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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI AMARJIT SINGH, HONBLE & SHRI S. RIFAUR RAHMAN, HONBLE
O R D E R PER S. RIFAUR RAHMAN (AM)
These appeals are filed by the assessee against different orders of the Learned Commissioner of Income Tax (Appeals)-21, Mumbai [hereinafter in short “Ld.CIT(A)”] dated 28.06.2019 for the A.Ys. 2010-11 and 2011-12.
2 & 6429/MUM/2019 (A.Ys: 2010-11 & 2011-12) M/s. Ravi Nirman Nigam Limited 2. Since the issues raised in both these appeals are identical, therefore, for the sake of convenience, these appeals are clubbed, heard and disposed off by this consolidated order. We are taking Appeal in ITA.No. 6429/MUM/2019 for Assessment Year 2010-11 as a lead case.
The assessee has e-filed the return of income on 28.09.2010 declaring total income of ₹. NIL after claiming current year loss of ₹.64,986/- the return was processed u/s. 143(1) of the Income-tax Act, 1961 (in short “Act”) on 14.04.2011. Subsequently information was received from ACIT–CC-2(4), Ahmadabad that during the course of search on 15.10.2013 at the premises of M/s. Dharmadev Infrastructure Ltd., a total of 36 benami accounts were identified out of which one case is that of M/s. Ravi Nirman Nigam Ltd., having account no. 10569 in the Social Cooperative Bank Ltd., This account was opened on 24.09.2009 and closed on 03.07.2012. The Assessing Officer observed that on a perusal of the bank account it is observed that assessee had deposits amount of ₹.2,26,82,500/- which includes cash deposits amounting to ₹.10,82,500/- during the year under consideration. Accordingly, the assessment was reopened by issue of notice u/s. 148 of the Act and the assessment was 3 & 6429/MUM/2019 (A.Ys: 2010-11 & 2011-12) M/s. Ravi Nirman Nigam Limited completed. Aggrieved assessee preferred an appeal before the Ld.CIT(A) and Ld.CIT(A) dismissed the appeal filed by the assessee.
Aggrieved assessee is in appeal before us raising following grounds in its appeal: - “1. That on the facts and circumstances of the case and in law, the Ld. AO erred in initiating proceedings u/s 147 of the Act without appreciating the fact that information was received from the office of the ACIT, Central Circle - 2(4) in connection with the search conducted at the premises of M/s. Dharmadev Infrastructure Ltd, accordingly, notice u/s 153C ought to have been issued, as such, the reopening is void-ab-initio, without jurisdiction and liable to be quashed.
2. Without prejudice to the above, that on the facts and circumstances of ‘the case and in law, the Ld. CIT (A) erred in confirming the action of AO in reopening the matter u/s.147 on suspicion and surmises without any application of mind and solely on the basis of information received from ACIT CC - 2(4), thus the reopening, is bad in law and liable to be quashed.
3. That on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in confirming the action of AO in reopening the matter u/s 147 based on vague, contradictory and unclear, reason to believe and as such the reopening is bad in law and liable to be quashed.
4. That on the facts and circumstances of the case and in law, the Ld. CIT (A) erred in confirming the action of AO in passing. the re-assessment order u/s 147, despite the fact that no addition had been made on the alleged reasons and as such, the reassessment proceedings ought to have been dropped.
5. That on the facts and circumstances of the case and in law, the Ld. CIT (A) erred in confirming the action of AO in initiating the penalty proceedings u/s 271D and 271E without appreciating the fact that no addition has been made with respect to the reasons recorded
4 & 6429/MUM/2019 (A.Ys: 2010-11 & 2011-12) M/s. Ravi Nirman Nigam Limited for reopening of assessment, as such, the reassessment order is bad in law and liable to be quashed. 6. Your appellant craves leave to add to, amend or N.A alter or delete any of the above grounds of appeal.
Assessee also filed additional ground of appeal which is as under: - “That on the facts and circumstances of the case and in law, the department has erred in reopening the assessment u/s 147 of the Act without appreciating the fact that information was received from the office of the ACII, Central Circle - 2(4) in connection with the search conducted at the premises of M/s. Dharmadev Infrastructure Ltd, accordingly, notice u/s 153C ought to have been issued, as such, the reopening is void-ab-initio, without jurisdiction and liable to be quashed.”
