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Income Tax Appellate Tribunal, MUMBAI BENCHES “D”, MUMBAI
Before: Shri Joginder Singh, & Shri Ashwani Taneja
आदेश / O R D E R
Per Joginder Singh (Judicial Member) The assessee as well as Revenue is in cross appeal against the impugned order dated 12/06/2012 of the Ld. First Appellate Authority, Mumbai. The only effective ground agitated by the ld. counsel for the assessee is that the ld. First Appellate Authority erred in not holding that the order passed u/s 143(3) r.w.s 153C of the Income Tax Act, 1961 (hereinafter the Act) is bad in law, illegal and void ab-initio that to in the absence of any material seized during search. The remaining issues/grounds were not pressed by the ld. counsel for the assessee, being academic in nature.
During hearing of these appeals, the ld. counsel for the assessee, Shri Vijay Mehta, contended that no seized material was referred to by the ld. Assessing Officer for which our attention was invited to para -8 and 8.4 of the assessment order. It was also pleaded that even there is no finding in the impugned order with respect to the claim of the assessee for which our attention was invited to page-2, para 1.2 of the impugned order. The ld. counsel placed reliance upon the decision of the Tribunal in the case of Gopal Agrawal vs ACIT (ITA Nos, 7075 & 7076/Mum/2012), order dated 07/08/2015. On the other hand, the ld. DR, Shri B. B. Rajendra Prasad, contended that yes there is no reference to the seized material.
2.1. We have considered the rival submissions and perused the material available on record. The facts, in brief, are that the assessee is engaged in the business of manufacturing and trading of gray and fabrics. A search and seizure action u/s 132 of the Act was carried out in the case of M/s Bombay Rayon Fashions Ltd., Mr. Janardan Agarwal (Chairman), Mr. Prashant Agarwal (Managing Director), Mr. Aman Agarwal (Executive Vice-Chairman), Mr. Uday Mogrey (Executive Director-Corporate) and Mr. Asharam Mundra (Executive Director-Finance) on 12/08/2009. Thereafter, notice u/s 153C dated 13/12/2010 was issued to the assessee after recording the reasons. In response to the notice, the assessee filed its return declaring total income at Rs.1,71,87,230/-, on 21/02/2011. Notices u/s 143(2) and 142(1) of the Act along with questionnaire were served upon the assessee to which the assessee attended the proceedings. During the assessment year 2008-09, the assessee company purchased 99.75% shares of another company namely M/s B.R. Machine Tools Pvt. Ltd. (hereinafter in short BRMTPL) vide agreement dated 02/04/2007, thus, becoming the holding company. The company acquired by the assessee did not carry on any business during the year as well as in the next two years. The only income, during the year of that company was petty sales and long term capital gains on sale of land. It was also noticed that the assessee company had taken loan and advances of Rs. 2,80,00,000/- on 01/02/2008 from BRMTPL. The ld. Assessing Officer asked the assessee as to why this amount should not be treated as income in the hands of the assessee as per provisions of sections 2(22)(e) of the Act. In reply, the assessee claimed as under:-
During the year, the company has received an advances of Rs.2.80 crores from B.R. Machine Tools Pvt. Ltd. against the sale of property at Silvasa which is owned by the company. Silvasa properties were worth more than Rs.35 crores and the balance payment will be made when the deal will be completed. No interest has been paid on the said advances being against the sale of property. These advances are received for the business transaction, the provisions of Sec.2(22)(e0 is not applicable. No interest has been paid on these advances as this is a business transaction being received for sale of properties. Therefore, the provisions of Sec.2(22)(e) is applicable.
2.2. The claim of the assessee is that the impugned amount of Rs.2.08 crores was received as advance from BRMPTL against sale of property at Silvasa, which is owned by the company. The observation made in the order is reproduced hereunder:-
“8.4 On perusal of the above, it is noticed that the assessee company fulfills the following conditions:-
• BRMTPL is not a company in which public are substantially interested. • The assessee holds more than 10% voting power in BRMTPL. • An advance or loan amounting to Rs. l6,67,00,000/- is given by BRMTPL to the assessee company during the year. • The accumulated profits of BRMTPL was Rs. 20,07,20,638/-. • Money lending is not at all a part of business of BRMTPL - as seen from its Balance Sheets of previous 4 years.” 2.3. It is also noted that even in the impugned order, there is a finding (para 1.2) that it was claimed by the assessee that having carried out search, there is no specific evidence found relevant to this assessment as per section 153A, it does not authorize making denovo assessment and the power provided to the ld. Assessing Officer u/s 153A is confined to undisclosed income unearthed during search. The aforesaid decision of the Tribunal dated 07/08/2015 in Gopal Agrawal vs ACIT (ITA Nos, 7075 & 7076/Mum/2012), is reproduced hereunder for ready reference:-
“The aforesaid appeals have been filed by the assessee against separate impugned orders dated 16.10.2012 and 17.10.2012 passed by CIT(A) -41, Mumbai for the quantum of assessment passed u/s 143(3) r.w.s. 153C for the assessment years 2007- 08 and 2008-09 respectively.
