TaxTMI 
TaxTMI 
2014 (4) TMI 1111
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....nected, therefore, for the sake of convenience, they are clubbed, heard combinedly and disposed of in this consolidated order. Assessee wise, appeal wise and ground wise adjudication is given in the succeeding paragraphs. 1. APPEALS RELATING TO DEEPAK AGARWAL 2. Since, the issues raised in the assessee‟s appeals for the AYs 2003-04 to 2005-06 are identical, therefore for the sake of reference, we shall take up the grounds for raised by the assessee for the AY 2003-2004 in the case of Shri Deepak Agarwal. In this case vide ITA No.8912/M/2010, the assessee filed the appeal against the order of CIT (A)-41, Mumbai dated 25.11.2010 and the grounds raised therein read as under: "Assessment Order U/S 143(3) r.w.s 153A of the Income Tax Act, 1961 being bad in law and bad in facts. 1.0 The order passed by the Ld CIT (A)-41, Mumbai confirming the assessment order u/s 143(3) r.w.s. 153A of the Income Tax Act, 1961 is both bad in law and bad in facts. 1.1 In doing so, he did not appreciate that no addition could have been made while completing assessment u/s 153A of the Income Tax Act, 1961 in case of completed assessments if no undisclosed income was determinable from the material ....
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....garwal vs. ACIT vide ITA Nos.3389/M/2011 (AY: 2002-2003) and ITA No. 3390/M/2011 (AY: 2004-2005) vide order dated 10.01.2014. For the sake of completeness of this order, relevant portions of the said order of the Tribunal (supra) are reproduced here under: "6. Before the Tribunal: During the proceedings before us, Ld Counsel for the assessee brought our attention to the contents of the relevant assessment order passed u/s 153A r w s 143(3) of the Act and demonstrated that no seized material was used for making the additions either on account of inflated investment or on account of disallowance u/s 14A of the Act. Fairly referring to the proceedings during the search action, Ld Counsel mentioned that it is the valuation report of the DVO which was garnered by the office of the DIT (inv) during the search action. This was the only material collected by the Revenue in the search, which was available for the AO both for issuing the notice as well as for making additions. He reasoned that the Valuation report can as well be obtained during the normal assessment or reassessment proceedings and there is no need for invoking the provisions of section 153A of the Act in this regard. 7. Fu....
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....i Organics Ltd vs. DCIT [2010] 36 DTR 187 (Ahd) c) Suncity Allys Pvt. Ltd. vs. ACIT [2009] 124 TTJ 674 (Jodh) d) ACIT vs. PACL India Ltd [ITA No.2637/ Del/2010] e) Shri Deepen A Parekh vs. ACIT [ ITA No.467/Mum/2011] f) MGF Automobiles Ltd vs. ACIT [ ITA No.4212 & 4213/Del/2011] Further, Ld Counsel filed a copy of the order of the Tribunal in the case of Govind Agarwal HUF vs ACIT vide ITA No.217/Mum/2011 (AY 2008-2009) which is a part of the assessee‟s group and where notice u/s 153C was issued. Ld Counsel mentioned that the Tribunal has upheld the invalidity of such notice and deleted the additions made on account of gift emanated from the books of accounts. (ii) The second aspect of his arguments relates to the treatment to be given to the DVO‟s report, if the said report constitutes any incriminating material. Mentioning that the Revenue did not consider the same as a incriminating material for the purpose of issuance of notice u/s 153A of the Act, Ld Counsel mentioned that the office of DIT (Inv) referred the impugned house property (Mangaldeep at Udaipur) to the valuation cell for identifying the market value of the property, not the cost of acquisition. (A....
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....he only investment on the house, no construction was undertaken by this date. AO came to such conclusion for assessee‟s failure to furnish the supporting bills to demonstrate the fact of part construction of the impugned residential property. It is a case of mere presumption and the additions are unsustainable on such presumption. AO has no evidence to infer that the assessee‟s figure of Rs. 46,13,007/- is bogus and Rs. 14.8 lakhs is the only investment on the said property. In fact, Rs. 14.8 lakhs is the cost of the land plots on which the house was constructed and assessee spent the balance of Rs. 31,33,007/- in construction of the house. Therefore, the proceedings initiated u/s 153A is required to be quashed and the addition based on the surmises of the AO should not be sustained. 8. On the other hand, Ld DR relied heavily on the order of the AO and the CIT (A). In connection with the legal issue regarding the validity of the notice u/s 153A of the Act, Ld DR filed a copy of the order of the Tribunal in the case of Scope (P) Ltd vs. DCIT [2013] 33 Taxmann.com 167 (Mumbai Trib.) dated 20.3.2013 and stated that under the provisions of section 153A of the Act, AO is bo....
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....10. The stand of the Revenue is that the first proviso to section 153A empowers the AO to issue notice u/s 153A of the Act in respect of the 6 AYs prior to the assessment year in which the search took place. The relevance of the existence of incriminating material is not provided in the said provisions. As per the revenue there should not be any difference qua the completed assessments and the abated assessments for all six AYs in so far as the powers of the AO is concerned and he is empowered to issue notice u/s 153A and make additions either based in the incriminating material or otherwise. 11. Per contra, the case of the assessee is that the AO may be empowered to issue notices for all the six AYs in view of the cited decisions ie Jai Steel (India) Ltd (supra), Scope (P) Ltd (supra) etc. However, in case of completed assessments, AO is empowered to made additions only based on the incriminating materials and not otherwise Jai Steel (India) Ltd (supra), LMJ International Ltd (supra), Gurinder Singh Bawa (supra) etc. For making the routine additions, which are normally done in the regular assessments, the completed assessment need not be disturbed by invoking the provisions of se....
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....be read in the context of sections 132 or 132A, inasmuch as, in case nothing incriminating is found on account of such search or requisition, then the question of reassessment of the concluded assessments does not arise, which would require more reiteration and it is only in the context of the abated assessment under second proviso which is required to be assessed. ......From a plain reading of the provision along with the purpose and purport of the said provision, which is intricately linked with search and requisition under sections 132 and 132A, it is apparent that: (a) the assessments or reassessments, which stands abated in terms of second proviso to section 153A, the Assessing Officer acts under his original jurisdiction, for which, assessments have to be made; (b) regarding other cases, the addition to the income that has already been assessed, the assessment will be made on the basis of incriminating material and (c) in absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. .....The argument of the assessee that the Assessing Officer is also free to disturb income, expenditure or deductio....
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....AO can make additions in the assessment, even if no incriminating material has been found. But in other cases the Special Bench held that the assessment under section 153A can be made on the basis of incriminating material which in the context of relevant provisions means books of account and other documents found in the course of search but not produced in the course of original assessment and undisclosed income or property disclosed during the course of search. In the present case, the assessment had been completed under summary scheme under section 143(1) and time limit for issue of notice under section 143(2) had expired on the date of search. Therefore, there was no assessment pending in this case and in such a case there was no question of abatement. Therefore, addition could be made only on the basis of incriminating material found during search. B. All Cargo Global Logistics Ltd. v. Deputy Commissioner of Income-tax, Central Circle-44 [2012] 23 taxmann.com 103 (Mum.) (SB) Para 58 of SB decisions: Thus, question No.1 before us is answered as under : (a) In assessments that are abated, the AO retains the original jurisdiction as well as jurisdiction conferred on him u/s 15....
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.... be made on the basis of incriminating material such as books of accounts, other documents found in the search but not produced in the course of original assessment and undisclosed income or property discovered in the course of the search. 15. We also find that the CIT(A) made a reference to the incriminating material, which yielded disclosure of some undisclosed income. But, on perusal of the documents, we find that the CIT(A) entered into an error zone and the disclosure is only Rs. 5 crores in this case and the same relates to the lands deals. In principle this disclosure has nothing do with the impugned additions u/s 68 or 14A of the Act. In the instant case, specific to the assessee, no incriminating material with the details was referred either in the assessment order or in the order of the CIT (A) for making the impugned additions. As per the cited judgment in the case of Jai Steels Ltd, supra, the assessment u/s 153A is only for reiteration rather than making any additions in a routine manner without the strength of the incriminating materials. Similar view was taken up by the ITAT, Delhi „H‟ Bench, in the case of V.K. Fiscal Services P Ltd vs. DCIT vide ITA No....
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....k the additions u/s 68 or 14A o the Act made in the assessment made u/s 153A of the Act for the AY under consideration. Regarding the DVO‟s report gathered during the search action, we find that the report suffers from certain deficiencies qua cost of construction of residential property and the land obtained thereto. The said report constitutes an opinion of the third party which cannot be used by the AO for making additions and such additions, if any, cannot be sustained legally. As such, we find that the AO has not used the said report of the DVO also for making additions of Rs. 31,33,007/-, the difference between accounted amount of Rs. 46,13,007/-, claimed as the amount spent on construction of house and acquisition of land as on 31.3.2002 minus Rs. Rs. 14.8 lakhs, the investment made on the land plots. AO made addition for assessee‟s failure to provide evidences / bills in support of the claim of expenditure on the construction. It the presumption of the AO that the plots since acquired only by July 2001, the assessee would not have spend Rs. 31,33,007/- by 31.3.2002. This is merely a presumption rather conclusion based on any evidences. Such additions are unsusta....
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....in the case of Jai Steel (India) Ltd and other orders of the Tribunal (supra), we are of the opinion that the additions made by the AO in the absence of any incriminating material are not sustainable. Accordingly, additions are deleted and the ground no.1 raised by the assessee is allowed. 7. Ground no.2 relates to the addition u/s 68 on account of „unexplained gifts received by the asessee'. In this regard, Ld Counsel for the assessee relied on the order of the Tribunal in the case of M/s. Govind Agarwal (HUF) vs. DCIT vide ITA No.8917/M/2010, dated 16.5.2013, for the AY 2005-06 and read out the relevant paras 6 & 7 of the said order of the Tribunal dated 16.5.2013 (supra) which read as under: "6. We have heard the rival contentions on the preliminary issue as to whether the addition can be made in the present case once the assessment for the assessment year 2005-06 has attained finality and no incriminating material was found during the course of search. On a perusal of the records and the findings of the Assessing Officer and the learned Commissioner (Appeals), we find that there is no reference to any seized material or any incriminating documents so as to suggest....
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.... six assessment year if pending on the date of initiation of search shall abate. There have been divergent views regarding scope of application of section 153A in cases where no incriminating material was found indicating any undisclosed income. Some of the Tribunal Benches had taken the view that in case no incriminating material was found AO had no jurisdiction to make assessment or reassessment under section 153A while some other Benches held that jurisdiction under section 153A was automatic to reassess six immediate preceding assessment years irrespective of the fact whether any incriminating material was found or not. Another aspect on which there had been divergent views was whether even if AO had jurisdiction under section 153A, addition can be made in assessment / reassessment only when some incriminating material has been found. All these aspects had been referred to the Special Bench of the Tribunal in case of Alcargo Global Logistics Ltd. and order of Special Bench dated 6.7.2012 has been referred. 6.1 The Special bench in the case of Alcargo Global Logistics Ltd. (supra), has held that provisions of section 153A come into operation if a search or requisition is initi....
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....ssee relied on the order of the Tribunal in the case of M/s. Govind Agarwal (HUF) vs. DCIT vide ITA No.8917/M/2010, dated 16.5.2013, for the AY 2005-06 and read out the relevant paras 6 & 7 of the said order of the Tribunal dated 16.5.2013 (supra) which read as under: "6. We have heard the rival contentions on the preliminary issue as to whether the addition can be made in the present case once the assessment for the assessment year 2005-06 has attained finality and no incriminating material was found during the course of search. On a perusal of the records and the findings of the Assessing Officer and the learned Commissioner (Appeals), we find that there is no reference to any seized material or any incriminating documents so as to suggest that addition made in the assessment order are based on any incriminating material found at the time of search. Once that is so and also that the assessment for the assessment year 2005- 06 has attained finality before the date of search, then no addition can be made under section 153A. The Mumbai Special Bench decision of the Tribunal in All Cargo Global Logistic Ltd. (supra), after analyzing the relevant provisions of the Act, came to the fo....
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....d that jurisdiction under section 153A was automatic to reassess six immediate preceding assessment years irrespective of the fact whether any incriminating material was found or not. Another aspect on which there had been divergent views was whether even if AO had jurisdiction under section 153A, addition can be made in assessment / reassessment only when some incriminating material has been found. All these aspects had been referred to the Special Bench of the Tribunal in case of Alcargo Global Logistics Ltd. and order of Special Bench dated 6.7.2012 has been referred. 6.1 The Special bench in the case of Alcargo Global Logistics Ltd. (supra), has held that provisions of section 153A come into operation if a search or requisition is initiated after 31.5.2003 and on satisfaction of this condition, the AO is under obligation to issue notice to the person requiring him to furnish the return of income for six years immediately preceding the year of search. The Special Bench further held that in case assessment has abated, the AO retains the original jurisdiction as well as jurisdiction under section 153A for which assessment shall be made for each assessment year separately. Thus i....
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.... Agarwal and the grounds raised therein read as under: "i) Whether, on the facts and in the circumstances of the case, the Ld CIT (A) has erred in admitting and accepting new argument of assessee during the appellate proceedings that the transaction of purchase of shares were off market transactions without providing any opportunity to the AO. ii) Whether on the facts and in the circumstances of the case, the Ld CIT (A) has erred in treating the purchase as well as the sale transactions of the shares of the M/s. Database Financial ltd as genuine without taking into account the following facts. a. The purchase as well as sale of the said shares were admitted on oath u/s 131 dated 3.1.2008 and u/s 132(4) dated 4.2.2008 on the behalf of the assessee, as to be non genuine and tax there upon was also paid by the assessee. b. The authenticity of the documents related to purchase and sale of the said shares is not confirmed by the broker or any other party and these very documents were admitted to be created for the purpose of the "managed capital gain" by the assessee / asessee‟s representative u/s 131 and 132(4) of the Act. c. The assessee had purchased the said shares on ....
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....venue for the AYs 2003-04 to 2005-06 are dismissed. I.T.A. No.4546/M/2011 (AY:2006-2007) (By Revenue) I.T.A. No.4548/M/2011 (AY:2007-2008) (By Revenue) (In the case of Deepak Agarwal) 15. These two appeals filed by the Revenue on 6.6.2011 are against the order of the CIT (A)-41, Mumbai dated 25.3.2011 for the assessment year 2006-2007 and 2007-2008. Concerned assessments were completed u/s 143(3) r.w.s 153A of the Act. Since, the grounds raised by the Revenue in these two appeals are identical and the only difference is in figures, therefore, for the sake of reference, the grounds raised with regard to AY 2006-07 are taken for adjudication which read as under: "I Whether, on the facts and in the circumstances of the case and in law, the Ld CIT (A) is justified in holding that the assessee has not made any unexplained investments in acquiring shares of M/s. Dunston Goods P. Ltd. in view of the following facts: A. All companies are investments companies and hence the net asset value (NAV) is the appropriate method for the valuation of shares. B. It is impossible for assese to acquire shares of M/s. DGPL at Rs. 5 per shares as per agreement in June 2004 when company itself has ....
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.... the fair market valuation. However, no incriminating documents was seized which shows that the appellant and the family members has paid any amount over and above which is shown on these loose papers and in the books of accounts of the assessee. The statement recorded u/s. 132(4) of the assessee and the family members, it was stated that no payment was made other than the value of these shares shown in the books of accounts. The assessee has adopted profit earning/yield capitalization method in the valuation of these shares. On the other hand, the AO has adopted the NAV method for valuation of shares and accordingly the difference computed was treated as unexplained investment u/s. 69 of the Income tax Act. In view of these facts, it is clear that there is no dispute that no incriminating document was found and seized during the course of search which proves that the assessee has more than the price entered in the books of accounts. The addition was made only on the basis of method rejected which was applied by the appellant i.e. profit earning and yield capitalization method and adopted the NAV method by the AO. Now question arises whether section 69 of the Income tax Act is appl....
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....which prove that the assessee has made any other payment over and above except the amount shown in the books of accounts. No addition can be made u/s. 69 of the Income tax Act. Secondly, the method of valuation of shares adopted by the appellant i.e. profit earning/yield capitalization methods and the method by the AO i.e. NAV method; both are recognized but depends on the facts of the case on which particular method can be applied. Further it is also well established fact and law that no addition can be made on the basis of computation method until and unless it is proved that any unexplained investment made by the assessee. It is also noticed that the facts of the present case are squarely covered by the decision of Hon‟ble Mumbai Tribunal in case of Rupee Finance and Management Pvt. Ltd. vs. ACIT 119 TTJ 643 supra has relied upon by the assessee where it is held as un e "The undisputed facts in this case are that the assessee company has purchased certain shares at a price which is below the market value. There is no dispute of the fact that the price paid for the shares by the assessee company were the cost incurred by the purchaser. It is also not disputed that, all th....
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....he disallowance of Rs. 1,12,822/- for the AY 2006-07 and Rs. 4,096/- for the AY 2007- 08 u/s 14A made by the AO. During the first appellate proceedings, CIT (A) directed the AO to re-compute the disallowance made by the AO. At the outset, Shri Devendar Mehta, Ld Counsel for the assessee brought our attention to the judgment of the Hon‟ble Bombay High Court in the case of CIT vs. M/s. Godrej Agrovet Ltd vide Income Tax Appeal No. 934 of 2011, dated 8.1.2013 and mentioned that the in view of the above mentioned judgment, the ITAT has taken the view that the disallowance u/s 14A should be restricted to 2% of the dividend income. Ld Counsel also relied on various decisions of the ITAT, Kolkata Benches in support of his contention. 19. On the other hand, Ld DR relied on the orders of the Revenue Authorities. 20. We heard both the parties and perused the orders of the Revenue. It is a fact that the relevant assessment years i.e., 2006-07 and 2007-08 under consideration are outside the scope of provisions of Rule 8D. The said provisions cannot be treated as applicable to the A.Y.2006-07 & 2007-08 under consideration when the same is precluded by the Hon‟ble Bombay High Court....
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....a delay of 464 days in filing the Cross Objections before the Tribunal. In this regard, Ld Counsel brought our attention the affidavit dated 3.10.2013 filed by him and read out the relevant contents of the same which read as under: "i)...... ii) Shri Nand Kishor Katwankar is office assistant working in my office since 1985. He is usually assigned the work of submitting and collecting documents from the Income Tax Department of various clients. He collected the grounds of appeal of Shri Deepak Agarwal for AY 2006-07.. iii) Usually, the documents collected from Income Tax Department are placed before me for reviews. However, as I was out of town, he kept the grounds of appeal in relevant file but inadvertently, did not bring it to my notice for further action. iv) As soon as the file was put up for before me for preparation of written submission, I noticed that the Cross Objection against the Revenue‟s appeal were not prepared and filed before the Hon‟ble Tribunal. v) I reiterate that the above mistake was a bona fide mistake and an inadvertent lapse on our part and assessee should not be allowed to suffer because of it." 25. In this regard, Ld Counsel for the....
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....sake of reference, the grounds raised with regard to AY 2006-07 are taken for adjudication which read as under: "I Whether, on the facts and in the circumstances of the case and in law, the Ld CIT (A) is justified in holding that the assessee has not made any unexplained investments in acquiring shares of M/s. Dunston Goods P. Ltd. in view of the following facts: A All companies are investments companies and hence the net asset value (NAV) is the appropriate method for the valuation of shares. B It is impossible for assessee to acquire shares of M/s. DGPL at Rs. 5 per shares as per agreement in June 2004 when company itself has allotted shares at the premium of Rs. 90 per share in the FY 2000-01, FY 2001-02, FY 2002-03, FY 2003-04 and also in subsequent financial year. C There is no evidence to accept the claim of the assessee that some of the investments made by the companies are dead investments as no provisions are made by the management in the accounts and there is no disclosure made by tax auditor in the notes of accounts on this issue. Further, it is found that these companies have realized fully all the investments without any difficulty. II Whether, on the facts and in....
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....3 and mentioned that the in view of the above mentioned judgment, the ITAT has taken the view that the disallowance u/s 14A should be restricted to 2% of the dividend income. Ld Counsel also relied on various decisions of the ITAT, Kolkata Benches in support of his contention. 34. On the other hand, Ld DR relied on the orders of the Revenue Authorities. 35. We heard both the parties and perused the orders of the Revenue. It is a fact that the relevant assessment years i.e., 2006-07 and 2007-08 under consideration are outside the scope of provisions of Rule 8D. The said provisions cannot be treated as applicable to the A.Y.2006-07 & 2007-08 under consideration when the same is precluded by the Hon‟ble Bombay High Court in the case of Godrej & Boyce Mfg. Co. Ltd. Vs. DCIT, reported in (2010) 328 ITR 81(Bom). The Hon‟ble Bombay High Court also in the case of CIT vs. M/s. Godrej Agrovet Ltd vide Income Tax Appeal No. 934 of 2011, dated 8.1.2013, has held that percentage of the exempt income can constitute a reasonable estimate for making disallowance in the years earlier to the assessment year 2008-09. The relevant portion of the said judgment of the Bombay High Court (su....
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.... grounds of appeal of Shri Devesh Agarwal for AY 2006-07.. iii) Usually, the documents collected from Income Tax Department are placed before me for reviews. However, as I was out of town, he kept the grounds of appeal in relevant file but inadvertently, did not bring it to my notice for further action. iv) As soon as the file was put up for before me for preparation of written submission, I noticed that the Cross Objection against the Revenue‟s appeal were not prepared and filed before the Hon‟ble Tribunal. v) I reiterate that the above mistake was a bona fide mistake and an inadvertent lapse on our part and assessee should not be allowed to suffer because of it." 40. In this regard, Ld Counsel for the assessee relied on the judgment of the Hon‟ble Supreme Court in the case of Collector, Land Acquisition vs. Mst. Katiji & Ors [1987] 167 ITR 471; another judgment of the Apex Court in the case of Concold of India Insurance Co. Ltd vs. Smt. Nirmala Devi, 118 ITR 507 and some other decisions of the Hon‟ble High Courts of which are relevant for the proposition that "the delay in filing of appeal due to lapse on part of assessee‟s Counsel who was lookin....