IN INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH (BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER) IT(SS)A. Nos: 302 to 308/AHD/2012 and 316 & 317/Ahd/2012 (Assessment Years: 2004-05 to 2010-11) Shri Sanjay P. Mehta V/S ACIT, Central Circle-2(1), Aashirwad, 1563-A, Ahmedabad Rupani Circle to Sardar Nagar Circle Road, Bhavnagar-364001 PAN No. AABPM2719D ACIT, Central Circle-2(1), V/S Shri Sanjay P. Mehta Ahmedabad Aashirwad, 1563-A, Rupani Circle to Sardar Nagar Circle Road, Bhavnagar- 364001 PAN No. AABPM2719D (Appellant) (Respondent) IT(SS)A. Nos: 309 to 312/AHD/201& 315/Ahd/12 (Assessment Years: 2005-06 to 2007-08 & 2009-10) Smt. Trupti S. Mehta V/S ACIT, Central Circle-2(1), Aashirwad, 1563-A, Ahmedabad Rupani Circle to Sardar Nagar Circle Road, Bhavnagar-364001 PAN No. AIVPM0988M 2 IT(SS)A Nos. 302 to 312/Ahd/2012 & Ors. . A.Ys. 2004-05 to 2010-2011 ACIT, Central Circle-2(1), V/S Smt. Trupti S. Mehta Ahmedabad Aashirwad, 1563-A, Rupani Circle to Sardar Nagar Circle Road, Bhavnagar- 364001 PAN No. AIVPM0988M (Appellant) (Respondent) Appellant by : Shri Vijay Ranjan with Ms. Ira Kappor Respondent by : Mrs. Vibha Bhalla, CIT/DR ( )/ORDER Date of hearing : 05 -10-2016 Date of Pronouncement : 17 -10-2016 PER BENCH: 1. aforementioned captioned appeals are by two appellants namely Sanjay P. Mehta and Trupti S. Mehta. Appeals of Sanjay P. Mehta relates to assessment year 2004-05 to 2010-11 and appeals of Trupti S. Mehta relates to A.Y. 2005-06 to 2009-10. In case of Sanjay P. Mehta, revenue is in cross appeals for A.Y. 2005-06 & 2006-07 and in case of Trupti S. Mehta, revenue is in cross appeals for A.Y. 2005-06. 2. Rival submissions have been heard at length. Having heard rival contentions, we have carefully perused orders of authorities below. 3 IT(SS)A Nos. 302 to 312/Ahd/2012 & Ors. . A.Ys. 2004-05 to 2010-2011 3. search and seizure operation was carried out theat business and residential premises of assessee on 12.01.2010 and accordingly assessments have been made u/s. 153A of Act. 4. In all aforementioned bunch of appeals, common issues are involved; therefore, they were heard together and are being disposed of by this common order for sake of convenience. 5. additions made in all these appeals which are in dispute either by assessee or by revenue can be classified under following heads:- (1) Additions in respect of low withdrawal for household expenses. (2) Additions on account of deemed dividend u/s. 2(22)(e) of Act. (3) Unexplained investment in house property. (4) Unexplained investment in house property taken on Pagdi . 6. It is say of ld. counsel that additions made on account of household expenses and deemed dividend have no reference to any incriminating material found at time of search; therefore, these additions are outside purview of Section 153A. contention of ld. counsel can be understood by following chart:- Shri Sanjay P. Mehta Date of Search: 12/01/2010 Event A.Y. 2004- A.Y. 2005- A.Y. 2006- A.Y. 2007-08 A.Y. 2008-09* A.Y. 2009- A.Y. 2010-11 05 06 07 10 Date of 26.10.2004 30.08.2005 13.10.2006 31.07.2007 31.07.2008 25.09.2009 17.09.2009 filling return 4 IT(SS)A Nos. 302 to 312/Ahd/2012 & Ors. . A.Ys. 2004-05 to 2010-2011 u/s. 139 Time 31.10.2005 31.08.2006 31.10.2007 31.07.2008 30.09.2009 30.09.2010 30.09.2011 limit for issuance of notice u/s. 143(2) of Act Time 31.12.2006 31.12.2007 31.12.2008 31.12.2009 31.12.2010 31.12.2011 31.03.2013 limit for completin g assessme nt u/s. 143(3) of theAct. Status Completed Completed Completed Completed Completed* Abated Abated Smt. Trupti Sanjay Mehta Date of Search: 12/01/2010 Event A.Y. 2005-06 A.Y. 2006-07 A..Y. 2007-08 A.Y. 2009-10 Date of filing 30.08.2005 27.10.2006 31.07.2007 24.09.2009 return u/s. 139 Time limit for 31.08.2006 31.10.2007 31.07.2008 30.09.2010 issuance of notice u/s. 143(2) of Act Time limt for 31.12.2007 31.12.2008 31.12.2009 31.12.2011 completing assessment u/s. 143(3) of Act 7. perusal of aforementioned charts shows that prior to date of search, assessments stood completed and, therefore, if no incriminating material is found then no additions