Shri N Suryanarayana Challakere v. The Deputy Commissioner Of Income Tax Central Circle 1 2 Bangalore

In The Income Tax Appellate Tribunal Smc B Bench Bangalore Before Shri Arun Kumar Garodia Accountant Member It A Nos 1708 1709 Bang 2017 Assessment Year S 20 10 11 2011 12 Shri N Suryanarayana Bangalore Road Gandhinagar Challakere 577 522 Chitradurga Dt Pan Akjps 8213 L Vs The Deputy Commissioner Of Income Tax Central Circle 1 2 Bangalore Appellant Respondent Assessee By Shri Lokesh Jain Ca Revenue By Shri Palani Kumar Addl Cit Dr Date Of Hearing 2 3 1 1 201 7 Date Of Pronouncement 01 1 2 2017 O R D E R Per Shri A K Garodia Accountant Member Both These Appeals Are Filed By The Assessee Which Are Directed Against Two Separate Orders Of Ld Cit A Davangere Both Date D 30 03 2017 For Assessment Years 2010 11 And 2011 12 Both These Appeals Were Heard Together And Are Being Disposed Of By Way Of This Common Order For The Sak E Of Convenience 2 It Was Submitted By Ld Ar Of Assessee That Grou Nd Nos 1 2 And 3 In Both Years Are General And Ground No 4 Is Regarding Val Idity Of Reassessment Proceedings This Ground Is As Under 4 The Ld Assessing Officer Erred In Carrying Out The Impugned Assessment Under Section 147 Of The Income Tax Act And The Ld Cit A Erred In Upholding The Order Of The Ld Assessi Ng Officer 3 The Assessee Has Also Raised One Additional Grou Nd In Both Years Which Is As Under Theld Ao Erred In Carrying Out The Impugned Assessm Ent Under Section 147 Of The Income Tax Act Instead Of Sectio N 153 C Of The Income Tax Act Ita Nos 1708 1709 Bang 2017 Page 2 Of 9 4 Regarding The Issue Involved In Ground No 4 And The Additional Ground It Was Submitted By Ld Ar Of Assessee That Search Was Con Ducted U S 132 Of It Act And In The Case Of M S Anantha Refinery Pvt Ltd Arpl On 03 12 2010 And The Reopening Is In The Basis Of Material Found In That Search And Therefore In The Facts Of The Present Case The Provisions Of Se Ction 153 C Are Applicable And Not Of Section 147 And Therefore Reopening Is Bad In Law Reliance Has Been Placed By Him On The Tribunal Order Rendered In The Case Of Rajat Shubra Chatterji Vs Acit In Ita No 2430 Del 2015 And Ito Vs Shri Arunkumar Kapoor As Reported In 140 Ttj 0249 The Ld Dr Of Revenue Supported The Orders Of The Authorities Below 5 I Have Considered The Rival Submissions I Find That As Per The First Tribunal Order Rendered In The Case Of Rajat Shubra Chatterj I Vs Acit Supra I Find That The Copy Of This Tribunal Order Is Not Made Availab Le By The Learned Ar Of The Assessee But This Tribunal Order Is Reported In Cch 135 Delhi Tribunal In That Case The Tribunal Followed Another Tribunal O Rder Rendered By Amritsar Bench Of The Tribunal In Ito Vs Shri Arunkumar Kap Oor Supra And Hence I First Consider The Applicability Of That Tribunal O Rder Of Amritsar Bench Of The Tribunal Para Nos 7 2 8 And 9 Of This Tribunal Order Are Relevant For The Issue In Dispute Before Me And Therefore These Paras Are Reproduced Herein Below For Ready Reference These Paras Are As Under 7 2 The Undisputed Facts Are That A Search Was Cond Ucted Under Section 132 Of The Act In The Case Of M S To Day Homes Infrastructure Pvt Ltd On 28 3 2006 During The C Ourse Of Which Certain Incriminating Documents Were Allegedly Seiz Ed It Is Also A Matter Of Record That The Dcit Central Circle 22 New Delhi Intimated The Ao Of The Assessee About Seizure Of C Ertain Documents Pertaining To The Assessee During Search And Enclos Ed Copy Of Those Documents Requesting Him To Take Appropriate Action Under Section 153 C 148 Of The Act It Is After That During The Co Urse Of Appellate Proceedings Before The Cit A The Assessee Took An Additional Ground Of Appeal To The Effect That The Reassessment Proce Edings Initiated By The Ao U S 148 Are Illegal And Void Ab Initio In T He Instant Case The Learned Cit A Has Correctly Observed That The A O Should Have Issued Notice Under Section 153 C Of The Act And Sho