DCIT vs Kawatra Tent and Caterers Pvt. Ltd.

“5.2

I have co nsidered the facts o f the case and the material available on record. The appellant is engaged in the business o f providing banque t service s. A search and seizure ope ration u/s 132 of the Act was conducte d on 03.05.2018 on the business and re sidential premises of the Kawatra Tent Group and incr iminating documents were found and seize d from the premises o f the assessee. I he case of appe llant was reopened u/s 147 of the Act. 1961 on the basis of informatio n received by the jurisdictio nal A O from the investigation wing of I T Department. The assessment was co mpleted at an inco me of Rs. 5.20.96.210/- after making addi tio n of suppressed sales of Rs.5.25.65.017/- by applying suppressio n factor of 3.8234.

On perusal of the assessment reco rd, it has been found that the suppression factor was compute d on the basis of accounted and unaccounted s ale of the assessee which were de tecte d during the search operatio n on the business premises of the asse ssee on 03.05.2018. T he appe llant contented that the re was not even a single document seized pertaining to AY 2012- 13. There are entr ies from 18.01.2013 to 16.02.2013 and 18.04.2016 to 14.04.2018 which are re levant to AY 2013-14, 2017-18, 2018- 19 and 2019-20. There are no other documents mentioned by the assessing officer in the assessment order . The assessing officer in the assessment order has nowhere mentioned that the impo unded material belo ngs/ pertains to AY 2012- 13. The assessing officer has calculated the sale suppressio n factor of 3.8234 and estimated the suppresse d sales of Rs.5,25,65,017/- as against the sales of Rs. 1,86,17,630/- as booked in the regular boo ks o f accounts.

5.2.1

I have considere d the submis sions made and the arguments advanced during the course of hearing. Pro visions of section I53A inter alia reads:-

“153A . (1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and sectio n 153, in the case of a person whe re a search is initiated under section 132 o r hooks of account, other documents or any assets arc requis itio ned under section 132A after the 31st day of May, 2003, the Assessing Office r shall—

(a)

issue notice to such person requiring him to furnish within suc h perio d, as may he specified in the notice , the re turn o f income in r espect o f each assessment year falling within six assessment years and for the rele vant assessment year o r ye ars referred to in clause (b), in the prescribe d fo rm and verifie d in the pre scribed manner and setting fo rth such o the r particulars as may be pre scribed and the provisio ns of this Act shall, so far as may be apply accordingly as if such return were a return required to be furnished under sectio n 139:

(b)

assess or reassess the total income of six assessment years immediate ly preceding the assessment year relevant to the previo us year in which such search is conducted o r requisitio n is made and for the relevant assessment year or years:

Pro vide d that the Assessing Officer shall assess or reassess the total income in re spect o f each assessment year falling within such six assessment years and fo r the relevant assessment war or years.

Pro vide d further that asse ssment or reassessment, if any, relating to any assessme nt ye ar falling within the period of six assessment ye ars and for the relevant assessment year or years refe rred to in this sub-section pending o n the date of initiation of the search under section 132 or making of requisitio n under section 132A, as the case may be. shall abate:

Pro vide d also that the Central Government may by rules made by it and published in the Official Gazette (exce pt in cases where any assessment or reassessment has abated under the second proviso), specify the class or classes of cases in which the Assessing Office r shall no t be require d to issue notice for assessing o r reassessing the to tal income for s ix assessment ye ars immediately preceding the assessment year relevant Io the previous year in which se arch is conducted or requisitio n is made and for the re levant assessment year or years:

Pro vide d also that no notice for assessment or reassessment shall he issue d by the Assessing Office r fo r the relevant assessment year or ye ars unless-

(a)

the Assessing Officer has in his possession books of account or othe r documents or evide nce which reveal (hat the income, represented in the form of asset, which has e scaped assessment amounts to or is likely to amount to fifty lak h r upees or more in the re levant assessment war or in aggregate in the relevant assessment years:

(b)

the income re ferred Io in clause (a) or part thereof has escape dd assessment fo r such year or years: and

(c)

the search unde r section 132 is initiate d or requisitio n under section I32A is made on or afte r s t the 1 day o f Apr il, 2017.

Explanation I .— For the purposes of this sub-section, the e xpression "re levant assessment .war " shall mean an assessment year prece ding the assessment year relevant to the previo us year in which search is conduc ted o r requisition is made which falls beyo nd six assessment years but not late r than ten assessment ye ars fro m the e nd of the assessment year relevant to the previo us year in which search is co nducted or re quisition is made .

Explanation 2.— For the purposes of the fo urth proviso , "asset" shall include immovable property being land or building or both, shares and securities, loans and advances, de posits in bank account."

Perusal o f the above section demonstr ate that it starts with no n-obstante clause therefore pro visions of this section will o verr ide provisio ns of section 147 & 148. Further above provisions also autho rize assessing officer co assess or reassess and issue notice under section I53A beyond six ye ars which arc termed as re levant assessment ye ar or years subject to compliance o f the requirement of the fourth proviso to sectio n 153A before issuing notice beyond six years from the end of assessment ye ar r elevant to the pre ceding year in which search is conducted or requisitio n is made.

