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Income Tax Appellate Tribunal, “G” BENCH, MUMBAI
Before: SHRI PRASHANT MAHARISHI, AM & SHRI PAVAN KUMAR GADALE, JM
2. DCIT CC-2(2) Mumbai (the ld. AO) for A.Y. 2010-11 against the order of the CIT(A)-48, Mumbai (the ld CIT-A) and for the same A.Y. is filed by the Spaciality Paper Ltd (the Assessee) against the same appellate order.
3. In the ld. AO has raised following grounds of appeal stating that ld CIT (A) is not correct in holding :
“1. On the facts and circumstances of the Appellant’s case and in law the ld. AO erred in passing ex-parte order by invoking the provisions of Sec. 144 of the Income Tax Act, 1961 without providing reasonable opportunity of being heard.
On the facts and circumstances of the appellants case and in law the Learned Assessing Officer erred in rejecting the book results u/s. 145(3) of the Income Tax Act, 1961.
On the facts and circumstances of the Appellant’s case and in law the ld A.O. erred in estimating the gross profit at the rate of 28% amounting to ₹ 31,38,34,088/- as per para 13 of the impugned order.
4. On the facts and circumstances of the Appellant’s case and in law the ld. A.O. erred in making the addition of ₹ 10,43,01,079/- on account of alleged unexplained loan creditors by invoking provisions of Section 68 of the Income Tax Act, 1961 as per para 14 of the impugned order.
5. On the facts and circumstances of the Appellant’s case and in law the ld. A.O. erred in making an ad-hoc addition of ₹ 10,00,000/- as alleged unexplained cash credit basis by invoking provisions of Section 68 of the Income Tax Act, 1961 as per para 31 of the impugned order.”
“1. On the facts and circumstances of the case and in law the Ld Commissioner of Income-Tax(Appeal) erred in not allowing the additional grounds of appeal on the ground that the assessment order is passed on the normal provisions of the Act, based on notice issued under section 143(2) without accepting the fact that notice u/s. 153C was issued in the case of the Appellant and based on the date of intimation of search on the basis of satisfaction note, the year falls within the period of six years from the date of initiation of search and order should have been passed under section 153C r.w.s. 153A and not under section 144/143(3) of the Income Tax Act, 1961 on the ground or grounds as stated in the Appellate Order or otherwise.
2. On the facts and circumstances of the case and in Law the Ld. Commissioner of Income Tax (Appeals)(referred as CIT(A)) erred in confirming the ex-parte order passed by the Assessing Officer (AO) by invoking the provision of section 144 without calling any information from the AO on the ground as contained in the appellate order or otherwise.
3. On the facts and circumstances of the case and in law the Ld. CIT(A) erred in confirming the rejection of books of account u/s. 145(3) of the Income Tax Act, 1961 on the ground or grounds as stated in the Appellate order of otherwise.
4. On the facts and circumstances of the case in law, the Ld. CIT(A) erred in confirming the addition of G.P @25% based on order in some other case, and thereby confirming the addition on account of gross profit of ₹ 28,02,09,007/- on the ground as stated in the Appellate order of otherwise.
5. On the facts and circumstances of the case and in law and Ld. CIT(A) erred in confirming the addition of ₹
Briefly stated the fact for A.Y. 2011-12 shows that search took place u/s. 132 of the Act in case of Reliable Paper (India) Ltd. and its group concerns from 23.02.2010 to 28.04.2010. Subsequently, notice u/s. 142(1) of the Act dated 19.11.2012 was issued to the assessee which was not responded to. However, the fact shows that assessee has filed original return of income u/s. 139 of the Act on 19.07.2011 at ₹Nil. Several further notices were issued which were not complied with. Therefore, the AO issued show cause notice to complete the assessment u/s. 144 of the Act. Even that notice was not complied with.
