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Income Tax Appellate Tribunal, MUMBAI BENCH “A”, MUMBAI
Before: SHRI KULDIP SINGH & SHRI S. RIFAUR RAHMAN
Per : Kuldip Singh, Judicial Member:
For the sake of brevity aforesaid interconnected appeals bearing common question of law and facts are being taken up for disposal by way of composite order.
Appellant Shri Amish Anantrai Modi (hereinafter referred to as the assessee) and appellant DCIT/ACIT, Central Circle-2(1), Mumbai (hereinafter referred to as the Revenue) by filing aforesaid cross appeals sought to set aside the impugned orders dated 09.11.2021, 15.06.2021, 31.05.2021 & 30.07.2021 for A.Y. 2011- 12, 2012-13, 2013-14 & 2014-15 respectively passed by Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)], on identical grounds except the difference in amount of addition inter alia that (grounds are taken from all assessee’s appeals for A.Y. 2012-13, 2013-14 & 2014-15):
ITA No.1311/M/2021 for A.Y.2012-13 “1. In the facts and circumstances of the case and in law, the learned CIT(A) erred in confirming the assessment passed u/s 153C of the Income tax Act, 1961 which was passed in the absence of any incriminating material and without appreciating the fact that original assessment made u/s 143(3)/143(l)(a) which was completed on the date of initiation of search do not get abated. 2. In the facts and circumstances of the case and in law, the learned CIT(A) erred in confirming the assessment u/s 153C which was passed without having jurisdiction to the assessing officer as no opportunity of being heard u/s 127 of the act was granted to the appellant. 3. In the facts and circumstances of the case and in law, the learned CIT(A) erred in confirming the assessment u/s 153C which was passed without furnishing the copy of the satisfaction recorded.
ITA Nos.1311, 1312 & 1468/M/2021 & ors. 3 Shri Amish A. Modi
In the facts and circumstances of the case and in law, the learned CIT(A) erred in confirming the assessment u/s 153C which was passed without appreciating the fact that order was passed on the basis approval granted u/s 153D in a routine manner.
In the facts and circumstances of the case and in law, the learned CIT(A) erred in confirming the assessment u/s 153C which was passed without granting a copy of the statement recorded on 14.01.2015 and thereby violating natural justice.
In the facts and circumstances of the case and in law, the learned CIT(A) erred in confirming the disallowance of Rs.7027 being exemption claimed u/s 10(38) in respect of long term capital gain on sale of shares and addition of the same u/s 68 as cash credit.
In the facts and circumstances of the case and in law, the learned CIT(A) erred in confirming the addition u/s 68 of Rs. 4,66,290 being net sales proceeds (Net of capital gain offered for tax) in respect o jewelry sold.
In the facts and circumstances of the case and in law, the learned CIT(A) erred in computing addition of Rs. 1,43,625 by considering two layers for commission ignoring the fact that there are at least three layers, the Trust, the accommodating party and the agent.
In the facts and circumstances of the case and in law, the learned GT(A) erred in confirming further commission of 59413 ignoring the fact that he has already computed commission of Rs. 1,43,625 (as per (9) above).
ITA No.1312/M/2021 for A.Y.2013-14
In the facts and circumstances of the case and in law, the learned CIT(A) erred in confirming the assessment passed u/s 153C of the income tax Act, 1961 which was passed in the absence of any incriminating material and without appreciating the fact that original assessment made u/s 143(3)/143(l)(a) which was completed on the date of initiation of search do not get abated.
In the facts and circumstances of the case and in law, the learned CIT(A) erred in confirming the assessment u/s 153C which was passed without having jurisdiction to the assessing officer as no opportunity of being heard u/s 127 of the act was granted to the appellant.
ITA Nos.1311, 1312 & 1468/M/2021 & ors. 4 Shri Amish A. Modi
In the facts and circumstances of the case and in law, the learned CIT(A) erred in confirming the assessment u/s 153C which was passed without furnishing the copy of the satisfaction recorded.
In the facts and circumstances of the case and in law, the learned CIT(A) erred in confirming the assessment u/s 153C which was passed without appreciating the fact that order was passed on the basis approval granted u/s 153D in a routine manner.
In the facts and circumstances of the case and in law, the learned CIT(A) erred in confirming the assessment u/s 153C which was passed without granting a copy of the statement recorded on 14.01.2015 and thereby violating natural justice.