can be made u/s. 153A of Act in respect of items of additions which have no co-relation with incriminating material. This view is now settled in favour of assessee and against revenue by judgment of Hon ble Bombay High Court in 5 IT(SS)A Nos. 302 to 312/Ahd/2012 & Ors. . A.Ys. 2004-05 to 2010-2011 case of Continental Warehousing Corporation 374 ITR 645 which reads as under:- Once it is held that assessment has attained finality, then AO while passing independent assessment order u/s. 153A r.w. s 143(3) of IT. Act could not have disturbed assessment/reassessment order which has attained finality, unless materials gathered in course of proceedings u/s. 153A of Income Tax Act establish that reliefs granted under finalized assessment/reassessment were contrary to facts unearthed during course of 153A proceedings. If there is nothing on record to suggest that any material was unearthed during search or during 153A proceedings, AO while passing order u/s. 153A r.w.s. 143(3) cannot disturb assessment order." 10.2. Hon'ble High Court had occasion to consider following questions of law: "1. Whether on facts and in circumstances of case, Hon'ble ITAT is correct in narrowing down scope of assessment u/s. 153A in respect of completed assessments by holding that only undisclosed income and undisclosed assets detected during search could be brought to tax? 2. Whether on facts and in circumstances of case, Hon'ble ITAT is correct in law in holding that scope of Sec. 153A is limited to assessing only search related income, thereby denying Revenue opportunity of taxing other escaped income, that comes to notice of AO.? 3. Whether on facts and in circumstances of case, Hon'ble ITAT was right in limiting scope of Sec. 153A only to undisclosed income when as per section AO has to assess total income of six assessment years?"- and Hon ble High Court of Bombay finally held as under:- We, therefore, dismiss Revenue s appeal and answer substantial question of law against Revenue and in favour of assessee. 6 IT(SS)A Nos. 302 to 312/Ahd/2012 & Ors. . A.Ys. 2004-05 to 2010-2011 8. Now, other issue which has to be decided is whether time limit of issue of notice u/s. 143(2) if found expired can be construed as completed assessment. To this question, answer is given by Co-ordinate Bench of Tribunal Delhi in case of PACL India Ltd. in ITA no. 2637/Del/2010 and same reads as under:- 7.After hearing both sides on issue and taking into consideration, records available following facts emerges as undisputed. regular return of income was filed on 2.12.2003 and same was processed u/s 143(1)(a) of Act. time period for issuing notice u/s 143(2) of IT Act for selecting case for security expired on 31.12.2004. first search was conducted on premises of assessee on 22.9.2005 and 2nd search was conducted on 25.8.2006 and in both searches, no incriminating material, document, unaccounted assets and bogus of accounts were found and seized relating to land development expenses debited in profit and loss account for year. both searches on assessee did not yield any incriminating material on basis of which it can be said that assessee was indulgent in debiting bogus land development expenses in its books of account. There is no reference of any material found in search for making assessment u/s 153A of Act. Thus basic controversy before us remains about scope of assessment u/s 153(A) when return has been accepted u/s 143(1)(a) and time period for issuing notice u/s 143(2) has elapsed. 