9911796707
TMI Blog2018 (1) TMI 245X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.2] The learned CIT(A) erred in holding that the name of the assessee was included in the warrant issued to search the premises at 111/112, Anil Complex, New Link Road, Near Regency Marriage Hall, Ulhasnagar- 2 and therefore, the learned A.O. was justified in completing the asst. u/s. 153A on the basis of the said authorization. 1.3] The learned CIT(A) failed to appreciate that - a. The warrant issued to search the premises at 111/112, Anil Complex, New Link Road, Near Regency Marriage Hall, Ulhasnagar - 2 did not belong to the assessee firm nor the assessee conducted it's business from the said address and therefore, there was no search on the assessee firm and the assessment initiated and completed u/s. 153A was bad in law. b. Conducting a search on the premises of the partner does not amount to conducting a search on the firm and thus, in this case, it cannot be held that the appellant firm was searched. c. The additional grounds raised by the appellant ought to have been admitted and allowed as it was shown by the appellant that the business premises of the firm were not searched and the asst. u/s 153A is wand void. . 2] The learned CIT(A) erred in confi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed CIT(A) erred in holding that the search action u/s. 132 was conducted on the assessee firm and thus, the asst. order passed u/s 153A is valid in law. 1.1] The learned CIT(A) erred in holding that the name of the assessee was included in the warrant to search the premises at 111 / 112, Anil Complex, New Link Road, Near Regency Marriage Hall, Ulhasnagar 2 and therefore, the assessee was searched and the asst. u/s 153A was valid. 2] The Learned CIT (A) failed to appreciate that the assessment for A.Y.2007-08 was a non abated assessment and since no incriminating evidence was found relating to the impugned addition of Rs. 2,60,00,000/- during the course of alleged search on the appellant firm, no addition could be made in 153A assessment. The entire addition of Rs. 2,60,00,000/- may kindly be deleted. 3] Based on the loose papers found in the search on Atul Chordia Group and the statement of Shri Atul Chordia, the learned CIT(A) erred in holding that in total, the appellant had paid on money of Rs. 7,60,00,000/- to M/s. Ashray Premises Pvt. Ltd. for purchase of the property named Deccan Paper Mill Property. 4] The learned CIT(A) erred in confirming an addition of Rs. 2,6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtunity to cross examine Shri Atul Chordia and therefore, the reliance placed on his statement for making addition in the hands of the appellant firm was not valid at all. f. There was no concrete evidence that the appellant firm had paid Rs. 5,00,00,000/- as on money for purchase of the said property in this year and hence, the addition made of Rs. 5,00,00,000/- in this year was not justified at all." Subsequently, assessee filed abridged grounds of appeal for A.Y. 2010-11, as under:- The following grounds are without prejudice to each other On the facts and in law, 1] Based on the loose papers found in the search on Atul Chordia Group and the statement of Shri Atul Chordia, the learned CIT(A) erred in holding that in total, the appellant had paid on money of Rs. 7,60,00,0007- to M/s. Ashray Premises Pvt. Ltd. for purchase of the property named Deccan Paper Mill Property. 2] The learned CIT(A) erred in confirming an addition of Rs. 5,00,00,000/- in the hands of the appellant firm for this year on the basis of the evidence seized during the search on Atul Chordia Group (third party). 3] The appellant craves leave to add, alter, amend or delete any of the above groun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee and confirmed the action of the Assessing Officer. 5. The learned AR vehemently contended that no search action was carried out in either of the premises of the assessee firm situated in Pune i.e. 2418, East Street, Thakkar House, 1st Wing, 2nd Floor, Camp Pune. There had been a search u/s. 132 at 111/112, Anil Complex, New Link Road, Near Regency Marriage Hall, Ulhasnagar- 421 002 and for this our attention was drawn towards 1st para at page 2 of the assessment order. The place where search had taken place belongs to Khairari Group and was occupied by various concerns controlled by them. These places were the principal place of business of various other concerns. The assessee had nothing to do with this premises except that it is the office address of one of the company in which one of its partner is interested i.e. Konark Project Ltd. The assessee does not have any connection whatever with this premises i.e. 111/112, Anil Complex, New Link Road, Near Regency Marriage Hall, Ulhasnagar- 421 002. The assessee is filing its return with ITO Ward 2(2), Pune and after the search action the case of the assessee was centralized and transferred to Central Circle Thane. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... search is conducted so as to assess or reassess the total income of such six assessment years. The provisions to section 153A(1)(b) will be redundant if a search is only initiated but not conducted against a person, as the initiation of search and conduct thereof are two distinct actions of two different Income Tax Authorities under the Act. A panchnama needs to be drawn in the name of the person against whom the provisions of section 153A are sought to be invoked and the absence of such panchnama shall firstly negate the facts and circumstances leading to the initiation of the search, secondly, disprove the fact of the conduct and conclusion of the search and, thirdly, also result in defeating the provisions of section 153A(1)(b). 