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Income Tax Appellate Tribunal, MUMBAI BENCH “H”, MUMBAI
Before: SHRI C.N. PRASAD, HONBLE & SHRI RAJESH KUMAR, HONBLE
PER C.N. PRASAD (JM) 1. These three appeals are filed by the assessee against the common order of the Ld. Commissioner of Income-tax (Appeals)-11, Pune dated 21.12.2015 for the Assessment years. 2005-06, 2006-07 & 2007-08.
2 ITA.Nos. 1008, 1009 & 1010/MUM/2016 M/s. Abhishek Enterprises 2. In all these three appeals the assessee is challenging the order of the Ld. CIT(A) in upholding the action of the Assessing Officer in passing the order u/s.153A without jurisdiction and in the absence of any incriminating materials.
Ld. Counsel for the assessee, at the outset submitted that the Assessment Years under consideration i.e. 2005-06, 2006-07 & 2007-08 were not abated as there is no pending proceeding for all these three assessment years when search took place on 18.10.2010. It was submitted that the time limit for issue of notice u/s 143(2) for all these three Assessment Years was also lapsed on 30.09.2006, 30.09.2007 and 30.09.2008 respectively. It was submitted that when the assessments were not abated the additions can be made only based on the seized material and in the absence of any seized material the disallowance of advertising and publicity expenses and disallowance of interest income under the head income from other sources instead of business income cannot be made while completing the assessments u/s. 153A of the Act. Reliance was placed on the following decisions. a. Gurinder Singh Bawa v. DCIT [Mumbai] 28 taxmann.com 328 b. Anil Mahavir Gupta v. ACIT [Mumbai] 82 taxmann.com 122 c. Smt. Yamini Agarwal v. DCIT [Kolkata] 83 taxmann.com 209 d. Bishwanath Garodia v. DCIT [Kolkata] 76 taxmann.com 81 e. CIT v. Gurinder Sigh Bawa [386 ITR 483 (Bombay)] f. All Cargo Global Logistics Ltd. v. DCIT [ITAT Mumbai Special Bench] [147 TTJ 513]
3 ITA.Nos. 1008, 1009 & 1010/MUM/2016 M/s. Abhishek Enterprises 4. Ld. DR vehemently supported the orders of the Authorities below.
5. We have heard the rival submissions and perused the orders of the authorities below. On a reading of the Assessment Order there is nothing to suggest that the additions/disallowances were made based on any seized materials. There is no any reference to seized materials whatsoever based on which the additions/disallowances were made. Similarly, though the assessee raised specific ground before the Ld.CIT(A) that the assessments made are bad in law for the reason that Assessing Officer made additions without there being any seized materials pursuant to action u/s. 132 of the Act, we find that the Ld.CIT(A) brushed aside the contentions of the assessee and held that the Books of Accounts inventoried during the search would be like a new materials and the Assessing Officer has to take note of such materials while completing the assessment. U/s. 153A of the Act. This contention of the Ld.CIT(A) is totally misplaced. Admittedly all the three assessments i.e. A.Y.2005-06, 2006-07 & 2007-08 are unabated assessments as there was no pending proceedings and the time limit for issue of notice u/s.143(2) for all these three Assessment Years expired on 30.09.2006, 30.09.2007 and 30.09.2008 respectively. Hence the assessments are unabated. When the assessments are unabated the only course left with the Assessing Officer is to make additions/disallowances pursuant to search
4 ITA.Nos. 1008, 1009 & 1010/MUM/2016 M/s. Abhishek Enterprises proceedings based on the seized materials and complete the assessment u/s. 153A of the Act.
The Hon'ble Jurisdictional High Court in the case of CIT v. Continental Warehousing Corporation [374 ITR 645 (Bom)] held as under:- “(i) that the notice under section 153A was founded on search. If there was no incriminating material found during the search then the Tribunal was right in holding that the power under section 153A being not expected to be exercised routinely, should be exercised if the search revealed any incriminating material. If that was not found then in relation to the second phase of three years, there was no warrant for making an order within the meaning of this provision.”
