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PER K. NARASIMHA CHARY, J.M. Aggrieved by the order dated 25/3/2013 in appeal No. 29/11- 12/714, passed by the learned Commissioner of Income Tax (Appeals)- XXXIII, New Delhi (“Ld. CIT(A)”) in the case of Lt Foods Ltd. (previously M/s LT Overseas Ltd) (“the assessee”) for the assessment year, 2006-07, both the Revenue and the assessee preferred these two appeals. Since the appeals emanate from the very same assessment proceedings and the impugned order, we deem it just and convenient to dispose of these two appeals by way of this common order.
Brief facts of the case as could be culled out from the record are that the assessee is a company, engaged in the business of manufacturing and trading of rice. For the assessment year 2006-07, it had filed its return of income under section 139(1) of the Income Tax Act, 1961 (for short “the Act”) on 30/11/2006, declaring nil income and book profit under section 115JB of the Act at Rs.11,84,51,099/-. Assessment under section 143(3) of the Act was completed on 22/12/2008 at a total income of Nil, but the additions were made by the learned Assessing Officer on account of staff training expenses etc. and the assessee carried the matter in appeals.
There was a search and seizure operation under section 132 of the Act conducted on 10/02/2009 on the group of cases including the assessee company, pursuant to which notice under section 153A of the Act was issued on 7/10/2009 requiring the assessee company to file the 3 & 4163/Del/2013 return of income. Assessee filed the return of income under section 153A of the Act declaring an income of Rs.91,320/-. Learned Assessing Officer, vide order dated 24/12/2010 called for a special Audit Report under section 142(2A) of the Act for the assessment year 2006-07 and the special auditor submitted the report on 22/6/2011. After considering the same vide order dated 31/12/2011 the learned Assessing Officer assessed the taxable income of the assessee at Rs.20,51,94,631/-by making several additions.
Assessee preferred an appeal against the additions before the Ld. CIT(A) and challenged the assumption of jurisdiction of the Assessing Officer under section 153A of the Act also. By way of impugned order, Ld. CIT(A), allowed the claim for deduction under section 80IB (11A) of the Actand deleted the addition of Rs.1,74,82,760/- made by the Assessing Officer under section 69 of the Act. Challenging these two aspects, Revenue preferred ITA No. 4045/del/2013. Ld. CIT(A) negatived the objections raised by the assessee in respect of jurisdiction under section 153A of the Act exercised by the learned Assessing Officer and also reference to special audit in section 142 (2A) of the Act and sustained the additions made by the learned Assessing Officer by way of disallowance under section 40A(3) of the Act, 40(a)(ia) of the Act, personal expenses and disallowance under section 14A of the Act. Assessee, therefore, filed ITA 4163/del/2013.
ITA 4045/Del/2013 (Revenue’s appeal)
4 & 4163/Del/2013 5. Coming to the grounds No. 1 to 3 of the Revenue’s appeal, these grounds relate to the allowance of deduction under section 80IB (11 A) of the Act by the Ld. CIT(A). At the outset, it is brought to our notice by the Ld. AR that this issue was directly and substantially involved in assessee’s own case for the assessment years 2004-05 and 2005-06 and it was decided in favour of the assessee by granting relief. He produced the copy of the order dated 3/7/2019 in ITA No. 838/Del/2014, 4161 and 4162 /Del/ 2013 passed by a coordinate Bench in assessee’s own case for assessment years 2003-04 to 2005-06.
We have gone through the order of the Tribunal for assessment years 2004-05 and 2005-06. Vide paragraph Nos. 31 and 41, the Tribunal observed that the disallowance was made by the learned Assessing Officer without having any incriminating material found during the course of search and therefore, while following the decision of the Hon’ble Jurisdictional High Court in the case of CIT vs. Kabul Chawla, 380 ITR 573, the Tribunal reached a conclusion that such a disallowance cannot be sustained.
Insofar as this particular year 2006-07 is concerned, there is no dispute that the facts are identical. It is not the case of the Revenue that any incriminating material was seized at the time of search throwing some light on the aspect of allowability of 80IB (11A) of the Act. Assessment order speaks that it is only basing on the Revenue audited report, he reopened this issue and in view of the decision of the Hon’ble jurisdictional High Court in the case of Kabul Chawla (supra), such a course is impermissible. We, therefore, while respectfully following the 5 & 4163/Del/2013 decision of the jurisdictional High Court in the case of Kabul Chawla (supra), as was followed by a coordinate Bench of this Tribunal in assessee’s own case for the assessment year 2004-05 and 2005-06, reach a conclusion that the disallowance of deduction under section 80IB (11A) of the Act is bad under law and cannot be sustained. We, accordingly, uphold the findings of the Ld. CIT(A) and dismiss these grounds of appeal.