6. Then, the LD AO proceeded to complete the assessment. The ld. AO noted that assessee is a dealer in papers and has incurred losses of ₹6,75,42,733/- .Further, assessee has carried forward losses of ₹8.39 Crores. The ld. AO examined balance-sheet and profit and loss account of the assessee and in absence of any information with respect to the raw material consumed and expenditure incurred as well as the stock statement and books of accounts, the ld. AO rejected books applying the provisions of Section 145(3) of the Act. After rejecting the books of accounts and in absence of delivery challans, transport bills, lorry receipts, expenditure accounts, quantitative details of stock & banks loan which were not produce before the Assessing Officer, he estimated the total income of the assessee at ₹31,38,34,088/- @ 28% of the total turnover. In absence of any information about the creditors amounting to ₹10,43,01,079 and unexplained cash credit u/s. 68 of ₹ 10lacs, both these sums were added u/s 68 of the Act. Accordingly, assessment order u/s. 144 of the Act was passed on 28.03.2013 determining total income of the assessee at ₹ 41,91,35,170/-.
Assessee aggrieved with Assessment order preferred appeal before ld. CIT-A. Assessee objected to the rejection of books of accounts as well as additions. The ld. AR before the ld. CIT(A) filed an additional ground of appeal stating that the order passed u/s. 144 is illegal and non maintainable because Assessment order should have been passed u/s. 153C of the Act. Assessee submitted that ld AO issued notices u/s 153C of The Act for A.Y. 2004-05 to 2009-10 were issued on 19/11/2012. It was further stated that notice u/s.
8. The ld CIT (A) , On the merits, after confirming the action of ld. AO of making assessment u/s. 144 of the Act estimated the gross profit @25% based on the decision in case of group concern. He upheld the addition of unexplained credits of ₹ 10,43,01,079 u/s. 68 but deleted the ad-hoc addition of ₹ 10 lacs u/s. 69 of the Act.
9. On the issue of additional ground, LD CIT (A) held that the assessee is merely assuming the date of satisfaction note u/s. 153C of the Act and dismissed additional ground. Such appellate order was passed on 20.09.2019.
The ld. AO is aggrieved with the action of the ld.CIT (A) in reducing the gross profit from 28%-25% and deletion of addition of ₹ 10 Lacs, is in appeal before us.
Assessee is aggrieved with the order of the ld.CIT (A) on the ground that the assessment should have been made u/s. 153C of the Act. The order u/s. 144 is not valid, rejection of the books of accounts is not good and further the confirming of unexplained cash credit of ₹ 10,43,10,79/- is also not good.
As main ground in appeal of assessee is a jurisdictional ground that the order should have been passed u/s. 153 C of the Act, we take up appeal of the assessee first.
As per Ground No. 1 assessee challenged that the assessment should have been u/s. 153C of the Act. The impugned assessment order is passed u/s. 144 of the Act, therefore same is invalid.
The ld. AR relied on the decision of the Hon‟ble Delhi High Court in case of PCIT Vs. Sarvar Agency Pvt. Ltd. as well as the decision of the co-ordinate
The ld. DR vehemently supported the orders of the ld.CIT (A) where this issue was raised for the first time. It was submitted that there is no satisfaction and therefore assessee is not entitled to take shelter under the provisions of u/s. 153C of the Act.
We have carefully considered the rival contention and perused the orders of the lower authorities. In the present case, the assessment order is passed u/s. 144 r.w.s. 143 (3) of the Income Tax Act. The fact shows that, a search took place in the case of reliable paper group on 23.03.2010 to 28.04.2010. The assessment order in case of the assessee was already made u/s. 153C of the Act for A.Y. 2004-05 to 2009-10. Those assessment orders travelled up to the level of co-ordinate bench and additions were deleted in absence of any incriminating material found during the course of search. Since, the ld. AO issued the notices u/s. 153(C) of the Act for A.Y. 2004-05 to 2009-10 on 19.11.2012, this is presumably the last date which can be assumed safely being the „date of search‟ in case of the assessee i.e. „other person‟. As per the 1st provisio to section 153C(1) of the Act date of initiation of search in case of „other person‟ shall be construed as per date of receiving the books of accounts for documents or assets seized or requisition by the AO of the assessee. In this case, it can be safely presume that the date of search in the case of assessee is 19.11.2012 because as on that date notices u/s 153C of the Act was issued for other assessment years. Accordingly, order u/s. 153Cof the Act is required to be passed for the A.Y. 2006-07 to 2011-12. Further any addition to be made for this assessment year is to be based on incriminating material found during the course of search. When the issue was raised before the ld. CIT-A, the LD AO in the remand report categorically submitted that relevant files are not traceable; therefore, the ld. AO is not in a position to give any specific date. This fact is specifically mentioned by the ld. AO in his remand report dated 23.08.2016. Therefore, we are constraint to take the date of search as 19.11.2012. This is the date of search also accepted by the