8. In our considered view, there is no dispute with regard to proposition that A.O has jurisdiction u/s 153A of Act to initiate assessment/ reassessment proceedings for all six years to compute total income of assessee including undisclosed income where action have been taken against assessee u/s 132(1) of IT Act. However, question remains that when return has been processed u/s 143(1)(a) and time period for issuing notice u/s 143(2) for selecting return for scrutiny has elapsed then what nature of proceedings commenced and concluded u/s 143(1)(a). How these are different from proceedings commenced and concluded u/s 143(3) of Act. There is no doubt 7 IT(SS)A Nos. 302 to 312/Ahd/2012 & Ors. . A.Ys. 2004-05 to 2010-2011 that once proceedings u/s 143(3) are completed and concluded then there is nothing which will abate as per provisions of section 153A of Act. 9. In our considered opinion, section 153A referred to "pending" "assessment" or "reassessment" and not "assessment orders". assessment may not be pending even though there is no formal order u/s I43(1)(a). moment return is filed and acknowledgement or intimation issued, proceedings initiated by filing return are closed, unless they are again triggered by issuing notice u/s 143(2) of IT Act. In case under consideration, period for issuing notice u/s 143(2) elapsed. process has attained finality which can only be assailed u/s 148 or 263 of IT Act. Such proceedings can never be initiated u/s 143(2) when time period for issuing notice u/s 143(2) has expired. Hon'ble ITAT, Mumbai C Bench in case of ACIT Vs. Pratibha Industrialist Ltd. reported in 23 ITR Tribunal 766 Mumbai has also held as under :- "Although by proceedings initiated under section 153A all six years shall become subject matter of assessment under section 153A Assessing Officer shall have free-hand, through abatement, only on proceedings that are pending, to frame assessments afresh. But in case where proceedings have reached finality, assessment under section 153A read with section 143(3) and certain incriminating documents have been found indicating undisclosed income, addition shall only be restricted to those documents or incriminating material, and clubbed only to assessment framed originally, as law does not permit Assessing Officer to disturb issues already concluded. Where on date of initiation of search under section 132 or requisition of books, no proceeding is pending, but in search, material is found indicating incriminating material, Assessing Officer embarks on jurisdiction, wherein he has to club two safe of incomes, returned income and unearthed income and arrive at total income. 9. In case of Kabul Chawla 380 ITR 573, Hon ble High Court has summarized legal position as under:- 8 IT(SS)A Nos. 302 to 312/Ahd/2012 & Ors. . A.Ys. 2004-05 to 2010-2011 37. On conspectus of Section 153A(1) of Act, read with provisos thereto, and in light of law explained in aforementioned decisions, legal position that emerges is as under: i. Once search takes place under Section 132 of Act, notice under Section 153 A(l) will have to be mandatorily issued to person searched requiring him to file returns for six AYs immediately preceding previous year relevant to AY in which search takes place. ii. Assessments and reassessments pending on date of search shall abate. total income for such AYs will have to be computed by AOs as fresh exercise. iii. AO will exercise normal assessment powers in respect of six years previous to relevant AY in which search takes place. AO has power to assess and reassess 'total income' of aforementioned six years in separate assessment orders for each of six years. In other words there will be only one assessment order in respect of each of six AYs "in which both disclosed and undisclosed income would be brought to tax". iv. Although Section 153 does not say that additions should be strictly made on basis of evidence found in course of search, or other post-search material or information available with AO which can be related to evidence found, it does not mean that assessment "can be arbitrary or made without any relevance or nexus with seized material. Obviously assessment has to be made under this Section only on basis of seized material." v. In absence of any incriminating material, completed assessment can be reiterated and abated assessment or reassessment can be made. word 'assess' in Section 153 is relatable to abated proceedings (i.e. those pending on date of search) and word reassess' to completed assessment proceedings. vi. Insofar as pending assessments are concerned, jurisdiction to make original assessment and assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on basis of findings of search and any other material existing or brought on record of AO. 9 IT(SS)A Nos. 302 to 312/Ahd/2012 & Ors. . A.Ys. 2004-05 to 2010-2011 vii. Completed assessments can be interfered with by AO while making assessment under section 153A only on basis of some incriminating material unearthed during course of search or requisition of documents or undisclosed income or property discovered in course of search which were not produced or not already disclosed or made known in course of original assessment. 