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Income Tax Appellate Tribunal, “F” BENCH, MUMBAI
Before: SHRI N.K. BILLAIYA & SHRI PAWAN SINGH
आदेश / O R D E R PER N.K. BILLAIYA, AM: These appeals by the assessee are preferred against three separate orders of the Ld. CIT(A)-41, Mumbai pertaining to Assessment years 2004-05 & 2005-06. is the appeal against levy of penalty u/s. 271(1)(c) of the Act for A.Y. 2005-
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6. Since the grievance relating to the quantum additions are similar in both the assessment years under consideration i.e. 2004-05 and 2005-06, these appeals were heard together and disposed of by this common order for the sake of convenience.
ITA No. 5077/M/2010 – 2004-05
Briefly stated the facts of the case are that the original return of income was filed on 31.10.2004. A survey action was conducted on 5.1.2006. During the course of which the assessee surrendered additional income and accordingly the return of income was revised on 29.3.2006. The assessment was completed u/s. 143(3) of the Act vide order dated 29.12.2006.
2.1. Subsequently a search and seizure operation u/s. 132 of the Act was carried out on 10.10.2007 pursuant to which notice u/s. 153A was issued and served upon the assessee. In response to the notice, the assessee filed its return of income on 17.11.2008 declaring income at Rs. 3,32,42,350/- which included undisclosed income admitted during the course of survey.
2.2. The assessment was made u/s. 143(3) r.w. Sec. 153A of the Act vide order dated 22.12.2009 wherein the income has been computed as under:
Returned income (as per Rs. 3,32,42,350/- return u/s. 153A Add: Deduction u/s. 80HHC Rs. 1,18,64,652/- (as discussed above) Deduction u/s. 80G Rs. 2,00,000/- Rs. 1,20,64,652/- Rs. 4,53,06,999/- Add: (i)Addition made in original Rs. 59,80,021/- order u/s. 143(3) (as discussed
3 Valiant Glass Works Pvt. Ltd. above) (ii) Payments to relatives of Rs. 1,49,550/- Rs. 61,29,571/- employee (as discussed above) Gross total Rs. 5,14,36,570/- income Less: Deduction u/s. 80G Rs. 2,00,000/- Total income Rs. 5,12,36,570/-
3. Aggrieved by this, the assessee carried the matter before the Ld. CIT(A) but without any success.
Before us, it was strongly contended that the additions have been made without any reference to any incriminating material found during the course of the search operations, therefore, assessment made u/s. 153A of the Act is bad in law. Reliance was placed on the decision of the Hon’ble High Court of Delhi in the case of Kabul Chawla in with 709/2014 dated 28.8.2015. It is the say of the Ld. Counsel that since the assessments have been made without any incriminating material found during the course of the search, the order is bad in law.
Per contra, the Ld. Departmental Representative could not bring any distinguishing decision in favour of the Revenue nor the DR could point out any addition based upon any incriminating material found during the course of the search.
We have given a thoughtful consideration to the rival submissions. We have carefully perused the orders of the authorities below. Undisputedly, the case in hand before us relates to the assessments made u/s. 153A of the Act pursuant to search and seizure operations u/s. 132 of the Act and it is now a settled proposition of law that such assessments have to be considered in 4 Valiant Glass Works Pvt. Ltd.
the light of the decision of the Hon’ble Jurisdictional High Court given in the case of All Cargo Global Logistics in Income Tax Appeal No. 1969 of 2013 and Continental Warehousing Corpn., in Income Tax Appeal No. 523 of 2013 and also in the case of Murli Agro Products. The relevant portion of the decision in the case of Continental Warehousing Corpn. (supra) reads as under:
“Once it is held that the assessment has attained finality, then the AO while passing the independent assessment order u/s. 153A r.w. s 143(3) of the I.T. Act could not have disturbed the assessment/reassessment order which has attained finality, unless the materials gathered in the course of the proceedings u/s. 153A of the Income Tax Act establish that the reliefs granted under the finalized assessment/reassessment were contrary to the facts unearthed during the course of 153A proceedings. If there is nothing on record to suggest that any material was unearthed during the search or during the 153A proceedings, the AO while passing order u/s. 153A r.w.s. 143(3) cannot disturb the assessment order.”
The Hon’ble High Court had an occasion to consider the following questions of law:
“1. Whether on the facts and in the circumstances of the case, the Hon’ble ITAT is correct in narrowing down the scope of assessment u/s. 153A in respect of completed assessments by holding that only undisclosed income and undisclosed assets detected during search could be brought to tax?
