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Income Tax Appellate Tribunal, DELHI BENCH: ‘C’ NEW DELHI
Before: SHRI R. K. PANDA & MS SUCHITRA KAMBLE&
This appeal is filed by the Revenue against the order dated 29/09/2015 passed by CIT(A)-XXVI, New Delhi for Assessment Year 2006-07.
The grounds of appeal are as under:-
“1. The order of Ld. CIT (A) is not correct in law and on facts.
2. That the CIT (A) has substantially erred on facts and in law in condoning the delay in filing of appeal without considering the illegal conduct of the assessee during the search operations including manhandling the search officers, looting of seized material and registration of criminal case against the promoters of the group and their associates due to such criminal actions.
3. That the CIT (A) has erred on facts and in law in condoning the delay in filing of appeal without considering the non compliant and highly non co- cooperative conduct of the assessee during the original assessment proceedings and the reassessment proceedings after the revision order passed by the CIT u/s 264 of Act.
That the CIT (A) has substantially erred on facts and in law in condoning the delay in filing of appeal without considering the fact that the assessee remained non compliant to the notices issued by the Income Tax Authorities even though an affidavit was filed by the director of the assessee undertaking that no non- compliance shall be made to the notices issued by the Income Tax Authorities.
5. That the CIT (A) has substantially erred on facts and in law in condoning the delay in filing of appeal without appreciating and considering the observations of his Ld. Predecessor (specifically under para 8.4 of the order) while dismissing the appeal of the assesee against the penalty imposed under Section 271 (l)(b) of the Act.
6. That the CIT (A) has substantially erred on facts and in law in condoning the delay in filing of appeal in relying upon the judicial precedents without appreciating that the referred judicial precedents call for the bonafide conduct and no negligence of the assessee which is completely absent in this case.
7. The CIT(A) has erred on facts and in law in holding that AO could not have proceeded to frame assessment u/s 153A in respect of the year under consideration on the ground that no incriminating material was found whereas the CIT(A) has himself referred about the incriminating material in para-22 of the order.
8. The CIT(A) has erred on facts in law in deleting the addition of Rs. 20,90,000/- made by AO on account of unexplained credit in the bank account.
The CIT(A) has erred on facts in law in deleting the addition of Rs.95,00,000/- made by AO on account of unexplained cash credit in the form of advance without considering the prerequisites of Section 68 of the Act.
The CIT(A) has substantially erred on facts and in law in deleting the addition of Rs. 1,00,00,000/- made by AO on account of unexplained credit.
The CIT(A) has erred on facts in law in deleting the addition on account of different unexplained credits without properly verifying the identity, genuineness and creditworthiness of the transactions and without applying the ratio of the decisions of Hon’ble Delhi High Court in the case of Nova Promoters, Nipun Builders, N.R. Portfolio, MAF Academy etc.
The CIT (A) has erred in facts and law in allowing the appeal of assessee by relying upon the additional evidences filed in the course of appeal and without giving an opportunity to the Assessing Officer to rebut the submissions filed by assessee.
The CIT(A), being a fact finding authority, has erred in facts and in law in allowing the appeal of the assessee without independently verifying the facts of the case, as mandated by the Hon’ble Delhi High Court in the case of CIT Vs Jansampark Advertising (375 ITR 373).
The CIT (A) has erred in relying upon submissions made by the assessee before the CIT in the course of proceeding u/s 264 of the Act in allowing the relief on various grounds without appreciating that the matter was set aside by the CIT to the file of the AO to re-examine the issues afresh and the assessee had not made any compliance before the AO in the course of set aside proceeding and therefore the issue remained unexamined.
The assessee company is dealing in real estates, land trading and development. A search was conducted at the officer premises of the company on 31.01.2008. Accordingly, a notice u/s 153A was issued on 24.11.2008 and again notice u/s 142(1) alongwith questionnaire was issued on 19.10.2009. The assessee did not file return of income in response to the notices within the time allowed. On 25.11.2009, the assessee filed a letter with a print out of return for A.Y. 2006-07 and requested that return filed u/s 139 of the Act should be treated as return filed under Section 153A of the Act. The Assessing Officer on 29.12.2009 passed order u/s 153A/144 determining total income at Rs 2,15,74,710/-.
4. Being aggrieved by the Assessment Order, the assessee filed appeal before the CIT(A). The CIT(A) allowed the appeal of the assessee.
The Ld. DR submitted that the assessment was ex-parte originally and after the order passed under Section 264 by the CIT still the assessee did not file the documents before the Assessing Officer for the second round as well. The Ld. DR submitted that the Assessing Officer has rightly made additions and the CIT(A) without calling for remand report allowed the appeal of the assessee. The Ld. DR submitted that there is incriminating material available on record during the search. The Ld. DR relied upon the order of the Assessing Officer.