At the time of hearing, Ld. AR submitted that as under: - “Whether AO right in invoking 148 instead of 153C: At the outset we would like to draw your attention to the relevant portion of the Reason to believe issued by the Ld.A.O. in AY10-11 viz. DCIT-13(3)(1) which is reproduced as below: "Since account of M/s. Ravi Nirman Nigam Ltd. found at the premise of MIs Dliarmadev Infrastructure Ltd. is Benami, I have reason to believe that the income of at least Rs.2,26,82,500/-, chargeable to tax has escaped assessment for A. Y. 2010-11 by reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment, for that assessment year and it is fit case for issuing notice u/s 148 of the Income tax Act, 1961." Relevant Para of Reasons for AY 11-12 is reproduced below: 3. As per the information, in the case M/s. Ravi Nirman Nigam Ltd, huge debit/credit transactions were made in its account in very short period of time pertaining to A. Y. 2011-12, which includes cash deposits and thereafter the account was closed by the entity. The details of the transactions is as under –
5 & 6429/MUM/2019 (A.Ys: 2010-11 & 2011-12) M/s. Ravi Nirman Nigam Limited Amount of total Sr. Name of the bank credited Cash AY. total credits No and Account No deposits out of amount 1 2011-12 Social Co-operative Rs. 11,12,84,800/- Rs. 11,40,000/ Bank Ltd. No. 10569 4. In the backdrop of above facts, I have reason to believe that the income of at least Rs. 11,12,84,800/-, chargeable to tax has escaped assessment for A. Y.2011-12 by reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment, for that assessment year and it is fit case for issuing notice u/s.148 of the Income Tax Act, 1961." Full copy of reason for AY 2010-11 and 2011-12 is enclosed herewith. The above reason to believe clearly indicate that the Ld.A.O. has relied on the bank account statement which was found in the search at the premises of M/s. Dharamdev Infrastructure and based on these Bank statement which is a 'document seized' and 'belongs to' the appellant and was forwarded to the Ld.A.O. by ACIT .CC 2(4) , the re-opening was initiated. Thus, the term 'information' in the Reason to believe is used in the context of Bank Statement only. There is no doubt that the information here means the documents relied upon itself and there is no difference between these two as contented by the Ld.D.R. Since Section 153C starts with a non obstante clause i.e. 'Notwithstanding anything contained in Section 139. Section 147, section 148, section 151 and section 153....', whenever any books of accounts or documents seized are handed over to the assessing officer of the persons other than the searched person, the AO of the other person can issue notice only under section 153C. In the appellant's case, since search was conducted on M/s. Dharamdev Infrastructure and the alleged incriminating material found there is the basis of reopening, the exact section which applies on your appellant is section 153C of the Act and not section 147 of the Act. Accordingly, the Ld. AO ought to have issued the notice u/s 153C not u/s 148 of the Act. Hence, reopening is bad in law, without jurisdiction and liable to be quashed. In support of our contention, we rely on the following decisions of co ordinate benches which clearly lays down that the nonobstante clause in section 153C bars the A.O. to re-open such matters u/s 148 and the facts of these cases are similar to that of the appellants case.