2. The preliminary ground raised in both the appeals by way of additional grounds are that; the Ld. CIT(A) has erred in law and on facts in affirming the assessment order passed u/s 143(3) r.w.s. 153C, without appreciating the fact that there was no incriminating documents seized or information gathered during the search, which can lead to any adverse inference for making the addition in the hands of the assessee.
Before us, the Ld. Counsel Shri Vijay Mehta submitted that in both the years, the assessments stood finalized at the time of search, which here in this case should be reckoned from the date of issuance of notice u/s 153C. No assessment was pending and, these are non-abated assessments within the meaning of second proviso to section 153A. After referring to following dates and events :-
AY 2007-08 AY 2008-09 Return of income filed u/s 139(1) 29.10.2007 16.09.2008 Date of search 12.08.2009 12.08.2009 Relevant date of issuance of notice u/s 17.08.2010 17.08.2009 153C Last date of issuance of notice u/s 31.10.2008 30.09.2009 143(2) he submitted that at the time of issuance of notice u/s 153C, there was no pending assessment for the assessment year 2007-08 & 2008-09 and therefore, they do not get abated in terms of second proviso to section 153A. In such a situation, he submitted that unless any incriminating material is found during the course of search, no addition can be made by the Assessing Officer over and above the income already assessed. He submitted that in the case of another family member of the assessee, Shri Gopal Agarwal the Tribunal in vide order dated 28.05.2014 has decided the similar issue in favour of the assessee. On the other hand, Ld. DR strongly relied upon the order of the CIT(A).
4. After considering the rival submissions, we find that in the additional ground raised by the assessee, the main issue which has been challenged before us, is that, in absence of any incriminating material found during the course of the search, the additions made by the Assessing Officer and confirmed by the CIT(A) are bad in law as the assessments for the impugned assessment years were not abated at the time of issuance of notice u/s 153C. Here in this case, admittedly, search took place on 12.08.2009 and notice u/s 153C for acquiring the jurisdiction for forming the assessments for 6 assessment years in terms of section 153A, was issued on 17.08.2010. Thus, the time limit forexamining the pending assessment has to be reckoned from this date. As noted above, the time limit of issuance of notice u/s 143(2) in AYs 2007-08 & 2008-09 had expired before the date of issuance of notice u/s 153C and return of income filed by the assessee thus stood finalized and such an assessment does not get abated in terms of second proviso to section 153A. Once that is so, no addition over and above returned income can be made, unless any incriminating document/material or information is unearthed/gathered at the time of search. This proposition has now been upheld by the Hon’ble Bombay High Court in the case of Allcargo Global Logistic Ltd vs CIT, reported in 374 ITR 645 (Bom). Thus, on this preliminary ground alone, the impugned additions made by the Assessing Officer and confirmed by the CIT(A) stands deleted.
In the result, appeals of assessee for both the years are treated as allowed.”
Considering the totality of facts and the ratio laid down in the aforesaid order of the Tribunal, the only issue before us is in the absence of any incriminating material found during search, the additions made by the Assessing Officer and confirmed by Ld. Commissioner of Income Tax (Appeal) are whether bad in law as the assessment for the impugned assessment year were not awaited at the time of issuance of notice u/s 153C of the Act. Thus, unless and until any material/document or information is gathered/unearthed at the time of search, we find merit in the contention of the assessee. Our view finds support by the decision from Hon’ble jurisdictional High Court in Allcargo Global Logistic Ltd. vs CIT 374 ITR 645 (Bom.), thus, on this preliminary ground alone, the additions made by the Assessing Officer/confirmed by the Ld. Commissioner of Income Tax (Appeal) stands deleted.
3. Other issues were not pressed by the ld. counsel for the assessee, being academic in nature.
In the light of aforesaid decision, the appeal of the Revenue has also become in-fructuous. Finally, the appeal of the assessee is disposed of in terms indicated hereinabove, whereas, the appeal of the Revenue is dismisses as in-fructuous. This order was pronounced in the open court in the presence of Ld. representatives from both sides at the conclusion of the hearing on 27/06/2016.
Sd/- Sd/- (Ashwani Taneja) (Joginder Singh) लेखा सद�य / ACCOUNTANT MEMBER �या�यक सद�य / JUDICIAL MEMBER मुंबई Mumbai; �दनांक Dated : 28/06/2016 f{x~{tÜ? P.S/.�न.स. आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. आयकर आयु�त(अपील) / The CIT, Mumbai. 4. आयकर आयु�त / CIT(A)- , Mumbai 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, मुंबई / DR, ITAT, Mumbai 6. गाड� फाईल / Guard file.