153B(1)(a)& 153B(2) as the determination of the financial year in which the search was conducted will be impossible resulting into provisions of section 153A(1)(b) being non-starter. Further the time limit for completion of assessment u/s 153B will also not be workable in absence a last panchnama witnessing the execution of the last of the authorizations. Thus, it was stressed that the execution of the last of the authorizations for search under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AR before us submitted that the assessee has taken this ground before the CIT(A) but the CIT(A) dismissed the ground mentioning that this ground does not emanate from the order of the Assessing Officer as the assessee has not taken this issue before the Assessing Officer. It was contended that this ground is a legal ground and has to be admitted. The learned DR, on the other hand, relied on the order of the CIT(A) and submitted that there has been search carried out in assessee's case at 111/112, Anil Complex, New Link Road, Near Regency Marriage Hall, Ulhasnagar- 2, which is the address and the business place of partner of the assessee firm. The law nowhere mentions that in case of a partnership firm search can be carried out only at the address mentioned in the partnership deed and in this regard our attention was drawn towards the assessment order where the address of the assessee is mentioned as 111/112, Anil Complex, New Link Road, Near Regency Marriage Hall, Ulhasnagar- 2, which was covered by the search conducted u/s. 132(1). The assessee had never objected with regard to the address mentioned by the Assessing Officer in the assessment order. In the appeal Memo, the address ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness from the said place. The premises where the search was conducted relate to Konark Project Ltd., in which one of the assessee's partner is interested. But this is not the address of the assessee firm. The assessee's firm is constituted on 26.08.2005 vide partnership deed dated 26.08.2005 and subsequently amended vide deed dated 30.06.2006 and 3.11.2006. The address in the partnership deed dated 26.08.2005 and 30.06.2006 is 2418, East Street, Thakkar House, 1st Wing Camp, Pune and in the deed dated 3.11.2006, the address is 5th Avenue, Dhole Patil Road, Pune. These are the address of principal place of business of the assessee is constituted. It is also not denied that in Income Tax database i.e. PAN/TIN record the address of the assessee from 2.11.2006 is appearing as 5th Avenue, Dhole Patil Road, Pune. In the notice issued on 5.12.2011 the address of the assessee is shown as 2418, East Street, Thakkar House, 1st Wing Camp, Pune. In the reply to the show cause notice dated 5.12.2011 the address of the assessee is the same. We also noted that in the ITR-5, filed by the assessee on 02.08.2007, the address of the assessee is appearing as 5th floor, 5th Avenue, Dhole Patil Road, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cessary to analyze the provisions of section 132(1) as well as 153A. The provisions of section 153A, 153B and 132(1) are reproduced as under: "153A. (1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section-15-1 and section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003, the Assessing Officer shall- (a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years [and for the relevant assessment year or years] referred Co in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139; (b) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be produced, any books of account or other documents which will be useful for, or relevant to, any proceeding under the Indian Income-tax Act, 1922 (11 of 1922), or under this Act, or (c) any person is in possession of any money, bullion, jewellery or other valuable article or thing and such money, bullion, jewellery or other valuable article or thing represents either wholly or partly income or property which has not been, or would not be, disclosed for the purposes of the Indian Income-tax Act, 1922 (11 of 1922), or this Act (hereinafter in this section referred to as the undisclosed income or property), From the reading of these provisions, it is clear that section 153A(a) of the Income tax Act authorized the Assessing Officer to issue notice in a case where search has been initiated and thus, it is only machinery section. Section 153A(b) of the Act also authorizes the Assessing Officer to assessee or reassess the income of six assessment years immediately preceding assessment years relevant to the previous year in which the search has been conducted or requisition is made. The said subsection using the term "search is conducted" had also specified assessment year for whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nion that the conditions stipulated u/s. 153A, for the issue of notice, are not satisfied. Until and unless the Assessing Officer assumes the valid jurisdiction u/s. 153A the assessment made in consequence of the notice issued u/s. 153A, in our view is invalid and void ab initio. We accordingly quash the assessment made by the Assessing Officer. 