Referred Sections:
Section 153A of the Income Tax Act, 1961
Section 132 of the Act
Section 2(14) of the Act
Section 2(22)(e) of the Income Tax Act, 1961
Referred Cases / Judgments:
CIT vs. Kabul Chawla, 380 ITR 573
CIT vs. Anil Kumar Bhatia
CIT vs. MeetaGutgutia (supra) in paras 69 to 72
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH `G'NEW DLEHI
BEFORE SHRI O.P.KANT, ACCOUNTANT MEMBER
AND
SHRI K. NARASIMHA CHARY, JUDICIAL MEMBER
ITA.No.72/Del/2012
Assessment Year: 2005-06
ACIT, Central Circle-22, vs M/sSatnam International P. Ltd.,
New Delhi, 201, Vipps Centre,
2, Community Complex, Masjid
Moth, G.K. II, New Delhi
PAN AAACS1173P
(Appellant) (Respondent)
Appellant by: Shri S. S. Rana, CIT-DR
Respondent by: Sh. Sanat Kapoor, Advocate
Date of hearing: 11/7/1919
Date of order : 16 /7/2019
ORDER
PER K. NARASIMHA CHARY, J.M.
Challenging the Order dated 27.10.2011 in Appeal No. 268/09-10
passed by the Ld. Commissioner of Income Tax (Appeals)-III, Delhi, ("Ld.
CIT(A)"), Revenue preferred this appeal.
2. Briefly stated relevant facts are that the assessee company was
incorporated on 26.3.1989 to carry out the business of builders,
colonisers estate developers, town planners etc. For the Assessment
Year 2005-06 they have filed their return of income on 28.10.2005
declaring an income of Rs.4,97,607/-. Subsequently, the search and
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seizure operations were conducted in the group cases of
M/sKohinorFood Ltd on 5.12.2007 and according to the Revenue, a
search warrant was issued and executed in the name of the assessee
also. Notice dated 12.12.2008 was issued under section 153A of the
Income Tax Act, 1961 (for short "the Act") and the assessee claims to
have filed their return of income on 5.1.2009 declaring the total income
of Rs 4,97,607/-and paid the tax.
3. Assessee further filed a letter dated 13.4.2009 contesting the
validity of the notice dated 12.12.2008 issued under section 153A of the
Act on the ground that the learned Assessing Officer of the person on
whom the search under section 132 of the Act was conducted had not
recorded satisfaction note that the valuable article, books of accounts
or documents seized during the course of search belong to a person
other than the person searched. Assessee further contested that no
search warrant of authorisation for conducting research was issued
under section 132 of the Act nor was the same executed in the name of
the assessee.No panchnama has been drawn and no search was
conducted in the premises of the assessee company. It could be seen
from the record that the assessee specifically alleged that the Assessing
officer had invoked the provisions of section 153A of the Act without
complying with the provisions contained in section 132 of the Act
before issuing the notice under section 153A of the Act, thereby
rendering the proceedings under section 153A of the Act without
jurisdiction and consequently null and void.
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4. During the course of assessment, learned Assessing Officer found
that the assessee company had shown purchase of land for
Rs.68,22,000/-and the sale of the same for Rs.74,02,875/-after debiting
the expenses to the tune of Rs.5,93,098.85. Further the assessee
adjusted the brought forward losses of Rs.95,491/-.Learned Assessing
Officer treated the sale consideration of Rs.78 lakhs as income from
undisclosed sources. So also not accepted the plea of the assessee that
the sum of Rs.2 Lacs was the loan. He, therefore, by order dated
21/12/2009 under section 153A /143(3) of the Act by made an addition
of Rs.78,00,000/-on account of unexplained income from undisclosed
sources and Rs.2,00,000/-on account of unexplained cash credit claimed
to be loan.
5. Assessee preferred an appeal before the Ld. CIT(A) challenging
these two additions. Ld. CIT(A) held that the addition of Rs.78 lakhs and
Rs.2 Lacs is baseless and deleted. Ld. CIT(A), however, declined to allow
the set off of loss of Rs.95,491/-. Revenue is, therefore, aggrieved by
the deletion of the major addition and preferred this appeal.
6. Under rule 27 of the Appellate Tribunal Rules, 1963, assessee
submitted that the assumption of jurisdiction by the learned Assessing
Officer under section 153A of the Act, in the absence of any
incriminating material seized from the assessee at the time of search by
the Revenue, by issuing notice under section 153A of the Act is bad and
the consequent assessment has to be quashed.
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7. We have gone through the record. From the impugned order, it
is clear that as demonstrated by the assessee, the assessee made
payments through cheques to various persons with whom agreement
to purchase land at Sonipat was made between the landowners and the
assessee and the same land was sold by the assessee to Eldeco
Infrastructure and Properties Ltd and the copies of the part payment
agreement to purchase the land as well as the confirmation from the
Eldeco Infrastructure and Properties Ltd and the bank statement and
copy of the statement of account of Eldeco were to be found on record.
Ld. CIT(A) held that the assessee acquired the right to purchase the
property, which is capital asset within the meaning of Section 2(14) of
the Act and sold the same to Eldeco and, therefore, the sale of such
right had resulted in capital gains to the assessee under the provisions
of the Act. Ld. CIT(A), on a perusal of the return of income of the
assessee for assessment year 2005-06 as well as the computation of
income and the trading and profit and loss account for the period,found
that the assessee had shown the income arising from the above
purchase and sale transaction of land under the heading "Business
Income" but this transaction is not business of the assessee but rather
in the nature of capital investment giving rise to short-term capital gain.