In the facts and circumstances of the case and in law, the learned CIT(A) erred in computing addition of Rs. 3,27,945 by considering two layers for commission ignoring the fact that there are at least three layers, the Trust, the accommodating party and the agent.
In the facts and circumstances of the case and in law, the learned CIT(A) erred in confirming further commission (5)1.5% ignoring the fact that he has already computed commission of Rs.3,27,945 (as per (6) above)”
ITA No.1468/M/2021 for A.Y.2014-15
In the facts and circumstances of the case and in law, the learned CIT(A) erred in confirming the assessment passed u/s 153C of the Income tax Act, 1961 which was passed:
(a) In the absence of any incriminating material (b) Without having jurisdiction to the assessing officer as no opportunity of being heard u/s 127 of the act was granted to the appellant. (c) Without furnishing the copy of the satisfaction recorded. (d) Without appreciating the fact that order was passed on the basis approval granted u/s 153D in a routine manner. (e) Without granting a copy of the statement recorded on 14.01.2015 and thereby violating natural justice.
In the facts and circumstances of the case and in law, the learned CIT(A) erred in confirming addition to the extent of Rs. 7,00,000 out of total addition of Rs. 24,00,000 made by the assessing officer and ignored the submission of the appellant that loan taken was Rs.17,00,000 only.
(a) In the facts and circumstances of the case and in law, the learned CIT(A) erred in taking rate of commission at 3% and
ITA Nos.1311, 1312 & 1468/M/2021 & ors. 5 Shri Amish A. Modi
computing addition of Rs. 6,47,829 by considering two layers for commission ignoring the fact that there are at least three layers, the Trust, the accommodating party and the agent. (b) The learned CIT(A) also erred in taking total deposits into bank for computing the commission ignoring the fact that bank deposits also include deposits for which income has been offered to tax and for which complete details were submitted. 4. In the facts and circumstances of the case and in law, the learned CIT(A) erred in confirming further commission @1.5% ignoring the fact that he has already computed commission of Rs. 1,29,726 (as per (3) above).”
Briefly stated facts necessary for adjudication of the controversy at hand in all the aforesaid appeals bearing ITA No.1311, 1312, 1357, 1448 & 1570 are: a search and seizure operation was carried out in the group case of M/s. Navjivan Charitable Trust on 27.10.2014 from which it was noticed that the assessee trust accepts donation in cheque from the doner and returns back the money in cash after deducting commission at 3% of the donation amount to the doner which fact was admitted by one of the trustee namely Subash Kadam during recording of his statement under section 131 on 10.11.2014 by DDIT (Inv.), unit 2(4), Mumbai. The assessee namely Amish A. Modi is one of such persons who has provided accommodation entry to M/s. Navjivan Charitable Trust through various parties. After recording satisfaction note, a notice dated 20.04.2016 under section 153C of the Income Tax Act, 1961 (for short ‘the Act’) for A.Y. 2009-10 to 2014-15 and notice under section 142(1) dated 22.04.2016 for A.Y. 2015-16 was issued to file the return of income to which assessee opted to treat the return already filed in response to the notice under section 153C of the Act. Notice under section 142(1) were issued for A.Y. 2009-10 to 2014-15 and A.Y. 2015-16 which was duly
ITA Nos.1311, 1312 & 1468/M/2021 & ors. 6 Shri Amish A. Modi
served upon the assessee but assessee did not furnish complete details. Then the AO sought information under section 133(6) of the Act from Axis Bank and Jammu & Kashmir Bank where the assessee is having accounts. From the analysis of the information provided by the bank, the AO noticed huge number of bank accounts in the assessee’s account with Jammu & Kashmir Bank about which the assessee was asked specific question in his statement recorded under section 131 of the Act.
From the total deposits made by the assessee in the bank accounts the total year-wise deposits were noticed as under: F.Y. Relevant A, V. Total deposits (RS.) 2010-11 2011-12 12.36.000/- 2011-12 2012-13 52,00,000/- 2012-13 2013-14 1,32,24,000/- 2013-14 2014-15 2,06,21.600/- 2014-15 2015-16 5,91,45,787/-
On failure of the assessee to furnish detail qua the transaction in the bank account asked for in the statement recorded under section 131 of the Act, the same has been treated as undisclosed income of the assessee and as such the same has been taxed as unexplained credit under section 68 of the Act for the relevant years.
AO also made addition on account of net sale proceeds (net of capital gains offered for tax, made addition on account of commission) in all the aforesaid assessment years and thereby
ITA Nos.1311, 1312 & 1468/M/2021 & ors. 7 Shri Amish A. Modi
framed the assessment under section 143(3) read with section 153C of the Act.