Uld Have Framed The Assessment Under Section 153 C Read With Section 153 Of The Act Section 153 Cof The Act Reads As Under Ita Nos 1708 1709 Bang 2017 Page 3 Of 9 153 C Notwithstanding Anything Contained In Sectio N 139 Section 147 Section 148 Section 149 Section 151 And Sect Ion 153 Where The Assessing Officer Is Satisfied That Any Money Bull Ion Or Other Valuable Article Or Thing Or Books Of Account Or Documents S Eized Or Requisitioned Belongs Or Belong To A Person Other T Han The Person Referred To In Section 153 A Then The Books Of Acco Unt Or Documents Or Assets Seized Or Requisitioned Shall Be Handed Over To The Assessing Officer Having Jurisdiction Over Such Other Person And That Assessing Officer Shall Proceed Against Each Such Other Perso N And Issue Such Other Person Notice And Assess Or Reassess Income O F Such Other Person In Accordance With The Provisions Of Section 153 A 8 On A Perusal Of The Above Provisions It Would B E Clear That The Provisions Of Section 153 C Of The Act Were Applicab Le Which Supersedes The Applicability Of Provisions Of Secti Ons 147 And 148 Of The Act As We Have Already Noted Hereinabove That The Documents Were Seized During The Search Under Section 132 Of The Act And The Same Was Sent To The Assessees A O At Amritsar By The Officer At Delhi In Our View The Learned Cit A Has Correctl Y Observed That Only The Provisions In Which Any Assessment Could B E Made Against The Assessee In The Income Tax Act Was Section 153 C Read With Section 153 Of The Act It Is Also Apparent From The Record That The Officer At Delhi Has Mentioned In His Letter That The Necessar Y Action May Be Taken As Per Law Under Section 153 C 148 Of The Act Hence Notice Issued Under Section 148 Of The Act And Proceedings Under Section 147 Of The Act By The Ao Are Illegal And Void Ab In Itio In View Of The Provisions Of Section 153 C Of The Act Section 147 148 Stand Ousted In The Instant Case The Procedure Laid Down Under Sec Tion 153 C Has Not Been Followed By The A O And Therefore Assessmen T Has Become Invalid We Also Observe That The Cit A Was Justif Ied In Following The Ratio Laid Down By The Honble Supreme Court In The Case Of Manish Maheshwari Vs Acit And Another Reported In 2007 289 Itr 341 Wherein It Has Been Held That If The Procedure Laid Down In Section 158 Bd Is Not Followed Block Assessment Proceedings Would Be Illegal The Cit A Has Correctly Observed That Th E Provisions Of Section 153 C Are Exactly Similar To The Provisio Ns Of Section 158 Bd Of The Act In Block Assessment Proceedings T Hus Considering The Entire Facts And The Circumstances Of The Prese Nt Case We Hold That The Cit A Was Fully Justified In Quashing The Rea Ssessment Order We Also Do Not Find Any Merit In The Submissions Of Th E Learned Dr That During The Course Of Search It Was Found At Premis Es Of M S Today Homes Infrastructure Pvt Ltd Pertaining To M S P R Infrastructure Ltd And Not The Assessee In This R Egard We May Point Out That The Contention Raised By The Learned D R Is Factually Incorrect And Contrary To The Available Records Of Seized Documents Specifically Mentioned In The Assessment Order Date D 30 12 2008 In View Of The Above Factual Discussion We Do Not Fin D Any Merit And Substance In The Contention Of The Learned D R The Refore We Uphold The Order Of The Cit A And Dismiss The Ground Nos 1 To 4 Of The Appeal Ita Nos 1708 1709 Bang 2017 Page 4 Of 9 9 Since We Have Upheld The Order Of The Cit A In Quashing The Reassessment Order And Therefore We Do Not Think It Necessary To Go Into The Merits Of The Case 6 In The Present Case Also This Is Noted By The A O In The Assessment Order That During The Course Of Search Operation Carried Out U S 132 Of The Act In The Case Of Arpl On 03 12 2010 Seized Material Marked As A Nsn 1 Was Found Which Reflected That There Was Unexplained Investment Of Rs 9 90 145 Made By The Assessee On The Basis Of This Evidence Found In T He Course Of Search The Ao