8. So also, in respect of the addition of Rs.2 Lacs, it was submitted
before the Ld. CIT(A) that the said amount of Rs.2 Lacs was unsecured
loan from its directors as on 31.3.2005 and the directors have given the
loan to the assessee from the personal withdrawals from their capital
account, which was entered in the journal book and journal voucher
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was also filed. On a perusal of the material before him, as a matter of
fact, Ld. CIT(A) found that the directors made withdrawals for
household expenses and the unsecured loan of Rs.2 Lacs to the
assessee was properly explained.
9. No material is produced before us by the Revenue to disturb the
factual finding written by the Ld. CIT(A) basing on the material in the
shape of the agreement to purchase the land, confirmation from the
purchaser of the land, and statement of accounts, trading and profit
and loss account etc in respect of the deletion of Rs. 78 lakhs and the
statement of affairs in the books of accounts of the assessee, journal
book and journal voucher etc in respect of the deletion of Rs.2Lacs.
Findings of fact by the Ld. CIT(A) are firmly entrenched into the record
and do not warrant any interference, in the absence of any material
rendering it unacceptable.
10. Further, it has been the case of the assessee all through that no
search was conducted in their premises not any search warrant was
executed on their name. It is further contended that nothing
incriminating was found against the assessee in any search that was
conducted in respect of the assessee. The additions are not based on
any material relating to our belonging to the assessee and as a matter
of fact no satisfaction to that effect by the Assessing Officer of the
person searched was recorded. In the circumstances, assessee placed
reliance on the decision of the Hon'ble jurisdictional High Court in the
case of CIT vs. Kabul Chawla, 380 ITR 573 and submitted that in the
absence of any incriminating material available qua the assessee qua
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the assessment order, it is not open for the revenue to make any
addition.
11. It is not the case of the Revenue that any incriminating material
was found justifying the additions in this case. Though the assessee has
been contending that no search was conducted in their premises
pursuant to any warrant issued on their name and no material was
seized in their premises justifying the additions, such a contention has
not been rebutted by the authorities below. It is also not in dispute that
as on the date of search there were no pending assessment
proceedings in respect of the AssessmentYear 2005-06.It is, therefore,
clear that in the absence of any incriminating material that could be
found during the search and seizure operations, the concluded
assessment of the assessee for the AY 2005-06 was reopened and the
additions were made.
12. Hon'ble Delhi High Court in case of CIT vs. Kabul Chawla (supra)
considering its earlier decision in the case of CIT vs. Anil Kumar Bhatia
(supra) considered the following question of law:
"2. The issue that the Court proposes to address in
these appeals is the same that was considered by
the ITAT viz., "Whether the additions made to the
income of the Respondent-Assessee for the said
A.Ys under section 2(22)(e) of the Income Tax Act,
1961 (`Act') were not sustainable because no
incriminating material concerning such additions
were found during the course of search and further
no assessments for such years were pending on the
date of search ?"
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13. Further, the Hon'ble Delhi High Court in the above case as
regards completed assessment held as under :
"vii. Completed assessments can be interfered with by
the A.O. while making the assessment under section
153A only on the basis of some incriminating
material unearthed during the course of search or
requisition of documents or undisclosed income or
property discovered in the course of search which
were not produced or not already disclosed or made
known in the course of original assessment"
14. The Hon'ble Delhi High Court in its recent decision in the case of
Pr. CIT vs. MeetaGutgutia (supra) in paras 69 to 72 has held as under :
"69. What weighed with the Court in the above
decision was the "habitual concealing of income and
indulging in clandestine operations" and that a
person indulging in such activities "can hardly be
accepted to maintain meticulous books or records
for long." These factors are absent in the present
case. There was no justification at all for the AO to
proceed on surmises and estimates without there
being any incriminating material qua the AY for which
he sought to make additions of franchisee
commission.
70. The above distinguishing factors in Dayawanti
Gupta (supra), therefore, do not detract from the
settled legal position in Kabul Chawla (supra) which
has been followed not only by this Court in its
subsequent decisions but also by several other High
Courts.
71. For all of the aforementioned reasons, the
Court is of the view that the ITAT was justified in
holding that the invocation of Section 153A by the
Revenue for the AYs 2000-01 to 2003-04 was
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without any legal basis as there was no incriminating
material quaeach of those AYs.
Conclusion
72. To conclude :
(i)Question (i) is answered in the negative i.e., in
favour of the Assessee and against the Revenue. It is
held that in the facts and circumstances, the Revenue
was not justified in invoking Section 153 A of the Act
against the Assessee in relation to AYs 2000-01 to AYs
2003-04."
15. In the circumstances, it is clear that the decision of the
Hon'ble jurisdictional High Court in the case of Kabul Chawla
(supra) is applicable and even on the question of law also, the
additions cannot be sustained.
16. Viewing from any angle there do not appear any valid
grounds to interfere with the findings of the Ld. CIT(A) in the
impugned order, and therefore, we decline to interfere with the
same.
17. Appeal of the Revenue is, accordingly, dismissed.
Pronounced in the open court on 16th July, 2019.
Sd/- sd/-
(O.P.KANT) (K. NARASIMHA CHARY)
Accountant Member JUDICIAL MEMBER
Dated: 16th July, 2019
`VJ'
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Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR
ITAT NEW DELHI
Draft dictated 15.7.2019
Draft placed before author 16.7.2019
Approved Draft comes to the Sr.PS/PS
Order signed and pronounced on
File sent to the Bench Clerk
Date on which file goes to the AR
Date on which file goes to the Head Clerk.
Date of dispatch of Order.
Date of uploading on the website
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