10.The aforementioned ratio laid down by Hon ble High Court of Delhi has been followed by Hon ble High Court of Delhi in case of Lata Jain in Income Tax Appeal No. 274 & 276 of 2016 wherein Hon ble High Court held as under:- 5. short point involved is whether ITAT was correct in concluding that there had to be incriminating material recovered during search qua Assessee in each of years for purposes of framing assessment under Section 153 of Act? 6. It is not in dispute that in respect of Respondent Assessee for AYs in question initial assessment proceedings took place under Section 143(3) of Act. Thereafter they were sought to be reopened by issuing notice under Section 147 of Act and re-assessment orders were passed under Section 147 read with Section 143(3) of Act. During both aforementioned proceedings question whether gold and silver utensils were capital assets or personal effects of Assessee was examined. They were held not to be personal effects. 7. It has been noticed by ITAT in impugned order that for A.Ys in question no incriminating material qua Assessee was found. 8. In that view of matter, and in light of decision of this Court in CIT vs. Kabul Chawla (2016) 380 ITR 573 (Delhi), Court is of view that impugned order of ITAT suffers from no legal infirmity and no substantial question of law arises for determination. 10 IT(SS)A Nos. 302 to 312/Ahd/2012 & Ors. . A.Ys. 2004-05 to 2010-2011 11.Now let us examine aforementioned ratios laid down by Hon ble High Courts in light of facts on record before us. 12.The only basis for making additions on account of low household withdrawals relates to Question No. 9 of statement of Smt. Trupti S. Mehta recorded u/s. 132(4) of Act on 12/01/2010 wherein she has deposed that her monthly household expenditure is between Rs. 50,000/- to Rs. 80,000/-. similar statement was made by Sanjay P. Mehta in his statement recorded u/s. 131 on 31/03/2010. Except for reference to these two statements, no incriminating material was found at time of search which could suggest that assessee has made expenditure on ceremonial functions, marriage, foreign tours etc. There is also no reference made by Assessing Officer to any incriminating material found at time of search to justify impugned addition for low withdrawal for household expenses. entire addition has been made on ad-hoc basis. We, therefore, do not find any merit in such addition made u/s. 153A of Act. 13.Similar is case for additions made on account of deemed dividend u/s. 2(22)(e) of Act on loans and advances received from Priya Blue Industries Pvt. Ltd. wherein assessees are having substantial share holding. perusal of assessment order shows that additions have been made in routine manner without there being any incriminating material found at time of search. In light of ratios laid down by 11 IT(SS)A Nos. 302 to 312/Ahd/2012 & Ors. . A.Ys. 2004-05 to 2010-2011 Hon ble High Courts (supra), this addition is also outside purview of order made u/s. 153A of Act read with section 143(3). 14.We, accordingly, set aside findings of ld. CIT(A) and direct A.O. to delete additions made on account of low withdrawal for household expenses and deemed dividend. 15.The next contentious issue relates to additions made on account of unexplained investment in house property. 