REAL INNERSPRING TECHNOLOGIES (P) LTD,NEW DELHI vs. DCIT, NEW DELHI

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ITA 514/DEL/2015Status: DisposedITAT Delhi14 November 2018AY 2011-126 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the assessment initiated under Section 153A was void ab initio as no incriminating material belonging to the assessee was found during the search. Proceedings under Section 153C could have been initiated at most.

What were the facts?

During a search operation on a group of companies, Rs. 10,00,000 cash was found at the premises of another entity, claimed by the assessee. The assessee explained this cash was brought by its General Manager from another unit.

What were the issues?

Whether the assessment initiated under Section 153A was valid when no incriminating material belonging to the assessee was found during a search on a group entity. Whether the addition of Rs. 10,00,000 as unexplained cash was justified.

Which sections of the Income-tax Act were involved?

Section 132,Section 153A,Section 153C

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, DELHI BENCHES: ‘F’, NEW DELHI

Before: SMT. BEENA A PILLAI & SHRI PRASHANT MAHARISHI

For Respondent: Smt. Sulekha Verma, CIT (DR)
Hearing: 05/11/2018Pronounced: 14/11/2018

ORDER PER BEENA A PILLAI, JUDICIAL MEMBER Present appeal has been filed by assessee against order dated 30/10/14 passed by Ld. CIT (A)-XXXIII, New Delhi for assessment year 2011-12 on the following grounds of appeal: Addition for alleged unexplained cash Rs. 10,00,000 1. “That on the facts and in the circumstances of the case and in law, Ld. CIT(A) erred in not deleting the wrongful addition made on account of alleged unexplained cash amounting to Real Innerspring Technologies (P) Ltd. Rs. 10,00,000/- ignoring assessee’s reply and explanation offered.

2. That on the facts and in the circumstances of the case and in law, Ld. CIT(A) erred in sustaining the wrongful addition made on account of alleged unexplained cash amounting to Rs. 10,00,000/- on the basis of conjectures and surmises, on legally unsustainable basis, without objectively considering assessee’s case and cited precedent. The appellant craves leave to add, to amend, modify, rescind, supplement or alter any of the grounds stated herein above, either before or at the time of hearing of this appeal.”

2.

Brief facts of the case are as under: A search and seizure operation under section 132 was carried out on 21/01/11 in DS group of cases. Group is primarily involved in manufacturing and trading of chewing tobacco and premium pan masala, besides other business. The group is also involved in food products, packing, hospitality, rubber steel and education business.

2.1 Assessee filed its return of income for year under consideration on 30/09/11 declaring loss of Rs.3,25,344/-. In response to notice, representative of assessee appeared before Ld. AO. Ld. AO observed that assessee is engaged in manufacturing of mattress, spring unit and base etc. It has been recorded by Ld. AO that during search and seizure proceedings took place at B-7- 8, Sector 3, Noida, office premises of assessee company and other group concerns cash of Rs.73,90,360/- and Rs. 60 Lacs was Real Innerspring Technologies (P) Ltd. found. It was observed that out of the seized cash Rs. 10 Lacs has been claimed by assessee company as belonging to assessee.

2.2 Upon query being raised by Ld. AO assessee submitted that General Manager of assessee, came from Rudrapur unit of company with cash of Rs. 10 Lacs to handed over to Noida unit. Is it was submitted by assessee that since General Manager reached very late, by the time cashier had left and the same was handed over to Sh. Subash Chand Gupta for safe custody. It was submitted by assessee that the amount is duly reflected in the companies audited financial statement under the head loans and advances sub Ledger income tax under protest. Assessee also produced extract of cash book of Rudrapur unit before Ld. AO in support of claim and affidavit by General Manager of assessee.

2.3 Ld. AO rejected submissions of assessee and added sum of Rs. 10 Lacs to total income from undisclosed sources. Aggrieved by order of Ld. AO assessee preferred appeal before Ld. CIT (A) who upheld addition.

3.

Aggrieved by order of Ld. CIT (A) assessee is in appeal before us now.

4.

Ld.AR submitted that material found during search could have been used for framing assessment under section 153C of the Act. He submitted that authorities below failed to appreciate fact that assessee is an independent entity. Placing reliance upon Inventory of cash dated 21/01/11 drawn by search team, Ld.AR submitted that entire cash has been found from premises of other person’s and does not carry name of assessee. He thus

Real Innerspring Technologies (P) Ltd. alleged that proceedings initiated by Ld.AO under section 153A is bad in law. Ld.AR placed reliance upon decision of Hon’ble Delhi High Court in the case of CIT vs Kabul Chawla reported in 380 ITR 573.

5.

On the contrary Ld.DR submitted that, there were simultaneous search at various premises, and assessee being part of the group, it should be construed that material was gathered from premises of searched person. He also submitted that search on Directors construed to be search on the company and initiation of assessment under section 153A is to be held valid.

6.

We have perused the submissions advanced by both the sides and the light of the records placed before us.

7.

During the arguments, Ld.AR submitted that assessee explained cash belonging to Rudrapur unit of assessee, which is reflected in books of account. He submitted that an affidavit of General Manager who carried cash and handed over to Subash Chander Gupta father of Sh. Archit Goyal, Director of assessee, since accountant had already left. He has thus submitted that under no sum circumstances the said cash of Rs. 10 Lacs could be treated as undisclosed.

8.

It is also submitted by Ld.AR that action initiated by Ld.AO under section 153A is not valid as assessee is not one of the person who forms part of search under section 132 of the Act. This fact is very much clear from “Inventory of Cash” found and seized dated 21/01/11 submitted by Ld.AR before us today. In Real Innerspring Technologies (P) Ltd. our opinion the search did not result in any incriminating material having found, belonging to assessee. We agree with the contention advanced by Ld. AR that, at the most revenue could have initiated proceedings under section 153C. Considering totality of facts, we hold assessment in case of assessee under section 153A to be void ab initio, liable to be quashed.

Accordingly, grounds raised by assessee stands allowed.

In the result appeal filed by assessee stands allowed.

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