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Shri Parag M. Sanghvi, 2203, Windsor Tower, Shashtri Nagar, Andheri(W), Mumbai 400 053 Vs. The ACIT/DCIT, CC-38, Mumbai.
October, 01st 2015
              IN THE INCOME TAX APPELLATE TRIBUNAL
                   MUMBAI BENCH "C", MUMBAI

           BEORE SHRI G.S.PANNU, ACCOUNTANT MEMBER
             AND SHRI AMIT SHUKLA, JUDICIAL MEMBER

                      ITA No. 8027 /MUM/2010
                     (Assessment Year : 2004-05)
                      ITA No. 5139 /MUM/2013
                     (Assessment Year : 2004-05)

Shri Parag M. Sanghvi,
2203, Windsor Tower,
Shashtri Nagar, Andheri(W),
Mumbai 400 053
PAN: ATYPS3041A                                     ...   Appellant

Vs.

The ACIT/DCIT, CC-38,
Mumbai.                                            .... Respondent

            Appellant by             : Shri J.P.Bairagra
            Respondent by             : Shri Sanjay Bahadur
      Date of hearing                :       02/07/2015
      Date of pronouncement           :      30/09/2015


                               ORDER

PER G.S. PANNU,AM:

      The captioned two appeals relate to the same assessee for
assessment year 2004-05 and, therefore, they have been clubbed and
heard together and a consolidated order is being passed for the sake of
convenience and brevity.
                                         2
                                                                   ITA No. 8027 /MUM/2010
                                                                (Assessment Year : 2004-05)
                                                                   ITA No. 5139 /MUM/2013
                                                                (Assessment Year : 2004-05)


2.    ITA No.8027/Mum/2010is an appeal by the assessee                       directed
against the     order passed by CIT(A)-41,Mumbai dated 06/09/2010,
which in turn      has arisen out of an order passed by the Assessing
Officer dated 23/12/2009 under section 143(3) r.w.s. 153A of the
income Tax Act, 1961 ( in short `the Act'). In this appeal, assessee has
raised the following Grounds of appeal:-

      "(1) On the facts and in the circumstances of the case, the Ld.CIT(A) erred in
      confirming the addition of Rs.1,29,53,823/- in the assessment u/s.153A of
      the I.T. Act as no relevant or incriminating material or evidence was found
      or seized during the course of search reflecting undisclosed income.

      (2) On the facts and in the circumstances of the case, the CIT(A) erred in
      confirming the addition of Rs.1,29,53,823/- which was without any basis.

      (3) On the facts and in the circumstances of the case and in law, the Ld.
      CIT(A) erred in confirming the addition of Rs.1,29,53,823/- on account of gift
      received from Shri Ashok Pamani and Shri Raj Sitadas both being NRI as
      unexplained cash credit u/s.68 of the Income Tax Act, 1961."

3.    Briefly put, the relevant facts are that the appellant is an
individual, who alongwith his family members was subject to a search
action by the Department under section 132 of the Act on 12/9/2007.
Pursuant to search, a notice under section 153A of the Act was issued
on 24/7/2008 calling for a return of income. In response, the assessee
filed a return of income on 24/8/2009 declaring a total income of
Rs.10,89,125/- as against an income of Rs.5,77,443/- declared in the
return of income originally filed under section 139(1) of the Act on
01/09/2004. The return of income filed by the assessee was subject to
a scrutiny assessment under section 143(3) r.w.s. 153A of the Act,
whereby the total income has been assessed at Rs.1,40,42,948/-. The
difference between the returned              and the assessed income was
primarily on account of an addition of Rs.1,29,53,823/- made by the
                                        3
                                                            ITA No. 8027 /MUM/2010
                                                         (Assessment Year : 2004-05)
                                                            ITA No. 5139 /MUM/2013
                                                         (Assessment Year : 2004-05)





Assessing Officer by invoking the provisions of section 68 of the Act.
The said addition was on account of gift received by the assessee from
two Non-Resident Indians, namely, Shri Ashok Pamani -Rs.77,03,823/-
and Shri Raj Sitadas Motwani - Rs.52,50,000/-, which have been treated
as unexplained cash credits in the hands of the assessee. The said
addition stands affirmed by CIT(A) also and accordingly, the assessee is
in further appeal before us.

4.    Before the CIT(A) as well as before us, assessee has assailed the
addition on points of law as well as on facts. The first and foremost
plea raised by the assessee is contained in the abovestated Ground of
appeal No.1, whereby it is contended that the addition of
Rs.1,29,53,823/- made by the Assessing Officer is beyond the scope of
assessment under section 153A of the Act in as much as no
incriminating material or evidence was found or seized during the
course of search, which could assail the genuineness of the impugned
gifts received from two Non-Resident individuals. Since the aforesaid
issue goes to the root of the matter, being jurisdictional issue, the same
is being taken up at the thresh-hold.

