Prestige Buildwell Pvt. Ltd.,, New ... vs Department Of Income Tax

DCIT Prestige Buildwell Pvt. Ltd. Cent. Circle 1, 10th Floor, Aggarwal Millenium New Delhi Vs Tower, Netaji Subhash Place, Pitampura, New Delhi Pan No-AADCP6788N Appellant Respondent

C.O. No.285/Del/2014 ITA No. 241/Del/2013 (Assessment Year: 2006-07)

Prestige Buildwell Pvt, Ltd. DCIT 10th Floor, Aggarwal Cent, Circle 1, Millenium Tower, Netaji Vs New Delhi Subhash place, Pitampura New Delhi Pan No. AADCP6788N Appellant Respondent

Appellant by : Sh. Vivek Wadekar, CIT DR Respondent by : Sh. A.K. Jain, CA

Date of Hearing 17.06.2015 Date of pronouncement 30.06.2015

ORDER

PER A. T. Varkey JM These appeals filed by the Revenue and Cross Objection filed by the Assessee are directed against the order dated 26.11.2012 passed by the Ld. CIT(A)-III, New Delhi pertaining to the assessment year 2006-07.

2. The grounds raised in Revenue‟s Appeal in ITA No. 241/Del/2013 (A.Y. 2006-07):-

ITA No. 241/Del/2013 C.O. No.285/Del/2014 (Assessment Year: 2006-07)

"1. On the facts and in the circumstances of the case, the CIT(A) has erred in deleting the addition of Rs. 20,00,000/- made by the AO u/s 68 of the Income Tax Act,1961.(herein after the Act).

2 The order of the Ld CIT(A) is not tenable on facts and in law."

3. The grounds raised in Assessee‟s Cross Objection No. 285/Del/2014 (A.Y. 2006-07) are as under:-

"1. That on the facts and circumstances of the case, the Commissioner of Income Tax (appeals) has erred both in law and on facts in confirming the proceedings initiated under section 153A of Income Tax Act, which is bad in law in the absence of any incriminating material belonging to the assessee being found during the course of search.

2 That on the facts and circumstances of the case, the Commissioner of Income Tax (Appeals) has erred both in law and on facts in confirming the validate of impugned assessment order dated 27.12.2011 u/s 153A of the Income Tax as framed by the Assessing officer in respect of closed assessment for which no incriminating material seized during the course of search and seizure action.

3 That on the facts and circumstances of the case, the Commissioner of Income Tax (Appeals) has erred both in law and on facts in confirming the action and procedure followed by the Assessing officer during the proceeding u/s 153A of the Income Tax Act, which is invalid in eyes of law being based on incorrect postulate that search assessment u/s 153A is denovo in nature whereas the same is to be based and confined to incriminating material unearthed during search operations. 4 That on the facts and circumstances of the case, the Commissioner of Income Tax (Appeals) has erred both in law and on facts in confirming the charging of interest u/s 234B(3) from 25.10.2007 where as in the present case the original assessment was completed on 09.04.2008 hence the interest u/s 234B(3) should have been charged from 10.04.2008 till 27.12.2011 i.e. for 44 months as against 51 months charged by the AO."

4. The facts in brief are that the original return in this case was filed on 06-01- 2007 declaring net taxable income Rs. 5,95,233/-. The return was processed u/s. 143(1) of the Income Tax Act, 1961 (hereinafter "the Act") and later on scrutiny assessment was carried out vide order dated 09.04.2008 u/s 143(3) of the Act. Subsequently, a search and seizure operation was carried out against the unity group of companies (Unity Group) and individuals on 2 ITA No. 241/Del/2013 C.O. No.285/Del/2014 (Assessment Year: 2006-07)

20.8.2009. The assessee was also covered in search u/s. 132 of the Act. After the search, proceeding u/s. 153A of the Act were initiated and notice u/s. 153A of the Act dated 26.07.2011 was issued to the assessee requiring it to file the return of income. In response thereto, the assessee filed his reply dated 18.08.2011 and has requested to treat the original return of income filed u/s 139(1) as the return filed u/s. 153A of the Act. In this case regular proceedings were initiated and notice u/s. 143(2) and 142(1) of the Act, along with the questionnaire was issued and duly served upon the assessee.