The Ld. AR submitted that the original returns were filed on 07.11.2006 by the assessee whereas the search took place on 31.01.2008. The Ld. AR further pointed out that the documents regarding repayment seized from the assessee company which was annexure A-15 page 65 clearly shows that the amount outstanding towards M/s Lakshya Buildtech stands sqarued up by the payment made by M/s Vatika Landbase P Ltd. and accordingly at the end of the year, the amount was outstanding not towards M/s Lakshya Buildtech but towards M/s Vatika Landbase P. Ltd. Thus, the Ld. AR submitted that there is no incriminating material as these documents were produced at the time of the original assessment proceedings itself. The Ld. AR relied upon the decision of the Hon’ble Delhi High Court in case of CIT Vs. Kabul Chawla dated 28/8/2015. On merit as well the Ld. AR relied upon the order of the CIT(A).
We have heard both the parties and perused the material available on record. The CIT(A) held as under:
“10. I have considered the legal issue raised by the appellant based upon various judicial pronouncements highlighted in his written submissions. It is seen that the judgment of Hon’ble jurisdictional High Court in the case of CIT v MGF Automobiles dated 13.08.2015 has laid the law with reference to this issue…………………….
SUMMARY OF THE LEGAL POSITION (xxiii) On a conspectus of Section 153A(1) of the Act, read with the proviso thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under:-
(a) Once a search takes place under Section 132 of the Act, notice under Section 153A : will have to be mandatory issued to the person searched requiring him to file reruns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place.
(b) Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be completed by the AOs as a fresh exercise.
(c) The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income’ of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs "in which both the disclosed and the undisclosed income would be brought to tax."
(d) Although Section 153A 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."
(e) In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153A is relatable to abated proceedings (i.e those pending on the date of search) and the word 'reassess' to completed assessment proceedings.
(f) Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO.
(g) Completed assessments can be interfered with the AO while making the assessment under Section 153A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment. (xxiv) The present appeals concern AYs, 2002-03, 2005-06 and 2006-07. On the date of the search the said assessments already stood completed. Since no incriminating material was unearthed during the search, no additions could have been made to the income already assessed.
(xxv) The question framed by the Court is answered in favour of the Assessee and against the Revenue.
(xxvi) The appeals are accordingly dismissed but in the circumstances no orders as to costs.”
In view of above analysis of legal view on the issue, the AO couldn’t have proceeded to frame assessment u/s 153A in respect of year under consideration as no incriminating documents/assets have been found during search operation pertaining to this year. This ground of appeal, is therefore, allowed.
Thus, in our opinion, the CIT(A) has rightly held that there is no incriminating documents/assets found during the search operation. Though the Ld. DR disputed the same, but could not demonstrate that the documents are incriminating in nature. In fact, these documents prove the transactions of the assessee as claimed by the assessee in its books of accounts which were produced before the Assessing Officer during the assessment proceedings. As regards merit of the case are concerned the relevant extracts of the order of the CIT(A) are as under: “18. 1 have considered the facts of the case, the basis of addition made by the AO and the arguments of the AR during the assessment proceedings as well as reassessment proceedings It is seen that the appellant had claimed the allowance of the impugned expenses on the ground that the same were incidental and necessary in carrying on the business but despite specific requirement of the AO, the evidence of having incurred the said expenses was not filed. In the circumstances, the AO was correct in disallowing the same. The expenses like audit fees, printing and stationary, ROC filing fees though more or less mandatory in nature have to be shown to be paid and necessary vouchers to support the same has to be filed, which has not been done. Therefore, the same cannot be allowed merely on the ground that the same because of their inherent nature are necessary for the business. The addition made is therefore, confirmed except in respect of bank charges of Rs 3629 which are evident from the bank account perusal.” …… “21. I have considered the facts of the case, the basis of addition made by the AO and the arguments of the AR during the assessment proceedings as well as reassessment proceedings. It is seen that the appellant had explained the query of the AO on the issue by submitting that the impugned deposits were out of the cash available with the appellant as evidenced by the cash book maintained in the regular course of business. It is also seen that the AO in his report submitted to CIT(C)-2, New Delhi in the proceedings u/s 264, had clearly accepted that the Assessee had opening cash balance of Rs 22,37,794 as on 31.03.2005 and in view of that, the addition made was excessive. This clearly shows that the observation of the A.O the assessment order that no explanation had been filed by the assessee on the issue is contrary to the facts of the case. The explanation of the assessee is supported by the cash book maintained on day to day basis which is part of the regular books of accounts and the same have also been audited. It is also seen that there has not been any defect with respect to the maintenance of books of accounts so as to render the same doubtful or unreliable. The judicial pronouncements on the issue relied upon by the AR of the appellant have been perused and I am in agreement with the same. In the circumstances, the addition does not survive.”