Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI RAJESH KUMAR
PER BENCH
The aforesaid appeals of the Department and the cross objections of the assessee are against the common order dated 27th April 2009, passed by the learned Commissioner (Appeals), Central– VII, Mumbai, pertaining to assessment years 2003–04, 2004–05, 2005–06 and 2006–07.
At the outset, we propose to deal with assessee’s cross objections, as they are on the legal and jurisdictional issue of validity of assessment proceedings under section 153A of the Act. The grounds raised by the assessee in the cross objections which are common in all the assessment years read as under:–
―1. The assessment under reference is invalid, unlawful and is without assumption of valid jurisdiction under section 153A of the Act. The assessment is influenced by irrelevant considerations and incorrect appreciation of facts and evidences, while omitting to consider factors and principles of relevance. 2. The learned CIT(A) has erred in confirming the proceedings under section 153A, as valid proceedings.‖
Brief facts are, the assessee a company is engaged in developing housing projects and housing schemes. A search and seizure operation under section 132, was conducted in assessee’s case on 4th October 2006. Pursuant to the search and seizure operation, the Assessing
5 M/s. Rehab Housing Pvt. Ltd. Officer issued notices under section 153A of the Act calling upon the assessee to file his return of income for the assessment year 2001–02 to 2006–07. In response to the notices issued under section 153A of the Act, the assessee filed its return of income for the concerned assessment years by declaring income offered in the original return of income filed earlier. In the course of assessment proceedings, the Assessing Officer on the basis of material available on record found that during the financial 2000–01, assessee had submitted a tender to Mumbai Metropolitan Region Development Authority (MMRDA) for developing and building house projects for rehabilitation of project affected persons. He further, noticed that the Government of Maharashtra had taken up project called Mumbai Urban Transport Project with financial aid of World Bank. He observed, during the accounting period relevant to assessment year 2001–02 and 2002–03, though, the assessee had incurred certain expenditure and debited to work–in–progress account but there was no revenue earned by the assessee in these two years. He also noticed that prior to the search action, assessment in the case of assessee for assessment year 2004– 05 was completed under section 143(3) of the Act, vide order dated 17th March 2006, allowing assessee’s claim of deduction under section 80IB(10). Similar deduction was also allowed for assessment year 2005–06 in assessment completed under section 143(3) of the Act on 17th March 2006. However, the Assessing Officer issued a questionnaire to the assessee seeking clarification and justification of deduction claimed under section 80IB(10). In the said show cause notice, the Assessing Officer raising various issues observed, assessee is not eligible to claim deduction under section 80IB(10). Though, the assessee in reply to the show cause notice submitted a detail explanation justifying its claim of deduction under section 80IB(10), the Assessing Officer, however, rejecting assessee’s claim of deduction
6 M/s. Rehab Housing Pvt. Ltd. under section 80IB(10) completed the assessment for the assessment years under dispute in the present appeals. Being aggrieved of the disallowance of assessee’s claim of deduction under section 80IB(10), assessee preferred appeals before the learned Commissioner (Appeals) challenging the assessment order both on the validity of proceedings initiated under section 153A as well as on the merits of the disallowance.
The learned Commissioner (Appeals) after considered the submissions of the assessee though upheld the validity of proceedings under section 153, however, he held that the assessee is eligible for deduction under section 80IB(10) on the profits derived from sale of TDR. Being aggrieved of the aforesaid decision of the learned Commissioner (Appeals), while the Department has filed appeals challenging the allowance of assessee’s claim of deduction under section 80IB(10), in the cross objections assessee challenged the decision of the learned Commissioner (Appeals) in upholding the proceedings under section 153A.