4.1 The aforesaid group is engaged in the real estate projects. The group is involved mainly in business of promotion and development of DDA approved commercial complexes. The assessee company has been incorporated on 15.03.2005 and this is the first year of its operation. During the year the company has started a new project and has purchased land for it at Jodhpur. During the year the company has received only interest income. AO has noticed that the assessee company has received share capital / share application money from different entities. He observed that some of the applicants are individuals as well as group companies related to the Unity Group itself and are assessed in the same Circle. The AO himself acknowledges in para 5 of the assessment order that the sources of fund of these persons / companies have been verified in their respective cases. And then he proceeds to verify the fresh share capital / share application money received by the assessee and for that summons were issued u/s. 131(1) of the Act, and information was called u/s. 133(6) of the Act. In the assessment order the AO observes that the requirement of Section 68 of the Act is that the onus to prove the credit entry in the books of accounts is primarily on the assessee and not on the department. According to him, the assessee has not fully discharged its onus to prove the creditworthiness of the creditors companies. He further observed that merely establishing the identity of the creditor is not enough. In this regard, he placed reliance on various judicial pronouncements and held that the amount introduced by the assessee is under the garb of „share application money/ share capital/ share premium‟ 3 ITA No. 241/Del/2013 C.O. No.285/Del/2014 (Assessment Year: 2006-07)

and therefore treated it as income of the assessee from undisclosed sources within the meaning of section 68 of the Act and the additions of Rs. 20,00,000/- was made while completing the assessment u/s. 153A/145(3) of the Act vide his order dated 27.12.2011.

5. Against the aforesaid order of the Assessing Officer, assessee appealed before the Ld. CIT(A), who vide his impugned order dated 26.11.2012 has partly allowed the appeal of the assessee and deleted the addition of Rs. 20,00,000/- made by the AO u/s. 68 of the Act.

6. Aggrieved by the order of the Ld. CIT(A), now the Revenue is in appeal and the assessee has preferred a cross-objection before the Tribunal. First of all we will deal with the cross-objection of the assessee.

CROSS- OBJECTION 285/DEL/2014 (AY 2006-07)

7. In the Cross Objection the assessee has raised four grounds, in which he has not pressed ground Nos.1 and 2, so the same stands dismissed.

8. Coming to the Ground Nos.3 the ld AR for assessee Shri A.K. Jain, has vehemently assailed the decision of the ld CIT(A) in respect to confirming the impugned reassessment order passed u/s 153A of the Income Tax Act, 1961 (herein after „the Act‟). According to him, without any incriminating material seized during the course of search and seizure conducted on 20.08.2009, the re-assessment and the impugned addition made u/s 153A is invalid in the eyes of law. The ld AR contended that for the extant year under consideration no incriminating material whatsoever has been seized during search which could have been the basis of any addition to be made u/s 153A of the Act. According to the ld AR since no incriminating material were seized, the AO could not have made the impugned addition in reassessment order without any incriminating material seized during the search proceedings which took place on 20.08.2009. In the absence of any incriminating material from the search in the possession of the AO, according to the Ld. AR, he could not have fastened the impugned addition. The Ld AR 4 ITA No. 241/Del/2013 C.O. No.285/Del/2014 (Assessment Year: 2006-07)

pointed out that original assessment for the year under consideration i.e. AY 2006-07 was itself a scrutiny assessment u/s 143(3) of the Act, and investigation was done by the AO at that time and after satisfying himself of the identity, creditworthiness and genuineness of the share transactions made a conscious decision not to make any additions during the original scrutiny assessment; and now the AO has imposed the impugned addition by invoking section 153A and based his addition on materials already on record and that too without any serious attempt to enquire or investigate about the veracity of the documents placed before him by the assessee, which according to Ld. AR is clearly illegal in the eyes of law. According to the ld AR, the original assessment which has been done under scrutiny u/s 143(3) of the Act cannot be unsettled without incriminating materials found during the search. In the case in hand according to the ld AR the AO did not have a single piece of incriminating material collected during search to impose the addition, therefore according to him, addition thus made without incriminating material found during search and seizure was clearly illegal in the eyes of law and therefore is invalid and cited the Special Bench decision of the Tribunal in All Cargo and also brought to our notice the Coordinate Bench decision of this Tribunal in the assessee‟s own case wherein the CO of the assessee has been allowed. On the other hand, the ld DR contended that once search takes place in the assessee‟s premises then the AO has no alternative but to invoke section 153(A) and assess or reassess the assessee for six assessment years immediately preceding the assessment year relevant to the previous year in which search has been conducted. According to the ld DR since the assessment year in question falls in the ambit of six years, the AO has to assess/reassess the assessee even though the original assessment was concluded u/s 143(3) of the Act and placed his reliance on the order of the Hon‟ble Delhi High Court in the case of Filatex India Ltd. In ITA No.269/2014and CM No.10077/2014 dated 14.07.2014. And also relied upon the decision on the following orders:-

