EMINENT INFRADEVELOPERS PVT. LTD.,NEW DELHI vs. DCIT, CENTRAL CIRCLE , NOIDA

ORDER PER R.K. PANDA, A.M. The above batch of five appeals filed by the Assessee are directed against the Common Order Dated 25.01.2018 of the Ld. CIT(A)-IV, Kanpur, relevant to the A.Ys. 2008-2009 and 2010-2011 to 2013-2014 respectively. Since common issues are involved in all these appeals,

ITA.No.1766/Del./2018 – A.Y. 2008-2009 [Assessee] :

2.1. The facts of the case, in brief, are that a search and seizure operation under section 132 of the Income Tax Act, 1961 was conducted on 12.11.2013 on the premises of the assessee comprising Eminent and Dynamic Group of cases in Agra & Delhi. The assessee is one of the group companies. In response to the notice under section 153A of the I.T. Act, 1961 issued on 15.07.2015, the assessee did not file its return of income. However, on 17.12.2015, the A.R. of the Assessee filed a copy of the income tax return stating that the same should be treated as return filed in response to notice under section 153A of the I.T. Act 1961. Subsequently, notice under section 143(2) of the I.T. Act

3 ITA.Nos.1766 to 1770/Del./2018 Eminent Infradevelopers Pvt. Ltd., New Delhi. was issued on 17.12.2015 under presumption that the assessee has e-filed its return of income. However, it was noticed that the assessee has not e-filed its return which is mandatory for the corporate assessees. However, the assessee did not e-file its return of income in response to notice under section 153 A of the Act and the date of compliance was fixed on 31.12.2015. Simultaneously, notices under section 153A of I.T. Act for the years 2008- 2009 to 2013-2014 and notice under section 142(1) for the Assessment year 2014-2015 were issued to the assessee. In response to the notices under section 153A of I.T. Act for A.Y. 2008-2009 to 2013-2014, the assessee did not e-filed its returns of income. However, for A.Y. 2014-2015, the assessee submitted a copy of return of income which was filed electronically on 31.03.2015. Subsequently, notices under section 143(2) of the I.T. Act were issued to the assessee on 17.08.2015 and the questionnaires along with notices under section 142(1) of the I.T. Act, were also issued and served on the assessee fixing the date for compliance on 07.01.2016. Since, nobody appeared on that date,

4 ITA.Nos.1766 to 1770/Del./2018 Eminent Infradevelopers Pvt. Ltd., New Delhi. subsequently notice under section 142(1) Dated: 22.01.2016 was again issued to the assessee, on which date, the assessee submitted part replies.

2.2. According to the A.O. the accounts of the assessee are defective and incomplete in as much as neither all the receipts nor the correct expenses have been recorded in the books of accounts and the assessee also admitted its incorrectness during the course of search and has made disclosure of Rs.20 crores to cover-up the discrepancies. Having regard to the nature and complexity of accounts, incorrectness of the accounts, multiplicity of transactions as well as specialized nature of business activities of the assessee and in the interest of justice, the A.O. vide letter Dated 22.03.2016 (Pages 84-89 of the paper book) directed the assessee to get its accounts audited under section 142(2A) of the I.T. Act, 1961 for the A.Ys. 2008-2009 to 2014-2015 by M/s D.S. Sinha & Co. 14, Ratan Villa, 7/33, Tilak Nagar, Kanpur, who was nominated by Ld. Pr. Commissioner of Income Tax (Central), Kanpur and to furnish a Report of such Audit in the Prescribed Form duly