Assessee carried the matter before the Ld. CIT(A) by way of filing appeal who has partly allowed the same. Feeling aggrieved both assessee as well as Revenue have come up before the Tribunal by way of filing cross appeals for A.Y. 2012-13, 2013-14 & 2014-15.
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.
Grounds No.2, 3, 4 & 5 9. During the course of argument Ld. A.R. for the assessee has not pressed ground No.2 to 5, hence the same are dismissed having not been pressed.
Ground No.1 10. Ld. A.R. for the assessee challenging the impugned order passed by the Ld. CIT(A) contended inter alia that during the search and seizure operation carried out at the premises of M/s. Navjivan Charitable Trust on 27.10.2014 “no incriminating document” qua assessee has been found/seized; that documents seized during the search and seizure operation available at page 2 to 10 of the paper book namely ledger account of M/s. Navjivan Charitable Trust, cash book etc. are pertaining to A.Y. 2009-10 rather addition has been made in the cases at hand i.e. of
ITA Nos.1311, 1312 & 1468/M/2021 & ors. 8 Shri Amish A. Modi
subsequent years; that the entire case has been based by the AO on the basis of solitary statement of assessee recorded during search proceedings which cannot be treated as an “incriminating document”; that in the bank statement supplied by Axis Bank available at page 5 of the paper book none of the transactions is in the name of the assessee; that even otherwise “incriminating material”, if any, should be qua the each assessment years; that statement recorded post search and during survey proceedings is not “incriminating document”; that identical issues has been decided in favour of the assessee in assessee’s own case for A.Y. 2009-10, 2010-11 & 2011-12 in ITA Nos.4584, 4585 & 4586/M/2018 and also relied upon the decision rendered by the Hon’ble Supreme Court in case of CIT vs. Sinhgad Technical Education Society in Civil Appeal Nos.11080 to 11083 of 2017 (2017) 397 ITR 34 (SC) and the decision of Hon’ble High Court of Delhi in case of CIT vs. RRJ Securities Ltd. (2016) 380 ITR 612 (Del) and in case of Pepsico India Holdings (P.) Ltd. vs. ACIT (2014) 50 taxmann.com 299 (Delhi).
However, on the other hand, to repel the argument addressed by Ld. A.R. for the assessee the Ld. D.R. for the Revenue relied upon the order passed by the AO and statement of assessee recorded during search and survey proceedings referred to in para 13.2 of the impugned order passed by the Ld. CIT(A) which is substantiated by bank statement; that Ld. CIT(A) has erred in considering the commission income only in order to make/confirm the addition and relied upon the decision rendered by Hon’ble High Court in case of P.R. Metrani Vs. Commissioner of Income Tax (2006) 287 ITR 209 (SC) and the decision of Hon’ble Allahabad
ITA Nos.1311, 1312 & 1468/M/2021 & ors. 9 Shri Amish A. Modi
High Court in the case of Gargi Din Jwala Prasad vs CIT (1974) 96 ITR 97 (Allahabad HC).
Undisputedly, assessments in all the aforesaid appeals were initiated on the basis of search and seizure operation carried out at M/s. Navjivan Charitable Trust under section 143(3) read with section 153C of the Act, that too on the basis of statement of assessee recorded under section 131 of the Act and ledger of the M/s. Navjivan Charitable Trust found and seized during the search and seizure operation. It is also not in dispute that nothing incriminating was found at the time of search and seizure operation at the premises of M/s. Navjivan Charitable Trust except ledger statement/bank statement which are pertaining to 2009-10 in which no addition has been made by the Revenue. It is also not in dispute that original assessment was made under section 143(3) of the Act which was completed on the date of initiation of search and as such do not get abated. It is also not in dispute that common satisfaction note has been recorded in all the years viz. 2009-10 to 2014-15 on the basis of books of accounts maintained by M/s. Navjivan Charitable Trust.
To move into motion section 153C of the Act something belonging to the assessee must be found in the premises of searched person and at the same time “incriminating material” should be qua the each assessment year.
Hon’ble Supreme Court while deciding the scope of section 153C in case of Sinhgad Technical Education Society (supra) held that incriminating material which was seized had to be pertained to the assessment year in question and this is the basic requirement
ITA Nos.1311, 1312 & 1468/M/2021 & ors. 10 Shri Amish A. Modi
under section 153C of the Act which is essential for the assessment under that provision which becomes a jurisdictional issue. In the instant case also no “incriminating material” is there qua the years under consideration. Even in the bank statement available at page 5 of the paper book name of the assessee is not there and as such very initiation of the assessment proceedings under section 153C of the Act is not sustainable in the eyes of law.
