The Principal Commissioner of Income-tax v. Rameshbhai Jivraj Desai
[Citation -2020-LL-0918-39]

Citation 2020-LL-0918-39
Appellant Name The Principal Commissioner of Income-tax
Respondent Name Rameshbhai Jivraj Desai
Court HIGH COURT OF GUJARAT AT AHMEDABAD
Relevant Act Income-tax
Date of Order 18/09/2020
Assessment Year 2009-10
Judgment View Judgment
Keyword Tags incriminating material • unaccounted profit • undisclosed income • on-money received • sham transaction
Bot Summary: Once a search or requisition is made, a mandate is cast upon the Assessing Officer to issue notice under section 153A of the Act to the person, requiring him to furnish thereturn of income in respect of each assessment year falling within six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made and assess or reassess the same. The second proviso makes the intention of the legislature clear as the same provides that assessment or reassessment, if any, relating to the six assessment years referred to in the sub- section pending on the date of initiation of search under section 132 or requisition under section 132A, as the case may be, shall abate. Sub-section of section 153A of the Act provides that if any proceeding or any order of assessment or reassessment made under sub- section isannulled in appeal or any other legal provision, then the assessment or reassessment relating to any assessment year which had abated under the second proviso would stand revived. Sub-section provides for revival of any assessment or reassessment which stood abated, if any proceeding or any order of assessment or reassessment made under section 153A of the Act is annulled in appeal or any other proceeding. In case where pending assessments have abated, the Assessing Officer can pass assessment orders for each of the six years determining the total income of the assessee which would include income declared in the returns, if any, furnished by the assessee as well as undisclosed income, if any, unearthed during the search or requisition. In the opinion of this court, the said contention does not merit acceptance, inasmuch as, the assessment in respect of each of the six assessment years is a Page 14 of 16 Downloaded on : Wed Sep 30 07:55:39 IST 2020 C/TAXAP/195/2020 ORDER separate and distinct assessment. If in relation to any assessment year, no incriminating material is found, no addition or disallowance can be made in relation to that assessment year in exercise of powers under section 153A of the Act and the earlier assessment shall have to be reiterated.


C/TAXAP/195/2020 ORDER IN HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 195 of 2020 PRINCIPAL COMMISSIONER OF INCOME TAX Versus RAMESHBHAI JIVRAJ DESAI Appearance: MRS MAUNA M BHATT, SENIOR STANDING COUNSEL(174) for Appellant(s) No. 1 for Opponent(s) No. 1 CORAM:HONOURABLE CHIEF JUSTICE MR. VIKRAM NATH and HONOURABLE MR. JUSTICE J.B.PARDIWALA Date : 18/09/2020 ORAL ORDER (PER : HONOURABLE MR. JUSTICE J.B.PARDIWALA) 1. This Tax Appeal under Section 260A of Income Tax Act, 1961 (for short Act, 1961 ) is at instance of Revenue and is directed against order passed by Income Tax Appellate Tribunal, Ahmedabad C Bench dated 17.01.2020 in IT(SS) No. 108/Ahd/2017 for A.Y. 2009-10. 2. Revenue proposed following substantial question of law for consideration of this Court:- Page 1 of 16 Downloaded on : Wed Sep 30 07:55:39 IST 2020 C/TAXAP/195/2020 ORDER Whether Appellate Tribunal is right in law and on facts in holding that in absence of any incriminating material related to given assessment year found during search, assessment u/s. 153A of Act cannot be made for that assessment year for which assessment has been concluded on date of search and not abated? 3. It appears from materials on record that search action under Section 132 of Act, 1961 was undertaken in group cases of Master Group in F.Y. 2012-13 on 03.01.2013. In such circumstances, in accordance with provisions of Section 153A of Act, 1961, notice was issued to assessee dated 19.11.2013. In response to said notice, assessee filed his return of income declaring total income of Rs. 12,74,710/-. Thereafter, order under Section 153A read with Section 143(3) of Act, 1961 dated 31.03.2015 came to be passed determining total income of Rs. 5,59,10,869/-. 4. It further appears that in course of assessment proceedings, Assessing Officer Page 2 of 16 Downloaded on : Wed Sep 30 07:55:39 IST 2020 C/TAXAP/195/2020 ORDER noticed that for A.Y. 2009-10, bad debts of Rs. 94,14,513/- were written off. auditor in his audit report stated that although bad debts of aforesaid amount were written off, yet no relevant records or details were furnished. In view of same, Assessing Officer disallowed claim of bad debts of Rs. 94,14,513/- and added same to total income of assessee. 