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Income Tax Appellate Tribunal, “D” Bench, Mumbai
Before: Shri Shamim Yahya & Shri Ravish SoodShri Mihir Nerurkar
PER RAVISH SOOD, JM
The present appeal filed by the revenue is directed against the order passed by the CIT(A), 54, Mumbai, dated 07.04.2017, which in turn arises from the order passed by the A.O under Sec. 144 r.w.s 153A of the Income Tax Act, 1961 (for short „Act‟), dated 26.03.2015. The revenue assailing the order of the CIT(A) has raised before us the following grounds of appeal: “(1) Whether the Ld CIT(A) has erred in law and facts in granting relief to the assessee while holding that no addition can be made in P a g e | DCIT, CC-6(2) Vs. Shri Mihir Nerurkar respect of an unabated assessment which has become final if no incriminating material is found during the search.”
2. Briefly stated, the assessee had filed his original return of income for A.Y 2011-12 on 02.09.2011, declaring total income at Rs.19,05,140/-. Search and seizure operations under Sec. 131 of the Act were carried out in the case of “Samira Group” on 21.03.2013. Assessee was covered in the aforesaid search proceedings, and warrants for his residential premises at 7, Shivayan Shrinagar Complex, P.L Lokhande Marg, Chembur, Mumbai and for Locker No. 87 held by him with Saraswat Cooperative Bank of India, Chembur were executed. In compliance to the notice issued under Sec.153A, the assessee filed his return of income on 12.12.2014 disclosing total income of Rs.19,05,140/-. Assessment under Sec.144 r.w.s 153A, dated 26.03.2015 was framed at a total income of Rs.3,93,20,360/-. The A.O while framing the assessment had inter alia made the following additions/disallowances in the hands of the assessee :
Sr. No. Particulars Amount 1. Addition of the commission income on sale of land Rs.6,00,000/- an other real estate transactions as was offered by the assessee as his additional income during the year before the income tax settlement commission.
Addition of „on-money‟ received by the assessee on Rs.18,00,000/- sale of flat (as gathered on the basis of incriminating documents found during the course of search proceedings) 3. Addition towards „on-money‟ received by the Rs.21,00,000/- assessee on sale of flat (as gathered on the basis of incriminating documents found during the course of search proceedings) 4. Addition towards irreconciled sale consideration Rs.48,30,980/- received by the assessee on sale of immovable property (as was discernible from the ITS details of the assessee) 5. Addition as per the deemed provisions of Sec.50C Rs.1,12,56,500/- on sale of property (as per the details discernible from the ITS data)
P a g e | DCIT, CC-6(2) Vs. Shri Mihir Nerurkar 6. Disallowance of unsubstantiated deductions Rs.1,10,796/- claimed by the assessee under chapter VIA 7. Disallowance of current year interest of housing Rs.1,50,000/- loan.
Disallowance of unsubstantiated claim of carry Rs.1,475/- forward of short term capital loss.
Disallowance of unsubstantiated business Rs.1,50,000/- expenses claimed by the assessee 10. Unexplained expenditure towards purchase of Rs.51,60,446/- mutual funds and payment of insurance premium by the assessee 11. Unexplained investment made by the assessee (as Rs.1,12,56,500/- discernible from the ITS data)
3. Aggrieved, the assessee carried the matter in appeal before the CIT(A). It was observed by the CIT(A) that the processing of the return of income filed by the assessee under Sec. 139 of the Act was already completed, and as on the date of initiation of the search proceeding i.e on 21.03.2013 no assessment/re-assessment proceedings were pending in his case for the year under consideration. Accordingly, the CIT(A) observed, that as on the date on which search proceedings were conducted i.e on 21.03.2013 no assessment proceedings were pending for the year under consideration i.e A.Y. 2011-12, therefore, the assessment in the case of the assessee was unabated. It was further observed by him that neither any notice was issued to the assessee under Sec.143(2)/148 of the Act for the year under consideration as on the date of search, i.e 21.03.2013, nor any assessment proceedings were pending before the A.O for the relevant year. Further, the CIT(A) called upon the A.O to verify from his records and submit the factual report, as to whether for the above referred assessment year any assessment/reassessment was pending as on the date of initiation of the search proceedings, which had got abated in terms of the provisions of Sec.153A of the Act. Apart there from, the A.O was also requested to specify whether any incriminating material/documents P a g e | DCIT, CC-6(2) Vs. Shri Mihir Nerurkar were found during the course of the search proceedings in respect of the disallowances/additions made, along with the details of the same. In reply, it was submitted by the A.O that on verification of the available records and as per the ITD system, it stood revealed that no scrutiny proceedings were pending prior to the search proceedings. Further, it was submitted by him that up to the date of initiation of the search proceedings no notice under Sec.143(2)/148 was issued to the assessee, and thus no assessment/reassessment was pending in his case for the year under consideration. Also, it was stated by the A.O that the scrutiny assessment was framed under Sec.153A after making the following additions/disallowances in the hands of the assessee :
Sr. No. Disallowance/addition Remarks 1. Addition of Rs.60000/- being This additions based on the assesses commission income. offering before the Hon‟ble ITSC.
2. Disallowance of Rs.1,50,000/- This disallowance is not on account of incriminating evidence found during the search as it is as based on non reconciliation of AIR/ITS details.