8. Before concluding, we would like to discuss the case law as has been relied on before us: J.M Trading Corporation vs. ACIT20SOT489 (MUM) In this case, premises owned by assesses were searched but these premises were not occupied by assesses but tenanted to someone else. It is held that search action was invalid and illegal, it is held (In para 24) that 'mere mentioning of name in the panchnama does not lead to the conclusion that a valid search has been conducted against the assessee'. The conclusion part is reproduced below:- "CONCLUSfQN Search of assessee's tenanted premises where assessee was not present could not be said to be valid search against the assessee even though his name was mentioned in the panchnama, hence assessment of assessee u/s. 143(3) rws 153A In pursuance of such invalid search had to be declare ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duct of search.} CIT vs. Kurban Hussain Ibrahimji Mithiborwala 82 ITR 821 Wherein Hon'ble Supreme Court has held as below: It is well settled that the ITO's jurisdiction to reopen an assessment under s. 34 depends upon the issuance of a valid notice. If the notice issued by him is invalid for any reason the entire proceedings taken by him would become void for want of jurisdiction. In the notice issued under s. 34 the ITO sought to reopen the assessment of the assessee for the assessment year 1948-49 but in fact he reopened the assessment of the year 1949-50. Hence, in our opinion, the High Court was right in holding that the notice in question was invalid and as such the ITO had no jurisdiction to revise the assessment of the assessee for the year 1949-50. These decisions support the view taken by us in the preceding paragraphs. Accordingly, we quash the assessment order passed u/s. 153A r.w.s. 143(3) of the Act. 9. Ground no.2 taken by the assessee relates to the addition of Rs. 2,60,00,000/-. In this regard, the leaned AR before us vehemently contended that even if it is assumed that there was a valid search in the case of the assessee, since no incriminating mat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in the case of Continental Warehousing Corporation (Nhava Sheva) Ltd.(supra). Respectfully following the said decision, we delete the addition of Rs. 2,60,00,000/- and allow ground no. 2 taken by the assessee. 11. Ground nos.3 & 4 for A.Y. 2007-08 and Ground nos. 1 & 2 for A.Y. 2010-11 relate to the sustenance of addition of Rs. 2,60,00,000/- and Rs. 5,00,00,000/- for A.Ys. 2007-08 and 2010-11 respectively. Both the parties agreed that since the facts involved relating to these additions are common the issue may be decided on merit on the basis of the facts for A.Y. 2007-08. The facts relating to these additions are that there had been a search in the case on 11.09.2009 on Panchsheel Group i.e. Ashray Premises Pvt Ltd. During the course of the search, two documents viz. Page No.23 (P23) and Page No.26(P26) were found. P23 is the Profit & loss account from 01.04.2006 to 3.08.2009 of Ashray Premises Pvt. Ltd., while P26 contains the ledger account of K.L.L. for the period 01.04.2006 to 3.08.2009. The P & L A/c. in P23 shows that a sum of Rs. 7,60,00,000 has been credited on account of sale of Deccan Paper Mill while P26 is a computerized ledger account of K.L.L in the books o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... following manner: "(a) Monetary consideration of Rs. 3,11,00,0007- to be paid as under: (i) Rs. 75,00,000/- vide cheque dtd 01-09-2005 of Rs. 55 lakhs & dtd 10-09- 2005 of Rs. 20 lakhs (ii)Rs.15 lakhs- after registered confirmation of deed with a consenting party latest by 15-06-2006. (iii) Rs. 2,21,00,0007- to be paid within two month after fulfillment of condition (ii) mentioned above. (b) 60,100 sq.ft built-up area (cost evaluated at Rs. 1,000/- per sq.ft)along with additional pro-rata 30 open & 30 covered car parking. The background of this property is that the property originally belonged to M/s Deccan Paper Mills Co. Ltd., who entered into an agreement dated 27.04.2002 on a stamp paper of Rs. 100/- with Ashray Premises Pvt. Ltd. for its development in consideration of handing over saleable built-up area of 63,600 sq. ft consisting of Row houses/Bungalow/offices/shops along with additional prorate open/covered car parking. Subsequently, a fresh agreement dated 22.04.2004 was executed and registered between Deccan Paper Mills Co. Ltd. and Ashray Premises Pvt. Ltd. in which there was a monetary consideration to be paid of Rs. 1,67,75,001/- as well as built-up area ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer was of the view that the assessee has paid an amount of Rs. 7,60,00,000/- in cash towards purchase of the said land. In view of the copy of ledger account of K.L.L. in the books of Ashray Premises Pvt. Ltd, the Assessing Officer was of the view that during A.Y. 2007-08, the partner of the assessee firm paid a sum of Rs. 2,60,00,000/- to the assessee while the seized paper shows a debit of Rs. 2,10,00,000/-. During the course of the search at the premises of one of the partners Shri Dilip Oswal, when the said transaction was asked to be explained, he answered as under: This transaction was entered in the year 2005-06, with Deccan Paper Mill and M/s. Ashray Premises Pvt Ltd. for plot of land admeasuring 3,52,000 Sq. Ft. approx at Mundhawa for which we had obtained development rights. As per the