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Income Tax Appellate Tribunal, DELHI BENCH “F”: NEW DELHI
Before: SHRI R.K. PANDA & MS. SUCHITRA KAMBLE
This appeal filed by the Revenue is directed against the order dated 29.11.2016 of the Ld. CIT(A) 23 New Delhi relating to assessment year 2011-12. The assessee has filed the Cross Objection against the appeal filed by the Revenue. For the sake of convenience these were heard together and are being disposed of by this common order.
Facts of the case, in brief, are that the assessee is group concern of Mauria group of companies. It derives income from manufacturing of Sweets and Restaurant activities. It filed its return of income on 27th September 2011 declaring NIL income. A search and seizure operation u/s 132 of the IT Act 1961 was conducted in the case of M/s. Mauria Udyog Ltd. and its group concern and residential/factory premises of partners, directors and proprietors of the group on 7th August, 2013. The AO issued notice u/s 153A of the Act on 5th February, 2015 which was duly served on the assessee. In response to the same the assessee vide letter dated 14th February 2015 requested the AO to treat the original return filed on 27th September, 2011 declaring total income of Nil in response to notice u/s 153A of the Act.
3. During the course of assessment proceedings, the AO noted that assessee has received share application money to the tune of Rs. 1 crore from Shri Ajay Chamanlal Kanwal and Rs. 1.50 crore from Shri Abhay Ajay Agarwal. In order to verify the transaction the AO issued notice u/s 133(6) of the Act on 29th February, 2016 to the above persons fixing the date of compliance for 10th March, 2016. Since no reply was received from the above persons, the AO held that the identity, creditworthiness and genuineness of the persons giving share application money to the tune of Rs. 2.5 crores remained to be established, The assessee failed to discharge the primary onus of proving the identity and capacity of the persons making the investment and the genuineness of transaction. Relying various decisions including the decision of Hon’ble Supreme Court in the case of Sumati Dayal vs. CIT reported in 214 ITR 801 the AO made addition of Rs. 2.50 crore to the total income of the assessee u/s 68 of the Income Tax Act.
4. Before the Ld. CIT(A) the assessee submitted that full details of the share application money received from Shri Abhay Ajay Agarwal and Shri Ajay Chamanlal Kanwal along with share application from, bank statements confirmation etc. were filed before the AO. It was further submitted that due to dispute with the shareholder Shri Abhay Ajay Agarwal was not giving the information u/s 133(6). However, Shri Ajay Chamanlal Kanwal had replied to the notice issued u/s 133(6) to the AO confirming the share capital / share application money invested by them.
Various details were furnished before the Ld. CIT(A) to substantiate the identity and creditworthiness of the share applicants and the genuineness of the transactions.
Based on the arguments advanced by the assessee, the Ld. CIT(A) deleted the addition of Rs. 2.50 crore made by the AO u/s 68 of the Act by holding that the assessee has discharged the onus cast on it by proving the identity and creditworthiness of the share applicants and the genuineness of the transaction.
Aggrieved with such order of the Ld. CIT(A), the revenue is in appeal before the Tribunal by raising the following grounds :-
“1. The order of Ld. CIT(A) is not correct in law and on facts
2. On the facts and circumstances of the case, the CIT(A) has erred in deleting the addition of Rs. 2,50,00,000/- made by AO on account of unexplained share application money.
3. The appellant craves leave to add, amend any/all the grounds of appeal before or during the course of hearing of the appeal.”
7. The assessee has raised the following grounds in the cross objections:-
1. “On the facts and circumstances of the case, the order passed by the learned Commissioner of Income Tax (Appeals) [CIT (A)] is bad both in the eye of law and on facts.
2. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the addition despite the fact that the proceedings initiated under Section 153A are bad in law in the absence of any incriminating material belonging to the assessee being found during the search.
3. On the facts and circumstances of the case, the learned CIT (A) has erred both on facts and in law in confirming the addition despite the fact that addition made by AO are legally unsustainable in the absence of any incriminating material being found in search relating to the assessment year under consideration.
The respondent craves leave to add amend on alter any of the grounds of cross objection.”
