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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI MAHAVIR SINGH, JM & SHRI RAJESH KUMAR, AM
O R D E R
Per RAJESH KUMAR, Accountant Member:
These are four appeals filed by the revenue and directed against the orders dated 12.12.2014 for the assessment year 2006-07 and order dated 02.12.2014 for the assessment years 2007-08 to 2009-10 respectively passed by the ld.CIT(A), Mumbai. Since these appeals are filed against the same assessee and the issues involved therein are common and therefore for the sake of convenience and brevity, these appeals were clubbed together, heard together and are being decided by this consolidated order.
2 to 1290/Mum/2015 2. At the outset the ld.AR drew our attention to a jurisdictional issue that the AO has no jurisdiction to make the additions except on the basis of seized materials because the assessment in all the four years had attained finality on the date of search and therefore ,the AO had no authority under the provisions of section 153A/153C of the Act to disturb the assessment which had attained finality on the date of search. The ld counsel drew our attention to application dated 25.10.2016 wherein the assessee raised a ground under rule 27 of the Income Tax Appellate Tribunal Rules, 1963 (hereinafter called as “ the Rules”) . The Ld counsel of the assessee stated that the issue is purely of legal nature which will go to the root of the matter and has been raised before ld CIT(A) also but the same has been decided against the assessee. It was explained that same was not challenged by the assessee as relief has been granted on merit of the case by the CIT(A). The ld counsel drew our attention to the para 3 and 3.1 of the appellate order wherein the issue has been decided by the FAA against the assessee.
Referring to the above , the ld counsel for the assessee stated that the AO had no jurisdiction u/s 153A/153C of the Act to make any additions by disturbing the assessment order which had attained finality on the date of search without any incriminating material being found by the search team during the course of search. The ld counsel drew our attention to the provisions of section 153C r.w.s. 153A of the Act which provides that all the 3 I.T.A. Nos.1287 to 1290/Mum/2015 assessments which are pending on the date of search shall abate and the AO has same jurisdiction to frame the assessment as u/s 143(3) of the Act and assessment which have attained finality on the date of search cannot be disturbed except on the basis of seized materials and not otherwise. The Ld counsel of the assessee vehemently submitted that in respect of assessments which are complete and attained finality on the date of search, the jurisdiction of AO is confined to make additions based on the search materials.
The DR. vehemently argued against taking up of this issue under rule 27 of the Rules for the reason that by taking up and deciding this ground, tribunal cannot put the revenue in worst position than what it was before CIT(A). The ld DR argued that the powers of the tribunal are confined to section 254(1) of the Act wherein it has to pass orders on the subject matter of the issue before it and the tribunal cannot go beyond it or pass orders or give directions which do not fall within the subject matter of the appeal for which the ld DR relied upon the decision of Hon’ble Bombay High Court in the case of New India Insurance Company Ltd Vs CIT (1957) 31 ITR 844 (Bom) wherein it has been held as under :
“3. Before we look at the authorities and before we look at the section and the relevant rules, it is desirable to consider on general principles what are the powers of an appellate Court. When an appellant comes before a Court of appeal, he comes there because he is dissatisfied with the decision of the trial Court and he challenges that decision; and he challenges that decision on certain grounds which are set out in the grounds of appeal or in the memo of appeal. The 4 to 1290/Mum/2015 respondent, if he has not appealed or has not cross-objected, is satisfied with the decision of the trial Court and he is before the Court of appeal to support the judgment of the trial Court. The appellant may challenge the decision of the trial Court even on grounds not contained in the grounds of appeal if the Court of appeal grants him leave to do so. Undoubtedly in granting leave the Court of appeal would consider various factors : whether the question raised would involve questions of fact which may necessitate a remand; whether the conduct of the appellant is such as to disentitle him to raise the new ground; and so on. But if leave is granted and if the other side has notice of the new ground which the appellant seeks to urge, there does not seem to be any reason why the Court of appeal should not permit the appellant to challenge the decision of the trial Court on a ground other than those taken in the grounds of appeal. The position with regard to the respondent is different: it is not open to him to urge before the Court of appeal and get a relief which would adversely affect the appellant. If the respondent wanted to challenge the decision of the trial Court, it was open to him to file a cross-appeal or cross-objections. But the very fact that he has not done so shows that he is quite content with the decision given by the trial Court. Therefore, under these circumstances, his only right is to support the decision of the trial Court. It is true that he may support the decision of the trial Court, not only on the grounds contained in the judgment of the trial Court, but on any other ground. In appreciating the question that arises before us, one must clearly bear in mind the fundamental difference in the positions of the appellant and the respondent. The appellant is the party who is dissatisfied with the judgment; the respondent is the party who is satisfied with the judgment. Now what we have just said is nothing more than really a summary of the provisions with regard to appeals and cross-objections contained in Order XLI of the Civil Procedure Code ; and, as we shall presently point out, the position of the Appellate Tribunal is the same as a Court of appeal under the Civil Procedure Code and the powers of the Appellate Tribunal are identical with the powers enjoyed by an appellate Court under the Code.”