Learned Sr. Counsel, Shri J.D. Mistry, appearing for the assessee submitted, assessee obtained the approval of housing project on 11th October 2002. In the assessment year 2003–04, only 5% of the work was complete. The learned Authorised Representative submitted, at the time of search under section 132 of the Act, there was no pending assessment for any of the assessment year under appeal. It was submitted, in fact for the assessment year 2004–05 and 2005–06, the assessments were earlier completed under section 143(3) of the Act accepting assessee’s claim of deduction under section 80IB(10) on the housing project. Further elaborating, the learned Authorised Representative submitted, a survey under section 133A of the Act was conducted in case of the assessee only for the purpose of verifying
7 M/s. Rehab Housing Pvt. Ltd. assessee’s claim of deduction under section 80IB(10) in respect of housing project. Learned Authorised Representative submitted, in the course of original assessment proceedings for assessment year 2004– 05 and 2005–06, the Assessing Officer examined in detail assessee’s claim of deduction under section 80IB(10) by verifying not only the letter of approval from MMRDA but all other relevant documents and thereafter concluded that the assessee is eligible for deduction under section 80IB(10). Learned Authorised Representative submitted, during the search and seizure operation, no incriminating material was seized from the assessee which could have enabled the Assessing Officer to validly initiate the proceeding under section 153A of the Act. The learned Authorised Representative referring to the impugned assessment order submitted, the only addition / disallowance made by the Assessing Officer in the proceeding under section 153A, is assessee’s claim of deduction under section 80IB(10). The learned Authorised Representative submitted on a perusal of the assessment order it is evident that only piece of evidence / material found in the search on the basis of which the Assessing Officer proceeded under section 153A is the letter of intent dated 11th October 2002, issued by the MMRDA in favour of the assessee concerning the housing project. The learned Authorised Representative submitted, the letter of intent being a public document being issued by a Government authority, under no circumstances can be treated as an incriminating material. He submitted, in any case of the matter, in the course of original assessment proceedings, the assessee in response to the query raised by the Assessing Officer has submitted not only the letter of intent dated 11th October 2002, but all other relevant documents like approved plans, permission from local authorities, etc., in a written explanation filed before the Assessing Officer. In support of such contention, the Assessing Officer invited our attention to the reply
8 M/s. Rehab Housing Pvt. Ltd. dated 20th December 2005, submitted before the Assessing Officer a copy of which is at Page–57 of the paper book. The learned Authorised Representative submitted as at the time of search and initiation of proceeding under section 153A of the Act, assessment proceedings in respect of none of the assessment years under dispute was pending and abated in terms of section under section 153A, the Assessing Officer can only assess such income which is unearthed on the basis of incriminating material found as a result of search. He submitted, any other issue which stood concluded in completed assessment cannot be re–opened in the proceedings under section 153A, in the absence of incriminating material. For such proposition, he relied upon the decision of the Hon'ble Jurisdictional High Court in CIT v/s Continental Warehouse Corp. & Anr., [2015] 374 ITR 645 (Bom.). He, therefore, submitted in the absence of any incriminating material, the Assessing Officer could not have re–examined assessee’s claim of deduction under section 80IB(10) which stood concluded in the original assessment proceedings. The learned Authorised Representative submitted, in the assessment proceedings initiated under section 153A of the Act for all these assessment years, the only issue considered by the Assessing Officer is assessee’s claim of deduction under section 80IB(10). Therefore, assessment order passed are invalid as the Assessing Officer has no jurisdiction under section 153A, to reopen an issue which has already been concluded in assessment proceedings earlier. He, therefore, submitted, assessment order passed under section 153A, being invalid should be quashed.
The learned Departmental Representative initiating his arguments raised a preliminary objection on the grounds raised by the assessee in the cross objection and submitted that grounds are vague and not specific, hence, the cross objection do not merit consideration.