5. assessee being dissatisfied with assessment order, preferred appeal before Commissioner of Income Tax (A). Commissioner of Income Tax (A) confirmed addition/disallowance and dismissed appeal of assessee. 6. assessee being dissatisfied with order of Commissioner of Income Tax (A), preferred appeal before Appellate Tribunal. Appellate Tribunal allowed appeal of assessee. 7. Being dissatisfied with order passed by Page 3 of 16 Downloaded on : Wed Sep 30 07:55:39 IST 2020 C/TAXAP/195/2020 ORDER Appellate Tribunal, Revenue is here before this Court with present appeal. 8. We have heard Ms. Mauna M. Bhatt, learned Senior Standing Counsel, appearing for Revenue. 9. Tribunal noted following contentions raised on behalf of assesee in its impugned order:- 1.1 order passed u/s. 250 on 26.12.2016 for A.Y. 2009-10 by CIT (A)-7, Abad upholding validity of proceedings u/s. 153A of Act as well as addition of Rs. 3,83,40,000/- as unaccounted profit in respect of land transactions 6t bad debts of Rs. 94,14,513/- is wholly illegal, unlawful and against principles of natural justice. 1.2 Ld. CIT(A) has grievously erred in law and or on facts in not considering fully and properly submissions made and evidence produced by appellant with regtard to impugned addition. 2.1 CIT(A) has grievously erred in law and Page 4 of 16 Downloaded on : Wed Sep 30 07:55:39 IST 2020 C/TAXAP/195/2020 ORDER on facts in confirming validity of proceedings as well as noticve u/s. 153A dated 19.11.2013 for A.Y. 2009-10, though conditions precedents were not fulfilled. Therefore, notice as well as proceedings u/s. 153A(1) were wholly illegally and unlawful in view of no incriminating material found during course of search for this year. 2.1 That in facts and circumstances of case as well as in law, Ld.CIT(A) ought not to have upheld validity of proceedings as well as notice u/s. 153A dated 19.11.2013 for A.Y.2009-10. 3.1 Ld.CIT(A) has grievously erred in law and on facs in confirming addition of Rs.3,83,40,000/- as unaccounted profit in respect of land transactions with M/s Raj Corporation as unaccounted profit in respect of land transactions. 3.2 Ld.CIT(A) has grievously erred in law and on facts in holding that appellant had failed to produce documents in respect of purchase and sale of land. 3.3 Ld.CIT(A) has grievousl erred in law Page 5 of 16 Downloaded on : Wed Sep 30 07:55:39 IST 2020 C/TAXAP/195/2020 ORDER and on facts in holding that there was unaccounted profit and on facts in holding that there was unacco8untd profit of Rs.3,83,40,000/- in respect of lands at Tragad Village which was diversion to books of RJD Impex Pvt.Ltd.(correct is M/s Raja Corporation) was sham transaction as well as explain satisfactorily impugned amount as well as make request for admisison of additional evidence. 4.1 Ld.CIT(A) has grievously erred in law and on facts in confirming disallowance of bad debts/business loss of Rs.94,14,513/-. 4.2 That in facts and circumstances of case as well as in law, Ld.CIT(A) ought not to have upheld disallowance of bad debts/business loss of Rs.94,14,513/-. It is, therefore, prayed that additiona/disallowance of Rs.3,83,40,000/- & Rs. 94,14,513/- and validity u/s. 153A(1) upheld by CIT(A) may kindl be deleted. 10. Appellate Tribunal, while allowing appeal of assessee held as under:- Page 6 of 16 Downloaded on : Wed Sep 30 07:55:39 IST 2020 C/TAXAP/195/2020 ORDER 53. At outset we note that technical issue raised by assessee in ground 1 & 2 challenging validity of assessment framed under section 153A of Act is identical to issue raised in case of Shri Rajnibhai Jivraj Desai in ITA No. 104/AHD/2017 which has been decided by us in favour of assessee vide paragraph No. 14 & 15 of this order. For detail discussion please refer relevant paragraph as discussed above. Therefore, respectfully following same and to maintain parity with findings, we allow technical ground raised by assessee in his favour withut going into merit of case. 11. We are of view that Tribunal could not be said to have committed any error in passing impugned order waranting any interference in this appeal. As such, question of law as proposed by Revenue cannot be termed as substantial question of law. 12. In aforesaid context, we may refer to and Page 7 of 16 Downloaded on : Wed Sep 30 07:55:39 IST 2020 C/TAXAP/195/2020 ORDER rely upon decision of this High Court in case of Principal Commissioner of Income-tax-4 vs. Saumya Construction (P.) Ltd, reported in 387 ITR 529, more particularly observations made in Paras 15 to 19, which read thus: 15. On plain reading of section 153A of Act, it is evident that trigger point for exercise of powers thereunder is search under section 132 or requisition under section 132Aof Act. Once search or