5 ITA No. 241/Del/2013 C.O. No.285/Del/2014 (Assessment Year: 2006-07)

 Anil Kumar Bhatia 24 Taxmann.com 98 dated 07.08.2012 of Hon'ble Delhi High Court  Raj Kumar Arora, ITA No. 56/2011 dated 11.07.2014 of Hon'ble Allahabad High Court  Canara Housing Development Company, ITA No. 38/2014 dated 25.07.2014 of Hon'ble Karnataka High Court  Apoorva Extrusion Pvt. Ltd., ITA No. 3308/Del/2010 for the A.Y. 2002-03, dated 09.10.2014 (IT AT, Delhi)  Shivnath Rai Harnarain (India) Ltd. v.DCIT 117 ITD 74 dated 15/02/2008 (ITAT, Delhi)  SSP Aviation Ltd. Vs. DCIT, WPC No. 309/2011 dated 29103/2012

9. We have heard both the parties and have perused the records of the case, and have gone through the case laws cited before us. Before we adjudicate this issue we were wondering whether an addition can be made without the support of any material leave alone incriminating material, which can be termed as the basis of such an addition whether it be during Sec. 143, 147, 153A proceedings. Even during best judgment assessment u/s. 144, 145 of the Act, the AO cannot arbitrarily make any additions based on surmises and conjectures. There are well settled guidelines for making even best judgment assessments. Settled position of law is that surmises and conjectures cannot be the base of any additions whether during scrutiny assessment u/s 143(3), u/s 147/148 or u/s 153A of the Act. Section 153A, no doubt is an overriding provisions which takes away the fetters found u/s 147/148 of the Act, which AO has to face while reopening assessment in case of escapement of income, etc. However the moot question is whether the AO can make additions based on no evidence, the answer has to be in the negative. But then the question is what is the scope of assessment and reassessment envisaged u/s 153A of the Act and what evidence can be taken by the AO during the 153A proceedings. The AO while exercising his jurisdiction u/s 153A, can assess/ reassess based on (a) evidences unearthed during the search, (b) evidences already on record during the original 6 ITA No. 241/Del/2013 C.O. No.285/Del/2014 (Assessment Year: 2006-07)

assessment u/s 143(1) or 143(1)(a) or 143(3) but not taken notice by the AO for whatever reason or if the view of the AO during original assessment has been found to be wrong due to some material unearthed during search or has come to the notice of the AO through any other means and (c) if any fresh evidence comes to the notice of Commissioner u/s 263 of the Act and he directs the AO to take the evidence into consideration, then the said evidence can be made use by the AO while computing the "Total Income"

of the assessee for the six Assessment Years immediately preceding the assessment year relevant to the previous year in which search has been conducted. The parliament has given a mandate to the AO, unbridled by any fetters to compute the "Total Income" based on evidence on record which has escaped notice of the AO during original assessment or the evidence adduced during original assessment has been found to be bogus by virtue of material unearthed during search and the fresh evidence unearthed during the search proceedings; and any other evidence which is brought to the notice of the AO by CIT u/s 263 of the Act. However the AO while computing the "total income" has to do that based on evidence as stated above; without the same, the additions will have no legs to stand and it has to necessarily fall. Coming to the case laws cited by the Ld. DR, we would like to point out that in all these cases decided by the Hon‟ble Jurisdictional High Court, on facts there was incriminating material and the view of the Special Bench of the Tribunal in All Cargo Logistics Ltd. in which the Special Bench held that the de-hors any incriminating material, no additions can be sustained has been upheld by the Hon‟ble Bombay High court in Income Tax Appeal No. 1969 of 2013 filed by the Revenue against the said decision of the Special Bench i.e. ALL Cargo, wherein the Hon‟ble High Court in para 14 (Page 9) has specifically adjudicated the issue raised before their Lordships that "to interpret not only the legal provisions but consider the correctness of the view taken in the Special Bench decision, we proceed to admit these appeals on the above questions."

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10. The grounds raised by the Revenue before the Hon‟ble High Court of Bombay in that case (ALL Cargo) were the following:-

"(i) Whether on the facts and in the circumstances of the case, the Hon'ble ITAT is correct in narrowing down the scope of assessment under section 153A in respect of completed assessments by holding that only undisclosed income and undisclosed assets detected during search could be brought to tax?

ii) 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 Section 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?

iii) Whether on the facts and in the circumstance of the case, the Hon'ble ITAT was right in limiting the scope of Section 153A only to undisclosed income when as per the section the AO has to assess the total income of the six assessment years?

iv) Whether on the facts and in the circumstances of the case, the Hon'ble Tribunal erred in holding that the assessee was entitled to deduction u/s. 80IA(4) which was contrary to the Circular of the CBDT No. 10/2005 as also contrary to the fact that JNPT Port had withdrawn its certification of the company?"

11. The Hon‟ble High Court of Bombay in para 31 held as follows:-

"We, therefore, hold that the Special Bench's understanding of the legal provision is not perverse nor does it suffer from any error of law apparent on the face of the record."

12. And finally in para 49 after concurring with the view of the Hon‟ble Delhi High Court order in Anil Kumar Bhatia‟s case held as follows:-

"We, therefore, dismiss the Revenue appeals and answer the substantial questions of law against the Revenue and in favor of the assessee."