Ld. Counsel for the assessee at the outset referring to the copy of the Panchanama dated 8.8.2013 submitted that no incriminating documents were found from the premises of the assessee. Therefore, in view of the decision of the Hon’ble Delhi High Court in the case of CIT vs. Kabul Chawla vide 709 and 713/2014 order dated 28th August, 2015 no addition could have been made to the income already assessed in absence of any incriminating material found during the course of search.. Relying on the following decisions he submitted that following the decision in the case of CIT vs. Kabul Chawla (supra) the Hon’ble Delhi High Court also held that no addition can be made in the absence of any incriminating material in case of completed assessments :-
Pr. CIT vs. Best Infrastructure (India) Pvt. Ltd. (2017) 397 ITR 82- Delhi High Court
2. Pr. CIT-Central -3 Versus Baba Global Ltd. 2017 (2) TMI 346- Delhi High Court
Pr. CIT (Central)-3 Versus Dharampal Premchand Ltd. – 2017 (8) TMI 958 – Delhi High Court He accordingly submitted that no addition could have been made in absence of any incriminating material found during the course of search.
So far as merit of the case is concerned, the Ld. Counsel for the assessee while relying on the order of Ld. CIT(A) submitted that compliance to the notice u/s 133(6) could not be made due to dispute between the assessee and Shri Abhay Ajay Agarwal. He submitted that Shri Abhay Ajay Aggarwal filed suits against the assessee before the Bombay High Court. He submitted that the AO has never asked the assessee regarding the court case. However, the assessee during the appellate proceedings before the Ld. CIT(A) submitted the copy of High Court order alongwith the copy of the affidavit filed by Shri Abhay Ajay Aggarwal enclosing affidavit exhibit with the appeal. As per the affidavit, he has submitted that he purchased shares of the assessee to the extent of 15% for Rs. 1.5 crors. He had further stated that his sales is USD27.36 million and the amount was routed through banking channel. He submitted that the Ld. CIT(A) had forwarded the documents to the AO for obtaining the remand report. However the AO failed to comment on the facts available in the affidavit.
So far as amount received from Shri Ajay Chaman Lal Kanwal is concerned he submitted that Shri Ajay Chaman Lal Kanwal vide his letter dated 8th March 2016 had submitted various details in response to notice u/s 133(6) such as details of investment made by him in the assessee company, copy of his income tax return, copy of his bank statement reflecting the payment made to the assessee company to the tune of Rs. 1 crore, copy of share certificate, copy of notice of assessment of the Inland Revenue Authority of Singapore with the assessable income of Singapore Dollar 136289. He accordingly submitted that once the assessee has discharged the onus cast on it by proving the identity and creditworthiness of the share applicant and the genuineness of the transaction, no addition u/s 68 could have been made. Relying on various decisions, he submitted that addition can not be made merely on surmises ,suspicion and conjectures. He accordingly submitted that the Ld. CIT(A) has rightly deleted the addition.
Ld. DR on the other hand strongly opposed the grounds raised by the assessee in the cross objection. She submitted that as per Rule 22 of ITAT Rules 1963 a Memorandum of cross objection filed under sub section 4 of section 253 shall be registered and numbered as an appeal and of the rules, so far as may be, shall apply to such appeal. Referring to provisions of section 253(4) of the Act and Rule 22 of ITAT Rule 1963 Ld. DR submitted that the cross objection can be filed only against any part of the order of appellate authority and the concerned party should be aggrieved. However, in the present case the grounds as raised in the cross objection were never taken before the Ld. CIT(A) nor did Ld. CIT(A) adjudicated these grounds. Therefore, once the assessee has foregone its right to appeal it cannot be raised in cross objection before the Tribunal. Referring to the decision of the Tribunal in the case of Neetee Clothing Pvt. Ltd. (2010) 129 TTJ 342 Ld. DR referred to para 10 to 18 of the order of the Tribunal and submitted that after considering various decisions the Tribunal has held that the aggrieved party can file memorandum of cross objection only when an issue has been decided against the cross objector. She submitted that if the assessee has no grievance against the appellate order no cross objection lies before the Tribunal. She accordingly submitted that the assessee can neither file appeal before the Tribunal nor memorandum of cross objection against the order of the Ld. CIT(A) and therefore the Cross Objection filed by the assessee deserves to be dismissed. So far as merit of the case is concerned, she heavily relied on the order of the AO.
Ld. Counsel for the assessee in his rejoinder submitted that the assessee at any point of time before the appellate authorities can take a legal ground as held in various decisions by Hon’ble Supreme Court and the Hon’ble Delhi High Court.