8. Coming to ground No. 4 of Revenue’s appeal, it pertains to the addition of Rs.1,74,82,760/-. Facts on this aspect are that the Assessing Officer made this addition on the basis of certain noting in the seized papers as pointed out by the special auditor. Record reveals that on going through the working made available by the assessee, special auditors pointed out that the assessee had devised a unique scheme to avoid/explain the unaccounted income/expenditure found recorded on the seized papers and created an entity of four main promoters of the group, claimed to be indulged in unaccounted transactions/siphoning of money, wherein all the documents found recorded on the credit side were treated as business receipts and all the amounts on the debit side as expenditure and the balance, if any left, was treated as business losses/business profit which were distributed among before persons and offered for taxation.
Assessee contended that the queries were raised by the Assessing Officer during the course of assessment of promoters/directors (individual cases) in respect of all the entries/transactions noted in the seized documents and it was replied that the Promoters/Directors of the earth group were involved in the business of trading of various items and 6 & 4163/Del/2013 trading in real estate; that it was also pointed out that all the entries noted in all the seized paper which were not recorded in the books of accounts or in respect of and related to the said trading business is done by the four brothers who are promoters/directors, namely, Vijay Kumar Arora, Ashwinie Kumar Arora, Surinder Kumar Arora and Ashok Arora. Assessee further contended that first of these trading transactions were done through Mr Pradeep. Assessee further contended that the income in respect of the said entries in the seized documents was declared in the individual cases to the tune of Rs.3,72,55,611/-while filing the return under section 153A of the Act and a further sum of Rs.5,21,50,000/-was declared on the basis of peak of all the transactions in the hands of said four brothers; that the total income declared/surrendered in respect of all the entries/transactions noted in all the seized documents was Rs.8,94,05,611/-; that the declaring/surrendering was made after discussion with the Assessing Officer and the taxes including the interest were paid accordingly; that the said declaration was duly accepted in the hands of the said four individuals for assessment years) and 2009-10, without Revenue preferring any appeal in the cases of such individuals. It was, therefore, contended that since the income on the basis of the transactions noted in the seized documents was already taxed in the hands of the individual cases, it is not open to the learned Assessing Officer to tax the said income again in the hands of the company, despite the fact that the said entries do not relate to the company as the mentioning of LT or Daawat was only for the sake of noting and it belongs to the individuals who are the Promoters/Directors of the Daawat group.
7 & 4163/Del/2013 10. Ld. CIT(A), having considered the contentions of the assessee and also the order dated 4/9/2012 for assessment years 2008-09 and 2009-10 passed by the Ld. Dispute Resolution Panel (DRP)-I in the case of the assessee, observed that the entries on the basis of which 40A(3) of the Act was invoked were taken from the seized material, peakof such cash entries was offered to tax as undisclosed income by the promoters of the company, namely, Vijay Kumar Arora, Ashwini Kumar Arora, Surinder Kumar Arora and Ashok Arora who were assessed by the learned Assessing Officer for such undisclosed income and the Ld. DRP also directed the Assessing Officer not to make addition on this issue in their order dated 4/9/2012. Ld. CIT(A) observed that since the issue emanates from the same seized material, and while agreeing with the Ld. DRP, reached the same conclusion. He, therefore, while allowing this ground directed the Assessing Officer to delete the addition.
Ld. AR submitted that the issue in the present caseemanate from the same seized material which was considered by the Ld. DRP for the assessment year 2008-09 and 2009-10 and Ld. CIT(A) did not commit any illegality while appreciating the contentions of the assessee in the light of the findings of the Ld. DRP by order dated 4/9/2012 for assessment years 2008-09 and 2009-10. Ld. AR submitted that since no appeal was preferred by the Revenue against the findings of the Ld. DRP, the Revenue cannot take a different stand in this appeal against their conduct in accepting the findings of the Ld. DRP.
Ld. DR placed heavy reliance on the assessment order and submitted that it was an error to tax the undisclosed income in the hands
We have gone through the record in the light of the submissions made on either side. It is an admitted fact that the addition in this case was made on the basis of the very same seized material that was considered by the Ld. DRP in assessee’s own case for the assessment years 2008-09 and 2009-10 by order dated 4/9/2012. It is also an admitted fact that the Ld. DRP directed the Assessing Officer not to make the addition on this issue. Such a finding has become final and as on the date it is not get disturbed. Further, the Revenue does not dispute the fact that the four individuals declared such income and surrendered the same while duly paying the taxes thereon. If at all those four individuals were not liable to pay such amount, the Revenue should not have accepted the same in their hands. Having accepted the contention of those four individuals and collecting the tax in their hands, itis not open for the Revenue now to say that such individuals were not liable to pay tax,but it is the company and company alone that is liable to pay tax. Revenue cannot approbate and reprobate and shift its stands.
