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Income Tax Appellate Tribunal, “B” BENCH, MUMBAI
आयकर अपीलीय अधिकरण “B” न्यायपीठ म ुंबई में। IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, MUMBAI श्री महावीर स िंह, न्याययक दस्य एविं श्री राजेश कुमार लेखा दस्य के मक्ष। BEFORE SRI MAHAVIR SINGH, JM AND SRI RAJESH KUMAR, AM Aayakr ApIla saM./ (inaQa-arNa baYa- / Assessment Year 2007-08) The Jt. Commissioner of Benco Finance and Investments Income Tax, Pvt. Ltd. Central Circle-7(2), Room No. Vs. 621, Tulsiani Chambers, Nariman 655, 6th floor, Aayakar Bhavan, Point, Mumbai-400 021 M.K. Road, Mumbai-400 020 .. (p`%yaqaaI- / Respondent) (ApIlaaqaI- / Appellant) स्थायी लेखा िं./PAN No. AABCB9349R अपीलाथी की ओर े / Appellant by : Shri Awungshi Gimson, CIT DR प्रत्यथी की ओर े / Respondent by : Shri Madhur Agarwal, AR ुनवाई की तारीख / Date of hearing: 13.08.2019 घोषणा की तारीख / Date of pronouncement : 21.08.2019 AadoSa / O R D E R महावीर स ुंह, न्याययक दस्य/ PER MAHAVIR SINGH, JM: This appeal of Revenue is arising out of the order of the Commissioner of Income Tax (Appeals)-49, Mumbai in appeal No. CIT(A)- 49/IT-36/2015-16 dated 05.01.2018. The assessment was framed by Dy. Commissioner of Income, Central Circle-7(2), Mumbai (in short DCIT/AO) under section 143(3) Read with section 153A of the Income-tax Act, 1961 (hereinafter ‘the Act’) vide order dated 27.03.2015 for AY 2007-08.
2. The only issue in this appeal of Revenue is against the order of CIT(A) deleting the addition made by AO on account of unexplained 2 share application money under section 68 of the Act amounting to ₹ 3,91,55,000/- and disallowance of expenses relatable to exempt income under section 14A read with Rule 8D of the Rules, as according to CIT(A), the original assessment has not abated and there is no incriminating material found during the course of search. Hence, the assessment on this addition was deleted in view of the decision of Hon’ble Bombay High Court in the case of CIT vs Continental Warehousing Corporation (Nhava Sheva) Ltd. (2015) 374 ITR 645 (Bom). For this, Revenue has raised the following two grounds: - “a) Whether on the facts and in the circumstances of the case and in law, the ld. CIT(A) was justified in deleting the addition of ₹ 3,91,55,000/- under section 68 of the Act in respect of share application money and addition of ₹ 11,24,964/- under section 14A made by the Assessing Officer, as it was not based on incriminating material found during the course of search.
d) Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition of ₹ 3,91,55,000/- under section 68 of the Act in respect of share application money and addition of ₹ 11,24,964/- under section 14A made by the assessing officer without appreciating the fact that the decision of continental warehousing corporation & the decision in the case of All Cargo Global Logistics have not been accepted by the department and an SLP has been filed in 3 the Supreme Court in both the cases decided by the High court i.e. Continental Warehousing Corporation as well as all Cargo Global Logistics vide appeal civil 8546 of 2015 and SLP civil 5254-5265 of 2016 respectively.”
We have heard rival contentions and gone through the facts and circumstances of the case. Brief facts are that the assessee company is engaged in finance and investment activities. The original return of income was filled by the assessee on 28.10.2007 declaring total income at ₹ 52,850/- under normal provisions. A search and seizure action under section 132 of the Act was conducted in the assessee’s case on 29.01.2013. In pursuance to this, a notice under section 153A of the Act was issued to the assessee on 14.02.2014. In response to this, the assessee filed Return of income declaring taxable income of Rs. 49,350/- on 11.03.2014. Subsequent to the search and seizure notice under section 143(2) of the Act dated 04.12.2014 and 142(1) of the act dated 15.12.2014 were issued and served on the assessee. The assessment under section 143(3) read with section 153A of the Act was completed on 27.03.2015 assessing the total income at ₹ 4,03,51,810/-. The assessee has given chronology of events, which are tabulated as under: - Particulars Date Before Search proceedings: Original Roll filed 28.10.2007 Intimation under section 143(1) of the Act 28.10.2008 Time limit of issue of notice under section 153(2) of the Act is expired 30.09.2008 No order U/s 143(3) of the Act was passed by the Assessing Officer - During the search proceedings Search and seizure action u/s 132 of the Act was conducted 29.01.2013 Notice issued under section 153A of the Act 14.02.2014 ROI filled against the notice issued u/s 153A of the Act 11.03.2014 Notice issued u/s 143(2) of the Act 04.12.2014 Order passed u/s 143(3) read with section 153A of the Act 27.03.2015 4 4. We noted that the CIT(A) has recorded categorical finding after examining the records of the case and the remand report of the AO that there is no incriminating material found qua these additions and he recorded following findings: - “As could be seen from the above report of the assessing officer there is nothing in the report which pertains to the assessment year 2007-08 which is the relevant assessment year. Also the companies which have invested in the assessee company are four companies listed below:
Morya Erectors Private Limited
Ruchi Integrated Steels (india) Limited
3. Ruchi Power Corporation Limited These companies have not subscribed to the share capital in the relevant assessment year and have no bearing to the KY in question. For the relevant assessment year i.e. 2007-08 the share capital has been invested by 13 companies as could be seen from the table mentioned in the assessment order. The assessing officer's report is silent on the investment made by these companies. The assessing officer has made general statements that major part of the search is related to Benco Finance and the Ruchi group and incriminating documents were found during the search action.