5. We have heard the rival contentions and perused the relevant materials including the issue of additions without being based upon the seized materials in those assessment years which had attained finality on the date of search as raised by the ld.AR under rule 27 of the Rules. The facts of the case reveal that this issue was taken up by the assessee before CIT(A)
5 to 1290/Mum/2015 and he adjudicated the same d against the assessee. However, the CIT(A) allowed the appeal of the assessee on merits, hence, assessee was not aggrieved by the order of the CIT(A). Here first of all, we have to refer to Rule 27 of the Rules, which reads as under:-
27. Respondent may support order on grounds decided against him.- The respondent, though he may not have appealed, may support the order appealed against on any of the grounds decided against him.
We find from this rule that respondent may support an order on the ground decided against him even though he has not appealed against an order deciding one of the grounds against him. We further find that Hon'ble Supreme Court in the case of CIT vs. Manick Sons, 74 ITR 1(SC) has interpreted the provisions of section 254(1) of the Act and not that the rule 27 of Appellate Tribunal, wherein respondent has been allowed to support the order appealed against on any other ground decided against him even tthough he may not have appealed against. It was explained by the Hon'ble Supreme Court that the powers conferred by this sub-section is wide but still it is a judicial power which may be exercised in respect of matter that arise in the appeal and according to law. The Tribunal in deciding an appeal before it must deal with question of law and fact, which arises out of an order of Assessing Officer and that of the CIT(A). It cannot assume powers which are inconsistent with the express provisions of the Act or its scheme. Hon’ble Allahabad High Court in the case of Kanpur Industrial Works vs. CIT, 59 ITR 407 (AL) has held that in case the assessee not liable to be assessed at all is 6 to 1290/Mum/2015 also a ground for showing that there should be no further increase and assessee may resist the appeal on this ground also. In the present case before us, the CIT(A) has allowed the appeal of the assessee on merits and relief has been granted by deleting all the additions. The only ground dismissed by CIT(A) was with regard to assumption of jurisdiction by AO to make addition without based on searched materials as nothing was found during the search proceedings. In view of the above facts we admit this additional ground of the assessee under Rule-27 and will adjudicate the same.
The ground taken by the assessee under rule 27 of the Rules dated 25.10.2016 reads as under:- RESPONDENT'S GROUNDS UNDER RULE 27 OF THE APPELLATE TRIBUNAL RULES, 1963. “1. On the facts and circumstances of the case and in law, the ld.CIT(A) has erred in affirming the action of the AO in confirming the addition mAde u/s 143(3) r.w.s 153C of the Act in absence of any incriminating material found during the course of search qua the additions, and hence, the additions made by the AO are bad in law.
The appellant craves leave to add to, amend or alter, the foregoing ground of appeal”
Brief facts of the case are that there was a search action conducted on 6.10.2010 in the case of M/s ARSS Infrastructure Project Limited and group concerns and in the said search action the case of the assessee was also covered under section 132 of the Act. Notice under section 153C of the Act was issued to the assessee on 17.1.2013 calling upon the assessee to file 7 to 1290/Mum/2015 return of income which was complied with by the assessee by filing return of income on 29.1.2013 declaring total income of Rs.3,22,609/- after claiming deduction under chapter VI-A amounting to Rs.1 lakh thereby declaring the net income of Rs.2,22,609/-. The assessee filed original return of income for the assessment year 2007-08 on 30.10.2006 along with the computation of total income and balance-sheet, profit and loss account declaring an income of Rs.2,67,840/-. The AO ultimately completed the assessment under section 143(3) read with section 153C of the Act vide order dated 30.3.2013 by assessing the income of Rs.67,20,840/- by making addition of Rs. 64 lakhs on account of various unsecured loans raised by the assessee from various parties as detailed in para 6.2 of the assessment order. Aggrieved by the order of the AO, the assessee filed appeal before the ld.CIT(A) challenging the order of the AO by raising specific ground that the assessment in the current year was not pending on the date of search and therefore not abated and consequently the additions made by the AO without reference in seized material were legally unlawful and without jurisdiction. However, the ld. CIT(A) dismissed the appeal after considering the submissions of the assessee by giving detailed finding and holding as under: “6. After carefully examining the facts of the case and the above contentions of the appellant in the appellate proceedings and referring to the case laws relied upon by the appellant, the facts clearly indicate that some incriminating materials were found during the course of search u/s 132 of the Act.
8 to 1290/Mum/2015 The issue of notice u/s 153C of the Act in case of the appellant is in accordance with the provisions of Sec-ion 132 and 153C of the Act as the incriminating materials had been seized during the course of Search conducted on the Gaggar Group on 06.10.2010. Further, on going through the case laws relied upon by the appellant, it has come to the notice that in the case of CIT vs. Murli Agro Products Ltd (August 9th, 2014 ), (Bombay High Court) the order para No.12 and 13) the following was observed by the Hon’ble High Court “12. Once it is held that the assessment finalized on 29.12.2000 has attained finality, then the deduction allowed under section 80 HHC of the Income-tax Act as well as the loss computed under the assessment dated 29-12-2000 would attain finality. In such a case, the A.O. while passing the independent assessment order under Section 153A read with Section 143(3) of the IT. Act could not have disturbed the assessment/ reassessment order which has attained finality, unless the materials gathered in the course of the proceedings under Section 153A of the Income-tax Act establish that the reliefs granted under the finalised assessment/reassessment were contrary to the facts unearthed during the course of 153A proceedings.