6 & 6429/MUM/2019 (A.Ys: 2010-11 & 2011-12) M/s. Ravi Nirman Nigam Limited • Bachan Singh and Ors. v. Dy. Commr. of Income Tax, Central Circle-1 and Ors.ITA Nos. 16, 15 and 87 (Asr)/2015 "14. ……. • Kalyanji Velji HLIF Versus DCIT-Central Circle-8 (4) , Mumbai And (Vice-Versa) 2021 (1) TMI 322 - ITAT Mumbai “9. ….. • Smt. Samanthapudi Lavanya v, Assistant Commissioner of Income Tax, Central Circle, Vijayawada "10.3 ….. • ACIT vs. Ws K.S. Chawla & Sons ('HUF) (ITA No. 27241DEL12015) - Delhi ITAT "9. ....... • Shri V.L. Khandge, Shri D.L. Khandge vs. ITO Ward-8(2), Pune and Vice Versa 12018 (4) TM! 1607 - ITAT Pune] "'29 …..." • Karti P. Chidambararn vs. Principal Director of Income Tax (Investigation) [2021 (7) TMI 393 - Madras High Court] "83. ….. It must be noted that similar view has been taken in the following cases: • M/s. Rayoman Carriers Pvt. Ltd., v. Asst. CIT CEN CIR 12, Mumbai - 11A No.3275/Mum/2015 & 3276/Mum/2015 • G. Koteswara Rao vs. Deputy Commissioner of Income tax, Central Circle1, Visakhapatnam[2015] 64 taxmann.com 159 • Rajat Saurabh Chatterji v. ACIT ITA No. 2430/DeV2015 - Delhi ITAT There is no reason to believe with the AO: Without prejudice, the reassessment proceedings are bad in law as there is material with the AO to form reason to believe that income has escaped assessment:
7 & 6429/MUM/2019 (A.Ys: 2010-11 & 2011-12) M/s. Ravi Nirman Nigam Limited • The bank account is duly disclosed in books of account. • The bank account is in the name of appellant and disclosed in the books of appellant then it cannot be Benami account. • Also on the same documents received from the AO of the searched person, there is no allegation of Benami for AY 11-12. • This shows that there is complete non application of mind by AO • The cash deposits in a bank account by itself does not give any reason to believe. Reliance in this regard is placed on Bir Bahadur Singh Sijwali vs. ITO, Ward 1, Haldwani [(2015) 53 taxmann.com 366 Delhi ITAT], wherein it was held that "8. Let us, in the light of this legal position, revert to the facts of the case before us. All that the reasons recorded for reopening indicate is that cash deposits aggregating to Rs 10,24,100 have been made in the bank account of the assessee, but the mere fact that these deposits have been made in a bank account does not indicate that these deposits constitute an income which has escaped assessment. The reasons recorded for reopening the assessment do not make out a case that the assessee was engaged in some business and the income from such a business has not been returned by the assessee. As we do not have the liberty to examine these reasons on the basis of any other material or fact, other than the facts set out in the reasons so recorded, it is not open to us to deal with the question as to whether the assessee could be said to be engaged in any business; all that is to be examined is whether the fact of the deposits, per se, in the bank account of the assessee could be basis of holding the view that the income has escaped assessment. lite answer, in our humble understanding, is in negative. The Assessing Officer has opined that an income of Rs 10,24,100 has escaped assessment of income because the assessee has Rs 10,24,100 in his bank account but then such an opinion proceeds on the fallacious assumption that the bank deposits constitute undisclosed income, and overlooks the fact that the sources of deposit need not necessarily be income of the assessee. Of course, it may be desirable, from the point of view of revenue authorities, to examine the matter in detail, but then reassessment proceedings cannot he resorted to only to examine the facts of a case, no matter how desirable that he, unless there is a reason to believe, rather than suspect, that an income has escaped assessment."
8 & 6429/MUM/2019 (A.Ys: 2010-11 & 2011-12) M/s. Ravi Nirman Nigam Limited • It is settled law that for mere verification, reopening is not permitted. Reliance can be placed on the following decisions: i) PCIT-5 vs. Manzil Dineshkumar Shah [(2018) 95 taxmann.com 46 - Gujarat High Court] "7. …… ii) Jalaram Enterprises (P.) Ltd. vs. ITO (12019] 104 taxmann.com 134 - Bombay High Court] In view of above submission, it is humbly requested that appeals be allowed and reassessment orders are quashed.”
On the other hand, Ld.DR relied on the orders passed by the lower authorities and submitted that it is not clear whether the material found during search that this issue was emanating from the search materials.
Considered the rival submissions and material placed on record, we observe from the record that the assessment was reopened mainly on the basis of information received from ACIT, Ahmadabad that during search proceedings in the case of M/s. Dharmadev Infrastructure Ltd., they unearthed the information relating to bank account in the case of assessee which contain the details of deposits and cash deposits. Based on the above information the assessment was reopened. Now before us assessee has filed the additional ground of appeal, challenging the above proceedings that whether the information found during the search can be applied to reopen the assessment instead of assessing the return of 9 & 6429/MUM/2019 (A.Ys: 2010-11 & 2011-12) M/s. Ravi Nirman Nigam Limited income under the provisions of section 153C of the Act. In this regard Ld. AR relied on following case law filed before us.