requisition is made, mandate is cast upon Assessing Officer to issue notice under section 153A of Act to person, requiring him to furnish thereturn of income in respect of each assessment year falling within six assessment years immediately preceding assessment year relevant to previous year in which such search is conducted or requisition is made and assess or reassess same. Since assessment under section 153A of Act is linked with search and requisition under sections 132 and 132A of Act, it is evident that object of section is to bring to tax undisclosed income which is found during course of or pursuant to search or Page 8 of 16 Downloaded on : Wed Sep 30 07:55:39 IST 2020 C/TAXAP/195/2020 ORDER requisition.However, instead of earlier regime of block assessment whereby, it was only undisclosed income of block period that was assessed, section 153A of Act seeks to assess total income for assessment year, which is clear from first proviso thereto which provides that Assessing Officer shall assess or reassess total income in respect of each assessment year falling within such six assessment years. second proviso makes intention of legislature clear as same provides that assessment or reassessment, if any, relating to six assessment years referred to in sub- section pending on date of initiation of search under section 132 or requisition under section 132A, as case may be, shall abate. Sub-section (2) of section 153A of Act provides that if any proceeding or any order of assessment or reassessment made under sub- section (1) isannulled in appeal or any other legal provision, then assessment or reassessment relating to any assessment year which had abated under second proviso would stand revived. proviso thereto says that such revival shall cease to have effect if such order of annulment is set aside. Thus, any proceeding of assessment or reassessment Page 9 of 16 Downloaded on : Wed Sep 30 07:55:39 IST 2020 C/TAXAP/195/2020 ORDER falling within six assessment years prior to search or requisitionstands abated and total income of assessee is required to be determined under section 153A of Act. Similarly, sub-section (2) provides for revival of any assessment or reassessment which stood abated, if any proceeding or any order of assessment or reassessment made under section 153A of Act is annulled in appeal or any other proceeding. 16. Section 153A bears heading Assessment in case of search or requisition . It is well settled as held by Supreme Court in catena of decisions that heading of section can be regarded as key to interpretation of operative portion of section and if there is no ambiguity in language or if it is plain and clear, then heading used inthe section strengthens that meaning. From heading of section 153, intention of legislature is clear viz., to provide for assessment in case of search and requisition. When very purpose of provision is to make assessment in case of search or requisition, it goes without saying that assessment has to have relation to search or requisition. In other words, assessment should be connected with Page 10 of 16 Downloaded on : Wed Sep 30 07:55:39 IST 2020 C/TAXAP/195/2020 ORDER something found during search or requisition, viz., incriminating material which reveals undisclosed income. Thus, while in view of mandate of sub-section (1) of section 153A of Act, in every case where there is search or requisition, Assessing Officer is obliged to issue notice to such person to furnish returns of income for six years preceding assessment year relevant to previous year in which search is conducted or requisition is made, any addition or disallowance can be made only on basis of material collected during search or requisition. In case no incriminating material is found, as held by Rajasthan High Court in case of Jai Steel (India), Jodhpur v. Assistant Commissioner of Income Tax(supra), earlier assessment would have to be reiterated. In case where pending assessments have abated, Assessing Officer can pass assessment orders for each of six years determining total income of assessee which would include income declared in returns, if any, furnished by assessee as well as undisclosed income, if any, unearthed during search or requisition. In case where pending reassessment under section 147 of Act has abated, needless to state thatthe scope and Page 11 of 16 Downloaded on : Wed Sep 30 07:55:39 IST 2020 C/TAXAP/195/2020 ORDER ambit of assessment would include any order which Assessing Officer could have passed under section 147 of Act as well as under section 153A of Act. 17. In facts of present case, search came to be conducted on 07.10.2009 and notice was issued to assessee under section 153A of Act for assessment year 2006-07 on 04.08.2010. In response to notice, assessee filed