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Income Tax Appellate Tribunal, NAGPUR BENCH, NAGPUR
Before: SHRI V. DURGA RAO & SHRI K.M. ROY, ACCOUNTANT, MEMBER
Date of Hearing – 01/08/2024 Date of Order – 06/08/2024
O R D E R PER K.M. ROY, A.M.
The appeal has been filed by the assessee challenging the impugned order dated 22/04/2021, passed by the learned Commissioner of Income Tax (Appeals)–3, Nagpur, [“learned CIT(A)”], for the assessment year 2010–11.
In its appeal, the assessee has raised following grounds:–
“(1). Whether the Ld. CIT(A) is correct in making the additions in the completed assessments when no assessment has abated, and where no incriminating materials or undisclosed property were found during the course of search. (2). Whether Ld. CIT(A) is justified fact and law in treating the agricultural land to be non- agricultural land and thereby making addition to the tune of Rs.2,55,00,000/- under the head short term capital gain of Income Tax Act, 1961.
Faiz Zakir Vali ITA no.65/Nag./2021
(3). Whether the Ld.CIT(A) is justified in law as well as fact in treating advance of Rs.82,00,000/- given by the company to the appellant as deemed dividend under Sec 2(22)(e) of the Income Tax Act. (4). Whether the Ld. CIT(A) is justified in law and facts in holding that the land in question was not the agricultural land and thus treating sale as short term capital gain. (5). The assessee pleas to add/amend/alter/change any ground of appeal during the course of appellate proceeding.”
The learned A.R., upon her argument by pointing out that the addition is not permissible in line with the judgment of the Hon’ble Supreme Court in PCIT v/s Abhisar Buildwell Pvt. Ltd., [2023] 454 ITR 212 (SC).
In the present case, the assessee is an individual and is a director in M/s. Unijules Life Sciences Ltd. The assessee had filed his return of income under section 139 of the Income Tax Act, 1961 ("the Act") on 16/03/2011, declaring a total income of ` 42,89,230. The last date of issuance of notice under section 143(2) of the Act was on 30/09/2011. It is a matter on record that no such notice was ever issued and, therefore, the assessment year 2010–11 is clearly an unabated assessment year since there was no pending proceeding as on the date of search. On 27/08/2013, a notice under section 153A of the Act was issued on 16/06/2014, which was served upon the assessee on 23/06/2014. Owing to the nature of land i.e., agricultural land, the assessee took a benefit of exempt income under section 10 of the Act at ` 2,55,00,000, on account of sale of land in the return of income filed under section 139(4) of the Act on 16/03/2011. The Assessing Officer completed scrutiny assessment, vide order dated 21/03/2016, determining total income as ` 3,79,89,230, after making addition of ` 82,00,000, on account of Faiz Zakir Vali ITA no.65/Nag./2021 deemed dividend under section 2(22)(e) of the Act and ` 2,55,00,000, on account of short term capital gains on sale of land for the year 2010-11 by holding the land to be non–agricultural. Aggrieved by the assessment order, the assessee filed appeal before the learned CIT(A).
The learned CIT(A), vide his impugned order, sustained the additions made by the Assessing Officer both on legality as well as on merits. Aggrieved, the assessee is in further appeal before the Tribunal.
We have heard the rival arguments, perused the material available on record and gone through the orders of the authorities below. Before us, the learned A.R. invited the attention of the Bench to the Panchanama statement under section 132(4) of the Act as well as assessment order. She vociferously submitted that there was no whisper in the assessment record or in the questionnaire under section 132(4) of the Act that any material has been unearthed to prove that there was any undisclosed income or property. She vehemently stated that purchase deed of the land was obtained from M/s. Unijules Life Science Ltd., which was also under simultaneous search in which the assessee was a Director. She proposed that the purchase of land was duly recorded in the regular books of account of the company as the same was disclosed as a fixed asset in the Balance Sheet of the company. She opined that even by the wildest stretch of imagination, documents which have been taken into account in preparing the regular books of account, can be called as incriminating, as the returns are based on such books and the same was already in the knowledge of the Department. She further submitted that the sole ground in which the addition has been made was due to re– Page | 3
Faiz Zakir Vali ITA no.65/Nag./2021 characterisation of the land as non–agricultural land instaed of agricultural land, as claimed by the assessee. She averted that the assessee has also disclosed in his return of income a sum of ` 2,55,00,000, as an exempt income and hence it is not the case that the assessee had ever tried to hide the matter from the Income Tax Authorities, because the assessee has voluntarily disclosed in the return of income. As regard the addition on account of deemed dividend, we find that the ledger disclosing the loan paid to the Director was duly reflected in the Balance Sheet of the Company. The learned A.R. further submitted that it is a current account with the company and substantially there was a cumulative credit balance in the company. In neither of the two cases, no incriminating material was found at the time of search in assessee’s residential premise to justify the addition. The learned Departmental Representative suggested that these documents are incriminating in nature and this points out escapement of income. Even if these have been recorded in the return of income, the addition is sustainable because there is non–adherence to the provisions of computation. At this juncture, we gainfully refer to Para–14 of the judgment of the Hon’ble Supreme Court in Abhisar Buildwell Pvt. Ltd. [2023] 454 ITR 212 (SC) and for better appreciation of the impugned issue, the same is reproduced below:–