(i). Karti P. Chidambaram v. Pr. DIt (Investigation) [2021 (7) TMI 393 – Madras High Court. (ii). Bachan Singh and Ors. v. DCIT [MANU/IS/0104/2016] (iii). Shri V.L. Khadge, Shri D.L. Khandge v. ITO -8(2), Pune and Vice Versa [2018 (4) TMI 1607 –ITAT Pune]
On a careful consideration of the facts on record and observe from the decision in the case of Karti P. Chidambaram v. Pr.CIT. (Investigation) (supra) the Hon'ble Madras High Court held as under: - “82. As opposed to this general procedure, there are specific provisions contained in Section 153A to Section 153C, which deal with assessments that commence after a search has been conducted under the provisions of Section 132 or requisition has been made under Section 132A. Sections 153A to Section 153C start with a non-obstante clause that specifically excludes the applicability of Section 147/148. Where, pursuant to a search conducted under Section 132, the Assessing Officer has in his possession books of account or other documents or evidence, which reveal that income, represented in the form of asset, or any part of such income generally, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more in the relevant assessment year or in aggregate over the relevant assessment years then the Assessing Officer may either assess/reassess for each of the preceding 6 Assessment Years immediately preceding the Assessment Year, in which, search has been conducted and for the relevant Assessment Year / years. Section 153C shall apply to cases where, pursuant to a search or requisition under Section 132 & 132A, the assessing Officer is satisfied that any money bullion jewellery or other valuable article or thing seized or requisitioned, belongs to or any books of accounts or documents pertains or pertain 10 & 6429/MUM/2019 (A.Ys: 2010-11 & 2011-12) M/s. Ravi Nirman Nigam Limited to a person other than the person referred to in Section 153A, then the material must be handed over the Assessing Officer having jurisdiction over such “other person” and the Assessing Officer may issue a notice along the same lines as under Section 153A if he is satisfied that such material has a bearing on the determination of total income of such persons. Apart from the Section containing a non- obstante clause, Section 153A and 153C also provides for a mechanism whereby all pending proceedings and assessments, as on date of receipt of materials seized by the Assessing Officer, shall stand abated.
Therefore, upon a conspectus of the relevant provisions, it is clear that the recourse under Section 153A and Section 153C is a special procedure that gets triggered upon receipt of incriminating material post any search or requisition. The normal course of assessment and reassessment is fundamentally altered when a search or requisition takes place under Section 132/132A and the moment, the seized materials are received by the Assessing Officers, the special procedure laid out under Section 153A or Section 153C shall come into effect. The use of the non-obstante clause coupled with the abatement mechanism contained in the provisions makes it clear that the legislative intent was for Assessing Officers to proceed only under Section 153A or Section 153C upon receipt of material seized or requisitioned. This special procedure is a derogation from the regular procedure for assessment or reassessment and only some immunity has been carved out for completed assessments. Therefore, the concerned jurisdictional Assessing Officer, upon receipt of material seized or requisitioned, can only proceed under Section 153A or 153C and they cannot proceed with any other pending assessment or proceeding.”
Respectfully following the above said decision, any material found during the search can be applied to initiate proceedings only u/s. 153C of the Act, not under section 147 of the Act. Accordingly, we are in agreement with the grounds raised by the assessee that the proceedings initiated u/s. 147 of the Act is void ab initio. Accordingly, any proceedings
11 & 6429/MUM/2019 (A.Ys: 2010-11 & 2011-12) M/s. Ravi Nirman Nigam Limited relating to the above assessment is also becomes invalid. Accordingly, the appeal filed by the assessee is allowed in this regard.
We have not adjudicated the main grounds of appeal at this stage and kept it open.
Coming to the appeal relating to A.Y. 2011-12, since facts in this appeal are mutatis mutandis, therefore the decision taken in A.Y. 2010- 11 is applicable to this assessment year also. Accordingly, this appeal is also allowed.
In the result, both the appeal filed by the assessee are allowed.
Order pronounced in the open court on 27.04.2022.