development agreement consideration of Rs. 3,11,00,000/- was to be paid to M/s. Ashray Premises Pvt Ltd and 61,000 Sq.Ft. of built-up area was to be handed over to Deccan Paper Mill. For this we had paid deposit Rs. 90 Lakhs(Rs. 5 Lakhs per month for 18 Months) to Deccan Paper Mill. When Shri Dilip Oswal was shown the seized documents from the premises of Ashraya Premise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee to crossexamine Shri Atul Chordia on 19.12.2011 but on that date Shri Atul Chordia did not attend. He attended office of the AO only on 20.12.2011 and his statement was recorded. He confirmed that a sum of Rs. 2,10,00,000/- was received from Kantilal L Lunkad & Dilip Jain but no question in respect of the sum of Rs. 5 crore was asked. Ultimately, the Assessing Officer noted that income was declared under the name and style of Ashray Premises (AOP) consisting of Atul Chordia & Kantilal Lunkad in the following manner: AY 2005-06 Rs. 01,68,75,000 AY 2006-07 Rs.03,18,28,400 AY 2007-08 Rs.00,65,00,000 AY 2009-10 Rs.00,42,00,000 AY 2010-11 Rs.16,35,00,000 The income relating to these transactions has not been disclosed by Ashray Premises Pvt Ltd. and in the disclosure Shri Atul Chordia made the following comment; "During the search, to buy peace with the Department we admitted 55 crores as undisclosed income. Out of this 22 crores was admitted by Ashray (AOP) between myself and Mr.Kantilal Lunkand as two partners. The said amount ofRs.2.10 crores given by Dilip Jain to Kantilal Lunkad was part of the disclosure in the hands of Ahsray (AOP) as undisclosed i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 100 with Deccan Paper Mills Co. Ltd. by which it agreed to develop the said property by handing over saleable built-up area of 63,600 sq. ft consisting of Row houses/Bungalow/offices/shops along with additional prorate open/covered car parking. Subsequently, a fresh agreement dated 22.04.2004 was executed and registered between Deccan Paper Mills Co. Ltd. and Ashray Premises Pvt. Ltd. in which there was a monetary consideration to be paid of Rs. 1,67,75,001/- as well as built-up area of 65,000 sq. ft. along with additional pro-rata open/covered car parking. Subsequently, a deed of confirmation was duly executed on 13.07.2006 between Ashray Premises Pvt. Ltd being the transferor), the assessee being the developer and Deccan Paper Mills Pvt Ltd being the consenting party to the agreement dated 20.05.2006. During the course of the search at Ashray Properties Pvt .Ltd. two documents were seized (P23 and P26), on the basis of which the Assessing Officer made the addition in the case of the assessee amounting to Rs. 2,60,00,000 in A.Y. 2007- 8 and Rs. 5 crores in A.Y. 2010-11. We noted that the statement of one of the Directors of Ashray Premises Pvt Ltd. was recorded and subsequentl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "M.C.M.G being amount received from mr. dilip jain on deccan paper retained by mr. K.LL as per inst. from kll : a/c for" and against the sum of Rs. 60,00,000/- credited on 22.10.2006, it has been mentioned "Mukesh Agarwal/Dilip Jain (6.25) Being account closed by mr lunkad and last payment received by mr lunkad". From these descriptions in this account, it is not clear that the payment has been made by the assessee in cash for getting the development rights in respect of plot no.96B, 96C and 96D at Village Mundhwa, admeasuring 3,51,541 sq. ft. at Pune. We noted that the development agreement has been registered on 20.05.2006 and the confirmation deed for the same was executed on 13.07.2006. If the assessee firm would have paid in cash naturally the seller would have received the payment in cash before signing and registering the said agreement. We also noted that during the course of the search at the premises of Shri Dilip Oswal & Shri Mahesh Khairari, the search party had specifically asked for the question relating to the sum of Rs. 7,60,00,000 paid by the assessee to Ashray Premises Pvt Ltd. and, in reply thereto, each of them has categorically denied any cash payment by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No addition can be sustained on the basis of assumption and presumptions, however, strong it may be. There is no material being brought on record for the A.Y. 2010-11 being found during the course of the search even in the case of Ashray Premises Pvt. Ltd. We, therefore, set aside the order of the CIT(A) in each of the assessment year and delete the addition of Rs. 2,60,00,000/- in A.Y. 2007-08 and Rs. 5 crores relating to A.Y. 2010-11. 13. From the profit & loss account seized from Ashray Premises Pvt. Ltd., we noted that neither there is any date nor the name of the assessee mentioned, which may prove that the assessee has paid a sum of Rs. 7,60,00,000/- in cash to M/s. Ashray Premises Pvt Ltd. We also noted from the said Profit & loss account that nowhere in these documents it is mentioned that M./s Ashray Premises Pvt Ltd. received a sum of Rs. 7,60,00,000/- in cash. The addition has been made merely on the basis of the statement of one of the Director of Ashray Premises Pvt Ltd. When the assessee's partners were cross-examined in this regard, they categorically denied that they have paid any cash. In our opinion, in view of the decision of Hon'ble High Court in the case of Co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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