PANKAJ KAKRANIA,KOLKATA vs. DCIT, CC 2(1), KOLKATA

Though the assessee has raised as many as five grounds of appeal but the sole issue involved in both the appeals are sustaining the 2 & 480/Kol/2024 Pankaj Kakrania, AYs: 2010-11 & 2011-12 addition to the total income of the assessee as deemed dividend u/s. 2(22)(e) of the Act.

Brief facts of the case of the assessee are that the assessee being an individual engaged in trading readymade garments under the name and style of JD India corporation being a proprietorship concern. Return of income was filed on 21.09.2011 declaring total income of Rs.29,77,688/-. A search operation was conducted u/s. 132 of the Act in the premises of the assessee. Notices u/s. 153A, 143(2) and 142(1) were issued. Ld. AO completed the assessment and added Rs.1,30,34,471/- to the total income of the assessee as deemed dividend. The said order was challenged by the assessee before the Ld. CIT(A) wherein also case of the assessee had been partly allowed and confirmed the order of the Ld. AO in which the Ld. AO has added an income of Rs.3,29,681/- to the total income of the account of the assessee being it deemed dividend. Being aggrieved by and dissatisfied with the order, the assessee had preferred this appeal before this Tribunal.

The Ld. Counsel for the assessee challenges the impugned order by say that the Ld. AO without being adding Rs.13,03,447/- to the total income of the assessee as deemed dividend without recognising the fact that the amount borrowed by the assessee from the company in which he has a substantial interest is a non-banking financial company whose substantial part of business was lending of money. The Ld. Counsel before this Tribunal took an additional ground being the legal ground that in course of search there was no incriminating material found by which Ld. AO has added the income rather in course of search there was only certain cash and jewellery was found, hence, in view of the Apex Court decision in PCIT Vs. Abhiser Buildwell P. Ltd. [2023] 454 ITR 212 (SC) addition made by the Ld. AO is erroneous and against the 3 & 480/Kol/2024 Pankaj Kakrania, AYs: 2010-11 & 2011-12 law. The Ld. Counsel further submits that there is no bar to take the additional ground being the legal ground before this Tribunal though the same has not been taken by the assessee before the Ld. CIT(A). He has filed a decision reported in National Thermal Power Co. Ltd. Vs. CIT [1998] 229 ITR 383 (SC). Contrary to that, the Ld. DR has vehemently supported the impugned order of the Ld. CIT(A).

It has further been held that: Undoubtedly, the Tribunal has the discretion in allow or not to allow a new ground to be raised. But where the Tribunal is only required to consider the question of law arising from facts which are on record in the assessment proceedings, there is no reason why such a question should not be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liability of an assessee.”

In the present case a legal issue has been raised. Hence, keeping in view the decision of the Apex Court, we do not find any hesitation to accept the legal ground taken by the assessee by way of additional ground and we are of this firm view to decide this case on the legal ground taken by the assessee.

After hearing the submissions of the rival parties and perusing the orders, we find that a search was conducted u/s. 132 of the Act at the premises of the assessee on 19.11.2015. It is an admitted fact that no assessment was pending for both the assessment years. It is also apparent from the record that finding of the Ld. AO regarding the 4 & 480/Kol/2024 Pankaj Kakrania, AYs: 2010-11 & 2011-12 deemed dividend was out of books of account/documents submitted during the assessment proceeding. On perusal of the order of the Ld. AO it appears to us that during the search a Panchnama was drawn and following valuables and documents were found to be seized:

Now look at the principle decided by the Apex Court in Abhiser Buildwell Pvt. Ltd. (supra). The Hon’ble Apex Court in the aforesaid case has held thus – “In case incriminating material is unearthed during the search the AO cannot assess or re-assess taking into the consideration the other material in respect of the completed assessment/unabated assessment meaning thereby in respect of completed/unabated assessment, no addition can be made by the AO in absence of any incriminating material found during the course of search u/s. 132. However, the completed/unabated assessment can be reopened by the AO in exercise of the power u/s. 147/148 of the Act subject to the fulfilment of the condition as envisaged/mentioned u/s. 147/148 of the Act and those powers are saved.”

The present case in hand reveals that the search operation was conducted u/s. 132 of the Act on 19.11/.2015 at that time no assessment was pending for both the assessment years. Hence, we are in this view that no addition can be made when there is no incriminating material had been found during the search. Accordingly, addition which has been made by the AO and confirmed by the Ld. CIT(A) on the basis of search is hereby deleted. Since appeal of the assessee is allowed on the legal ground itself, the other ground is not adjudicated and hence, the appeal of the assessee is allowed.