SRI. DCIT CEN CIR-22, MUMBAI vs. SHRIPAL S. MORAKHIA, MUMBAI

O R D E R

PER AMARJIT SINGH, JM:

A.Y. 2000-01 “1.a On the facts and circumstances of the case and in law, the CIT(A) erred in deleting the addition made by the A.O. u/s.41(1) though the A.O. had made speaking order on the addition. 1.b. On the facts and circumstances of the case and in law, the CIT(A) erred in ignoring the fact that a collusive arrangement existed between the assessee and the bank which made the latter to furnish certificate to I.T. Department contrary to accepted banking policy and norms regarding write off of irrecoverable loans.

2. The appellant craves to leave to add, to amend and / or to alter any of the grounds of appeal, if need be.

3. The appellant, therefore, prays that on the grounds stated above, the order of the CIT(A)-IV, Mumbai may be set aside and that of the Assessing Officer restored.

3. The brief facts of the case are that the assessee filed his return of income on 31.10.2000 declaring total income to the tune of Rs.3,82,76,438/-. The return was processed u/s.143(1) of the Income Tax Act, 1961 ( in short “the Act”) on 27.02.2002. There was a search and seizure action u/s.132 of the Act on SSKI group and by warrant dated 01.08.2003, assessee’s residence at 6A/2, Prithvi Apartments, 21, Altamount Road, Mumbai and his office with other group companies were covered under search. The search upon the assessee was finally concluded on 06.09.2003. Notice u/s.153A of the Act was issued on 23.04.2004. In response to the said notice, return of income declaring loss to the tune of Rs.3,82,76,438/- was filed on 28.05.2004. Notice u/s.143(2) of the Act was issued on 21.04.2005. A.Y. 2000-01 Detailed questionnaires u/s.142(1) were issued on 08.08.2005 and 14.12.2005. The assessee derives business income being professional fee, trading in shares and income from other source being interest and rent from sublet property. During the previous year, the assessee sold residential property, capital gain arising out of which has been offered as long term capital gain. The assessee has credited an amount of Rs.1,74,61,842/- in the capital account on account of cessation of liability but the said amount was not included in taxable income, therefore, the said amount was added to the income of the assessee and it was also found that the assessee has claimed excess set off Short Term Capital Loss to the tune of Rs.1,21,770/-, therefore, the same was disallowed and added to the income of the assessee. Thereafter, the total income of the assessee was assessed to the tune of Rs.5,99,39,389/-. Feeling aggrieved the assessee has filed the appeal before the CIT(A) who allowed the claim of the assessee, therefore the revenue has filed the present appeal before us. LEGAL ISSUES:-

4. The assessee has raised the legal issues before us regarding the legality of the order passed by the Assessing Authority. The learned representative of the assessee has argued that the Assessing Officer has reassessed the income of the assessee in view of the provision u/s.143(3) r.w.s. 153A of the Act which is wrong against law and facts specifically on the ground of that the search and seizure action was 3 A.Y. 2000-01 taken and was finally concluded against the assessee on 06.09.2003 but nothing incriminating material was found which leads to the reassessment of the income of the assessee, therefore the assessment order dated 28.03.2006 and subsequently the order passed by the CIT(A) in question are wrong against law and facts in view of the law settled in [2015] 374 ITR 645 titled as Commissioner of Income Tax Vs. Continental Warehousing Corporation (Nhava Sheva) Ltd. and All Cargo Global Logistics Ltd. and Bombay High Court in case of CIT Vs. Murli Agro Products Ltd. (ITA No.36 of 2009) and 259 CTR 281 (Raj.) in case titled as Jai Steel (India) Vs. Asst. CIT and 380 ITR 573 (Del) in case titled as CIT Vs. Kabul Chawla. However, on the other hand the learned representative of the department has refuted the said contentions. It is not in dispute that the assessee has filed his return of income on 31.10.2000 declaring total income to the tune of Rs.3,82,76,438/-. The return was processed u/s.143(1) of the Act on 27.02.2002. Thereafter, the search and seizure action u/s.132 of the Act was initiated against SSLO group and against the assessee by virtue of warrant dated 01.08.2003. No doubt the search action was taken after the expiry of one year while the return u/s.143(1) of the Act was processed on 27.02.2002. Thereafter, the notice was given to the assessee u/s.153A of the Act and the assessee filed the return of income declaring total loss to the tune of Rs.3,82,76,438/-. On appraisal of an entire order, it came into the notice that during the assessment cession of the liabilities by the bank was considered as 4