5.    In this context, Ld. Representative for the assessee explained
that during the course of search at the residence of the assessee no
incriminating documents, jewellery, cash or unaccounted bank account
etc. was found and, therefore, there was no seizure except some loose
papers which were appropriately explained in the course of assessment
proceedings and no addition has been made in respect of such loose
papers. It was pointed out that in the context of the original return
                                     4
                                                            ITA No. 8027 /MUM/2010
                                                         (Assessment Year : 2004-05)
                                                            ITA No. 5139 /MUM/2013
                                                         (Assessment Year : 2004-05)


filed u/s. 139(1) of the Act, since no notice under section 143(2) of the
Act was issued within the prescribed period, the assessment stood
completed and in any case on the date of search i.e. on 12/09/2007, the
assessment for the impugned assessment 2004-05 was not pending.
Therefore, the assessment for the year under consideration did not
abate in terms of the second proviso to section 153A(1) of the Act. On
this basis it is sought to be made out that no addition could be made in
the impugned assessment        unless some incriminating material was
found during the course of search regarding the ingenuineness of the
gifts in question. In this context the Ld. Representative for the assessee
has relied upon various decisions namely:-

1. All Cargo Global Logistics Ltd. vs. DCIT, 137 ITD 287 (Mum)(SB)

2. In the case of Shri Gurinder Singh Bawa, ITA No.2075/M/2010 & ITA
No.2669/M/2010 dated 16/11/2012 ­ 28 Taxmann.com 328

3. CIT (Central) vs. Murli Agro Products Ltd. ­ 49 Taxmann.com 172

5.1   Apart therefrom, reliance has also been placed on the decision
of the Tribunal in the case of the spouse of the assessee, Smt. Zeenat P.
Sanghvi in ITA No.8026/Mum/2010 dated 19/12/2014, wherein under
similar circumstances, it has been held that without referring to any
incriminating material found during the course of search, no addition
could be made in an assessment under section 153A of the Act in
relation to an assessment year for which the assessment did not abate.

6.    On the other hand, Ld. Departmental Representative appearing
for the Revenue     has defended the action of lower authorities by
                                     5
                                                            ITA No. 8027 /MUM/2010
                                                         (Assessment Year : 2004-05)
                                                            ITA No. 5139 /MUM/2013
                                                         (Assessment Year : 2004-05)


pointing out that the provisions of section 153A of the Act empower the
AO to assess or re-assess the total income of six assessment years
immediately preceding the assessment year relevant to the previous
year in which search was conducted. As per the Ld. Departmental
Representative the AO was duty bound to assess or reassess `total
income' of such assessment years and, therefore, the impugned
addition was justifiably made as it involves application of Section 68 of
the Act. The Ld. Departmental Representative pointed out that the
gifts received by the assessee from the two persons was scrutinized in
the context of the ingredients of section 68 of the Act and the Assessing
Officer concluded that the assessee could not establish the
creditworthiness of the donor or the genuineness of the transaction.

7.    We have carefully considered the rival submissions. Section 153A
of the Act postulates the assessment in cases of search or requisition
under section 132 or under section 132A of the Act respectively. The
said section envisages that the Assessing Officer shall assess or reassess
the total income for six assessment years immediately preceding the
assessment year relevant to the previous year in which search was
conducted. The second proviso to section 153A(1) of the Act also
prescribes that assessment or re-assessment, if any, relating to any
assessment year falling within the period of six years referred to in sub-
section(1) of section 153A of the Act, which is pending on the date of
initiation of search or making of requisition as the case may be , shall
abate. In other words, in so far as the pending assessments are
concerned, the competence of the Assessing Officer to make the
original assessment converges with the assessment to                be made
                                    6
                                                         ITA No. 8027 /MUM/2010
                                                      (Assessment Year : 2004-05)
                                                         ITA No. 5139 /MUM/2013
                                                      (Assessment Year : 2004-05)


u/s.153A of the Act, i.e. only one assessment shall be made for such
assessment years based on the findings of the search as well as any
other material existing or brought on record by the Assessing Officer.
Notably, there would assessments in the period of the six assessment
years identified in section 153A(1) of the Act, which would have
become final (i.e. not pending on the date of search); such assessments
do not abate in terms of the second proviso to sec.153A(1) of the Act,
The scope and ambit of such an assessment is the controversy before
us. In this context, it would be pertinent to refer to the judgment of
the Hon'ble Bombay High Court in the case of CIT vs. Continental
Warehousing Corporation (Nhava-Sheva) 58 Taxmann.Com 78 (Bom)
wherein the scope of an assessment under section 153A of the Act has
been considered. One of the points addressed by the Hon'ble High
Court was whether the scope of assessment under section 153A of the
Act envisages additions, which are otherwise not based on any
incriminating material found during the course of search.            As per
Hon'ble High Court, no addition could be made in respect of the
assessment that had become final in the event no incriminating
material was found during the course of search. The Hon'ble High Court
also noticed its earlier judgment in the case of Murali Agro-products
Ltd. (supra) and has elaborately culled out the scope and ambit of the
assessment and reassessment of total income under section 153A(1) of
the Act read with the proviso thereof. The Hon'ble Bombay High
Court in Continental Warehousing Corporation (supra) has ruled that
an unabated assessment under section 153A(1) would not encompass
an addition, if no incriminating material is found during the course of
                                     7
                                                           ITA No. 8027 /MUM/2010
                                                        (Assessment Year : 2004-05)
                                                           ITA No. 5139 /MUM/2013
                                                        (Assessment Year : 2004-05)