In the present case, there is nothing on record to suggest that any material was unearthed during the search or during the 153A proceedings which would show that the relief under Section 80HHC was erroneous. In such a case, the A.O. while passing the assessment order under Section 153A read with Section 143(3) could not have disturbed the assessment order finalized on 29.12.2000 relating to Section 80HHC deduction and consequently the C.I.T. could not have invoked jurisdiction under Section 263 of the Act.
Thus it is implied from the above clear observations of the Hon’ble Bombay High Court that if there is material found/unearthed during the search or 153A proceedings, the assessment completed earlier has not attained finality and hence would get abated. In view thereof, the AO was well within his powers under the Act to conclude the assessment on the basis of the material gathered even during the course of proceedings u/s 153C. In the case under reference, the material gathered during the course of proceedings u/s 153C, the AO has gathered certain material/information which has lead him to make additions to the returned income and thus, the assessment done u/s 153C r.w. 143(3)
The ld. AR vehemently argued before us that the addition made by the AO was without any jurisdiction as the same was not based upon any incriminating documents /material found during the course of search. While drawing our attention the provisions of section 153A/153C of the Act , the ld counsel argued that in respect of those assessments which were not pending on the date of search, the AO could make addition only on the basis of or with reference to the seized material and not otherwise. The ld AR stated that during the course of search, no incriminating material was found and seized and therefore the upholding the jurisdiction of the AO to make additions without reference to seized materials was against the provisions of section 153C of the Act. The ld. AR in defence of his argument heavily relied on the decision in the case of CIT V/s Murli Agro Products Ltd [2014] 49 taxmann.com 172 (Bombay) and All cargo Global Logistics Ltd. Vs. DCIT
(2012) 137 ITD 287 (Mum) Special Bench. Finally, the ld. AR submitted that since no incriminating material was found and seized during the course of search proceedings and therefore the addition made by the AO in respect of unsecured loans aggregating to Rs.64 lakhs was without jurisdiction as the assessment in the instant year had attained finality on the date of search.
The ld. DR on the other hand, heavily relied on the orders of authorities below and submitted that the material was gathered by the AO 10 to 1290/Mum/2015 during the course of assessment proceedings under section 153C and therefore the AO had the material on the basis of which he rightly made additions in respect of five unsecured loans/creditors on the grounds of creditworthiness, genuineness of transactions and identity of the creditors not being proved.
We have carefully considered the rival contentions and perused the material placed before us including the orders of authorities below and the case laws relied upon by the parties. We find that on the date of search the assessment for the instant year had already attained finality as the return was filed on 30.9.2006 whereas the search was conducted on 6.10.2010. We also find from the perusal of provision of section 153C of the Act that the AO shall assess the income in respect of six assessment years prior to the year in which the search was conducted. It has also been provided in the section that the assessment which are pending on the date of search shall be abated and assessment shall be made by the AO under section 153C in the same manner as assessment u/s 143(3) of the Act whereas in respect of those assessment years out of six years which are not pending on the date of search and have attained the finality, the AO has limited jurisdiction to make addition based upon the material seized during the course of search and not otherwise. The Hon’ble Bombay High Court in the case of Murli Agro Product Limited (supra) and All cargo Global Logistics Ltd (supra) as affirmed by the Jurisdictional High Court an identical issue has been decided 11 to 1290/Mum/2015 by holding that in respect of assessments which has attained finality on the date of search the additions can only be made based on the search materials. We accordingly, find merit in the contention of the ld. AR and hold that the order of the ld.CIT(A) is wrong and cannot be sustained qua upholding the additions made in the assessment year by the AO without seized material. We accordingly, set aside the order of ld.CIT(A) and hold that the addition of Rs.64 lakhs by the AO t is without jurisdiction under section 153C of the Act. Accordingly, the ground raised by the assessee under rule 27 of the ITAT Rules, 1963 is allowed.
ITA No 1288/Mum/2015 to 1290/Mum/2015 12. For assessment year 2007-08,2008-09 and 2009-10 , the returns were filed on 26.11.2007 , 14.11.2008 and 31.10.2009 whereas the search was conducted on 6.10.2010. It is clear from the above dates of filing return and date of search that the assessments for three years had attained finality on the date of search and therefore any additions can only be based upon the seized materials and not otherwise. In all these years the assessee has raised same ground under rule 27 of ITAT Rules as has been decided by us hereinabove. Since we have already decided the identical issue as raised by the assessee under rule 27 in these three appeals in in favour of the assessee, therefore, our decision in ITA No 1287/Mum/2015 would, mutatis mutandis, apply to these appeals as well. Accordingly we need not to go into the grievances raised by the revenue in its appeals.