2. Whether on the facts and in the circumstances of the case, the Hon’ble ITAT is correct in law in holding that the scope of Sec. 153A is limited to assessing only search related income, thereby denying Revenue the opportunity of taxing other escaped income, that comes to the notice of the AO.?
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Whether on the facts and in the circumstances of the case, the Hon’ble ITAT was right in limiting the scope of Sec. 153A only to undisclosed income when as per the section the AO has to assess the total income of the six assessment years?”-
and the Hon’ble High Court of Bombay finally held as under:
“ We, therefore, dismiss the Revenue’s appeal and answer the substantial question of law against the Revenue and in favour of the assessee”.
If the facts of the case in hand are considered in the light of the aforementioned decision of the Hon’ble Jurisdictional High Court. Undisputedly, during the course of the search and seizure operation, not a single piece of paper was found relating to the transactions. Moreover, the assessee filed original return on 31.10.2004 which was revised on 29.3.2006 pursuant to survey operations and in the revised return of income, the income offered during the survey operations were offered for taxation and the assessment has been made as such vide order dated 29.12.2006.
8.1. Thus, it can be seen that there is no material found at the time of search which can be said to be an incriminating material to justify the impugned additions and it is also not the case of the Revenue that the additions have been made on the basis of the materials found at the time of search. Considering the facts in the light of the ratio laid down by the decision of the Hon’ble High Court of Bombay (supra) and also by the decision of the Hon’ble High Court of Delhi (supra), we do not find any reason/justification in making the impugned additions. Order of the Ld. CIT(A) is accordingly set aside. The AO is directed to delete the impugned additions.
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In the result, the appeal filed by the assessee is allowed.
ITA No. 6123/M/2010- A.Y-2005-06
Facts of this year are that the original return was filed on 25.10.2005. Pursuant to survey operation conducted on 5.1.2006, additional income was offered for taxation by filing a revised return of income on 30.6.2006. A notice u/s. 143(2) of the Act was issued but no assessment made pursuant to this notice issued u/s. 143(2) of the Act.
10.1. A search and seizure operation was conducted on 10.10.2007 and accordingly statutory notices were issued, the return of income was filed and the assessment was completed u/s. 143(3) r.w. Sec. 153A of the Act.
The assessee carried the matter before the Ld. CIT(A) strongly contending that no incriminating documents/material was found during the course of the search and therefore the assessment made u/s. 153A is bad in law. The claim of the assessee did not find any favour with the Ld. CIT(A) who confirmed the assessment order.
Aggrieved by which the assessee is before us.
The Ld. Counsel for the assessee reiterated the chronological event of filing the original return of income till the issuance of notice u/s. 143(2) of the Act. It is the say of the Ld. Counsel that this notice is bad in law and the original return of income was accepted u/s. 143(1) of the Act and therefore assessment made u/s. 143(3) r.w.
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Sec. 153A is based on no incriminating material found during the course of the search and therefore is bad in law.
Per contra, the Ld. DR could not bring anything to the contrary to the dates mentioned by the Ld. Counsel.
We have given a thoughtful consideration to the chronological event relating to the filing of original return of income, revised return of income and notice issued u/s. 143(2) of the Act.
15.1. Admittedly, the revised return of income was filed on 30.6.2006. As per the provisions of Sec. 143(2), the notice should have been issued on or before 1.7.2007. The notice was issued on 22.8.2007. Thus, the said notice u/s. 143(2) is bad in law which means that the revised return of income was accepted as such u/s. 143(1) of the Act which also means that a completed assessment can be opened only when some incriminating material was found during the course of the search.
15.2. We have discussed this issue at length in (supra). Drawing support from our own findings given therein, we set aside the order of the First Appellate authority and direct the AO to delete the impugned additions.
In the result, the appeal filed by the assessee is allowed. –A.Y. 2005-06 17. This appeal by the assessee is against the levy of penalty u/s. 271(1)(c) of the Act.
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Since we have held the assessment made u/s. 143(3) r.w. Sec. 153A of the Act is bad in law in of even date and since we have directed the AO to delete the impugned additions, drawing support from the maxim Sublato fundaments credit Opus meaning – in the case the foundation is removed, super structure falls. Since the foundation i.e. assessment order has been removed, the super structure i.e. penalty falls. Appeal filed by the assessee is allowed.
In the result, all the appeals filed by the assessee are allowed.
Order pronounced in the open court on 11th December, 2015