return of income on 18.11.2010. In terms of section 153B, assessment was required to be completed within period of two years from end of financial yearin which search came to be carried out, namely, on orbefore 31st March, 2012. Here, insofar as impugned addition is concerned, notice in respect thereof came to be issued on 19.12.2011 seeking explanation from assessee. assessee gave its response by reply dated 21.12.2011 calling upon Assessing Officer to provide copies of statements recorded on oath of Shri Rohit P. Modi and Smt. Pareshaben K. Modi during search as well as copies of documents upon which department placed reliance for purpose of making proposed addition as well as copy of explanation given by Shri Rohit P. Modiand Smt. Pareshaben K. Modi Page 12 of 16 Downloaded on : Wed Sep 30 07:55:39 IST 2020 C/TAXAP/195/2020 ORDER regarding on-money received, copies of assessment orders in case of saidpersons and also requested Assessing Officer to permit him to cross-examine said persons. Assessing Officer issued summons to said persons, however, they were out of station and it was not known as to when they would return.In this backdrop, without affording any opportunity to assessee to cross-examine said persons, Assessing Officer made addition in question. 18. In this case, it is not case of appellant that any incriminating material in respect of assessment year under consideration was found during course of search. At therelevant time when notice came to be issued under section153A of Act, assessee filed its return of income. Muchlater, at fag end of period within which order under section 153A of Act was to be made, in other words, when limit for framing assessment as provided under section 153 was about to expire, notice has been issued in present case seeking to make proposed addition of Rs.11,05,51,000/- on basis of material which was not found during course of search, but on basis of statement of Page 13 of 16 Downloaded on : Wed Sep 30 07:55:39 IST 2020 C/TAXAP/195/2020 ORDER another person. In opinion of this court, in case like present one, where assessment has been framed earlier and no assessment or reassessment was pending on date of initiation of search under section 132 or making of requisition under section 132A, while computing total income of assessee under section 153A of Act, additions or disallowances can be made only on basis of incriminating material found during search or requisition. In present case, it is admitted position that no incriminating material was found during course of search, however, it is on basis of some material collectedby Assessing Officer much subsequent to search, that impugned additions came to be made. 19. On behalf of appellant, it has been contended that if any incriminating material is found, notwithstanding that in relation to year under consideration, no incriminating material is found, it would be permissible to make additions and disallowance in respect of all six assessment years. In opinion of this court, said contention does not merit acceptance, inasmuch as, assessment in respect of each of six assessment years is Page 14 of 16 Downloaded on : Wed Sep 30 07:55:39 IST 2020 C/TAXAP/195/2020 ORDER separate and distinct assessment. Under section 153A of Act, assessment has to be made in relation to search or requisition, namely, inrelation to material disclosed during search or requisition. If in relation to any assessment year, no incriminating material is found, no addition or disallowance can be made in relation to that assessment year in exercise of powers under section 153A of Act and earlier assessment shall have to be reiterated. In this regard, this court is in complete agreement with view adopted by Rajasthan High Court in case of Jai Steel (India), Jodhpur v. Assistant Commissioner of Income Tax (supra). Besides, as rightly pointed out by learned counsel for respondent, controversy involved inthe present case stands concluded by decision of this courtin case of Commissioner of Income-tax-1 v. Jayaben Ratilal Sorathia(supra) wherein it has been held that while it cannot be disputed that considering section 153A of Act, Assessing Officer can reopen and/or assess return with respect to six preceding years; however, there must be some incriminating material available with Assessing Officer with respect to sale transactions in particular assessment year. Page 15 of 16 Downloaded on : Wed Sep 30 07:55:39 IST 2020 C/TAXAP/195/2020 ORDER 13. In view of aforesaid, this appeal fails and is hereby dismissed. (VIKRAM NATH, CJ) (J. B. PARDIWALA, J) NAIR SMITA V./A.M.PIRZADA Page 16 of 16 Downloaded on : Wed Sep 30 07:55:39 IST 2020 Principal Commissioner of Income-tax v. Rameshbhai Jivraj Desai
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