Identical issue has been decided in and 7680 and 7603/MUM/2019 for A.Y. 2011-12 by the co-ordinate bench by order dated 22.09.2020 in case of Global Paper Impex Pvt Ltd wherein also on the same search and on the basis of notice u/s. 153(C) issued in earlier years on the same date i.e. 19.11.2012, the co-ordinate bench quashed the assessment framed b y the ld. AO u/s 144 of the Act holding as under:-
“3. Briefly stated facts necessary for adjudication of the controversy at hand in all the aforesaid appeals are: on the basis of search and seizure operation carried out in case of Reliable paper (I) Pvt. Ltd. and its group company, Mumbai during the period 23.02.2010 and 20.04.2010 notice under section 142(1) of the Income Tax Act, 1961 (for short „the Act‟) dated 19.11.2012 was issued and served upon the assessee. However, assessee has not filed the return of income in response to the notice under section 142(1) of the Act. Then notice under section 142(1) dated 11.01.2013 along with questionnaire was issued and duly served upon fixing the next date as 23.01.2013 but none appeared on behalf of the assessee. Thereafter, subsequent notices were issued but assessee failed to comply with the same and consequently Assessing Officer (AO) proceeded to complete the assessment under section 144 of the Act.
AO proceeded to assess the income of the assessee on estimation basis by taking sales turnover of the assessee of the previous year and extrapolating the sales turnover by 10% of the previous years which amounts to Rs.9,57,30,405/-. AO by considering the extrapolating the turnover by extra 10% which comes to Rs.1,05,30,34,458/- proceeded to compute the income of the assessee at Rs.29,48,49,648/- being 28% of the total turnover i.e. Rs.1,05,30,34,458/- as discussed in the preceding para. AO also made adhoc addition of Rs.55,00,000/- under section 68 as unexplained cash credit on his failure to submit the bank statements after repeated requests and thereby framed the assessment at the total income of Rs.29,98,49,650/- under section 144 of the Act.
5. Assessee carried the matter before the Ld. CIT(A) by way of filing appeal who has partly allowed the same. Feeling aggrieved assessee as well as Revenue have come up before the Tribunal by way of filing present cross appeals for A.Y. 2010-11.
We have heard the Ld. Authorised Representatives of the parties to the appeal, perused the orders passed by the Ld.
As the facts in the case of the assessee as well as the facts in the case of the Global Papers Impex Ltd are identical, respectfully following the decision of the co-ordinate bench in case of Global Impex Ltd (Supra), we also quash assessment order for A.Y. 2010-11 passed by the ld. AO u/s. 144 of the Act. Accordingly, Ground No. 1 of the appeal of the assessee is allowed.
In view of our decision all the other grounds in the appeal of the assessee as well as in the appeal of the ld. AO becomes infructous and hence, dismissed.
Accordingly, appeal of the assessee is allowed and appeal of the AO in ITA No.7601/MUM/2010 is dismissed.
For A.Y. 2011-12, is filed by the ld. AO and ITA No. 7679/MUM/2019 is filed by the assessee.
The facts in this year are identical to the facts for A.Y. 2010-11 in case of the assessee. In this A.Y. also the assessment was framed u/s. 144 of the Act instead of assessment u/s. 153C of the Act.
We have carefully considered the rival contentions and perused the order of the lower authorities. For the reasons given by us in appeal of the assessee deciding Ground No. 1 of the appeal for A.Y. 2010-11, following the decisions of the co-ordinate bench, we have held that this assessment should have been made u/s. 153C of the Act and not u/s. 144 of the Act, we quash assessment order passed by the ld. AO u/s. 144 of the Act. Accordingly, Ground No. 1 of the appeal of the assessee is allowed.
All other Grounds of the appeal assessee as well as the appeal of the ld. AO becomes infructuous and hence, dismissed.
In the result, appeal filed by the assessee for A.Y. 2011-12 is allowed.
Accordingly, appeal filed by the assessee for both these years are allowed and appeals of ld AO for both these years are dismissed.
Order pronounced in the open court on 29/12/2022.