Disallowance of Rs.1,50,000/- This disallowance is not on account of incriminating evidence found during the search as it is based on non reconciliation of AIR/ITS details.4.
Addition of Rs.51,60,446/-being This disallowance is not on account of unexplained expenditure incriminating evidence found during the search as it is based on non reconciliation of AIR/ITS details.
Disallowance of Rs.110796/- This disallowance is not on account of being claim of Chapter VIA incriminating evidence found during Deduction. the search as it is based on non reconciliation of AIR/ITS details.
Addition of Rs.48,30,980/- This disallowance is not on account of incriminating evidence found during the search as it is based on non reconciliation of AIR/ ITS details.
Addition of Rs.1,12,56,500/- This disallowance is not on account of incriminating evidence found during P a g e | DCIT, CC-6(2) Vs. Shri Mihir Nerurkar the search as it is based on non reconciliation of AIR/ITS details.
8. Addition of Rs.1,12,56,500/- This disallowance is not on account of being unexplained investment in incriminating evidence found during progress the search as it is based on non reconciliation of AIR/ITS details.
4. In the backdrop of the aforesaid facts, it was observed by the CIT(A) that as on the date of initiation of the search proceedings, i.e on 21.03.2013 no assessment/reassessment proceedings were pending in respect of the year under consideration i.e A.Y 2011-12, therefore, the assessment proceedings in the case of the assessee did not abate. The CIT(A) drawing support from the judgment of the Hon’ble High Court of Bombay in the case of CIT Vs. Continental Housing Corporation (Nhava sheva) Ltd. 58 taxman.com 78 (Bom) observed, that in respect of completed assessments which did not get abated, the assessment could be made by the A.O u/s 153A only on the basis of the „books of accounts‟ or other documents not produced in the course of the original assessment but found in the course of search proceedings, and also on the basis of the undisclosed income or undisclosed property discovered in the course of the said search proceedings. The CIT(A) relying on the aforesaid judgment of the Hon‟ble High Court observed, that an unabated/completed assessment could be interfered with by the A.O while making of an assessment under Sec.153A, only on the basis of some incriminating material unearthed during the course of the search proceedings, and in absence of any such incriminating material the completed assessment could only be repeated. Accordingly, it was observed by the CIT(A) that in respect of abated assessment/reassessments, the A.O is vested with the jurisdiction to exercise normal assessment powers i.e the full power to assess/reassess any income on the basis of findings of the search, and also on the basis of any other material P a g e | DCIT, CC-6(2) Vs. Shri Mihir Nerurkar existing or brought on his record. However, it was observed by the CIT(A), that in respect of completed assessments which did not abate on the date on which search proceedings are conducted, assessment could only be made on the basis of „books of accounts‟ or other documents not produced in the course of the original assessment and found during the course of search proceedings, and also the undisclosed income or undisclosed property discovered in the course of the said proceedings.
5. Admittedly, as in the case before us, no assessment /reassessment proceedings were pending in the case of the assessee on the date of initiation of the search proceedings i.e on 21.03.2013 in respect of the year under consideration viz. A.Y. 2011-12, therefore, the question of abatement of the assessment proceedings for the said year does not arise at all. We find that in the backdrop of the aforesaid facts, the CIT(A) relying on the judgments of the Hon’ble High Court of Bombay in the case of CIT Vs. Continental Housing Corporation (Nhava sheva) Ltd. 58 taxman.com 78 (Bom) and that of the Hon’ble High Court of Delhi in the case of CIT Vs. Kabul Chawla (61 taxmam.com 412) (Del) had rightly concluded, that in respect of the unabated assessment of the assessee for the year under consideration viz. AY. 2011-12, the additions/disallowances which were not made on the basis of any incriminating material or undisclosed income or undisclosed property, discovered in the course of the said proceedings, could not be sustained and was liable to be struck down. On the basis of his aforesaid observations, we find that the CIT(A) had deleted certain additions/disallowances which were not backed by any incriminating material or undisclosed income or undisclosed property, discovered in the course of the said proceedings, as under :
P a g e | DCIT, CC-6(2) Vs. Shri Mihir Nerurkar Sr. No. Particular Amount 1. Addition made by the A.O towards capital gain on Rs.48,30,980/- sale of property not offered for tax by the assessee (as was discernible from the ITS data) 2. Addition of capital gain on sale of property i.e Flat Rs.1,12,56,500/- No.1302, 13th Floor Sterling Apartment, Devanagar, sold by the assessee during the year (as was discernible from the ITS data) 3. Disallowance of unsubstantiated deductions Rs.1,10,796/- claimed by the assessee under chapter VIA 4. Disallowance of the unsubstantiated claim of Rs.1,50,000/- interest on housing loan raised by the assessee 5. Disallowance of carry forward of short term Rs.1475/- capital loss 6. Disallowance of unsubstantiated business Rs.1,50,000/- expenses 7. Addition towards unexplained expenditure Rs.51,60,446/- incurred by the assessee towards credit cards payments and payments made for purchase of mutual funds and insurance premium (as was discernible from the ITS data) 8. Addition towards unexplained investment in Rs.1,12,56,500/- properties (as was discernible from the ITS data)