5 ITA.Nos.1766 to 1770/Del./2018 Eminent Infradevelopers Pvt. Ltd., New Delhi. signed and verified. The A.O. subsequently vide letter Dated 29.03.2016 (Page-91 of the paper book) communicated the assessee to get its accounts audited by M/s D.C Shukla & Co, Kanpur within 90 days from the service of the notice and also stated that the name of D.S. Sinha & Co. was inadvertently mentioned. The time span was supposed to be expired on 21.06.2016. However, the assessee on 18.05.2016 filed a writ petition in the Hon’ble Allahabad High Court against the direction of Pr. CIT under section 142(2A) of the Act. This fact was communicated by the Assessee to the Auditor with a request to withhold the audit till the decision of the Court. In view of the above, time span for conducting the Audit was further extended till 31.07.2016 and further till 31.08.2016. As per the A.O. the decision of the Court is still awaited, neither there is any information from the side of assessee of any stay on the pending assessment by the Hon’ble Court. Therefore, since the assessment is getting time barred, the A.O. proceeded to complete the assessment. After considering the various submissions filed by the assessee from time to time, the 6 ITA.Nos.1766 to 1770/Del./2018 Eminent Infradevelopers Pvt. Ltd., New Delhi. A.O. completed the assessment by adopting the net profit rate of 15% on the turnover of Rs.9,56,33,536/- and determined the total income of the assessee at Rs.1,43,45,030/- for A.Y. 2008-2009.

2.3. For other assessment years also, the A.O. determined the income by applying the rate of 15% on the total turnover which are as under :

For the A.Y. 2010-2011 Rs.1,22,61,246/- For the A.Y. 2011-2012 Rs. 2,53,46,926/- For the A.Y. 2012-2013 Rs.5,86,40,100/- For the A.Y. 2013-2014 Rs.6,00,06,235/- 2.4. Before the Ld. CIT(A), apart from challenging the addition on merit, the assessee also challenged the validity of the assessment order being barred by limitation on the ground that the time limit for completion of the assessment is to be reckoned with reference to the direction for Special Audit Dated 21.03.2016 which expired on 25.08.2016. However, the A.O. has passed the assessment order on 28.10.2016. Therefore, such assessment order being barred by limitation is not enforceable in the eye of Law. So far as 7 ITA.Nos.1766 to 1770/Del./2018 Eminent Infradevelopers Pvt. Ltd., New Delhi. the merits of the case is concerned, relying on various decisions, it was argued by the Learned Counsel for the Assessee that no incriminating material was found during the course of search and, therefore, the A.O. was not justified in estimating the net profit rate of 15%.

2.5. However, the Ld. CIT(A) was not satisfied with the arguments advanced by the assessee. So far as the validity of the assessment on account of being barred by limitation is concerned, the Ld. CIT(A) decided the issue against the assessee by observing as under :

“5.6. One of the legal challenge of the appellant is that order passed by the AO is barred by limitation. It may be seen from the written submission of the appellant that assessment order passed on 28.10.2016 is void-ab-inito because that was beyond stipulated period of 90+60=150 days after the matter was referred u/s 142(2A) of the Act which had expired on 28.08.2O16. In view of 8 ITA.Nos.1766 to 1770/Del./2018 Eminent Infradevelopers Pvt. Ltd., New Delhi. this, assessment order passed by AO on 28.10.2016 is barred by limitation.”

2.6. So far as the merits of the case is concerned, the Ld. CIT(A) reduced such estimate of net profit from 15% to 8% by observing as under :

“6.4. Now issue to be decided is whether net profit adopted by AO at 15% is justified or not. Perusal of assessment order does not show any reasoning why net profit at 15% is adopted except a sentence where in AO mentioned that in this line of business profits are in the range of 15% to 25%. However no comparable case is cited by the AO with such high profits. On the one hand AO has not shown any comparable case with net profit in the range of 15% to 25% and on the other hand, appellant has disclosed net profit ranging from 3.31% to 7.06% during these relevant assessment years in appeals. Undersigned has already concluded that action of the AO in estimating the 9 ITA.Nos.1766 to 1770/Del./2018 Eminent Infradevelopers Pvt. Ltd., New Delhi. profits of the business u/s 144 of the Act is justified especially considering the fact that appellant has not maintained and produced the books of account including bills & vouchers and also by not producing the audit report u/s 142(2A) of the Act. Considering totality of the facts & circumstances of the case, undersigned is of the view that net profit adopted by the AO at 15% is on the higher side and is not based on any comparable cases. Undersigned is of the view that adoption of net profit at 8% of the gross turnover would meet the end of justice especially considering the intention of the legislature enshrined in provision of section 44AD of the Act wherein it is mentioned that in the business of civil construction profit would be computed at 8% of the gross turnover of the business. In the present case appellant failed to produce the audit report u/s 142(2A) of the Act. Books of account of the appellant cannot be relied in absence of supporting