Invoked The Provisions Of Section 147 After Duly Re Cording The Reasons For Reopening Of The Assessment And A Notice U S 148 O F The Act Was Issued On 16 04 2012 Which Was Duly Served On The Assessee Hence It Is Seen That The Search In The Present Case Was Carried Out On 03 12 2010 And Therefore For Assessment Year 2010 11 Section 153 C Can Be Invoke D But For Assessment Year 2011 12 Being The Year Of Search Section 153 C Cannot Be Invoked And Therefore In Respect Of Assessment Year 2010 11 Th Ese Tribunal Orders Cited By Ld Ar Of Assessee Are Applicable And Respectful Ly Following The Same I Hold That The Assessment Order Framed By The Ao U S 147 For Assessment Year 2010 11 Is Bad In Law Because The Same Should Have Been Made By The Ao U S 153 C Since In Ay 2010 11 The Assessment O Rder Itself Is Quashed The Issue On Merit Do Not Call For Any Adjudication A Ccordingly The Assessment Order In Assessment Year 2010 11 Is Quashed 7 In The Result The Appeal Of Assessee For Assess Ment Year 2010 11 Is Allowed 8 Now I Take Up The Appeal For Assessment Year 201 1 12 The Grounds Raised By The Assessee Are As Under 1 The Order Of The Learned Cit A Is Opposed To L Aw Facts And Circumstances Of The Case 2 The Order Is Passed In Haste Without Providing Sufficient And Reasonable Opportunity Of Being Heard 3 The Order Is Passed Against The Principle Of Natu Ral Justice And Thus Liable To Be Quashed 4 The Ld Assessing Officer Erred In Carrying Out T He Impugned Assessment Under Section 147 Of The Income Tax Act And The Ld Ita Nos 1708 1709 Bang 2017 Page 5 Of 9 Cit A Erred In Upholding The Order Of The Ld Asse Ssing Officer 5 The Ld Assessing Officer Erred In Treating The C Apital Balance Of Huf As Money Lent By The Appellant In The Ordinary Course Of Business Amounting To Rs 19 00 000 And Further E Rred In Treating The Sum Of Rs 2 28 000 As Interest Earned On The Same Further He Erred In Adding A Sum Of Rs 89 000 Rs 6 30 000 And Rs 1 53 000 As Unexplained Income The Ld Cit A Er Red In Confirming The Order Of The Ld Assessing Officer 6 The Ld Cit A Failed To Note That The Ld Ao Ha S Erred In Interpolating The Presumptive Provision Of Section 292 C Of The Act To Bring The Above Amounts To Tax In The Hands Of The Appellant 7 The Ld Cit A Erred In Confirming The Order Of The Ld Ao Who Erred In Treating The Scribbling Found In The Seize D Documents As Actual Transaction Of Business 8 The Ld Cit A And The Ld Ao Erred In Adding A Sum Of Rs 1 00 000 To The Income Of The Appellant Which In Fact Was A Transaction Of Hand Loan That Did Not Materialize Due To Insufficiency Of Funds 9 The Ld Ao Erred In Adding A Sum Of Rs 1 70 000 To The Income Of The Appellant Merely On The Basis Of Scribbling Mad E On One Of The Seized Materials 10 The Ld Cit A And The Ld Ao Failed To Appreci Ate That The Money Advanced By Ms Swetha Daughter Of The Appellant To M S Anantha Refinery Private Limited And Other Concerns Amounti Ng To Rs 7 17 000 Was In The Nature Of Loan For Which Ledger Extracts Were Furnished During The Course Of Assessment Proceedin Gs 11 The Ld Ao Erred In Levying Interest Under Sect Ion 234 A 234 B 234 C Of The Act The Computation Thereof Is Erroneo Us 12 The Appellant Seeks Your Leave To Add Alter A Mend Or Delete Any Of The Grounds Urged At The Time Of Hearing 9 In This Year Also Ground Nos 1 2 And 3 Are Ge Neral Which Require No Separate Adjudication And Ground No 4 And Additional Ground S Is Rejected Because I Have Already Seen That This Being The Year Of Searc H Provisions Of Section 153 C Are Not Applicable Ita Nos 1708 1709 Bang 2017 Page 6 Of 9 10 Regarding The Merit Of The Addition Being Dispu Ted By The Assessee As Per Ground Nos 5 To 8 It Was Submitted By Ld Ar Of A Ssessee That These Were The Submissions Of The Assessee Before The Ao As Noted By Him On Page No 5 Of The Assessment Order That The Amount Mentioned On P Age No 68 Of The Seized Material A Nsn 1 Are Belonging To N Surnarayana Huf Who