…… “24. I have considered the facts of the case, the basis of addition made by the A.O and the arguments of the AR during the assessment proceedings as well as reassessment proceedings. It is seen that the facts pertaining to transaction with M/s Lakshya Buildtech have not been correctly appreciated as the reply of the assessee dated 26.02.2013 has not been taken into consideration. It has been clearly highlighted in the said reply that the amount of Rs 95 lakhs received as advance for land during the year under consideration had been repaid to M/s Lakshya Buildtech on behalf of the assessee by M/s Vatika Landbase P Ltd. It is also seen that the factum of repayment is evidenced by document at page 65 of annexure A-15 seized from the appellant company which clearly shows that the amount outstanding towards M/s Lakshya Buildtech stands squared up by the payment made by M/s Vatika Landbase P Ltd and accordingly at the end of the year, the amount was outstanding not towards M/s Lakshya Buildtech but towards M/s Vatika Landbase P Ltd. It is quite logical that if the said advance received from M/s Lakshya Buildtech was of any doubtful nature so as to be in the nature of appellant's own unaccounted income, then there was no necessity to square it up by payment made by cheque on behalf of the assessee by M/s Vatika Landbase P Ltd. It is also seen that the said transaction has been confirmed by M/s Vatika Landbase P Ltd. The said confirmation -it been filed by the appellant at the stage of proceedings u/s 264. In view of the above detailed analysis of the submission made by the appellant, the observation of the AO in the assessment order that no details had been filed at any stage is contrary to the facts on record. In the circumstances, the burden cast upon the appellant u/s 68 was clearly discharged by bringing on record the various facets of the transaction. It is not the case that any queries had been caused by the AO to bring on record any adverse evidence to suggest doubts over the identity, creditworthiness, genuineness of M/s Lakshya Buildtech or M/s Vatika Landbase P Lt. It is also an important fact that no evidence in the form of any incriminating document or statement had been found during the course of search operation to support the presumption that the impugned advance from M/s Lakshya Buildtech was not a genuine transaction. I had also caused the appellant to file more evidence to support the creditworthiness of M/s Lakshya Buildtech and in pursuance thereof the financial statements of M/s Lakshya Buildtech had been filed for FY 2005-06 which show that it had total share capital and unsecured loans amounting to Rs 3,08,00,000 as on 31.03.2006 and the said company as per the record of the ROC was having address at B-116, Ground Floor, Okhla Industrial Area, Phase-I, New Delhi and was assessed with the Circle 15(1), Delhi. It is also seen that there are advances from developers to the tune of Rs 13,20,31,464 and there has been land purchased during the year amounting to Rs 12,76,66,827. The analysis of these figures clearly show that M/s Lakshya Buildtech is having sufficient resources to advance the amount of Rs 95 lakhs and the said company is also in the business of builders and developers. Apart from this, the said amount stand repaid on behalf of the assessee by M/s Vatika Landbase P Ltd and the same has been confirmed by M/s Vatika Landbase P Ltd. All these evidences have been ignored by the AO and apart from that no efforts have been made independently to examine the creditworthiness. In the circumstances, I don't see any logic in treating the said advance of Rs 95 lakhs as unexplained u/s 68. The same is directed to be deleted.”
“27. I have considered the facts of the case, the basis of addition made by the AO and the arguments of the AR, during the assessment proceedings as well as reassessment proceedings. It is seen that the appellant had filed specific details to explain the credits r e c e i v e d from Smt Priti Paul to the tune of Rs 75 lakhs and Sh Sandeep Paul to the tune of Rs 15 lakhs. The said explanation also detailed the fact that the amounts in question had originally been paid by the appellant company in FY 2004-05 for proposed purchase of land and it was on account of non-materialization of the deal that the said amount had been returned in this FY on 20.04.2005 and 21.04.2005. The same reply had been reiterated by the appellant vide his reply dated 26.02.2013. It is also seen that the AO in his report to the CIT(C) -2 u/s 264 had clearly admitted that no specific reason had been pointed out by the AO to make the impugned addition of Rs 1 crore and the submissions made by the assessee were received after passing of the original assessment order. In view of these facts, it becomes apparent that the AO in the reassessment proceedings did not refer to the assessment record or to the reply filed on 26.02.2013 and proceeded to make the impugned addition on the presumption that the said credits were unexplained. The facts clearly show that the appellant had advanced amounts to Smt Priti Paul and Sh Sandeep Paul in the FY 2004-05 in pursuance of proposed purchase of land and the amounts received during the year under consideration from the same persons is on account of refund only. It is another matter that the AO in the FY 2004- 05 had treated the said advances as unexplained as well. In view of the above detailed facts and circumstances of the case, the said credits in the bank account clearly pertain to the amounts received as refunds from Smt Priti Paul and Sh Sandeep Paul and therefore, no addition u/s 68 is called for. The same is directed to be deleted.
In the result the appeal is allowed.”
The CIT(A) has given a detailed and reasoned order on merit as well and the Ld. DR could not make out any contrary facts as stated in the order of the CIT(A). The submission of the Ld. DR that the documents were not filed before the Assessing Officer is also not correct as these documents have been submitted before the Assessment proceedings as per the record. Therefore, there is no need to interfere with the findings of the CIT (A). This appeal filed by the Revenue does not survive.
In result, the appeal of the Revenue is dismissed.