10 ITA.Nos.1766 to 1770/Del./2018 Eminent Infradevelopers Pvt. Ltd., New Delhi. evidences and the same is rejected u/s 145 of the Act. Even though turnover of the business of appellant is more than the turnover mentioned u/s 44AD of the Act legislative intention to rejected u/s 145 of the Act. Even though turnover of the business of appellant is more than the turnover mentioned u/s 44AD of the Act legislative intention to tax at 8% on gross receipts of the business involved in civil construction can be safely applied to the case of the appellant. Hence, AO is directed to work out the net profit @ 8% on gross turnover of business of the appellant. Therefore, this ground of appeal of the appellant is partly allowed.”

BECAUSE on a conjoint reading of section 153A and 132(1) and on the facts and circumstances of the case,

11 ITA.Nos.1766 to 1770/Del./2018 Eminent Infradevelopers Pvt. Ltd., New Delhi. the appellant could not have been treated/held to be the "person in whose case search and seizure action 1. under section 132(1) had been initiated", severally speaking and consequently proceedings initiated under section 153A for re-assessment were void ab-initio. BECAUSE the "CIT(A) has erred in law and on facts in upholding the validity of the assessment order dated 2. 28.10.2016 purported to have been passed under section 153A, without appreciating that a) direction dated 29.03.2016 issued for obtaining audit report under section 142(2A) as had been issued by Dy. CIT, Central Circle, Noida, was served on the appellant on 02.04.2016, whereas time limit for completion of assessment as provided in section 153B had already expired on 31.03.2016; and b) in any case, and without admitting, even if the time limit is to be reckoned from the date of service of the said directions i.e. 02.04.2016, the 12 ITA.Nos.1766 to 1770/Del./2018 Eminent Infradevelopers Pvt. Ltd., New Delhi. time limit/extended time limit had expired on 31.08.2016 BECAUSE the order dated 28.10.2016 was liable to be declared as non-est and wholly unenforceable in law 3. and view to the contrary as has been taken by the "CIT(A)" is wholly erroneous as being inconsistent with the facts of the case and law applicable thereto.

WITHOUT PREJUDICE TO THE AFORESAID BECAUSE all such material and information as was called for from time to time and within time limit permissible under section 153B had duly been 4. furnished and on a due consideration of the same, "CIT(A)" could not have upheld the assessment order dated 28.10.2016, that has been passed by invoking section 144 of the Act. BECAUSE there being no incriminating material found during the course of search and seizure action carried 5. out in pursuance of joint warrant of authorisation dated 31.10.2013, nor any such information/material being

13 ITA.Nos.1766 to 1770/Del./2018 Eminent Infradevelopers Pvt. Ltd., New Delhi. collected or otherwise becoming available to the Dy. CIT during the course of re-assessment proceedings, no addition to the income that already stood assessed, could have been made either on facts or in law. BECAUSE the CIT(A) on a due consideration of the facts 6. and circumstances of the case, particularly that a) the financial results disclosed by the appellant stood fully supported by audited statement of accounts, which were subjected to twin audits, one statutory audit under the Companies Act and another tax audit under the Income Tax Act; b) there was no qualification added in the audit reports about unverifiability of any expenditure/ receipt; c) the turnover disclosed by the said very audited statement of accounts was accepted as such; and d) there was not even a whisper about unverifiability of expenditure as stood debited in the Profit & Loss Account;

14 ITA.Nos.1766 to 1770/Del./2018 Eminent Infradevelopers Pvt. Ltd., New Delhi. the financial results declared by the appellant were liable to be accepted, without there being any rejection by invoking the provision of section 145(3) of the Act. BECAUSE estimate of net profit @ 8% of the turnover (as against the profit disclosed by the appellant) as 7. has been sustained by the "CIT(A)", is wholly erroneous without any basis and the same is not sustainable either on facts or in law. BECAUSE in any case the question of addition by way 8. of extra 'net profit', as sustained by the "CIT(A)" is wholly capricious, much too high and excessive. BECAUSE the order appealed against is contrary to the 9. facts, law and principles of natural justice.