5.2.2

From the facts on record, it is furthe r observed dial there was no incr iminating material found during the course o f se arch pertaining to the relevant assessment year which was a completed assessment and the estimated additio n were made o n the basis o f sales suppressio n factor computed on the basis o f evidences found during search pertaining to othe r the relevant Assessment ye ar. However, as pe r the provisions of Section 153A, the assessment beyond six assessm ent year from the AY in which search was conducted can o nly be done U/s 153A if the Assessing Officer has in his possessio n books of account or other documents or evide nce which r eveal that the income, represe nte d in the fo rm of asset (in the fo rm of immovable pro perty being land or building or bo th, shares and se curities, loans and advance s, deposits in bank account) which has escaped assessment amounts to or is likely to amount to fifty lak h rupees o r more in the relevant assessment year or in aggregate in the rele vant assessment years. In this case no incriminating documents was fo und and se ized and the addition was made on estimated basis. Further. Hon’ble Supreme Court of India in the lead matter PCIT Vs Abhisar Buildwell Pvt. Ltd. [2023 SCC Online SC 481] in the ir judgment date d 24/04/2023 held that in case no incriminating material is unearthed during the se arch, the AO cannot assess or reassess taking into conside ration the other material in respect o f comple ted assessments/unabated assessments. Meaning the reby, in assessments, no addition can be made by the AO in absence o f any incriminating material found dur ing the course o f search. The rele vant AY 2012- 13 was a completed assessment in the ease of the assessee.

5.2.3

Further, on perusal o f assessment order , it is evide nt that sole basis for reope ning of assessment proceedings unde r section 148 is the info rmation of search o f the appellant and no other info rmation or material relevant to the year under appeal was before the assessing officer for invoking provisio ns of section 148. F irst para o f the assessment order inter alia reads:-

"During the F.Y. 2018-19, info rmatio n was passe d on DCIT, Circle-14(1), New De lhi, the erstwhile jurisdiction of the assessee that Kawatar a Tent Group was se arched on 03.05.2018 and incriminating do cuments were found and seized from (he premise s o f the assessee."

The above facts establish that assessing officer was within his r ights to initiate procee dings under section 153A for se venth year, i.e., beyo nd six years from the end of assessment year relevant to the prece ding ye ar in which search is conducted. Ho weve r, in abse nce of any material be fore the assessing officer, other than material seized o r found during the course of search operatio ns, initiating proceedings under sectio n 148 for the year under appeal no t appears to be lawful if at all proceedings were to be initiated should have been initiale d under section 153A of Act, subject to compliance with pro visions of that sectio n.

Juris dictio nal I TAT of Delhi in the matter of ACIT Vs K.S. CHAWLA & SONS (HUF) ITA No .2724/ Dei/ 2015 in their judgment dated 18/05/2021 was co nside ring the similar issue as to whethe r asse ssment under section 147 o f A ct. could be made when the provisions of section 153C of Act, are applicable. Hon’ble ITAT in para 9 held that assessment, base d upon incriminating documents fo und during the course of search of 3rd party premises, can be made u/s 153C of the Act and held that no tice under section 148 o f Act and the consequent assessment proceedings and order passed under sectio n 147 o f A ct, are null and void.

5.2.4

Even if it is considered that the proceedings U/s 148 can be initiated, then also there are a ple tho ra of judgement by the Hon'ble SC & I ICs including that of jurisdictio nal High Court which states that if there was no new tangible material to justify reo pening, reassessment proceedings being a case o f change of opinion were not justifie d; Jetair (P.) Ltd. v. Deputy Commissioner of Income-tax [2023] 148 taxmann.co m 185 (Bombay). In the instant c ase, no new information pe rtaining to the relevant financial year was with the AO. but the proceedings U/s 148 r.w.s. 147 was initiate d on the basis of info rmation re ceived from the DDIT(Inv.) that the appe llant had been suppressing its business rece ipts and hence its sales should be estimated on the basis of sales suppressio n factor computed by the DDIT pertaining to the doc uments other than the re le vant financial Ye ar . The A.O. has not brought on reco rd any material on record which supports its claim of suppression of sale during the rele vant FY.

In the case o f Jindal Photo Films Ltd. v. Deputy Commissioner o f Income-tax [1998] 234 ITR 170 ( Delhi), the Hon' ble Jurisdictional Hi gh Co urt has held that since in instant case, between date o f o rders of assessment sought to be reopened and date of forming of opinio n by ITO, nothing new had happened, no change o f law was there, no new material had come on record or no new info rmation had been received, it had to be held that this was a case of m ere change of opinio n which did not provide jurisdiction to Assessing Officer to initiate proceedings under sectio n 147 and. hence, notices issued under section 148 were to be quashe d.

5.2.5

In view of the above, it is o bvio us that the proceedings U/s 148 r.w.s. 147 can only be initiated if there is some tangible material o n record. There w as no new material which had come to notice of Assessing Office r and entire reference in reaso ns recorde d was o nly the re por t from the DDIT (Inv.) and on the basis o f the same the addi tio n was made estimating the unacco unted sales applying the sales suppression factor. I he A.O. has not applied its mind be fore initiating the procee dings U/s 148 and nothing adverse we re bro ught on record during the proceedings under Sect ion-148 of the Act.

Consider ing the facts of the case and discussio n made above. I am of the opinio n that the addition made on estimated basis without any evidence or material on record pertaining to the rele vant Financial Year is not sustainable. Hence, die additio n of Rs.5,25,65,017/- on accounted of unaccounte d suppresse d sale made by the AO is dele ted. Ac cordingly, the Grounds raised by the appe llant is allowe d.”