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Income Tax Appellate Tribunal, MUMBAI BENCH “I”, MUMBAI
Before: SHRI C.N. PRASAD, HONBLE & SHRI N.K. PRADHAN, HONBLE
2 TO 7348/MUM/2011 ITA NO.7450 & 7451/MUM/2011 Ingram Micro India Private Ltd O R D E R PER C.N. PRASAD (JM) 1. These appeals are filed by the assessee for the Assessment Years 2002-03, 2003-04 and 2004-05 and by the Revenue for the Assessment Years 2003-04 and 2004-05 against common order of the Learned Commissioner of Income Tax (Appeals)-40, Mumbai dated 26.08.2011 arising out of the Assessment Orders passed u/s. 153A r.w.s. 143(3) of the Act.
The assessee in all its appeals has raised following common grounds except for the figures: - (1) The Learned Commissioner of Income Tax (Appeals) erred in holding that the Assessing Officer had not transgressed his jurisdiction while making an assessment u/s. 153A of the Act and making certain additions/disallowances in respect of items accepted in the regular Assessment Proceedings u/s. 143(3) of the Act where no such disallowance in this regard was made and no incriminating material was found in this respect during the course of the search proceedings. (2) Without prejudice to ground No.1, the Learned Commissioner of Income Tax (Appeals) erred in holding that the Assessing Officer had not transgressed his jurisdiction u/s. 153A of the Act for the year under consideration, on completion of survey proceedings u/s. 133A of the Act. Since there was no action u/s. 132 or 132A on the appellant for the year under consideration, the proceedings initiated u/s. 153A of the Act and the Assessment Order framed are illegal and void ab-initio.
3 TO 7348/MUM/2011 ITA NO.7450 & 7451/MUM/2011 Ingram Micro India Private Ltd (3) Without prejudice to Ground Nos. 1 & 2, the Learned Commissioner of Income Tax (Appeals) erred in confirming the action of the Assessing Officer in disallowing the prior period expenses incurred by the appellant Company, consisting of Vendor Claims written off, amounting to ₹.25,09,072/-. Having regard to the facts and circumstances of the case and the provisions of law, the appellant submits that the disallowance in unwarranted and required to be deleted. (4) Without prejudice to ground Nos.1 & 2, the Learned Commissioner of Income Tax (Appeals) erred in confirming the action of the Assessing Officer in disallowing commission payments during the year aggregating to ₹.1,49,93,430/- only on the ground that confirmations had not been filed by the appellant. Having regard to the facts and circumstances of the case, the appellant submits that the disallowance is unwarranted and requires to be deleted. (5) Without prejudice to ground Nos. 1 & 2, the Learned Commissioner of Income Tax (Appeals) erred in confirming the action of the Assessing Officer in disallowing advances written off during the year under consideration, amounting to ₹.11,16,732/-. Having regard to the facts and circumstances of the case, the appellant submits that the disallowance is unwarranted and requires to be delete.
The Revenue in its appeals challenged the order of the Ld.CIT(A) in allowing the deduction as claimed u/s. 80IB of the Act by the assessee.
Briefly stated the facts are that, the assessee is engaged in trading of computer software and computer peripherals both domestically and abroad. Search/Survey action u/s. 132/133A were carried out on 06.09.2007 in the assessee’s group concerns and assessee was also covered u/s. 132/133(A) of the Act. Search/Survey actions resulted into 4 TO 7348/MUM/2011 ITA NO.7450 & 7451/MUM/2011 Ingram Micro India Private Ltd seizure/impounding of documents, loose papers and various other materials. Pursuant to the Search/Survey the assessments were completed u/s. 153A r.w.s. 143(3) of the Act on 31.12.2009 for the Assessment Years 2002-03, 2003-04 and 2004-05 by making various additions/disallowances. Assessee preferred appeals before the Ld.CIT(A) who partly allowed the claims of the assessee. The assessee contended before the Ld.CIT(A) that no incriminating materials were found in the course of search leading to the additions/disallowances made in the Assessment Order and therefore the additions/disallowances made were bad in law. However, this contention of the assessee was not accepted by the Ld.CIT(A) holding that the new scheme of assessment u/s.153A and u/s.153C in cases of search has the effect of reopening of the assessments for the preceding six Assessment Years automatically as a consequence of search and the Assessing Officer has the power to make additions/disallowances in the re-assessments.
The Learned Counsel for the assessee Shri J.D. Mistry addressing on the first ground of appeal
s submits that no incriminating materials were seized and the additions/disallowances made in the Assessment Orders are not based on any seized/incriminating material found in the course of search but they were all routine additions/disallowances. Learned
5. TO 7348/MUM/2011 ITA NO.7450 & 7451/MUM/2011 Ingram Micro India Private Ltd Counsel for the assessee referring to the Assessment Orders submits that the additions/disallowances made by the Assessing Officer are towards bad debts, prior period expenses, commission payments, advances written off and staff welfare expenses. Learned Counsel for the assessee submits that while completing the assessment u/s. 143(3) all these claims were examined by the Assessing Officer and they are all routine additions/disallowances and these additions/disallowances were not based on any material seized in the course of Search/Survey proceedings. The Learned Counsel for the assessee further submits that all these assessments for the Assessment Years 2002-03, 2003-04 and 2004-05 are unabated assessments as the assessments were completed u/s. 143(3) prior to date of search and there were no proceedings pending in these Assessment Years.