Even otherwise identical issue has been decided by the co- ordinate Bench of the Tribunal in assessee’s own case in ITA Nos.4584, 4585 & 4586/M/2018 for A.Y. 2009-10, 2010-11 & 2011-12 wherein assessment was also framed under section 143(3) read with section 153C of the Act by returning following findings: “3. For A.Y. 2010-11, the issue in dispute is addition of Rs. 8,00,000/- as cash credit u/s. 68 and addition of Rs. 1,00,275/- as commission income. 4. One of the grievances raised by the assessee is that original assessment in this case was already completed on the date of initiation of search and hence these additions do not get abated. Hence, it is the plea that dehorse incriminating material found no addition is permissible. I note that addition in A.Y. 2010-11 has been done on account of cash credit u/s. 68 of Rs. 8,00,000/- and commission of Rs. 1,00,275/-. I note that while dealing with the addition the Assessing Officer has mentioned that addition u/s. 68 was done on examination of balance-sheet. Similar is the position of addition of commission income. There is no whisper in the assessment order that any incriminating material was seized in respect of addition which has been done. It is clear that search was conducted on 27.10.2014 and assessment year involved A.Y. 2010-11 was not abated assessment. Hence on the touchstone of Hon'ble Jurisdictional High Court decision in the case of Continental Warehousing Corporation (374 ITR 645), no addition was permissible dehorse incriminating material found. Since no incriminating material has been mentioned with respect to addition made, I set aside the orders of the authorities below and delete the addition. A.Y. 2011-12 5. In this appeal the assessee is aggrieved by the addition of Rs. 30,743/- as commission income and Rs. 12,36,000/- in respect of
ITA Nos.1311, 1312 & 1468/M/2021 & ors. 11 Shri Amish A. Modi
amount debited in the bank account as unexplained deposit u/s. 68 of the Act. 6. It is noted that in the assessment order the Assessing Officer has only mentioned the following :- The assessee vide letter dated 17/11/2016 vide para 3 was asked by the commission Income for providing accommodation entries through Shri Rashmikant Jhaveri's proprietary concern to M/s. Navjeevan Charitable Trust of Rs.30.743/- should not be taxed as your income. The assessee vide his letter dated 23/11/2016 confirmed to consider commission income in his computation of income. The commission income offered was not disclosed in the return of income therefore the same is taxed as undisclosed income of the assessee. Penalty proceedings u/s. 271(1)(c) Of the Act are initiated separately for furnishing inaccurate particulars of income. 7. From the above it is apparent that no incriminating material was found with regard to addition made. Furthermore, from where addition of Rs. 12,36,000/- for A.Y. 2011-12 has been done is not clear from the assessment order. Moreover, there is no mentioned of any incriminating material found with regard to addition made. Assessment year involved is A.Y. 2011-12, search was conducted on 27.10.2014 hence this is also not a case of abated assessment. In these circumstances, in my considered opinion decision of Hon'ble Jurisdictional High Court in the case of Continental Warehousing Corporation (supra) is squarely applicable. Since addition has not been based upon any incriminating material found during search no addition dehorse any incriminating material is sustainable. Hence the orders of authorities below are set aside and the addition is deleted. 8. In result, assessee’s appeal for A.Y. 2009-10 is dismissed as infructuous and assessee’s appeals for A.Ys. 2010-11 & 2011- 12 are allowed.”
In view of what has been discussed above and following the order passed by co-ordinate Bench of the Tribunal ground No.1 raised by the assessee in A.Y. 2012-13, 2013-14 & 2014-15 is allowed in favour of the assessee. When assessment framed under section 143(3) read with section 153C of the Act is not sustainable due to jurisdictional defect the issue raised by the assessee in
ITA Nos.1311, 1312 & 1468/M/2021 & ors. 12 Shri Amish A. Modi
ground No.6, 7, 8 & 9 on merits qua disallowance of Rs.7027/- being exempt claimed under section 10(38) of the Act on account of long term capital gain on sale of shares and addition made under section 68 on account of net sale proceeds in respect of the jewellery sold and addition made on account of commission income have become academic, hence need not be decided.