9 M/s. Rehab Housing Pvt. Ltd. As far as the merit of the issue is concerned, learned Departmental Representative submitted, reliance place by the assessee on the decision of the Hon'ble Jurisdictional High Court in Continental Warehouse Corp. & Anr. (supra), and the decision of the Tribunal, Special Bench, in All Cargo Global Logistics Ltd. v/s DCIT, [2012] 137 ITD (SB) 287 (Mum.), in no way helps the case of the assessee. He submitted, the intention of the legislature, while introducing the provisions of section 153A, as reflected in the speech of the Finance Minister while introducing Finance Bill for the financial year 2003–04 is avoidance of dispute, early finalization of search assessment and reduction in multiplicity of proceedings. For achieving that object the new procedure for search assessment was introduced as per which the Assessing Officer has been empowered to assess or re–assess the income in respect of six assessment years immediately preceding the assessment year relevant to previous year for which the search under section 132 was conducted. He submitted, in the new provision, the term ―undisclosed‖ has been done away with, therefore, the Assessing Officer can assess or re–assess any income which has escaped assessment. In this context, learned Departmental Representative also referred to CBDT Circular no.7/2003 dated 5th Sept 2003. The learned Departmental Representative submitted, the Hon'ble Supreme Court in CIT v/s Calcutta Knitwears, [2014] 362 ITR 673 (SC), has held that the provision of section 158BC and 158BD of the Act, as existed earlier for assessment of search related cases are machinery provision and, therefore, has to be construed in literal sense and cannot be interpreted in a different manner. Learned Departmental Representative submitted, the aforesaid decision of the Hon'ble Supreme Court was not before the Tribunal, Special Bench, while deciding the case of All Cargo Logistics Ltd. (supra) or before the Hon'ble Jurisdictional High Court while deciding the case of Murali Agro
10 M/s. Rehab Housing Pvt. Ltd. Products or in the case of Continental Warehouse Corp. & Anr. (supra). The learned Departmental Representative, therefore, submitted, the provisions of section 153A, being machinery provisions it has to be understood in its literal sense and cannot be interpreted in a different manner. He submitted, under the provisions of section 153A, the Assessing Officer has been given unfettered powers to assess the income relating to six preceding assessment years irrespective of the fact whether any incriminating material is found or seized during the course of search. Therefore, the jurisdiction of the Assessing Officer to initiate proceedings under section 153A, cannot be called into question. The Learned Departmental Representative submitted, even otherwise also, facts in assessee’s case are clearly distinguishable. He submitted, in assessee’s case, an incriminating material was seized in the course of search which is the letter of intent dated 11th October 2002, and as per panchanama of the search proceeding, such incriminating material is starting point for proceeding under section 153A. In this context, learned Departmental Representative relied upon a decision of the Hon'ble Supreme Court in CIT v/s Mukundray K. Shah, [2007] 290 ITR 433 (SC). Thus, it was submitted by the learned Departmental Representative, assessee’s contention that the proceedings under section 153A, is invalid is devoid of merit.
We have carefully and patiently considered the rival submissions and perused the order of the Departmental Authorities as well as material on record in the light of relevant case laws relied upon by both the parties. At the outset, we propose to deal with the objection raised by the learned Departmental Representative against the ground raised by the assessee in the cross objection. It is the contention of the learned Departmental Representative that the assessee has not raised any specific ground challenging the validity of proceedings
11 M/s. Rehab Housing Pvt. Ltd. under section 153A. However, after perusing the grounds raised by the assessee, we are unable to accept the arguments of the learned Departmental Representative as, in our view, the ground raised by the assessee are specifically on the issue of validity of exercise of jurisdiction under section 153A. Having held so, we propose to examine the primary and fundamental issue raised by the assessee relating to validity of proceedings under section 153A. It is the contention of the learned Authorised Representative that the issue relating to claim of deduction under section 80IB(10) having been concluded in the original assessment proceedings, could not have been made subject matter of proceedings under section 153A in the absence of any incriminating material found as a result of search when there is no assessment proceedings pending for any of the assessment year either on the date of search or at the time of issue of notices under section 153A. Before we decide the aforesaid issue, it is necessary to look at the relevant statutory provisions, as contained under section 153A of the Act, which is extracted below for convenience.