Identical issue came up before the Coordinate Bench in the case of the Narpat Mehta v. ACIT in ITA.No. 2152 & 2154 to 2158/Mum/2015 dated 21.10.2016 wherein the Coordinate Bench considered the decisions of the Hon'ble Jurisdictional High Court in the case of the CIT v. Gurinder Singh Bawa [386 ITR 483], decision of the Hon'ble Supreme Court in the case of the CIT v. Calcutta Knitwears [362 ITR 673] and CIT v. Continental Warehousing Corporation [374 ITR 645] held as under: “4. We have heard the rival submissions and perused the orders of the authorities below and the case-laws relied on. The short point for consideration in all these appeals before going into the merits of the disallowance is whether there is any incriminating material found in the course of search and whether the assessments have been abated or not. On a specific query by the Bench to the Ld. Departmental Representative to show the kind of seized material found in the course of search, based on which the impugned addition in the appeal was made and to show whether these assessments have been abated and there is no pending proceedings, Departmental Representative could not bring any incriminating material on record to suggest that the additions/disallowances were made in the impugned assessments were based on incriminating material. The Revenue also did not dispute before us that all these assessments were non-abated assessments. The decision relied on by the Ld. Departmental Representative in the case of Calcutta Knitwears (supra) has no application to the facts of these cases. The question before the Hon'ble Supreme Court was whether the 5 ITA.Nos. 1008, 1009 & 1010/MUM/2016 M/s. Abhishek Enterprises Assessing Officer has to record satisfaction that undisclosed income is involved before transferring the files to the concerned Assessing Officer and the time limit regarding such satisfaction was the issue, but in the cases on hand, the issue was whether any incriminating material was found and whether any disallowance was made based on which incriminating material and whether the assessments have abated by virtue of such incriminating materials or not is to be decided. The Revenue could not prove with evidences that the disallowances were made based on incriminating material seized in the course of search and the assessments have abated by virtue of such seized materials.
We find that an identical issue has been dealt with in assessee's own case i.e. Narpat Mehta for the Assessment Years 2005-06 & 2008-09 and set aside the additions/ disallowances made in those two years. Recently, the Bombay High Court in the case of CIT Vs. Gurinder Singh Bawa (supra) considered the question as to whether the addition can be made in non-abated assessments without there being any seized incriminating material and by applying its decision in the case of CIT Vs. Continental Warehousing Corporation reported in 374 ITR 645 (Bom.) held that once an assessment was not pending but had attained finality for a particular year, it could not be subject to proceedings under section 153A of the Act, if no incriminating materials were found in the course of the search. While dealing with the issue, the Jurisdictional High Court also considered the Special Bench decision of the Tribunal in the case of All Cargo Global Logistics Ltd. Vs. DCIT [2012] 18 ITR (Trib.) 106 (Mum), which was affirmed by the Jurisdictional High Court in CIT vs. All Cargo Global Logistics [374 ITR 645]. The Hon'ble Bombay High Court in Gurinder Singh Bawas (supra) held as under:-
3) For the Assessment Year 2005 -06, the respondent - assessee had filed his return of income declaring an income of Rs. 9.61 lakhs. The return of income as filed by the respondent - assessee was processed under Sec. 143(1) of the Act. Admittedly, no notice under Sec. 143(2) of the Act has been issued. Thereafter on 5 January 2007, a search was conducted on the respondent - assessee under Sec. 132 of the Act. Consequent thereto, proceedings under Sec. 153A of the Act were initiated. During the assessment proceedings for A.Y. 2005 -06, the Assessing Officer added an amount of Rs. 93.72 lakhs (declared as gifts) as being covered by Sec. 68 of the Act and an amount of Rs. 43.67 lakhs (accumulated profits of the lender) out of Rs. 1.5 crores received as loan from one K.P. Developers Pvt. Ltd. as deemed dividend under Sec. 2(22)(e) of the Act. Undisputedly, respondent - assessee was a shareholder in M/s K.P. Developers (P) Ltd. The aforesaid additions are reflected in an assessment order dated 31 December 2008 passed under Sec. 143(3) r/w 153A of the Act determining the respondent -assessee's total income at Rs.1.47 crores.
