ASSISTANT COMMISSIONER OF INCOME-TAX,, JALGAON vs. SMT. MADHURI SUNIL KOTHECHA,, JALGAON

आदेश / ORDER

PER VIKAS AWASTHY, JM

This bunch of six appeals, four by the Revenue and two by the

assessee are directed against the order of Commissioner of Income Tax

(Appeals)-12, Pune dated 15.12.2015 common for the assessment years

2006-07 to 2009-10.

The Revenue has assailed the findings of First Appellate Authority in

ITA No.383/PUN/2016 for the assessment year 2006-07. The assessee has

filed cross appeal in ITA No. 2458/PUN/2016 against the order of

Commissioner of Income Tax (Appeal) for the assessment year 2006-07.

The appeal filed by the Revenue in ITA No.384/PUN/2016 is against

the findings of Commissioner of Income Tax (Appeals) for the assessment

year 2007-08. The assessee has filed cross appeal for the said assessment

year in ITA No.2459/PUN/2016.

The appeals filed by the Revenue in ITA Nos. 385 & 386/PUN/2016

are directed against the order of Commissioner of Income Tax (Appeals) for

the assessment years 2008-09 & 2009-10, respectively. There are no cross

appeals by the assessee for the said two assessment years.

arising from same set of facts, these appeals are taken up together for

adjudication and are being disposed of vide this common order.

action was carried out at the premises of Kotecha Group of Jalgaon on

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09.08.2011. The assessee being one of the family members of Kotecha

group was covered under search action. The assessee is engaged in trading

of shares, trading in Futures and Options and commodity trading. The

assessee also earns interest income on fixed deposits. The assessee’s minor

son Siddharth Kotecha derived Short Term Capital Gain on sale of shares

which was clubbed with income of the assessee. The assessee in her return

of income had declared income from trading of shares, futures and options

under the head capital gains, whereas, the Assessing Officer treated the

income from sale of shares as ‘business income’. The Assessing Officer in

assessment proceedings consequent to the search, made certain additions

in the hands of the assessee for the assessment years under appeal.

the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for the

respective assessment years, the assessee filed appeals before the

Commissioner of Income Tax (Appeals). The Commissioner of Income Tax

(Appeals) after examining the facts and documents on record held that in

absence of any incriminating material, no addition can be made where the

assessments have not abated. Consequently, substantial additions made by

the Assessing Officer in all the impugned assessment years were deleted by

the Commissioner of Income Tax(Appeals). Against the findings of the

Commissioner of Income Tax (Appeals), the Revenue is in appeal before the

Tribunal. The assessee is also in appeal for two assessment years assailing

the findings of Commissioner of Income Tax (Appeals) in changing the head

of income of assessee’s minor son whose income from sale of shares has

been clubbed with that of assessee.

4 ITA Nos. 383 to 386/PUN/2016 ITA Nos. 2458 & 2459/PUN/2016

ITA No.383/PUN/2016 ( By Revenue) ITA No.2458/PUN/2016 (By Assessee) Assessment year 2006-07

Commissioner of Income Tax (Appeals) by raising following grounds:

“i) On the facts and circumstances of the case and in law, the ld. CIT(A) was not justified in adjudicating that the income earned by the assessee of Rs.29,14,221/- by selling of shares is business income on one hand and on the other hand considering the income of minor son clubbed in the hands of the assessee as Short Term Capital Gain, thereby treating the same issue differently for the same assessee. ii) On the facts and circumstances of the case, the ld.CIT(A) was not justified in treating the disclosed income in the revised return as income claimed to be exempt u/s.10(38) i.e. Long Term Capital Gain of Rs.54,82,500/-, when there is no mention of such a nexus and the same has been made on conjecture. Further, the assessee's act of including the exempted income under the head Long Term Capital Gain itself shows that the two are different, i.e. disclosed income in revised return and Impugned exemption claimed under LTCG. iii) On the facts and circumstances of the case, the Id. CIT(A) was not' justified in deleting the addition of Rs.21,680/- made on interest on PPF account, since the assessee has multiple PPF accounts. The appellant craves to add, amend or delete any grounds of appeal.”