The Learned Counsel for the assessee referring to the decision of the Hon'ble Jurisdictional High Court in the case of CIT v. Continental Warehousing Corporation and CIT v. All Cargo Global Logistics Ltd., in ITA.No. 523 of 2013 and ITA.No. 1969 of 2013 respectively dated 21.04.2015 submits that in an unabated assessment if there is no incriminating material found in the course of search additions/disallowances cannot be made. He also placed reliance in the 6 TO 7348/MUM/2011 ITA NO.7450 & 7451/MUM/2011 Ingram Micro India Private Ltd decision of the Hon'ble Jurisdictional High Court in the case of Dr. Gautam Sen v. Chief Commissioner of Income-tax [74 taxman.com 128]. The Learned Counsel for the assessee further referring to the Coordinate Bench decision in the case of M/s. Tech Pacific (India) Ltd. v. DCIT in ITA.Nos. 2383, 2384 & 2385/Mum/ 2011 dated 16.07.2015 which was latter on merged with Ingram Micro Private Limited submits that an identical issue came up for the Assessment Years 2002-03 to 2004-05 and the Coordinate Bench following the decision of the Hon'ble Jurisdictional High Court in the case of CIT v. Continental Warehousing Corporation and CIT v. All Cargo Global Logistics Ltd., (supra) which is reported in [374 ITR 645] quashed the Assessment Orders in the absence of any incriminating material found during the course of search for making the additions/disallowances. The Learned Counsel for the assessee further submits that a plain reading of the Assessment Order and also the Appellate Order makes it amply clear that none of the additions/disallowances were made based on any incriminating material found in the course of Search/Survey proceedings. Therefore, he submits that following the order in assessee’s own case the assessments have to be quashed.
7 TO 7348/MUM/2011 ITA NO.7450 & 7451/MUM/2011 Ingram Micro India Private Ltd 7. The Ld.DR referring to Para 3 & 4 of the Assessment Order submits that in the course of Search/Survey proceedings incriminating documents, loose papers and other material evidences were found and these were confronted to the persons and their statements were also recorded. Based on these impounded documents and after confronting these documents to the assessee and after obtaining the replies the assessments were made by making additions/disallowances by the Assessing Officer. Therefore, he contends that the contentions of the assessee that no seized materials were impounded in this case is not correct. Ld.DR further referring to the decision of the Hon'ble Kerala High Court in the case of E.N. Gopakumar v. CIT [75 taxman.com 215] submits that the Hon'ble High Court held that Assessment Proceedings generated by issuance of notice u/s. 153A(1)(a) can be concluded against interest of assessee including making additions even without any incriminating material being available against the assessee in search u/s. 132 of the Act. Therefore, he submits that even assuming that there is no incriminating material found still the Assessing Officer can proceed to make additions/disallowances without any incriminating material. He also strongly supported the orders of the Ld.CIT(A).
8 TO 7348/MUM/2011 ITA NO.7450 & 7451/MUM/2011 Ingram Micro India Private Ltd 8. We have heard the rival submissions, perused the orders of the authorities below. The first contention of the assessee is that there was no incriminating material found in the course of search, the additions/disallowances were not made on the basis of any incriminating material and since the issues taken up in the Assessment Orders were already examined while completing the original assessments u/s. 143(3) of the Act and the assessments were concluded and all these assessments are non-abated and therefore no additions/disallowances can be made without there being any incriminating material found in the course of search. We have perused the Assessment Orders and we observe that though the Assessing Officer records a finding that Search/Survey actions resulted into seizure of impounding documents, loose papers and other material evidences, they are mainly relating the international transactions. We observe from the Assessment Order that Assessing Officer made additions/disallowances in respect of bad debts, prior period expenses, commission payments, advance written off and staff welfare expenses and while making the additions/disallowances all these expenses there was no reference to any seized material by the Assessing Officer. We also find considerable force in the submissions of the Learned Counsel for the assessee that all these additions/disallowances of various expenses incurred in the course of 9 ITA NO.7346 TO 7348/MUM/2011 ITA NO.7450 & 7451/MUM/2011 Ingram Micro India Private Ltd carrying on the business and they are not relating to any items outside the Books of Accounts but they are all forming part of Annual Accounts. We also observe from the Assessment Order that the additions/disallowances were made based on the claims made by the assessee in the Books of Accounts, Profit and Loss Account, balance sheet and on the enquiries made in the course of Assessment Proceedings u/s. 153A and no seized material is referred to relating to all these additions/disallowances.