Grounds of appeals of Revenue in ITA No.1357 & 1570/M/2021 for A.Y. 2013-14 & 2014-15
ITA No.1357/M/2021 for A.Y. 2013-14
Whether on the facts and circumstances of the case and in law, the Ld. Pr.CIT(A)-48, Mumbai had erred in deleting the addition of Rs.5,00,000/- as unexplained cash credit overlooking the mismatch in date of loan in the Balance Sheet and the Loan confirmation filed by the assessee. 2. Whether on the facts and circumstances of the case and in law, the Ld. Pr.CIT(A}-48, Mumbai had erred m deleting the addition of Rs.21,47,538/- in respect of LTCG on sale of shares by way of unexplained cash credit, ignoring to the reasons of such addition by the A.O in the assessment order. 3. Whether on the facts and circumstances of the case and in law, the Ld Pr. CIT(A)-48, Mumbai had erred in reducing the extent of addition of Rs.1,38,583/ as commission income by interposing arbitrarily a percentage @ 1.50% in addition as commission income even when the assessee admitted to have omitted the inclusion of such commission income from his total income for the A Y under consideration. 4. Whether on the facts and circumstances of the case and in law, the Ld. Pr. CIT(A)-48, Mumbai had erred in restricting the addition of Rs.l,32,24,000/- to Rs.3,27,945/- only, giving credit to all the claims of the assessee and denials of the assessee against the accusations without calling for any verification by way of remand reports from the AO to delve into the actual facts and circumstances of the case.”
ITA No.1570/M/2021 for A.Y. 2014-15 “1. Whether on the facts and circumstances of the case and in law, the Ld Pr.CIT{A)-48, Mumbai had erred in restricting the
ITA Nos.1311, 1312 & 1468/M/2021 & ors. 13 Shri Amish A. Modi
addition of Rs.24,00,000/- to Rs.7,00,000/- as unexplained cash credit overlooking the mismatch in date of loan in the Balance Sheet and the Loan confirmation filed by the assessee. 2. Whether on the facts and circumstances of the case and in law, the Ld Pr.CIT(A)-48, Mumbai had erred in restricting the addition of Rs. 2,06,21, 600/- to Rs.6,47,829/- only, giving credit to all the claims of the assessee and denials of the assessee against the accusations without calling for any verification by way of remand reports from the A.O to delve into the actual facts and circumstances of the case.”
Primarily Ld. D.R. for the Revenue relied upon the order passed by the AO so far as ground No.1 & 2 of A.Y. 2013-14 is concerned. Ld. D.R. also contended that Ld. CIT(A) has erred in restricting the addition @ 1.5% whereas the assessee himself has admitted to pay @ 3% and that Ld. CIT(A) has also decided the issue in favour of the assessee without calling any verification from the AO by way of remand report while restricting the addition @ 1.5% as commission income particularly when assessee himself admitted to have earned commission income @ 3%. The Ld. D.R. also requested to send the matter back to AO for ascertaining the actual facts putforth by the assessee.
However, we are of the considered view that when the very initiation of assessment made under section 143(3) read with section 153C of the Act has not withstood the judicial scrutiny on account of jurisdictional defect there is no need to go into the merits qua the addition/deletion made by AO/ Ld. CIT(A). Consequently, appeals filed by the Revenue are liable to be dismissed in view of the findings given by the Tribunal in the preceding paras on ground No.1 of assessee’s appeal for A.Y. 2011-12, 2012-13 & 2013-14, being the block assessment pursuant
ITA Nos.1311, 1312 & 1468/M/2021 & ors. 14 Shri Amish A. Modi
to the search and seizure operation carried out on 27.10.2014 in case of Navjivan Charitable Trust.
In view of what has been discussed above, appeals filed by the assessee in ITA Nos.1311, 1312 & 1468/M/2021 for AYs 2012-13, 2013-14 & 2014-15 respectively & ITA Nos.2437& 2436/M/2021 for AYs 2011-12 & 2012-13 respectively are allowed and appeals filed by the Revenue in ITA No.1357 & 1570/M/2021 for A.Y. 2013-14 & 2014-15 respectively are hereby dismissed.
Order pronounced in the open court on 20.09.2022.
Sd/- Sd/- (S. RIFAUR RAHMAN) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, Dated: 20.09.2022. * Kishore, Sr. P.S.
Copy to: The Appellant The Respondent The CIT, Concerned, Mumbai The CIT (A) Concerned, Mumbai The DR Concerned Bench
//True Copy//
By Order
Dy/Asstt. Registrar, ITAT, Mumbai.