―[Assessment in case of search or requisition.77 153A. 78[(1)] Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person79where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003, the Assessing Officer shall—
(a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139;
12 M/s. Rehab Housing Pvt. Ltd. (b) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made :
Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years:
Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this80[sub-section] pending81 on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate81 :
82[Provided also that the Central Government may by rules83 made by it and published in the Official Gazette (except in cases where any assessment or reassessment has abated under the second proviso), specify the class or classes of cases in which the Assessing Officer shall not be required to issue notice for assessing or reassessing the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made.]
84[(2) If any proceeding initiated or any order of assessment or reassessment made under sub-section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) or section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to sub-section (1), shall stand revived with effect from the date of receipt of the order of such annulment by the84a[Principal Commissioner or] Commissioner:
Provided that such revival shall cease to have effect, if such order of annulment is set aside.]
Explanation.—For the removal of doubts, it is hereby declared that,—
(i) save as otherwise provided in this section, section 153B and section 153C, all other provisions of this Act shall apply to the assessment made under this section;
13 M/s. Rehab Housing Pvt. Ltd. (ii) in an assessment or reassessment made in respect of an assessment year under this section, the tax shall be chargeable at the rate or rates as applicable to such assessment year.‖ 8. On a bare reading of the aforesaid provisions, it is clear that in a case where search and seizure operation has been conducted under section 132 of the Act or books of account or documents have been requisitioned under section 132A, the Assessing Officer is empowered to assess or re–assess the total income of six assessment years immediately preceding the assessment year relevant to previous year in which search was conducted. The first proviso to section 153A(1) states that the Assessing Officer shall assess or re–assess the total income in respect of each assessment year falling within such six assessment years. The second proviso to section 153A(1) provides that assessment or re–assessment relating to any assessment year falling within the period of six assessment years as referred to in sub– section (1) of section 153A, pending on the date of initiation of search under section 132, shall abate.
The proviso contained under section 153A, has come up for scrutiny not only before the Tribunal but also different High Courts. The Special Bench of the Tribunal in All Cargo Global Logistics Ltd. (supra), while interpreting the provision of section 153A(1) held, insofar as pending assessments on the date of search are concerned, the Assessing Officer retains his jurisdiction to make original assessment and assessment under section 153A merged into one and only one assessment order in every assessment year shall be made separately on the basis of findings of the search and any other material brought on record of the Assessing Officer. However, in respect of non–abated assessments, in other words, concluded assessments the assessments will be made on the basis of books of account or other documents not produced in the course of original
14 M/s. Rehab Housing Pvt. Ltd. assessment but found in the course of search and undisclosed income or undisclosed property discovered in the course of search. The aforesaid view expressed by the Tribunal, Special Bench, in All Cargo Global Logistics Ltd. (supra) was approved by the Hon'ble Jurisdictional High Court in Continental Warehouse Corp. & Anr., (supra). While doing so, the Hon'ble Jurisdictional High Court referred to another decision of the same Court in Murali Agro Ltd. Therefore, examining the facts of the present case, in the touchstone of the legal principles laid down in the decision referred to above, the undisputed facts which emerge from the materials on record are, prior to the search a survey action under section 133A was conducted in case of assessee in February 2006, to specifically verify assessee’s claim of deduction under section 80IB(10) in respect of SRA project. In the course of survey, not only the director of the assessee company Shri Surendra V. Patel, was examined under section 131, but various documents were impounded. A site inspection was also carried out by the Departmental officers to verify the housing project under development. Not only in the course of survey, but during the original assessment proceedings for the assessment year 2004–05 and 2005– 06, as transpires from the observations made by the Assessing Officer in the assessment order passed under section 143(3) of the Act for the assessment years 2004–05 and 2005–06 on 17th March 2006, the assessee from time to time complied to the queries raised by the Assessing Officer in respect of deduction claimed under section 80IB(10) on the housing project. In fact, in Para–6 of the assessment order under reference the Assessing Officer has narrated the details of compliance made by the assessee in respect of claim of deduction under section 80IB(10). The Assessing Officer also examined various documentary evidences like letter of intent from MMRDA, approved plan, etc. In fact, in course of assessment proceedings, the Assessing
15 M/s. Rehab Housing Pvt. Ltd. Officer also raised a query with regard to the shopping project being constructed and whether such shopping project will not affect the eligibility of assessee’s claim of deduction under section 80IB(10). After considering the submissions of the assessee and examining the documentary evidence brought on record, the Assessing Officer allowed assessee’s claim of deduction under section 80IB(10) in the original assessment proceedings observing as under:–
―15. Incidentally, the aspect of shopping project which is a distinct separate and independent project relevant to the A.Y. 2006–07 and the assessee has agreed that no part of the shopping project would qualify for deduction under section 80IB(10) of the Act. Considering all the above facts and verification of diverse submissions and documents in respect of housing project, the assessee’s claim u/s 80IB(10) is found to be in order.