16.During course of search and seizure proceedings, diary was found which contained certain notings in relation to flat at Mumbai. notings pertain to four flats at Leela Baug, Matunga, Mumbai. Two flats were in name of Sanjay P. Mehta and two flats were in name of Trupti S. Mehta. These flats were purchased in February 2005 jointly. cost of flats disclosed in books of accounts is Rs. 1.70 crores. extract of seized diary is as under:- 8th floor Leelabaug-purchased on Dec 2004 Agreement signed on 09/02/2005 2.47 .47 Ramniwas purchased on 20/01/2006 .7 17.The copy of seized document can be found at page 37 of paper book and same is extracted in assessment order also. During 12 IT(SS)A Nos. 302 to 312/Ahd/2012 & Ors. . A.Ys. 2004-05 to 2010-2011 course of statement recorded at time of search, assessees were asked to explain aforementioned notings mentioned in diary. It was explained that notings refer to time period of various activities done in flat as per Vastu Sastra . This explanation of assessee was dismissed by A.O. who was of firm belief that Sanjay P. Mehta and Trupti s. Mehta have paid total amount of Rs. 2.94 crore for Residential Flat at Leelabaug. A.O. further observed that Sanjay P. Mehta has also paid Rs. 77 lakhs for office at Ramniwas. A.O. dismissed theory of Vastu time and concluded by holding that Rs. 1.24 crore is undisclosed investment in Residential Flat at Leelabaug. computation of Rs. 1.24 crore was arrived as follows:- 2.47 crore + .47 crore (being notings in diary) 1.70 crore (disclosed in books) 1.24 crore 18.The A.O. further divided 1.24 crores equally and made additions in hands of Sanjay P. Mehta and Trupti S. Mehta equally. A.O. further made additions of Rs. 0.77 crores towards acquisition of office premises at Ramniwas. 19.The asseseees carried matter before ld. CIT(A) and reiterated what has been stated before Assessing Officer. It was strongly contended that in impugned diary, there is no mention of rupees; reference to 13 IT(SS)A Nos. 302 to 312/Ahd/2012 & Ors. . A.Ys. 2004-05 to 2010-2011 jottings in diary was only in respect of timings as per Vastu consultant. 20.After considering facts and submissions, ld. CIT(A) observed as under:- 8.6 . I may agree with conclusion of A.O. that figures of 2.47, .47 and .77 do not reflect time but at same time I cannot accept contention of AO that these figures represent total consideration of acquisition of properties. For this purpose, AO has to prove that appellant had made total payment of Rs. 2.47, .47 crores towards acquisition of residential flat at Leela Baug and .77 crores towards acquisition of office premises at Ram Niwas. In my considered view, AO has not made out case that appellants have paid total consideration of Rs. 2.94 crores towards residential premises and Rs. 0.77 crores towards office premises. In absence of any corroborative evidences such as documented price, amounts paid by cheque and cash, figures of 2.47 and .47 cannot be treated as total cost of residential flat at Leela Baug. In order to prove that 2.47 and .47 represent total consideration of residential flat at Leela Baug, AO has to corroborate these amounts with cheque amounts already given. There is no mention that amount of Rs.2.47 and .47 are figures in crores and that these amounts are paid towards acquisition of residential flat at Leela Baug. During course of search and subsequent to search, Trupti S Mehta who has written page in her own handwriting did not state that total cost of residential flat at Leela Baug was Rs.2.47 + .47 = 2.94 crores. Further, AO has not established that these figures represent amount paid by appellants for purchase of residential flat at Leela Baug. It can be one of presumptions which is not supported by any evidence. Neither purchaser nor seller admitted receipt and payment of on money. Similarly, office property at Ramnivas is tenanted property and AO has not been able to prove that for acquiring tenancy right of property appellant Shri Sanjay P Mehta had paid .77 crores. Had counter parties accepted that they have received cash component from appellants then probably addition made by AO on basis of entries in seized paper could have been justified. But in present case neither counter parties have admitted, nor appellants have admitted nor A.O. had tried to corroborate cash payment by making any investigations. As mentioned earlier, this can be one of assumptions but not sufficient enough to make addition of Rs. 1.24 crores or 14 IT(SS)A Nos. 302 to 312/Ahd/2012 & Ors. . A.Ys. 2004-05 to 2010-2011 Rs.0.77crores. Therefore, in view of detailed submissions made by appellant, addition made on account of unaccounted investment in residential flat of Rs. 1.24 crores (Rs.62 lakh each in hands of Sanjay P. Mehta and Trupti S Mehta) and Rs.77 lakhs in office premises at Ramnivas is directed to be deleted. 