5 What incriminating documents were found is nowhere mentioned nor any copies forwarded by the AO.
It could be seen from the facts of the case and the remand report submitted by the assessing officer that there is no incriminating material found during the search on the basis of which the above additions have been made by the assessing officer in the relevant assessment year. The Hon’ble Bombay High Court in the case of CIT vs. Continental Warehousing (Corporation 58 Taxmann.com 78 after considering the decision of Al cargo Global Logistics Ltd 23 Taxmann.com 103 (BOM) (SB) held that no addition - can be made in respect of assessments which have become final if no incriminating material is found during the search. Further the honorable ITAT Mumbai in the case of Bermaco Energy Systems Ltd vs. DCIT 2199 and 2202/MUM/2013) in order dated 31 05.2016 held as under:
"We have considered rival contentions, carefully gone through the orders of authorities be/ow and also the paper books filed by the Id. AR, particularly, the pages to which our attention was invited during the course of hearing. We had also deliberated on the judicial pronouncements referred by Id. AG and CIT (A)
6 in their respective orders as well as cited by Id. AR and DR during the course of hearing before us in the context of factual matrix of the instant case. From the record we found that search was carried on 31.10.2009 at the business and residential premises of the assessee. Thereafter assessment was framed u/s 153A r, w. s. 143(3) of IT Act, In respect of assessment year 2004- 05, the assessee has filed its return of income on 31.10.2004, which was processed u/s 143(1) but no scrutiny assessment notice ti/s 143(2) was issued till 31.10.2005. As per the relevant provisions of law prevailing during the year cinder consideration notice u/s 143(2) is required to be issued before expire of 12 months from the end of the month in which return was furnished. Accordingly, the AG should have issued notice u/s 143(2) by 31.10.2005. However, no such notice was issued, thus, the assessment is treated to be completed since on the date of search i.e. 31. 10.2009, limit for issuing notice Li/s 143(2) was already expired. In respect of assessment year 2005-06 assessee has filed its return of income on 29.10 2005, which was also processed u/s 143(1). For taking into scrutiny notice u/s 143(2) was required to be issued before 31. 10.2006 i.e. time limit for issuing notice during the relevant assessment year tinder consideration. However, no notice u/s 143(2) was issued Even 7 no notice u/s 148 was issued for reopening of the assessment. Thus, the assessment for both the assessment year i.e. AY 2004-05 & 2005- 06, had become final and was not pending, therefore, there was 170 question of abatement. We had carefully gone through the order of AG as well as CIT (A). We had also gone through the statement recorded u/s 132(4) and did not find any mention of incriminating material with regard to bogus share capital or unsecured loans having been received by assessee in these years Whatever share capital and unsecured loans were received by the assessee was duly recorded in the regular books of account and shown in the audited accounts filed along with the return of income for the respective years. Applying the proposition of law laid down by ITAT Special Bench in the case of All Cargo Logistics Ltd., 137 ITO 287, which was confirmed by Hon'ble Bombay High Cowl vide order dated 21.04.2015, to the facts of the instant case, we can satisfy reach to the conclusion that in respect of the years for which assessment was not pending on the date of search and when no incriminating material was found during the course of search, the addition so made in the AY 2004-05 & 2005-06 were not justified. ..
8 In view of the above judicial pronouncements and also those which have been relied upon by the assessee in its submissions it is held that the assessing officer made the aforesaid additions in the absence of any incriminating material found during the search. Therefore, the additions made by the assessing officer under section 68 and under section 14 A are deleted.
The learned counsel for the assessee has further argued that the case could not have been reopened under section 153 A as there is no incriminating material found by the Department during the search. However, this contention of the learned counsel is not correct as the AO is mandated by law under section 153A (1) to assess or reassess the total income in respect of six assessment years immediately preceding the assessment year in which the search was conducted. Assessment year 2007- 08 being one of the preceding six assessment years, the assessing officer has rightly issued notice under section 153 A. Therefore, the validity of the order is upheld but the additions made by the assessing officer are deleted as they are not based on any incriminating material found during the search. This ground of appeal is PARTLY ALLOWED.”