As could be seen, the issue relating to assessee’s claim of deduction under section 80IB(10), was not only examined by the Assessing Officer in course of original assessment proceedings, but the issue stood concluded in the assessment order passed under section 143(3) of the Act on 17th March 2006. Therefore, considered in the light of the principle of law decided in the judicial precedents referred to above, it is necessary to examine whether the Assessing Officer can re–open the issue of assessee’s claim of deduction under section 80IB(10) in the proceedings under section 153A and whether there are any incriminating material in the possession of the Assessing Officer to re–consider the issue of deduction under section 80IB(10). As noticed, from the order sheet entries, the appeal was adjourned from time to time at the request of learned Departmental Representative only for enabling the Department to show that there was incriminating material found as a result of search for initiating proceedings under section 153A. However, as could be seen from the submissions of the learned
16 M/s. Rehab Housing Pvt. Ltd. Departmental Representative as well as the letter dated 1st December 2015 of the Assessing Officer addressed to the learned Departmental Representative, the only incriminating material found in search is the letter of intent dated 11th October 2002, which according to the Department is starting point for the proceedings under section 153A. Therefore, the issue is whether the letter of intent dated 11th October 2002, could at all be considered to be an incriminating material. At this stage it needs reiteration that in the impugned assessment orders only issue considered by the Assessing Officer is deduction claimed under section 80IB(10). Except this issue, Assessing Officer has not considered any other issue. Thus, it is patent and obvious that the proceedings under section 153A, was initiated only to re–examine assessee’s claim of deduction under section 80IB(10) in respect of the housing project.
Reverting back to the issue whether letter of intent dated 11th 11. October 2002, can at all be considered to be an incriminating material, it is necessary to refer to the said letter a copy of which is at Page–61 of the paper book. On a perusal of the said letter, it is noticed that it was issued by an officer of Slum Rehabilitation Authority towards approval of SRA project to be developed by the assessee. Therefore, there is no manner of doubt that the letter issued is by a Government agency / authority and it is further evident that the assessee was not the only person to whom such letter was issued. Prima–facie it is evident that the said letter of intent was also addressed to the principal developer which is project director, MUTP, MMRDA (PIA) and the architect also. Thus, the letter of intent being a public document cannot be considered to be an incriminating material. Moreover, it is further evident on record that the so called incriminating material i.e., letter of intent dated 11th October 2002, was produced by the assessee
17 M/s. Rehab Housing Pvt. Ltd. along with approved plan and other documentary evidence before the Assessing Officer in the course of original assessment proceedings vide its compliance dated 20th October 2005. A copy of the said compliance at Page–57 of the paper book bears testimony to this fact. Thus, as could be seen from the facts discussed above, the only material on the basis of which the Assessing Officer has proceeded to initiate and complete the assessment under section 153A is the letter of intent dated 11th October 2002, which was already available in the record of the Assessing Officer during the original assessment proceedings and the Assessing Officer while allowing assessee’s claim of deduction under section 80IB(10) in the original assessment proceedings has taken cognizance of the so called incriminating material. Therefore, the issue of deduction under section 80IB(10) having considered in the concluded original assessment proceedings for the assessment years 2004–05 and 2005–06 cannot be re–opened or re–examined in the proceedings under section 153A in the absence of any incriminating material found as a result of search as per the ratio laid down by the Special Bench of the Tribunal in All Cargo Global Logistics Ltd. (supra) and