The Ld. Counsel for the assessee submitted that the decision of the Tribunal in the case of Neetee Clothing Pvt. Ltd. (supra) holding that an aggrieved party can file memorandum of cross objection only when the issue has been decided against the cross objector was based on the decision of Hon’ble Bombay High Court in the case of Ugar Sugar Works Ltd. 141 ITR 326. However the said decision of the Bombay High Court in the case of Ugar Sugar Works Ltd, (supra) has been overruled by the larger bench of the same Hon’ble High Court in the case of Ahmedabad Electricity Company Ltd. vs CIT 199 ITR 351. Further the decision of the Tribunal in the case of Neetee Clothing Pvt. Ltd. (supra) has been overruled by Hon’ble Delhi High Court in the case of Fast Booking India Pvt. Ltd. in to 338, 339, 342/2015 order dated 2nd September, 2015. Referring to various other decisions filed in his synopsis, Ld. Counsel for the assesee submitted that after considering the decision of Delhi Bench of the Tribunal in the case of Neetee Clothing Pvt. Ltd. (supra) the coordinate bench of the Tribunal has held that the whole purpose of preferring the appeal and the objections and raising new ground for the first time before the appellate authority is to correctly assess the tax liability of the assesse. He accordingly submitted that in view of the principle laid down by the Jurisdictional High Court the legal issue raised in the cross objection has to be admitted and adjudicated on merit.
We have heard the rival arguments made by both sides, perused the orders of the AO and Ld. CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. Before adjudicating the issue on merit as per the grounds of appeal filed by the revenue we would like to decide first the maintainability of the cross objection as well as the grounds raised therein. A perusal of the assessment order as well as the order of Ld. CIT(A) shows that the addition was based on the basis of verification of balance sheet and not based on any incriminating material found during the course of search. Although the Ld. CIT(A) has decided the issue in favour of the assessee and has deleted the addition, the validity of the 11 assessment u/s 153A to the proposition that no addition can be made in absence of any incriminating material found during the course of search in case of a completed assessment was not adjudicated by him as the same was never argued before him. However, this ground being a legal one we are of the considered opinion that the assessee can not be precluded from raising a legal ground for the first time before the appellate authorities. We find the Delhi Bench of the Tribunal while deciding the case in the case of Neetee Clothing Pvt. Ltd. (supra) has held that an aggrieved party can file memorandum of cross objection only when an issue has been decided against the cross objector. The above decision was based on the decision of Hon’ble Bombay High Court in the case of Ugar Sugar Works Ltd (supra). However the said decision of Hon’ble Bombay High Court in the case of Ugar Sugar Works Ltd. has been overruled by the larger bench of the same High Court in the case of Ahmedabad Electricity Company Ltd. vs. CIT 199 ITR 351. Further the Hon’ble Delhi High Court in the case of Fast Booking India Pvt. Ltd. vs. DCIT (supra) has overruled the decision of the Tribunal in the case of Neetee Clothing Pvt. Ltd. (supra) and has held that the Tribunal while deciding the appeal is not confined to the ground set forth in the memorandum of appeal or those which the appellant may urge with its leave. It can decide the appeal on any ground provided only that the affected party has an opportunity of being heard on that ground. Further the Supreme Court in the case of NTPC vs. CIT reported in 229 ITR 383 has also explained that the power of the Tribunal in dealing with the appeals u/s 254 the Act is expressed in the widest possible terms". Similar view has been taken by the coordinate bench of the Tribunal in the case of ITO vs. Jasjit Singh (2014) TPMI 116 New Delhi and in the case of ACIT vs. MKR Construction Pvt. Ltd. reported in 2017 12 TMI 565. In view of the above decisions cited supra the decision relied by the Ld. DR are distinguishable and are not applicable to the facts of the present case. We, therefore, reject the arguments advanced by the Ld. DR regarding maintainability of the grounds in the cross objection and proceed to adjudicate the same.
15. A bare perusal of the assessment order shows that the addition is not based on any incriminating material found as a result of search but is based on the verification of the balance sheet of the assessee. The Hon’ble Delhi High Court in the case of CIT vs. Kabul Chawla (supra) has held that in absence of any incriminating material found as a result of search, no addition can be made in a completed assessment. The Hon’ble Delhi High Court following the above decisions has taken a similar view in the case of PCIT vs. Best Infrastructure (India) Ltd. PCIT vs Baba Global Ltd. (supra) and PCIT vs. Dharampal Premchand Ltd. (supra).Since the addition in the instant case is not based on any incriminating material found as a result of search in case of the assessee and it is a completed assessment, therefore, we are of the considered opinion that no addition could have been made by the AO in the instant case. We, therefore, allow the grounds raised by the assessee in the cross objection.
16. Since the Cross Objection of the assessee is allowed the grounds raised by the revenue have become academic in nature and therefore the same are not being adjudicated.
In the result the Cross Objection filed by the assessee is allowed and the appeal filed by the revenue is dismissed.