While accepting the stand taken by the assessee that since the tax was collected in the hands of the four individuals who are the promoters of the company and this fact was taken notice by the Ld. DRP while passing the order dated 4/9/2012 in assessee’s own case for the assessment years 2008-09 and 2009-10 and to direct the Assessing Officer not to make any addition on this issue, we hold that the
This appeal relates to the objections of the assessee in respect of jurisdiction under section 153A of the Act exercised by the learned Assessing Officer (grounds No. 1 to 5) and also reference to special audit in section 142 (2A) of the Act (grounds No. 6 to 8) and additions made by the learned Assessing Officer by way of disallowance under section 40A(3) of the Act (ground No. 10 and 11), 40(a)(ia) of the Act (grounds No. 12 to 15, personal expenses (Ground No. 16) and disallowance under section 14A of the Act read with Rule 8D of the income Tax Rules, 1962 (grounds No. 17 to 20). Grounds No. 9 and 21 are general in nature and follow the result on the other grounds.
At the outset, Ld. AR submitted that as on the date of search under section 132 of the Act in the case of the group including the assessee on 10/02/2009, no proceedings were pending before the Assessing Officer, and therefore, in terms of the decision of the Hon’ble jurisdictional High Court in the case of Kabul Chawla (supra) no proceedings stood abated, relating to this year. Basing on this, he submitted that inasmuch as no incriminating material was found during the course of search, the impugned assessment completed under section 153A of the Act and the additions/disallowances were made in de hors
10 & 4163/Del/2013 any material/evidence found and seized during the course of search and, therefore, cannot be sustained. For this proposition, he placed reliance on the decisions of the Hon’ble jurisdictional High Court in the case of Kabul Chawla (supra), Chintels India Ltd vs. DCIT, 397 ITR 416 (Del), PCIT vs. Best Infrastructure (India) Ltd., 397 ITR 82 (Del), PCIT Vs. MeetaGutgutia, 395 ITR 526 (Del), Ld. PCIT vs. Ms Lata Jain, 384 ITR 543 (del), etc.
He further submitted that under very similar circumstances in assessee’s own case for the assessment years 2004-05 and 2005-06, a coordinate Bench of this Tribunal dealt with the issue and while following the decision of the Hon’ble jurisdictional High Court in the case of Kabul Chawla(supra)held that in case of concluded assessments, no additions/disallowances can be made in the absence of any incriminating material found during the course of search.
Ld. DR submitted that the special Audit Report was considered by the learned Assessing Officer and in the absence of any acceptable explanation from the assessee, learned Assessing Officer was justified in making the addition and the Ld. CIT(A) is justified in sustaining such additions.
We have gone through the record in the light of the submissions made on either side. Assessment order does not reveal any material that was seized during the search conducted on 10/02/2009, following basis for any of the additions covered by grounds No. 10 to 20. It is also not in dispute that as on the date of search, no proceedings relating to this year
11 & 4163/Del/2013 were pending before the Assessing Officer.In terms of the judgement in Kabul Chawla (supra),assessments and reassessments pending on the date of the search shall abate and the total income for such assessment years will have to be computed by the Assessing Officers as a fresh exercise; and that although Section 153A of the Act does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment "can be arbitrary or made without any relevance or nexus with the seized material. Obviously, an assessment has to be made under this Section only on the basis of seized material." Obviously assessment for the assessment year 2006-07 was a concluded assessment.
As a matter of fact, in assessee’s own case for the assessment years 2004-05 and 2005-06, while dealing with the similar situation and same set of facts, a coordinate Bench of this Tribunal held that in the absence of any incriminating material found during the course of search, no addition/disallowance can be made in cases of concluded assessments. No change of circumstancesto prompt us to take a different view from the view taken by the coordinate Bench in assessee’s own case for the assessment years 2004-05 and 2005-06 and not to follow the decision of the Hon’ble judicial High Court in the case of Kabul Chawla (supra) are brought to our notice. We, therefore, while respectfully following the decision of the Hon’ble jurisdictional High Court in the case of Kabul Chawla (supra) hold that the assumption of jurisdiction by the 12 & 4163/Del/2013 learned Assessing Officer(grounds No. 1 to 5)to make reference to special audit in section 142 (2A) of the Act (grounds No. 6 to 8) and to make the additions in respect of disallowance under section 40A(3) of the Act (grounds No. 10 and 11), under section 40(a)(ia) of the Act (grounds No. 12 to 15, personal expenses (round No. 16) and disallowance under section 14A of the Act read with Rule 8D of the Rules (grounds No. 17 to 20), is bad under law and cannot be sustained. We, therefore, allow the grounds of appeal of the assessee.
In the result, appeal of the Revenue is dismissed and the appeal of the assessee is allowed.
Order pronounced in open court on 12th December, 2019.