the decision of the Hon'ble Jurisdictional High Court in Murali Agro Products (supra) and Continental Warehouse Corp. & Anr. (supra). It may be necessary to put on record, assessments for the assessment years 2003–04 and 2006–07 as it appears were under section 143(1). However, it is equally true that on the date of search under section 132(1), there was no pending assessment which could have abated, as in the concerned assessment year i.e., assessment year 2003–04 and 2006–07, the Assessing Officer has not issued statutory notices under section 143(1) or 143(2). Thus, there being no pending assessment in these assessment years on the date of search, in the proceedings initiated under section 153A, the Assessing Officer can only assessee or re–assess such income which was found on the basis of
18 M/s. Rehab Housing Pvt. Ltd. incriminating material found during the search. In the present case, leave alone any incriminating material, the Department has failed to bring any material found as a result of search which even remotely casts a doubt regarding assessee’s claim of deduction under section 80IB(10). In any case of the matter, the issue relating to assessee’s claim of deduction under section 80IB(10) having been concluded in the original assessment proceedings, the Assessing Officer could not have re–opened / re–examined it in the proceedings under section 153A, in the absence of any incriminating material. For the sake of completeness, it needs to be mentioned in the course of hearing, the learned Departmental Representative has relied upon two decisions of the Hon’ble Supreme Court as referred to in the earlier part of the order. However, on careful analysis of the decisions relied upon by the learned Departmental Representative they were found to be factually distinguishable and not applicable to the facts of the present case. In case of CIT v/s Calcutta Knitware (supra), the issue was relating to recording of satisfaction by the Assessing Officer under section 158BD. Considering the provisions contained under section 158BC / 158BD, the Hon'ble Supreme Court held, provisions of section 158BC / 158BD, being machinery provisions literal interpretation has to be given. However, the issue in the present case is totally different as it is with reference to section 153A of the Act and whether there is any incriminating material before the Assessing Officer to make addition of an item of income which has already been considered in a concluded assessment proceeding. In the case of Mukundray K. Shah (supra), as is evident from the discussion of facts a diary was seized as a result of search, whereas, in the case of before us, the so called incriminating material is not only a public document being a letter written by a Government authority, but also part of record in the original assessment proceedings. Therefore, on over all consideration of facts
19 M/s. Rehab Housing Pvt. Ltd. and circumstances of the case in the light of the decision of Hon'ble Jurisdictional High Court in Continental Warehouse Corp. & Anr., (supra), we hold that the assessment order passed under section 153A in the absence of any incriminating material to assess an item of income which has already been examined and finalized in concluded assessment proceedings is invalid and, therefore, has to be quashed. Consequently, allowing the grounds raised in the cross objections, we quash the assessment order passed under section 153A for the assessment years under appeal.
In the result, all the cross objections by the assessee are allowed.
Insofar as the appeals filed by the Department for the assessment years 2003–04, 2004–05, 2005–06 and 2006–07 are concerned, in view of our decision in the cross objections as aforesaid, the appeals filed by the Department having become infructuous, are hereby dismissed.
In the result, assessee’s cross objections are allowed and the appeals by the department are dismissed.
Order pronounced in the open Court on 11.05.2016
Sd/- Sd/- SAKTIJIT DEY RAJESH KUMAR ACCOUNTANT MEMBER JUDICIAL MEMBER
MUMBAI, DATED: 11.05.2016
20 M/s. Rehab Housing Pvt. Ltd.
Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The CIT(A); (4) The CIT, Mumbai City concerned; (5) The DR, ITAT, Mumbai; (6) Guard file. True Copy By Order Pradeep J. Chowdhury Sr. Private Secretary (Dy./Asstt. Registrar) ITAT, Mumbai