“14. In view of the above and for the reasons stated above, it is concluded as under: (1) that in case of search under section 132 or requisition under section 132A, the AO assumes the jurisdiction for block assessment under section 153A; (ii) all pending assessments/reassessments shall stand abated; (iii) in case any incriminating material is found/unearthed, even, in case of unabated/completed assessments, the AO would assume the jurisdiction to assess or reassess the 'total income' taking into consideration the Page | 4
Faiz Zakir Vali ITA no.65/Nag./2021 incriminating material unearthed during the search and the other material available with the AO including the income declared in the returns; and (iv) in case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabated assessments. Meaning thereby, in respect of completed/unabated assessments, no addition can be made by the AO in absence of any incriminating material found during the course of search under section 132 or requisition under section 132A of the Act, 1961. However, the completed/unabated assessments can be re-opened by the AO in exercise of powers under sections 147/148 of the Act, subject to fulfilment of the conditions as envisaged/mentioned under sections 147/148 of the Act and those powers are saved. The question involved in the present set of appeals and review petition is answered accordingly in terms of the above and the appeals and review petition preferred by the Revenue are hereby dismissed. No costs. Civil Appeal Nos.7738-7739/2021, 7736-7737/2021, 7732-7735/2021 and 7740-7743/2021
In the present case, we find that the documents seized during the search are not in the nature of incriminating documents, because these were duly recorded in the books of account of the Company. The assessment year 2010–11 is undisputedly an unabated assessment year. Even upon a meticulous examination of the statement under section 132(4) of the Act and in the assessment order, there is no reference to any document that has been seized from the assessee upon which the addition has been made. The learned D.R. failed to controvert this issue and submitted that the addition is justified. The Hon’ble Supreme Court has rightly concluded that in case the addition is made in the absence of any incriminating material, then the assessment can only be re–opened under section 147 of the Act, subject to fulfilment of conditions. We do not accept the proposition canvassed by the learned Departmental Representative that just because the income has not been correctly declared, the documents though recorded in the books of account can be said to be incriminating. Judicial decisions all over the country Page | 5
Faiz Zakir Vali ITA no.65/Nag./2021 at various levels had concurred only substantial corroborative evidences are an absolute necessity to carry out addition. At this point, the Bench posed a question to the learned Departmental Representative as to whether there was any understatement of consideration or receipt of any loan outside the banking channel which could possibly lead to generation of undisclosed income. However, the learned Departmental Representative failed to point out any such instance.
We also find that in the case of PCIT v/s Jignesh P. Shah, [2018] 99 taxmann.com 111 (Bom.) the assessee filed return of income for six years pursuant to notice under section 153A of the Act which was identical to the original return of income. The original return of income attained finality in the absence of notice under section 143(2) of the Act. The Assessing Officer made addition towards deemed dividend under section 2(22)(e) of the Act. The Hon’ble Bombay High Court relied on the decision in the case of CIT v/s Murli Agro Products Lid, [2014] 49 taxmann.com 172, wherein it was held that once the assessment has attained finality before the date of search and no material is found in the course of proceedings under section 132 of the Act, then, no addition can be made in the proceedings under section 153A of the Act and deleted the additions made on account of deemed dividend. Relying on the judgments of the Hon’ble Jurisdictional High Court binding upon us, we do not find any merit to sustain the addition.
Thus, we are in complete agreement that no incriminating materials were unearthed by the Revenue during the course of search irrespective of unabated assessment and hence no addition can be made by the Assessing Page | 6
Faiz Zakir Vali ITA no.65/Nag./2021 Officer in the absence of any incriminating material. Accordingly, there is no merit in both the additions made by the Assessing Officer and confirmed by the learned CIT(A). Thus, the assessee succeeds on the first ground. Insofar as other grounds are concerned, in view of our findings given above, those grounds have become academic in nature and hence we do not deal with the same. The very basis of assumption of jurisdiction in completing the assessment under section 153A of the Act is fragile and unsustainable. In the absence of valid foundation, the superstructure is bound to crumble. Accordingly, both the additions deserve to be deleted.
In the result, appeal filed by the assessee is allowed. Order pronounced in the open Court on 06/08/2024