In appeal, the Commissioner of Income-tax (Appeals) held that the addition of an amount of Rs. 43.67 lakhs as deemed dividend has to be deleted. This on the ground that there were no accumulated profits available with M/s. K. P. Developers (P.) Ltd. to distribute amongst it's shareholders. However, so far as the 6 ITA.Nos. 1008, 1009 & 1010/MUM/2016 M/s. Abhishek Enterprises addition in respect of the unexplained gifts aggregating to Rs. 93.70 lakhs is concerned, the Commissioner of Income- tax (Appeals) did not disturb the finding of the Assessing Officer.
On further appeal before the Tribunal, the assessee inter alia challenged the validity of the assessment made under section 153A of the Act. This onaccount of the fact that no assessment in respect of the six assessment years were pending so as to have abated. The impugned order accepted the aforesaid submission of the respondent- assessee by inter alia placing reliance upon the decision of the Special Bench of the Tribunal in All Cargo Global Logistics Ltd. rendered on July 6, 2012 - [2012] 18 ITR (Trib) 106 (Mum) [SB]. The Tribunal in the impugned order further held that no incriminating material was found during the course of the search. Thus the entire proceedings under section 153A of the Act were without jurisdiction and therefore the addition made had to be deleted on the aforesaid ground. The impugned order also thereafter considered the issues on the merits and on it also held in favour of the respondent-assessee.
Mr. Kotangale, the learned counsel for the Revenue very fairly states that the decision of the Special Bench of the Tribunal in All Cargo Global Logistics Ltd. v. Deputy CIT [2012] 18 ITR (Trib) 106 (Mum) [SB] was a subject matter of challenge before this court as a part of the group of appeals disposed of as CIT v. Continental Warehousing Corporation (Nhava Sheva) Ltd. [2015] 374 ITR 645 (Bom) upholding the view of the Special Bench of the Tribunal in All Cargo Global Logistics Ltd. Consequently, once an assessment has attained finality for a particular year, i.e., it is not pending then the same cannot be subject to tax in proceedings under section 153A of the Act. This of course would not apply if incriminating materials are gathered in the course of search or during proceedings under section 153A of the Act which are contrary to and/or not disclosed during the regular assessment proceedings.
In view of the above, on issue of jurisdiction itself the issue stands concluded against the Revenue by the decision of this court in Continental Warehousing Corporation (Nhava Sheva) Ltd. (supra). In the appeal before us, the Revenue has made no grievance with regard to the impugned order of the Tribunal holding that in law the proceedings under section 153A of the Act are without jurisdiction. This in view of the fact that no assessment was pending, so as to abate nor any incriminating evidence was found. The grievance of the Revenue is only with regard to finding in the impugned order on the merits of the individual claim regarding gifts and deemed dividend. However once it is not disputed by the Revenue that the decision of this court in Continental Warehousing Corporation (Nhava Sheva) Ltd. (supra) would apply to the present facts and also that there are no assessments pending on the time of the initiation of proceedings 7 ITA.Nos. 1008, 1009 & 1010/MUM/2016 M/s. Abhishek Enterprises under section 153A of the Act. The occasion to consider the issues raised on the merits in the proposed questions becomes academic."
6. Respectfully following the above said decision of the Jurisdictional High Court and the decision in assessee's own case by the Coordinate Bench of this Tribunal, we hold that no disallowance will survive as such disallowance was not made based on any incriminating material found in the course of search and all these assessments are admittedly, non-abated assessments. Thus, we delete the disallowance made in respect of interest paid and business expenses against interest income received from partnership in all these assessment years.”
Respectfully following the said decisions, we hold that in the absence of any seized materials in the case of the assessee the additions/disallowances made in the assessments for the Assessment Years 2005-06 to 2007-08 which were unabated has no legs to stand. Hence, we quash the Assessment Orders passed u/s. 153A of the Act for the Assessment Years 2005-06 to 2007-08. Grounds raised by the assessee are allowed on this preliminary issue.
In the result, appeals of the assessee are allowed.
Order pronounced in the open court on the 04th June, 2018.