3.1. Learned Counsel for the Assessee drew the attention of the Bench to the provisions of Section 142(2A) of the I.T. Act, 1961, which reads as under :

“142[(2A) If, at any stage of the proceedings before him, the [Assessing] Officer, having regard

15 ITA.Nos.1766 to 1770/Del./2018 Eminent Infradevelopers Pvt. Ltd., New Delhi. to the nature and complexity of the accounts of the assessee and the interests of the revenue, is of the opinion that it is necessary so to do, he may, with the previous approval of the [Chief Commissioner or Commissioner], direct the assessee to get the accounts audited by an accountant, as defined in the Explanation below sub-section (2) of section 288, nominated by the [Chief Commissioner or Commissioner] in this behalf and to furnish a report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed and such other particulars as the [Assessing] Officer may require.”

[Provided that the Assessing Officer shall not direct the assessee to get the accounts so audited unless the assessee has been given a reasonable opportunity of being heard.]

(2B) The provisions of sub-section (2A) shall have effect notwithstanding that the accounts of 16 ITA.Nos.1766 to 1770/Del./2018 Eminent Infradevelopers Pvt. Ltd., New Delhi. the assessee have been audited under any other law for the time being in force or otherwise.

(2C) Every report under sub-section (2A) shall be furnished by the assessee to the [Assessing] Officer within such period as may be specified by the [Assessing] Officer :

Provided that the [Assessing] Officer may, [suo motu, or] on an application made in this behalf by the assessee and for any good and sufficient reason, extend the said period by such further period or periods as he thinks fit ; so, however, that the aggregate of the period originally fixed and the period or periods so extended shall not, in any case, exceed one hundred and eighty days from the date on which the direction under sub- section (2A) is received by the assessee.”

3.2. Referring to the above, he submitted that the direction of the Pr.CIT in the instant case was communicated to the assessee vide letter Dated 29.03.2016

17 ITA.Nos.1766 to 1770/Del./2018 Eminent Infradevelopers Pvt. Ltd., New Delhi. and the period of 90 days + 60 days expires on 21.08.2016. However, the A.O. has passed the assessment order on 28.10.2016 which is beyond the period of limitation. He submitted that there was no stay from the Hon’ble Allahabad High Court against the writ petition filed by the assessee, which fact is also brought on record by the A.O. himself. Therefore, merely because the assessee has made a request to the Auditor to withhold the Audit till the decision of the Hon’ble High Court, cannot be held against the assessee, in absence of any stay by the Hon’ble High Court.

3.3. Referring to the Order of the Ld. CIT(A), he submitted that the Ld. CIT(A) has wrongly interpreted the provisions of Section 153B read with Explanation-(b) stating that the time period starting with the statutory filing of writ petition and ending with the date of disposal of the writ petition has to be excluded for computing the period of limitation. Learned Counsel for the Assessee, drew the attention of the Bench to the relevant portion of the Explanation to provisions of Section 153B which has been 18 ITA.Nos.1766 to 1770/Del./2018 Eminent Infradevelopers Pvt. Ltd., New Delhi. relied on by the Ld. CIT(A) and has been reproduced in his order as under :

"Explanation.—In computing the period of limitation for the purposes of this section,—

(i) the period during which the assessment proceeding is stayed by an order or injunction of any court; or (ii) the period commencing from the date on which the Assessing Officer directs the assessee to get his accounts audited under sub-section (2A) of section 142 and –

(a) ending with the last date on which the assessee is required to furnish a report of such audit under that sub-section; or.

(b) where such direction is challenged before a court, ending with the date on which the order setting aside such direction is received by the Principal Commissioner or Commissioner shall be excluded.”