Is Assessed To Tax Before The Learned Ito Ward 1 Chitradurga Under Pan Akbhn 2752 B And The Entire Calculation Is About Rough Estimate Written By The Grant Daughter Of The Assessee On Dictation Of The Assessee Out Of Memory It Is Submitted That The First Amount Noted Of Rs 19 Lacs Is Of Opening Capital Balance In Huf Account As On 31 03 2009 And Remaining Amounts Are Regarding Incomes Accrued Over The Years In Suppo Rt Of This Contention He Submitted English Version Of The Information As Per Scribbling On Page No 68 Of Seized Material As Per Which The Principle Amount W As Rs 19 Lakhs And The Interest Was Rs 2 28 Lakhs And Rs 0 89 Lakhs Tota Ling Rs 22 17 Lakhs To Which A Further Amount Was Added Rs 6 30 Lakhs Being In Respect Of Svt Profits And Further Interest Of Rs 1 53 Lakhs Was Added Making It Rs 30 Lakhs It Was Also Submitted That As Per The Capital Account Of Huf Ma De Available As Per Annexure 4 Of The Appeal Memo Paper Book Opening Balance As On 01 04 2004 Was Rs 19 89 470 Which Was Considered At Rs 19 Lakhs By The Assessee Out Of Memory And To This Various Income For Assessment Year 2005 06 To 2010 11 Were Added Making A Total Of Rs 30 Lacs He Submitted That The Opening Balance As Well As Closing Balance Of Huf Capital Is Tallying With The Rough Estimate On The Seized Material And Therefore No Addition Is Justified On The Basis Of This Seized Material Th E Ld Dr Of Revenue Supported The Orders Of Authorities Below 11 I Have Considered The Rival Submissions I Fin D Force In The Submissions Of Ld Ar Of Assessee Because As Per Seized Material Copy Of Which Is Available On Page No 27 Of The Paper Book Of Which English Tran Slation Is Made Available Opening Balance Is Of Rs 19 Lakhs And Closing Bala Nce After Making Addition Of Various Amounts Is Rs 30 Lakhs And The Name Mentio Ned On Top Is Tathaiah This Has Been Explained That In Kannada Tathaiah Is Called To Grandfather And It Has Been Explained That This Is In Hand Writ Ing Of The Granddaughter Of The Assessee The Amounts Are Tallying If It Is Co Nsidered That The Notings Are Ita Nos 1708 1709 Bang 2017 Page 7 Of 9 By Way Of Memory In Round Figure This Was The Con Tention Raised By The Assessee Since Very Beginning But No Reason Has Bee N Given In The Assessment Order Or In The Order Of Cit A To Rejec T This Explanation Of Assessee The Ao Has Simply Said That Assessee Did Not Satisfy This Claim In The Order Of Cit A Also This Is Only Basis Given By Cit A To Reject The Explanation Of The Assessee That No Evidence Was Pl Aced On Record To Justify The Explanation Of The Assessee In My Considered Opinion Assessee Has To Explain The Seized Paper And If The Explanation Of The Assessee Is Rejected Cogent Reasons Should Be Given For Such Rejection Explanation Of The Assessee Is Reasonable That These Are Rough Estimated Figure S Noted Out Of Memory About Opening Balance Of Capital Of Huf And Its Inc Ome Over The Years And The Same Is Supported By The Balance Sheet Of Huf Excep T Odd Figures Under These Facts I Feel It Proper To Accept The Explana Tion Of The Assessee In The Facts Of The Present Case Therefore I Delete The Addition On The Basis Of This Seized Material Of Rs 30 Lakhs Ground Nos 5 6 And 7 Are Allowed 12 Regarding Ground No 8 In Respect Of Addition Of Rs 1 00 000 It Was Explained By The Assessee Before The Ao Cit A And Before Me That This Was A Proposed Transaction Which Did Not Materialize Th Is Relevant Seized Material Is Available On Page No 28 Of The Paper Book And I Fi Nd That In The Same Amount Of Rs 1 00 000 Is Mentioned With One Name But Th E Date Mentioned Has Been Struck Down In My Considered Opinion The Seized Material Itself Suggests That Since The Date Is Struck Down It May Be A Case Of Non Materialization Of The Transaction And Therefore On This Issue Also I Fi Nd Force In The Submissions Of Ld Ar Of Assessee And Therefore This Addition Of Rs 1 00 000 Is Also Deleted Ground No 8 Is Allowed 13 Regarding Ground