during the course of search, no incriminating material was found and there

was no pending assessment for the assessment year 2006-07. Thus, it is a

case of non-abated assessment. The Assessing Officer could not have made

any addition in absence of any incriminating material. The ld. AR in support

of his submissions, placed reliance on the decision of Hon'ble Bombay High

Court in the case of CIT Vs. Continental Warehousing Corporation (Nhava

Sheva) reported as 374 ITR 645 and the decision of Pune Bench of the

5 ITA Nos. 383 to 386/PUN/2016 ITA Nos. 2458 & 2459/PUN/2016

Tribunal in the case of Leelavati Vijay Kumar Kotecha in ITA Nos.1294 to

1297/PUN/2016 for the assessment years 2007-08 to 2012-13. The ld. AR

pointed that all the additions were made by Assessing Officer without

incriminating material, on mere change of opinion.

Department vehemently defended the assessment order and prayed for

reversing the findings of Commissioner of Income Tax (Appeals).

and have perused the orders of the Authorities below. It is an undisputed

fact that no incriminating material was found during the course of search

that would have resulted in any addition in income returned by the

assessee. It is also an uncontroverted fact that assessment consequent to

the return of income filed u/s.139 of the Act for the assessment year 2006-

07 was completed. Thus, on the date of search, no assessment was pending

which could have abated. In other words, it is a case of non-abated

assessment. It is a well settled law that no addition can be made in respect

of assessments which have become final if no incriminating material is

found during search. The law was first propounded by the Hon'ble Bombay

High Court in the case of CIT Vs. Murli Agro Products Ltd. reported as 49

taxmann.com 172 which was subsequently followed by the Hon'ble Bombay

High Court in the case of CIT Vs. Continental Warehousing Corporation

(Nhava Sheva) (supra.). Similar view has been taken by the Hon'ble Delhi

High Court in the case of CIT Vs. Kabul Chawla, reported as 380 ITR 573.

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Thus, in view of undisputed facts of the case and law laid down by

the Hon'ble Jurisdictional High Court which has been consistently followed

by the Tribunal, we do not find any merit in the grounds raised by the

Revenue, accordingly, the same are dismissed being devoid of any merit.

dismissed.

filed cross appeal against the order of Commissioner of Income Tax

(Appeals) for assessment year 2006-07 and contested the same by raising

following grounds:

“1) On the facts and in the circumstances of the case and in law the Honourable CIT (Appeals)-12, Pune erred in confirming the treatment of Short Term Capital Gain Rs.26,24,802/- on sale of shares of Listed Companies as profits and gains of business on the grounds that the appellant is trading in shares. The appellant hereby prays that the Short Term Capital Gain of Rs.26,24,802/- may please be restored and addition as normal business income may please be deleted. 2) The appellant hereby reserves the right to add, amend, alter, delete or raise any additional ground/s on or before the date of hearing.”

assessment and no incriminating material was found during search.

Therefore, no addition can be made in the case of the assessee. A change of

head of income under such circumstances is also not permissible once the

return of the assessee has been subjected to assessment and has been

accepted by the Department. Without there being any incriminating

material, in the case of completed assessments, neither any addition can be

made nor there can be any change of opinion, be it change of head of

7 ITA Nos. 383 to 386/PUN/2016 ITA Nos. 2458 & 2459/PUN/2016

income. Hence, we find merit in the submissions of the ld. AR, accordingly,

appeal filed by the assessee for the assessment year 2006-07 is allowed.

is allowed.

ITA No.384/PUN/2016 (By Revenue) ITA No.2459/PUN/2016 (By Assessee) Assessment Year 2007-08

Commissioner of Income Tax (Appeals) by raising following grounds:

“i) On the facts and circumstances of the case, the ld. CIT(A) was not justified in deleting the addition of Rs.26,414/- made on interest of PPF account, since the assessee has multiple PPF accounts. ii) The appellant craves to add, amend or delete any grounds of appeal.”

