted that the additions/disallowances made in all the captioned appeals has no rational connection or live link with material found in the course of search action carried out under s.132 of the I.T.Act on 09/02/2005 in Dharamdeo Builders Group of cases. The Ld.AR for the assessee submitted that prior to the search, the assessee had filed original return of income under s.139 of the Act on 31.08.1999 disclosing total income of Rs.1,97,060/-. The regular assessment relating to AY 1999-2000 as well as 2000-01 in 2405 & 2146/Ahd/08 [Shri Umang H Thakkar] A.Y. 1999-2000 & 2000-01 - 4 - appeal falling within the period of 6 assessment years referred to in Section 153A(1) had stood concluded and were not pending on the date of initiation of search under s.132 of the Act. Therefore, the regular assessment survives and does not get abated. It was further vehemently asserted that the assessment order was framed making certain observations on re-appreciation of facts already disclosed/available with the department prior to search. It was further vehemently asserted that the adjustments made in the search assessments are possibly subject matter of regular assessment and do not resonate with the scheme of search assessment under s.153A of the Act de hors reference to any incriminating material in this regard. The learned AR reiterated that both these assessments stood concluded on the date of search and were not pending for assessment and hence in the absence of incriminating material, no adjustment in the returned income is permissible under section 153A of the Act. The learned AR thereafter submitted that the law is well settled in this regard. A reference was made to the decision of the Hon’ble Gujarat High Court in the case of Pr.CIT vs. Saumya Construction Pvt. Ltd. (2016) 387 ITR 529 (Guj.) for the proposition that only undisclosed income and undisclosed assets detected during search can be brought to tax under s. 153A of the Act. It was thus contended that the Revenue is not entitled to make additions/disallowances unrelated to or unconnected with incriminating material found in the course of search where the assessments were not pending and stood completed on the date of search. The learned AR further submitted that the narrower sweep of proceedings under s.153A of the Act has been fortified by several judgments of the Hon’ble High Courts and Tribunals. The learned AR thus submitted in conclusion that in view of the inherent lack of jurisdiction in carrying out the additions/disallowances as made by the AO in Section 153A proceedings, the controversy cropped up in respective appeals flowing from the orders of the CIT(A) / AO is infructuous at the threshold.
The learned DR for the Revenue, on the other hand, relied upon the action of the AO. On a specific query from the bench, the learned DR could not controvert assertions made on behalf of the assessee about the absence of any incriminating material found as a result of search which has any bearing on the additions/disallowances in controversy.
We have carefully perused the rival submissions and perused the case records. The first and foremost controversy that arises for adjudication is on the scope and ambit of assessment proceedings under s.153A of the Act. The case propounded on behalf of 2405 & 2146/Ahd/08 [Shri Umang H Thakkar] A.Y. 1999-2000 & 2000-01 - 5 - the assessee that additions/disallowances made in Section 153A proceedings has no rational connection with incriminating material, if any, found as a result of search remains undisputed. It is also not dispute that assessment pertaining to the assessment years in question viz. AYs. 1999-2000 & 2000-01 stood concluded either under s.143(1) or under s.143(3) of the Act and were not pending at the time of search. In the backdrop of these facts, we straightway notice that the scope of assessment under s.153A of the Act in respect of completed assessment is circumscribed by the condition that the additions/disallowances must have some bearing with the incriminating material detected in the course of search. The scope of assessment under s.153A of the Act in respect of concluded assessment is thus narrower in its sweep as held in long line of judicial precedents including the decision rendered by the Hon’ble Gujarat High Court in Saumya Construction (supra), PCIT vs. Deepak J Panchal (2017) 397 ITR 0153 (Guj), CIT vs. Deepakkumar Agrawal (2017) 398 ITR 586 (Bombay) & Priya Holdings Pvt. Ltd. vs. ACIT (2018) 90 taxmann.com 408 (Ahd). We also note that the Hon’ble Delhi High Court in Pr.CIT vs. Meeta Gutgutia (2017) 82 taxmann.com 287 (Delhi) expressed the same view, the SLP against which filed by the Revenue was dismissed as reported in (2018) 96 taxmannc.om 468 (SC). In the light of the consistent view by higher judicial forum, the position of law is explicitly clear. In the absence of any connection with the incriminating material, the additions/disallowances in respect of concluded assessments prior to initiation of search are not permissible in law.
In the absence of any incriminating materials shown to be found in the course of search, the action of the AO is contrary to the position of law judicially enumerated. Therefore, where the additions/disallowances itself are unsustainable and bad in law, the controversy cropped up in the respective appeals of both sides on merits of additions/disallowances is rendered non est. In the light of the aforesaid transactions, the additions/disallowances made in assessment framed under s.153A of the Act is devoid of any legitimacy. Under the circumstances, the additional ground raised
by the assessee is allowed and the appeal of the Revenue is dismissed at the threshold as the action of the AO itself suffers from lack of jurisdiction. The order of the CIT(A) is accordingly set aside and the AO is directed to cancel the additions/disallowances made without reference to the incriminating material. , 2405 & 2146/Ahd/08 [Shri Umang H Thakkar] A.Y. 1999-2000 & 2000-01 - 6 -
9. In the result, appeal of the assessee is allowed whereas appeal of the Revenue is dismissed for AY 1999-2000.
We now advert to concerning AY 2000-01. The facts and circumstances in the captioned Revenue’s appeal are identical to AY 1999-2000 (supra). Thus for the similarity of reasons, the appeal of the Revenue is required to be dismissed at the threshold.
In the combined result, both the appeals of Revenue are dismissed and the assessee’s appeal for AY 1999-2000 is allowed.
This Order pronounced in Open Court on 11/09/2019
Sd/- Sd/- (RAJPAL YADAV) (PRADIP KUMAR KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad: Dated 11/09/2019 True Copy S. K. SINHA आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. राज�व / Revenue 2. आवेदक / Assessee 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त- अपील / CIT (A) 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाइल / Guard file. By order/आदेश से,
उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद ।