TaxTMI 
TaxTMI 
2016 (3) TMI 1167
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....ld. CIT(A) 2003-04 28.74% 30% 30% i.e. amounting to Rs. 52,726/- 2004-05 23.75% 25% 25% i.e. amounting to Rs. 65,213/- 2005-06 23.77% 25% 25% i.e. amounting to Rs. 59,711/- 2006-07 16.72% 20% 20% i.e. amounting to Rs. 2,76,545/- 2007-08 17.20 20% 20% i.e. amounting to Rs. 2,05,698/- 2008-09 -13.12% 17% 17% i.e. amounting to Rs. 21,41,926/- 2009-10 19.41% 20% 20% i.e. amounting to Rs. 60,746/- 4.1 At the outset assessee referred to petition for admission of additional ground in appeals from AY 2003-04 to AY 2008-09, reading as under: - 1. On the facts and in the circumstances of the case and in law the proceeding under s. 153A of the IT Act, 1961 is not legal and void ab initio and the impugned assessment u/s.153A r/w.143(3) of the Income-tax Act, 1961 is liable to be annulled as department has not carried out search operations over the assessee but survey u/s 133A of Income Tax Act and no search warrant served on the appellant. 4.2 Ld. Counsel for the assessee contends that:- i. The ground being raised is p....
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....ther office, godown or branch at any other place. This statement which is accepted by the department clearly mentions that there are no other premises of the assesse in question. Thus the alleged search u/s 132(1) was not conducted at any of its premises; neither at registered office at 18 Chomu Road nor at factory i.e. VKI Indl. area. Only survey proceedings u/s 132A were carried out on 27/08/2008 at VKI area factory premises. The statement of Shri Subhash Gupta was recorded, inventory was prepared and books were impounded all under the survey proceedings u/s 132A and not under alleged search proceedings. Record thus clearly indicates that none of the premises owned, occupied or possessed by assesse were ever searched 132(1). 4.3 It is contended that Chomu house is a big complex and various group companies have distinct spaces occupied by them. Company is an incorporated entity and search on one company cannot be assumed to be deemed to be a search u/s 132 on a concern who has no connection whatsoever with these premises. The residential portion used by Sh. Madan lal Mittal, Smt. Sangita Mittal, Sh. Lal Chand Mittal, Sh. Radhey Shyam Mittal, Smt. Sharda Mittal, Sh. Murari Lal M....
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....erns i.e. M/s Mittal Enterprises and M/s Mittal Associates are carried out. This premise does not belonging to or is occupied or shared by assesse, therefore, the alleged search warrant was never served upon the assessee. In the absence of proper execution of search warrant, there cannot be any valid search. The search party recorded statements about the location of office of various business concerns of the group which is tabulated as under:- S.No Statement made by Place where recorded What stated in statement PB pg 1 Shri Murari Lal Mittal statement dated 27-082008 D-42, Chomu House * Office of Mittal Enterprises is at C-1, Chomu House, Opp Roadways Workshop Jaipur Office of M/s Mittal Granite is at Road No 14, VKI Area, Jaipur 375 2 Shri Murari Lal Mittal statement dated 28-082008 C-1, Mittal Chamber, C- Scheme, Jaipur Office of Mittal Enterprises is at C-1, Mittal Chamber, Chomu House, Opp Roadways Workshop Jaipur Office of M/s Mittal Granite is at Road No 14, VKI Area, Jaipur 411 3 Shri Radhey Shyam Mittal statement dated 05-09-2008 C-1, Mittal Chamber, C- Scheme, Jaipur Answer to question No 2 is that office of M/s Mitt....
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....ovision conferred by the Income Tax Act and supported by a plethora of judicial precedents including Hon'ble Supreme Court judgment in the case of NTPC (supra); the assessee's addition ground is fully eligible for admission and proper adjudication. 4.7 We have heard the rival contentions and perused the material available on record in respect of the additional ground. In our considered view the additional ground raised by the assessee is purely legal in nature, goes to the root of the assessments, no fresh verification of facts is required. Respectfully following Hon'ble Supreme Court judgment in the case of NTPC (supra), the additional ground raised by the assessee is admitted. 5.1 Adverting to arguments on there being no search assessment u/s 132(1) on the assessee, ld. Counsel reiterated the facts mentioned above and cross tallied them with relevant pages of detailed paper books filed in this behalf. Reliance is placed on following decisions:- (i) Mumbai Bench of the Tribunal in the case of J.M. Trading Corporation vs. ACIT', 20 SOT 489 (Mum), wherein, it was held that where a search is carried out at the premises owned by the assessee, but rented to other concern....
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.... any implication, prove the conduct of search against the assessee, in view of the fact that the assessee was not available at the address searched upon. In the present case, the situation is rather more in favour of the assessee. Here, it is not that the premises was owned by the assessee but was rented out. Rather, undisputedly, the premises searched does not belong to the assessee. The department's appeal in the case of 'JM Trading Corporation' was dismissed in limine for want of substantial question of law by the Hon'ble High Court of Bombay. While doing so, the finding of the Tribunal to the effect that noncompliance of the provisions of the Income-tax Act by the authorized officer renders a search invalid and illegal. The Hon'ble Supreme Court has also dismissed the SLP filed by the department. In 'Dr. Mansukh Kanjibhai Shah vs. ACIT, Central Circle-2', 129 ITD 376 (Ahm) (supra) also, since, inter alia, no search operation was conducted in the premises of the assessee, it was held that the proceedings u/s 153A of the Act were invalid and bad in law. 12. No decision to the contrary has been brought to our notice. 13. In view of the above discussion, we hold t....
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....in the case of Siksha vs. Commissioner of Income Tax & Ors. (2011) 336 ITR 0112 wherein Hon'ble High Court has held that:- "... If search as contemplated under s. 132 of the IT Act, 1961 is conducted in the premises of a person without any warrant of authorization in the name of the person searched, or on the basis of a warrant of authorization in the name of some other persons, that would be a clear case of non-application of mind of the empowered IT authorities and such a search cannot be held to be valid. It is so, because the belief which forms the foundation of search relates to a definite person who is to be subjected to search. If the contrary is the fact situation, the same would amount to serious lapses and would be in clear violation of the provisions contained in s. 132(1) of the IT Act, 1961, as it does not stand to the test of s. 132 of the IT Act, 1961. Therefore, the most serious content of the warrant of authorization is the name and description of the person whose premises, etc., are sought to be searched. The Punjab & Haryana High Court in Jagmohan Mahajan & Ors. vs. CIT & Ors. 1976 CTR (P&H) 316 : (1976) 103 ITR 579 (P&H) held that a search auth....
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....ed on one of the directors. Therefore, there is no infirmity in the impugned search proceedings. 6.1 Adverting to the merits of appeals ld. Counsel for the assessee contends that ground No. 1 & 2 challenge the arbitrary rejection of books of accounts by applying the provisions of section 145 (3) of Income Tax Act, 1961 and trading addition by estimating the GP on declared sales. No incriminating material was found during the course of alleged illegal search. There is neither reference to any incriminating material nor reliance on any inquiry consequent to search in the entire length and breadth of orders of ld. AO or ld. CIT(A). The arbitrary approach of lower authorities is apparent from the fact that while framing the impugned 153A assessments ld. AO has only increased the GP already declared by assesse in original returns based on audited accounts. The rejection of books and higher estimation of GP being not based on any incriminating material, cogent reasons or application of mind are grossly unsustainable in post search assessment. It is a settled law that in 153A assessment additions cannot be made in the absence of any incriminating material found during the course of sea....
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....ITAT Jodhpur Bench has held that unless the AO is able to point out certain transactions which have been left to be entered in the books of account or that the assessee has sold some of the items at a price higher than what is disclosed in the books of account or if proper particulars, bills, vouchers, are not forthcoming etc., the books of account cannot be rejected without assigning specific reasons. In the instant case merely because different range and nature of items are being dealt with by the assessee and the maintenance of quantitative stock of each and every item is not practically possible, the books of account maintained by the assessee which are free from any defect cannot be rejected merely because the average GP rate was slightly lower than the average GP rate of the earlier year. * Vishal Infrastructure Ltd Vs ACIT 104 ITD 537 (ITAT Hyderabad) :- Hon'ble ITAT Hyderabad A Bench held that the undisputed fact is that the assessee which is a limited company has been consistently following a particular method of accounting. Its accounts are audited both under the Companies Act as well as under s. 44AB. Such audited accounts are being filed with the Registrar of C....
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....e assessing officers with such unbridled powers to arbitrarily review their own orders only because search is conducted. Therefore the provisions are well qualified with sufficient riders in the form of words on the basis of incriminating material found during the course of search or information received based on search proceedings and other words. Besides by a plethora of judgments Hon'ble Supreme Court and various High Courts, including the jurisdiction Rajasthan High Court has interpreted these exigencies and in unison held that additions cannot be made unless they are based incriminating material found during the course of search or information received based on search proceedings. The books of account can be rejected only where the correct profits cannot be deduced from the regular books of account of the assessee and even if books are rejected additions in search assessments u/s 153A cannot be made in the absence of incriminating material. In the case of the assessee, the taxable profits are ascertainable from the completed, duly closed audited record and books of account regularly maintained by the assessee. 7.1 Apropos the arbitrary estimation of GP, it is vehemently con....
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..../s CIT 37 ITR 288 (SC) iii. Omar Salary Mohamad v/s CIT 37 ITR 151 (SC There being no search, department realized the fallacy in their proceedings and therefore, carried out a survey on assessee on 27.08.2008 and during the course of survey prepared the inventory of physical stock at Rs. 13,73,232/-. Taking the physical stock found to the department at the time of survey as closing stock of 27.08.2008 the consolidated GP of the assessee for the period 01.04.2003 to 27.08.2008 can be computed and the same can be compared from the total gross profit declared by the assessee. The calculation is as under: - a) Year to year trading results declared by the assessee in regular books of accounts and AO's action in estimation of GP was as under:- AY PB pg Opening Stock Purchases & Exp Gross Profit Total Debit Side Sales + Job Work Closing Stock Total Credit side % GP Declared by Assessee GP rate Estimated by AO GP Addition made by AO (In Rs.) (In Rs.) 2003-04 24,31 47500 3527821 1204732 4780053 4191525 588528 ....
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.... 07-08 13,01,714 08-09 13,08,804 09-10 (Up to 27.08.08 7,22,881 To Gross Profit (11.67%) 47,78,075 Total 4,22,99,945 Total 4,22,99,945 These figures are self explanatory, as per this consolidated trading account assessee's total GP for the period from 01.04.2003 to 27.08.2008 comes to Rs. 47,78,075/- resulting in GP @ 11.67%. compared to this assessee's GP declared in books comes to Rs. 60,69,209/- i.e. GP (@ 14.82%, from this parameter also assessee in fact has offered better GP. Looking from any angle i.e: i. In the absence of search in assessee's premises, impugned assessments u/s 1532A are ab initio void as held by judicial precedents including those cited above. ii. Books of accounts have been rejected without citing any specific defects. Only defect cited is a sweeping observation that quality wise stock register is not maintained. Various courts have clearly held that the absence of stock register cannot be th....
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....e. (i) Apropos merits the record reveals that the addition in question have been made only by rejecting the assessee's audited books and estimating the GP. Ld. AO also has not adopted any uniform standard of estimation. In some years it has been estimated at higher rates and in some at lower rates, thus the methodology of estimation is neither scientific nor objective but a product of conjectures and self contradictory. No specific reasons have been ascribed as to the defects in the books of accounts, there effect on ascertaining the correct income and reasons for rejection of books. Ld. CIT(A) has upheld the rejection of books however, accorded some relief by reducing GP estimate. No cogent reasons are again given by ld. CIT(A) in this behalf. (ii) Apropos Stock register, assesse has explained that in the business of manufacturing/job work and trading of granites and it is practically not possible for the assessee to maintain the day to day stock register because of number of quality and varieties and colours However, even if separate record is not maintained the Books of Accounts can't be rejected on this ground based on its reliance on the above cited cases of ....
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....e books of the assesse u/s 145(3) which are upheld. Besides based on our above observations, case laws and the facts that books of accounts stand upheld we delete the additions of GP as retained by Ld. CIT(A).Assessee's grounds in this behalf are allowed. 8.1 Adverting to the additional ground raised by the assessee, though the impugned additions have been deleted on merits, however being a legal ground duly admitted by us, its adjudication becomes necessary. The assessee is part of a group which is primarily engaged in Pharma Trade as C/F agent. Assessee company is in a totally different field i.e. granite manufacturing and trading and having registered office at 18 Chomu Road and its factory i.e. VKI Indl. Area. Search operations u/s 132 are admittedly not carried out in these premises and only survey proceedings u/s 132A were carried out on 27/08/2008 at VKI area factory premises. It has not been disputed by the department that though assessee's name appears in search authorization, as a group search director's residence was searched. Actually no premises of the assesse company were searched which is evident as there is no Panchnama or inventory in assesse company's name. Dep....
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....prises and M/s. Associates are carried out. This premise does not belonging to or is occupied or shared by assesse dealing in granite business only. These facts are uncontroverted. 8.2 Appreciating all these rival contentions, facts and material available on record it is apparent that though assessee's name appears on authorization but the same was not executed on the asssessee's premises and no Panchnama or Inventory was prepared. Now we advert to the vehement contention of ld. DR that director is assesse company's representative and search on his premises should be harmoniously construed as a valid search in terms of sec. 132. We are unable to agree with this proposition, various courts have held that search actions are in the nature of enforcement which involves invasion in the privacy of asssessee; such action has to be in full conformity with relevant legal provision. Such jurisdiction or action cannot be validated in casual manner. In the absence of any search u/s 132 and no action u/s 153C as mentioned above the assessments in question cannot be validated on assumptions to fall under these provisions. Thus sec. 153C cannot be deemingly applied in the absence of mandatory ....