21.Aggrieved by this, revenue is before us in cross appeals. ld. D.R. strongly supported findings of A.O. and placed reliance on seized material. Per contra, ld. counsel reiterated what has been stated before lower authorities. 22.We have given thoughtful consideration to orders of authorities below. We have also carefully perused copy of seized document placed at page 37 of paper book. It is undisputed fact that there is no reference to any monetary consideration paid in said diary. mention of 2.47, .47 and .77 cannot be construed as reference to monetary consideration in crores. This appears to be only presumption/assumption. There is nothing on record which could suggest that any verification have been made from seller/landlord of impugned properties of Leelabaug and Ramniwas. Instead of making any verification from other side, A.O. has simply assumed that impugned jottings are rupees in crores. entire additions have been made without bringing any corroborative evidence on record. Additions cannot be sustained on such flimsy grounds. We, therefore, do not find any reason to interfere with findings of ld. CIT(A). Cross appeals of revenue on this account are dismissed. 15 IT(SS)A Nos. 302 to 312/Ahd/2012 & Ors. . A.Ys. 2004-05 to 2010-2011 23.In case of Trupti S. Mehta assessment year 2009-10, additions have been made as deemed dividend on loans and advances received from Priya Blue Industries Pvt. Ltd. When assessee was asked to explain why additions should not be made u/s. 2(22)(e) of Act, assessee explained that said amount was received for taking Keyman Insurance Policy. It was explained that company was taking Keyman Insurance Policy for benefit of its directors Sanjay P. Mehta and Turpti S. Mehta but later on company was advised that such policy has to be taken by individuals. Therefore, company advanced amount to individuals and in turn they paid Insurance Premium. This explanation of assessee was dismissed by A.O. who proceeded by invoking provisions of Section 2(22)(e) of Act and made impugned additions. 24.The assessee carried matter before ld. CIT(A) but without any success. 25.Before us, ld. counsel reiterated what has been stated before lower authorities and ld. D.R. strongly supported findings of revenue authorities. 26.We have given thoughtful consideration to orders of authorities below qua issue. We have also gone through Insurance Premium receipt placed before us during course of appellate proceedings. We find force in contention of ld. counsel. impugned amount advanced by Priya Blue Industries Pvt. Ltd. was towards payment of 16 IT(SS)A Nos. 302 to 312/Ahd/2012 & Ors. . A.Ys. 2004-05 to 2010-2011 Insurance Premium of two policies. Considering these facts, in our considered opinion, said advance made by Priya Blue Industries Pvt. Ltd. cannot be construed as deemed dividend in hands of assessee. advance was given for payment of Insurance Premium and Insurance Premium has accordingly been paid as per receipts placed on record. Therefore, we do not find any merit in additions made by A.O. and confirmed by ld. CIT(A). We, accordingly, set aside findings of ld. CIT(A) and direct A.O. to delete additions made u/s. 2(22)(e) of Act. 27.In result, appeals filed by Assessee are allowed and appeals of Revenue are dismissed. Order pronounced in Open Court on 17 - 10- 2016 Sd/- Sd/- (MAHAVIR PRASAD) (N. K. BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad: True Copy Rajesh Copy of Order forwarded to:- 1. Appellant. 2. Respondent. 3. CIT (Appeals) 4. CIT concerned. 5. DR., ITAT, Ahmedabad. 6. Guard File. By ORDER Deputy/Asstt.Registrar ITAT,Ahmedabad Sanjay P. Mehta v. ACIT, Central Circle-2(1), Ahmedabad