(Appeals) on the solitary issue of deleting addition of Rs.26,414/- on

account of interest on Public Provident Fund (PPF) accounts. The Assessing

Officer made addition on the ground that the assessee is having multiple

PPF accounts and whereas, the assessee can claim benefit of deduction in

respect of only one such PPF account.

identical to ground No.(iii) raised in assessment year 2006-07. The addition

has been made by the Assessing Officer merely on change of opinion. The

return of the assessee filed u/s.139 of the Act was subject to scrutiny

assessment. The assessment order u/s.143(3) of the Act was passed on

8 ITA Nos. 383 to 386/PUN/2016 ITA Nos. 2458 & 2459/PUN/2016

29.12.2009 i.e. much prior to the date of search. Thus, it is a case of non-

abated assessment. No incriminating material, whatsoever, was found

during search and seizure action that could have resulted in addition during

the impugned assessment year. Therefore, following the detailed reasons

given while adjudicating appeal of Revenue assessment year 2006-07, the

present appeal of the Revenue for assessment year 2007-08 is dismissed

being devoid of any merit.

dismissed.

Income Tax (Appeals) for assessment year 2007-08 and contested the same

by raising following grounds:

“1) On the facts and in the circumstances of the case and in law the honourable CIT(Appeals)-12, Pune erred in confirming the treatment of Short Term Capital Gain Rs.15,38,490/- on sale of shares of Listed Companies as profits and gains of business on the grounds that the appellant is trading in shares. The appellant hereby prays that the Short Term Capital Gain of Rs.15,38,490/- may please be restored and addition as normal business income may please be deleted.

2) On the facts and in the circumstances of the case and in law the honourable CIT(Appeals)-12, Pune erred in confirming the treatment of Long Term Capital Gain Rs.13,11,006/- on sale of shares of Listed Companies as profits and gains of business on the grounds that the appellant is trading in shares. The appellant hereby prays that the Long Term Capital Gain of Rs.13,11,006/- may please be restored and addition as normal business income may please be deleted.

3) The appellant hereby reserves the right to add, amend, alter, delete, or raise any additional grounds on or before the date of hearing.”

assessment and no incriminating material was found during search.

Therefore, no addition can be made in the case of the assessee. A change of

9 ITA Nos. 383 to 386/PUN/2016 ITA Nos. 2458 & 2459/PUN/2016

head of income under such circumstances is also not permissible. Once the

return of income filed u/s.139 of the Act by the assessee has been subjected

to scrutiny assessment and has been accepted by the Department, without

there being any incriminating material and being the case of non-abated

assessment, neither any addition can be made nor there can be any change

of head of income. Hence, we find merit in the submissions of the ld. AR and

allow the appeal of assessee for assessment year 2007-08.

is allowed.

ITA No.385/PUN/2016 (By Revenue) Assessment Year 2008-09

Commissioner of Income Tax (Appeals) by raising following grounds:

“i) On the facts and circumstances of the case and in law, the ld. CIT(A) was not justified in considering that the additions which are not based on the material gathered during the search are beyond the scope of assessment u/s.153A without appreciating that the additions made by the AO was as a result of search and the issues, directly or indirectly, emerged only after the search action and evidences gathered during the assessment proceedings and hence, cannot be seen in isolation from search. ii) On the facts and circumstances of the case, the ld. CIT(A) erred in deleting the addition of Rs.1,37,60,491/- as business income and treating the same as Long Term Capital Gain. iii) On the facts and circumstances of the case, the ld. CIT(A) erred in deleting the addition of Rs.1,28,921/- as business income and treating the same as Long Term Capital Gain. iv) On the facts and circumstances of the case and in law, the Id. CIT(A) was not justified in treating the disclosed income being investment in plot of land situated at G.No.105, Plot no.36, Mauje Nimkhedi & Dist.Jalgaon as being included under the head 'investment in plots' without considering that the investment of Rs.18,72,660/-has been unearthed following search action and the assessee has failed to provide any cogent evidence to support her claim.

10 ITA Nos. 383 to 386/PUN/2016 ITA Nos. 2458 & 2459/PUN/2016

v) On the facts and circumstances of the case, the ld.CIT(A) was not justified in deleting the addition of Rs.31,594/-made on interest of PPF account, since the assessee has multiple accounts. vi) The appellant craves to add, amend or delete any grounds of appeal.”

return of income u/s.139 of the Act on 30.09.2008. The time allowed

for making scrutiny assessment u/s.143(3) of the Act expired on

31.12.2010. A search action was carried out in the case of assessee on

09.08.2011. Thus, by the time search action was carried out, the time

period for scrutiny assessment u/s.143(3) of the Act had already

expired. The ld. AR further submitted that no incriminating material,

whatsoever, was found during search action. The Assessing Officer in

assessment proceedings consequent to notice issued u/s.153A of the

Act made addition merely on presumption and assumption and change

of opinion.