No 9 In Respect Of Addition O F Rs 1 70 000 The Seized Material Is Available On Page No 29 Of The Paper B Ook Regarding This Seized Material This Was The Contention Of The Assessee T Hat This Document Does Not Belong To The Assessee Had This Document Been Foun D In The Possession Of The Assessee The Presumption Would Have Worked Against The Assessee But In This Case The Search Is Carried Out In The Premises Of Arpl And Not In The Case Of The Assessee And Therefore This Explanation Cannot Be Brushed Aside And It Ita Nos 1708 1709 Bang 2017 Page 8 Of 9 Has To Be Seen That Whether From The Seized Materia L There Is Any Indication That It Belongs To The Assessee From The Seized Ma Terial Available On Page No 29 Of The Paper Book It Is Seen That There Is Noti Ng Of A Few Amounts Only Without Any Name Or Date As Per The Page 8 Of The Assessment Order Also It Comes Out That The Ao Has Invoked The Provisions Of Section 292 C Without Any Concrete Finding That This Document Has Any Relatio N With The Assessee I Find That Section 292 C Comes Into Operation If The Docu Ment In Question Is Found In The Possession Of The Assessee Ion Course Of Search In The Present Case Section 292 Cd Is Not Applicable Because The Documen T In Question Is Not Found In The Possession Of The Assessee And It Was Found In Course Of Search At The Premises Of Arpl Hence Any Addition On The Basis Of This Dumb Document Is Not Justified Without Establishing Any Connection W Ith The Assessee And Therefore This Addition Of Rs 1 70 000 Is Also Deleted Ground No 9 Is Also Allowed 14 Regarding Ground No 10 In Respect Of Addition Of Rs 7 17 Lakhs It Is The Explanation Of The Assessee That This Amount Was Ad Vanced By Daughter Ms N S Swetha To Various Concerns Of Arpl And The Same I S Appearing In The Books Of Arpl The Ao Is Saying On Page No 8 Of The Ass Essment Order That The Assessee Did Not Explain The Source Of Amount State D To Have Been Invested By His Daughter In Various Concerns Before Me The A Ssessee Made Available Copy Of It Return Filed By Daughter Of The Assessee Ms N S Swetha For Assessment Year 2005 06 On 29 07 2005 Available On Pages 87 To 91 Of Paper Book And The Same For Assessment Year 2006 07 Is Av Ailable On Pages 92 To 94 Of Paper Book And For Assessment Year 2007 08 Is Available On Pages 95 To 97 Of Paper Book And The Same For Assessment Year 2 008 09 Is Available On Pages 98 To 100 Of Paper Book And The Same For Asse Ssment Year 2009 10 Is Available On Pages 101 To 104 Of Paper Book And For Assessment Year 2010 11 Is Available On Pages 105 To 107 Of Paper Book As Per The Balance Sheet As On 31 03 2010 Available On Pages 107 Of Paper Book Swetha Is Showing Advances Of Rs 1 50 Lakhs In The Name Of M S Anan Tha Spinning Mills Pvt Ltd And Rs 4 30 Lakhs In The Name Of Arpl Apart From O Ther Assets And The Total Assets Is Totaling Rs 15 14 720 As On 31 03 2010 And Return Of Income For Assessment Year 2010 11 Was Filed On 30 03 2011 I E Much Before The Ita Nos 1708 1709 Bang 2017 Page 9 Of 9 Reopening Of The Assessment For This Year And A Y 2010 11 Hence These Documents Have To Be Accepted And As Per The Same The Source Of Fund Is Properly Explained In The Hands Of Ms N S Swetha D Aughter Of The Assessee And Therefore This Addition Is Also Deleted Grou Nd No 10 Is Also Allowed 15 Ground No 11 Is Consequential Being Regarding Interest U S 234 A 234 B And 234 C 16 In The Result The Appeal Filed By The Assessee For Assessment Year 2011 12 Is Partly Allowed 17 In The Combined Result The Appeal Filed By The Assessee For Assessment Year 2010 11 Is Allowed And For Assessment Year 2011 12 Is Partly Allowed Order Pronounced In The Open Court On The Date Ment Ioned On The Caption Page Sd Arun Kumar Garodia Accountant Member Bangalore Dated The 01 St December 2017 Ms Copy To 1 App Ellant 2 Respondent 3 Cit 4 Cit A 5 Dr Itat Bangalore 6 Guard File By Order Senior Private Secretary Income Tax Appellate Tribunal Bangalore