19 ITA.Nos.1766 to 1770/Del./2018 Eminent Infradevelopers Pvt. Ltd., New Delhi. 3.4. He submitted that since it is an admitted fact that there is no stay by the Hon’ble High Court against the writ petition filed by the assessee, therefore, the finding of the Ld. CIT(A) is contrary to fact and Law. He accordingly submitted that since the A.O. has passed the order on 28.10.2016 which is after the specified date of 25.08.2016, therefore, such order being barred by limitation, cannot be enforceable in the eye of Law and such assessment order has to be quashed. For the above proposition, he relied on the decision of the Amritsar Bench of the Tribunal in the case of Srinagar Development Authority vs., ITO in ITA.Nos.97 to 99/ASR/2014 vide Order Dated 18.01.2019.

3.5. So far as the merits of the case is concerned, the Learned Counsel for the Assessee submitted that no incriminating material whatsoever was found during the course of search and the addition made by the A.O. is not based on any incriminating material. He has simply estimated the net profit @ 15% of the turnover which was reduced by the Ld. CIT(A) to 8% and that too without any basis. The Learned Counsel for the Assessee relied on 20 ITA.Nos.1766 to 1770/Del./2018 Eminent Infradevelopers Pvt. Ltd., New Delhi. various decisions including the decisions of Hon’ble Delhi High Court in the case of CIT vs., Kabul Chawla 380 ITR 573 Del.) and in the case of Pr. CIT vs. Meeta Gutgutia 395 ITR 526 (Del.) and various other decisions and submitted that since the addition is not based on any incriminating material, therefore, all the orders passed under section 153A have to be quashed.

21 ITA.Nos.1766 to 1770/Del./2018 Eminent Infradevelopers Pvt. Ltd., New Delhi. CIT(A) has already given substantial relief to the assessee by reducing the net profit rate from 15% to 8%, therefore, the assessee should not have any grievance.

22 ITA.Nos.1766 to 1770/Del./2018 Eminent Infradevelopers Pvt. Ltd., New Delhi. 1961 and had communicated the same to the Auditor with a request to withhold the audit till the decision of the Court, however, it is also brought on record by A.O. himself in para-7 of his order that the decision of the Court is still awaited and there is no information from the side of the assessee regarding any stay on the pending assessment by the Hon’ble High Court. Under these circumstances, we find merit in the submission of the Learned Counsel for the Assessee that as per the provisions of Section 142(2A) of the I.T. Act, 1961, the time period of 90 days plus further extension of 60 days expired on 21.08.2016. Whereas, the A.O. in the instant case has passed the assessment order on 28.10.2016 and, therefore, the order passed by the A.O. is barred by limitation.

5.1. So far as the finding given by the Ld. CIT(A) that in view of provisions of Section 153B read with Explanation- (b) the time period starting with the date of filing of the writ petition and ending on the date of disposal of the writ petition is to be excluded is concerned, we do not find any merit in the same. Admittedly, the assessment proceedings

23 ITA.Nos.1766 to 1770/Del./2018 Eminent Infradevelopers Pvt. Ltd., New Delhi. have not been stayed by an order or injunction of any Court which fact was also brought on record by the A.O. himself at para-7 of the assessment order. Further, although such direction was challenged before the Hon’ble High Court, however, no order setting aside such direction has been received by Pr. CIT or CIT which is to be excluded. Therefore, the Ld. CIT(A) has gone wrong by invoking the provisions of Explanation-(b) to Section-153B. We, therefore, set aside the order of the Ld. CIT(A) and quash the assessment order passed by the A.O. being barred by limitation. Since the assessee succeeds on this legal ground, the other grounds challenging the validity of additions in the absence of any incriminating material is not being adjudicated being academic in nature. Appeal filed by the assessee is allowed.

24 ITA.Nos.1766 to 1770/Del./2018 Eminent Infradevelopers Pvt. Ltd., New Delhi. ITA.Nos.1767, 1768, 1769 & 1770/Del./2018 : [Assessee] Assessment Years 2010-11, 2011-12, 2012-2013 & 2013-2014

25 ITA.Nos.1766 to 1770/Del./2018 Eminent Infradevelopers Pvt. Ltd., New Delhi. 9. To sum-up, all the appeals of the Assessee are allowed.

Order pronounced in the open Court on .07.2021.