21.1 The ld. AR submitted that ground Nos. (i) and (vi) are general in

nature.

21.2 The ld. AR further submitted that in ground Nos. (ii) and (iii), the

Revenue has assailed the action of Commissioner of Income Tax

(Appeals) in deleting addition arising out of trading in shares by the

assessee and her minor son. The additions were made merely on

change of opinion without there being any incriminating material.

21.3 In respect of ground No.(iv), the ld. AR submitted that addition

was made in respect of investment in plot of land comprising in Gat

11 ITA Nos. 383 to 386/PUN/2016 ITA Nos. 2458 & 2459/PUN/2016

No.105, Plot No. 36, Mauje: Nimkhedi & Dist. Jalgaon. The ld. AR

submitted that the assessee had acquired the said plot of land in the

year 2001 and the same was reflected in the Balance Sheet for the

Financial Year 2001-02. The addition was made by the Assessing

Officer merely for the reasons that the agreement for purchase of the

said plot of land was found during search. The Commissioner of Income

Tax (Appeals) deleted the addition by observing that the land was

purchased on 02.03.2001 and the transaction was recorded in the

books of account. There was no evidence that any unexplained

investment was made by the assessee in respect of purchase of land

during the year under consideration.

21.4 With regard to ground No.(v), relating to interest on PPF account,

the ld. AR submitted that this ground is identical to ground No.(iii)

raised in assessment year 2006-07.

Assessing Officer in the assessment order and prayed for reversing the

findings of Commissioner of Income Tax (Appeals).

undisputed fact that on the date of search, there was no pending

assessment for the impugned assessment year. No document has been

placed by Revenue on record to show that incriminating material was

found during the course of search action on the basis of which

additions have been made in the hands of the assessee for assessment

year 2008-09.

12 ITA Nos. 383 to 386/PUN/2016 ITA Nos. 2458 & 2459/PUN/2016

23.1 Ground Nos. (i) and (vi) are general in nature and hence, requires

no adjudication.

23.2 Ground Nos. (ii), (iii) and (v) of the appeals are similar to the one

raised in appeal for the assessment year 2006-07. Since there are no

incriminating material and the assessment for assessment year under

appeal have not abated, no addition made on the basis of mere change

of opinion, is sustainable. Accordingly, ground Nos. (ii), (iii) and (v) of

the appeal are dismissed being devoid of any merits.

23.3 In ground No. (iv), the Revenue has assailed deleting addition

made on account of investment of Rs.18,72,660/- in plot of land

situated at No.105, Plot No. 36, Mauje : Nimkhedi & Dist. Jalgaon. The

Commissioner of Income Tax (Appeals) has deleted the addition on the

ground that the plot of land was purchased in the year 2001 and the

transaction was recorded in the books of account. During search no

evidences were found that any unexplained investment was made by

the assessee for purchase of said plot of land during the period relevant

to impugned assessment year. The ld. AR has drawn our attention to

the Balance Sheet as on 31.03.2001 indicating the extent of investment

made and list of immovable properties held by the assessee as on

31.03.2001.We find that the plot in question has been disclosed in the

list of immovable properties as on 31.03.2001. Since the purchase of

asset has already been reflected in the Balance Sheet for the financial

year ending in which the asset was purchased, mere seizure of some

documents pertaining to the said property would not make the

13 ITA Nos. 383 to 386/PUN/2016 ITA Nos. 2458 & 2459/PUN/2016

documents incriminating. We do not find any infirmity in the order of

Commissioner of Income Tax (Appeals) in deleting the addition.

Accordingly, the impugned order is upheld and the appeal of Revenue

for the assessment year 2008-09 is dismissed being devoid of any merit.

09 is dismissed.