13. In the present case, the Ld CIT(A), while allowing the assessee‟s appeal on merit‟s made a categorical finding in para 9.7 of the impugned order that no evidence could be unearthed adverse to the assessee for the instant year as under:-

"9.7 I find from the evidence available on record that from its side, the appellant company has furnished all the necessary documentary evidence relating to share capital. Firstly, in the 8 ITA No. 241/Del/2013 C.O. No.285/Del/2014 (Assessment Year: 2006-07)

original proceedings under section 143(3) and later again in 153A proceedings. Also no incriminating document/evidence is available or new facts have emerged during the search proceedings doubting the creditworthiness or genuineness of transactions, specifically in view of the fact that in original 143(3) proceedings both these entities have duly responded to the notices issued by the Department and their identity, creditworthiness and genuineness have been accepted.''

14. Also we find that ld CIT(A) has made a finding that no incriminating material has been found during search in para 9.14 at Pg.37 of the impugned order as under:-

"Thus, in view of the factual position as well as the judicial pronouncement on the subject, discussed above, I am of the considered view that the appellant has discharged the initial onus of establishing the bona- fides of the transaction and the AO was not justified in ignoring various evidences available within the original 143(3) proceedings and especially when no incriminating documents/ evidence is found during the search to suggest that the 2 entities namely Technicom Associates and Hamara Samay TV Network, are sham entities and when their balance sheet speaks otherwise."

15. The Ld DR could not controvert this factual finding of the Ld CIT(A) as to whether any evidence adverse to the assessee was found during the search which could have been the basis for addition while "computing the total income" as envisaged u/s 153A of the Act.

16. In Filatex India Ltd. case and other cases relied and cited by the Ld. DR, we find that on facts there was incriminating material on record, so those case laws cannot be applied to the case in hand, since there was no incriminating material found in the instant case during search of the assessee for the year under consideration. In Anil Kumar Bhatia‟s case also there was incriminating material on record to justify additions, but here in this case there was no incriminating material at all.

17. Therefore in the facts and circumstances of the case we find that the original assessment done u/s 143(3), which was re-assessed invoking 153A after search u/s 132 of the Act is valid, however the additions made has no

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basis and is not based on any evidence to support the same collected during the search conducted against it and so the same has been rightly deleted by the ld CIT(A).

18. We take note of the 'A' Bench decision of ITAT, Delhi, in the assessee‟s group company M/s Aggarwal Plaza Pvt. Ltd Vs. DCIT, in ITA No. 1605/Del/2013, for the AY 2005-06, vide order dated 18/07/2014 considered identical grounds in the case of Sanjay Aggarwal Vs. DCIT in ITA No. 3184/Del/2013, for the A.Y. 2003-04 under Section 153A proceedings wherein the Bench vide para 14 held as follows:

"14. Since the Special Bench has decided this issue in this manner, it is not possible for us to deviate from the same. There has to be some consistency in the view taken by the Tribunal. Once a Special Bench has decided a particular issue in a particular manner, then, that becomes binding on all the division benches across the country unless there is a contrary judgment of the Hon'ble Supreme Court or that of some High Court. As the ld. DR failed to point out any specific and direct judgment rendered by the Hon'ble High Court on the issue which is obtaining in the present appeal, we are disinclined to deviate from the Special Bench order in the case of All Cargo (supra). We, therefore, hold in principle that no addition can be made for any assessment year u/s I53A, the assessment for which is not pending on the date of search, unless any incriminating material is found in the course of search."

19. Consistent with the view taken therein and taking note that the Hon‟ble Bombay High Court has upheld the Special Bench decision of the Tribunal, in ALL Cargo (supra) we uphold the contention of the assessee that no addition can be made for this assessment year u/s 153A since no incriminating material was unearthed during the course of search and admittedly original assessment has not abated as on date of search. So we are inclined to follow the view of the Coordinate Bench as stated above.

20. As we have upheld the ground of the assessee in CO that de-hors any incriminating material no addition can be made while computing "Total income" under section 153A of the Act, we are not inclined to adjudicate the

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appeal of the Revenue as it would be an academic exercise only so we dismiss it.

21. In the result, the Revenue‟s appeal stands dismissed and Cross Objection filed by the Assessee stands partly allowed.

Order pronounced in the Open Court on 30/06/2015.

-Sd/- -Sd/- [R.S.SYAL] [A.T. VARKEY] ACCOUNTANT MEMBER JUDICIAL MEMBER Date 30/06/2015 "AK KEOT'' Copy forwarded to: - 1. Appellant - 2. Respondent - 3. CIT 4. CIT (A) 5. DR, ITA

TRUE COPY By Order, Assistant Registrar, ITAT, Delhi Benches

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