search, because in such a case, the original   assessment had become
final. This proposition has been canvassed by the Ld. Representative for
the assessee       before us in order to assail the addition of
Rs.1,29,53,823/-   made    by the Assessing Officer treating the gifts
received from Non-resident individuals as unexplained, within the
meaning of section 68 of the Act.

7.1   In the present case, we have perused the orders of the lower
authorities and find that there is nothing on record to suggest that any
material was found during the course of search which would show that
the impugned gifts received from the two Non-Resident individuals
were in-genuine or were contrary to the stated position. Notably, the
assessee has asserted before the lower authorities that gifts of
Rs.77,03,823/- from Shri Ashok Pamani and Rs.52,50,000/-from Shri Raj
Sitadas Motwani were received through banking channels. The assessee
had furnished copies of the gift deeds, copies of the Passport and bank
statement of the donees to establish the genuineness of the gifts. The
discussion in the respective orders of the authorities below also reveal
that documents showing the PAN of Shri Ashok Pamani               were also
furnished by the assessee. Before us, the Ld. Representative for the
assessee also referred to page 29 of the Paper Book, wherein is placed a
copy of an Article published in the magazine containing a write-up
about the financial and business interest of the two donors, which
prima-facie show the creditworthiness of the donees. Be that as it may,
we are not presently dealing with the merits of the efficacy of the
ingredients of section 68 of the Act, but we are only trying to ascertain
as to whether any incriminating material was unearthed during the
                                     8
                                                           ITA No. 8027 /MUM/2010
                                                        (Assessment Year : 2004-05)
                                                           ITA No. 5139 /MUM/2013
                                                        (Assessment Year : 2004-05)


course of search which would show that the gifts were ingenuine. On
this aspect, we find that there is no material referred to by the Revenue
to say that any incriminating material was unearthed during the search.
Therefore, in this factual background, we do not find any justification
for the Assessing Officer to make the impugned addition in an
assessment finalized under section 153A of the Act in the absence of
any incriminating material having been found during the course of
search, qua the impugned gifts from the Non-Resident individuals. We
may categorically mention here that on the date of initiation of search,
qua the assessment year 2004-05 under consideration, assessment was
not pending and, accordingly, the assessment for this year did not abate
in terms of the second proviso to Section 153A(1) of the Act. Therefore,
the ratio of the judgment of Hon'ble Bombay High Court in the case of
Continental Warehousing Corporation (Nhava-Sheva) (supra) is clearly
attracted and the impugned addition could not have been made in
respect of an unabated assessment which had become final in the
absence of any incriminating material having been found in the course
of search, qua the impugned gift. Thus, we set aside the order of CIT(A)
and direct the Assessing Officer to delete the addition of
Rs.1,29,53,823/- as the same is purported to be beyond the scope and
ambit of an assessment envisaged under section 153A of the Act. Thus,
on this aspect assessee succeeds.

7.2   In the result, appeal of the assessee in ITA NO.8027/Mum/2010 is
partly allowed as above.
                                     9
                                                            ITA No. 8027 /MUM/2010
                                                         (Assessment Year : 2004-05)
                                                            ITA No. 5139 /MUM/2013
                                                         (Assessment Year : 2004-05)


8.    In so far as, the other captioned appeal is concerned, the same
relates to penalty imposed under section 271(1)(c) of the Act of
Rs.42,74,762/-in the context of the addition of Rs.1, 29,53,823/- made
by the Assessing Officer in the assessment order under section 153A of
the Act dated 23/12/2009 for assessment year 2004-05. Since we have
deleted the addition in the earlier appeal, the very basis for the levy of
penalty under section 271(1)(c) does not survive and, therefore, the
same is deleted.

      In the result, both the appeals of the assessee are allowed, as
above.

      Order pronounced in the open court on 30/09/2015.

         Sd/-                                   Sd/-
  (AMIT SHUKLA)                           (G.S. PANNU)
JUDICIAL MEMBER                      ACCOUNTANT MEMBER
Mumbai,Dated 30/09/2015
Copy of the Order forwarded to :
1.   The Appellant
2.   The Respondent.
3.   The CIT(A)-
4.   CIT
5.   DR, ITAT, Mumbai
6.   Guard file.

                                            BY ORDER,
//True Copy//
                                           (Dy./Asstt. Registrar)
                                         ITAT, Mumbai
Vm, Sr. PS

 
 
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