Even before us the Revenue could not bring any seized materials leading to all these disallowances/additions. In the case of M/s.Tech Pacific (India) Ltd. v. DCIT, assessee’s own case, the Coordinate Bench in ITA.No. 2383 to 2385 /MUM/2011 dated 16.07.2015 for the Assessment Years 2002-03, 2003-04 and 2004-05 quashed the assessments following the decision of the Hon'ble Jurisdictional High Court CIT v. Continental Warehousing Corporation and CIT v. All Cargo Global Logistics Ltd., [374 ITR 645] in the absence of any incriminating material found in the course of search and the additions were not made based on any incriminating material found, observing as under: “2. The Ld. Counsel for the assessee stated that ground No. 1 in all these appeals challenges the jurisdiction of the Officer for making an assessment u/s. 153(A) of the Act. It is the say of the Ld. Counsel that this issue has been decided in favour of the assessee and against the Revenue by the Hon’ble Jurisdictional High Court in the case of CIT Vs (1)
10 TO 7348/MUM/2011 ITA NO.7450 & 7451/MUM/2011 Ingram Micro India Private Ltd Continental Warehousing Corporation and (2) All Cargo Global Logistics ltd., 374 ITR 645. The Ld. Counsel further stated that if the order of the Hon’ble Bombay High Court is followed and ground No. 1 is allowed, the other grounds of appeal will become otiose.
3. Per contra, the Ld. Departmental Representative could not bring any distinguishing decision in favour of the Revenue.
4. Briefly stated the facts of the case are that the assessee group is engaged in trading of computer software and computer peripherals both domestically and abroad. Search and seizure action u/s. 132 and also survey action u/s. 133A of the Act were carried out on this group on 6.9.2007. The search/survey actions resulted into seizure and impounding of documents, loose papers and other material evidencing the irregularities relating mainly to international tax. 4.1. The assessment for A.Y 2002-03 was completed by disallowing bad debts claimed Rs. 8,76,448/-, depreciation on goodwill Rs. 35,39,132/-, depreciation on commercial vehicles-Rs. 5,33,790/- and Staff/ other welfare expenses at Rs. 3,05,508/-. Assessment for A.Y 2003-04 was completed by making disallowances on similar heads though with different quantum and the same is done in A.Y. 2004-05.
5. Aggrieved by the assessments, the assessee carried the matter before the Ld. CIT(A) but without any success.
6. Before us, the Ld. Counsel for the assessee stated that the additions/disallowances which was not made in the normal/regular assessment and in respect whereof no incriminating material was found during the search cannot now be made for the first time in the assessment made u/s. 153A of the Act, since it would confer upon the AO the power to review or revise his own order. It is the say of the Ld. Counsel that this proposition has been confirmed by the Hon’ble High Court of Bombay in the case of Continental Warehousing Corporation and All Cargo Global Logistics ltd (supra).
11 TO 7348/MUM/2011 ITA NO.7450 & 7451/MUM/2011 Ingram Micro India Private Ltd 7. We have carefully considered the orders of the authorities below. We have also gone through the decision of the Hon’ble Jurisdictional High Court (supra). It is an undisputed fact that there was no incriminating material found during the search for making the impugned disallowances/additions. The ratio laid down by the Hon’ble Jurisdictional High Court (supra) squarely apply on the facts of the case wherein the Hon’ble High Court has held as under: “Held, dismissing the appeals, (i) that the notice u/s. 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 u/s. 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 provisions.” Respectfully following the decision of the Hon’ble Jurisdictional High Court, we set aside the order of the Ld.CIT(A) and quash the impugned assessment orders.
Respectfully following the decision of the Hon'ble Jurisdictional High Court in the case of CIT v. Continental Warehousing Corporation and CIT v. All Cargo Global Logistics Ltd., (supra) and the Coordinate Bench in the case of M/s. Tech Pacific (India) Ltd. v. DCIT (supra) we set aside the order of the Ld.CIT(A) and quash the impugned Assessment Orders passed u/s. 153A r.w.s. 143(3) of the Act for the Assessment Years 2002-03, 2003-04 and 2004-05.
12 TO 7348/MUM/2011 ITA NO.7450 & 7451/MUM/2011 Ingram Micro India Private Ltd 11. Since we have decided the first ground and the issue of very jurisdiction in making additions/disallowances in the absence of any incriminating material found in the course of search in favour of the assessee, we do not find it necessary to decide the other grounds of appeal and becomes Otiose.
Coming to the appeals of the Revenue since we have quashed the assessments made u/s. 153A r.w.s. 143(3) for the Assessment Years 2002-03, 2003-04 and 2004-05 the appeals of the Revenue becomes infructuous.
In the result, appeals of the assessee are partly allowed and Revenue’s appeals are dismissed.
Order pronounced in the open court on the 15th November, 2017.