ITA No.386/PUN/2016 (By Revenue) Assessment Year 2009-10

Commissioner of Income Tax (Appeals) by raising following grounds:

“i) On the facts and circumstances of the case and in law, the ld. CIT(A) was not justified in considering that the additions which are not based on the material gathered during the search are beyond the scope of assessment u/s.153A without appreciating that the additions made by the AO was as a result of search and the issues directly or indirectly emerged only after the search action and evidences gathered during the assessment proceedings and hence cannot be seen in isolation from search. ii) On the facts and circumstances of the case, the ld. CIT(A) erred in deleting the addition of Rs.1,19,98,381/- as business income and treating the same as Long Term Capital Gain. iii) The appellant craves to add, amend or delete any grounds of appeal.”

2009-10 as well no incriminating documents were found and there was

no pending assessment. The assessee filed return of income u/s.139 of

the Act on 03.09.2009, time for issuing notice u/s.143(2) expired on

30.09.2010. No notice u/s.143(2) of the Act was issued to the assessee

till then. Thus, it is a case of closed assessment. The ld. AR pointed that

addition was made by the Assessing Officer merely by changing head of

14 ITA Nos. 383 to 386/PUN/2016 ITA Nos. 2458 & 2459/PUN/2016

income. The assessee had disclosed income from trading of shares as

‘capital gain’. The Assessing Officer made addition by holding gain on

sale of shares as ‘business income’. The ld. AR submitted that in view of

law laid down in the case of CIT Vs. Murli Agro Products Ltd. (supra),

no addition can be made without there being any incriminating material

and there is no pending assessment. The Assessing Officer has made

addition merely on the basis of change of opinion. The Commissioner of

Income Tax (Appeals) deleted the addition following the law laid down

by the Hon'ble Jurisdictional High Court.

Assessing Officer and prayed for reversing the findings of Commissioner

of Income Tax (Appeals) on this issue.

solitary issue raised in the appeal by Revenue is with regard to change

of head of income. The assessee disclosed gain from trading in shares

under the head “capital gains”. The Assessing Officer changed the head

of income to “Business Income”. It is an undisputed fact that there was

no pending assessment and no incriminating material was found during

search. Thus, it is a case of non-abated assessment. The Assessing

Officer cannot make addition by merely changing head of income in

assessment proceeding u/s.153A of the Act, without there being any

incriminating material in a case of closed assessment. We do not find

any infirmity in the order of Commissioner of Income Tax (Appeals) in

deleting the addition. The findings of the Commissioner of Income Tax

15 ITA Nos. 383 to 386/PUN/2016 ITA Nos. 2458 & 2459/PUN/2016

(Appeals) are upheld, consequently, appeal of the Revenue for the assessment year 2009-10 is dismissed.

Order pronounced on Thursday, the 28th day of February, 2019.

Sd/- Sd/- (डी. क�णाकरा राव/D. KARUNAKARA RAO) (�वकास अव�थी /VIKAS AWASTHY) लेखा सद�य/ACCOUNTANT MEMBER �या�यक सद�य/JUDICIAL MEMBER

पुणे / Pune; �दनांक / Dated : 28th February, 2019. SB

आदेश क� ��त�ल�प अ�े�षत / Copy of the Order forwarded to :

अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. 3. The CIT(Appeals)-12, Pune. 4. The Pr. CIT, Central, Nagpur. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, “ए” ब�च, 5. पुणे / DR, ITAT, “A” Bench, Pune. गाड� फ़ाइल / Guard File. 6.

// True Copy // आदेशानुसार / BY ORDER,

�नजी स�चव / Private Secretary आयकर अपील�य अ�धकरण, पुणे / ITAT, Pune.

16 ITA Nos. 383 to 386/PUN/2016 ITA Nos. 2458 & 2459/PUN/2016

Date 1 Draft dictated on 15.02.2019 Sr.PS/PS 2 Draft placed before author 28.02.2019 Sr.PS/PS 3 Draft proposed and placed JM/AM before the second Member 4 Draft discussed/approved by AM/JM second Member 5 Approved draft comes to the Sr.PS/PS Sr. PS/PS 6 Kept for pronouncement on Sr.PS/PS 7 Date of uploading of order Sr.PS/PS 8 File sent to Bench Clerk Sr.PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R 11 Date of dispatch of order