w w w . L a w y e r S e r v i c e s . i n



The Asstt Commissioner of Income v/s The Jayesh Steel Pvt.Ltd


Company & Directors' Information:- S A L STEEL LIMITED [Active] CIN = L29199GJ2003PLC043148

Company & Directors' Information:- M M S STEEL PRIVATE LIMITED [Active] CIN = U27109TZ1996PTC006849

Company & Directors' Information:- G. O. STEEL PRIVATE LIMITED [Active] CIN = U27100PB2007PTC031033

Company & Directors' Information:- C P S STEEL INDIA PRIVATE LIMITED [Active] CIN = U27104TZ2003PTC010552

Company & Directors' Information:- JAYESH STEEL PRIVATE LIMITED [Active] CIN = U27109GJ1998PTC034507

Company & Directors' Information:- J M G STEEL PRIVATE LIMITED [Strike Off] CIN = U27105BR1992PTC004985

Company & Directors' Information:- H L STEEL PVT LTD [Active] CIN = U27107AS1992PTC003726

Company & Directors' Information:- K V M STEEL PRIVATE LIMITED [Active] CIN = U29141DL1988PTC031248

Company & Directors' Information:- K STEEL PRIVATE LIMITED [Strike Off] CIN = U27104JH1973PTC000998

Company & Directors' Information:- R. J. STEEL PRIVATE LIMITED [Active] CIN = U28112MH2009PTC193047

Company & Directors' Information:- M M STEEL PRIVATE LIMITED [Active] CIN = U27107MH2001PTC131270

Company & Directors' Information:- B L STEEL PVT LTD [Active] CIN = U51909WB1981PTC034021

Company & Directors' Information:- R K G STEEL PRIVATE LIMITED [Active] CIN = U27109DL2004PTC128852

Company & Directors' Information:- V B STEEL PRIVATE LIMITED [Active] CIN = U28112MH2010PTC211691

Company & Directors' Information:- I B STEEL COMPANY PRIVATE LIMITED [Strike Off] CIN = U28910MH2010PTC211344

Company & Directors' Information:- Y D STEEL PRIVATE LIMITED [Strike Off] CIN = U27109WB1997PTC086155

Company & Directors' Information:- J S C STEEL PRIVATE LIMITED [Active] CIN = U27106UP2013PTC061568

Company & Directors' Information:- S. M. STEEL PRIVATE LIMITED [Active] CIN = U51101MH2013PTC239811

Company & Directors' Information:- R K P STEEL LTD [Active] CIN = L27109WB1980PLC033206

Company & Directors' Information:- C P STEEL PRIVATE LIMITED [Active] CIN = U27100WB2008PTC127447

Company & Directors' Information:- A. K. J. STEEL PRIVATE LIMITED [Active] CIN = U28112WB2010PTC144880

Company & Directors' Information:- C D STEEL PVT LTD [Under Liquidation] CIN = U27109WB1981PTC034340

Company & Directors' Information:- T M S STEEL PRIVATE LIMITED [Strike Off] CIN = U02710TZ1996PTC007498

Company & Directors' Information:- P M R STEEL PRIVATE LIMITED [Active] CIN = U51102DL2003PTC122675

Company & Directors' Information:- C T STEEL PVT LTD [Active] CIN = U27109WB2005PTC106634

Company & Directors' Information:- P G STEEL PVT LTD [Strike Off] CIN = U24111AS1998PTC005409

Company & Directors' Information:- A AND S STEEL PRIVATE LIMITED [Active] CIN = U63090DL1987PTC027835

Company & Directors' Information:- J S STEEL PRIVATE LIMITED [Active] CIN = U52190CT1978PTC001432

Company & Directors' Information:- U M STEEL PRIVATE LIMITED [Strike Off] CIN = U27209TN1986PTC013670

Company & Directors' Information:- E & G STEEL INDIA PRIVATE LIMITED [Strike Off] CIN = U28113PN2009PTC134643

Company & Directors' Information:- L N STEEL PRIVATE LIMITED [Active] CIN = U27310WB2007PTC118206

Company & Directors' Information:- K. D. W. STEEL PRIVATE LIMITED [Active] CIN = U28910UP2011PTC043976

Company & Directors' Information:- R. N. STEEL PRIVATE LIMITED [Active] CIN = U27100WB2007PTC116588

Company & Directors' Information:- P M STEEL PRIVATE LIMITED [Active] CIN = U27105MP1982PTC001915

Company & Directors' Information:- M R STEEL (INDIA) PRIVATE LIMITED [Active] CIN = U27100TG2013PTC088808

Company & Directors' Information:- C K STEEL PVT LTD [Active] CIN = U29150WB1975PTC030259

Company & Directors' Information:- A M Q STEEL PRIVATE LIMITED [Strike Off] CIN = U27310UP2012PTC053823

Company & Directors' Information:- K STEEL & COMPANY PVT LTD [Strike Off] CIN = U51909WB1991PTC053960

Company & Directors' Information:- N S STEEL PVT LTD [Strike Off] CIN = U27106PB1980PTC004266

Company & Directors' Information:- R C STEEL PVT LTD [Strike Off] CIN = U28112AS1980PTC001811

Company & Directors' Information:- P D STEEL PRIVATE LIMITED [Strike Off] CIN = U74899DL1989PTC038426

Company & Directors' Information:- A K STEEL PVT LTD [Strike Off] CIN = U99999DL1961PTC003566

Company & Directors' Information:- H S P STEEL PRIVATE LIMITED [Strike Off] CIN = U27100MH2013PTC242983

Company & Directors' Information:- R B R STEEL PRIVATE LIMITED [Active] CIN = U51103PB2013PTC037791

Company & Directors' Information:- D H STEEL PRIVATE LIMITED [Strike Off] CIN = U27109RJ2012PTC039742

Company & Directors' Information:- R A STEEL PRIVATE LIMITED [Active] CIN = U51909MH2014PTC253625

Company & Directors' Information:- N. V. STEEL PRIVATE LIMITED [Strike Off] CIN = U27310DL2009PTC186541

Company & Directors' Information:- K. D. STEEL PRIVATE LIMITED [Strike Off] CIN = U28939DL2012PTC244467

Company & Directors' Information:- STEEL INDIA PRIVATE LIMITED [Strike Off] CIN = U00349KA1958PTC001309

Company & Directors' Information:- STEEL CO PVT LTD [Strike Off] CIN = U51109WB1947PTC015981

    IT(SS)A Nos. 49 & 50/Ahd of 2017

    Decided On, 16 November 2018

    At, Income Tax Appellate Tribunal Ahmedabad

    By, THE HONOURABLE MR. PP. BHATT
    By, PRESIDENT & THE HONOURABLE MR. PRAMOD KUMAR
    By, VICE PRESIDENT

    For the Appellant: Vinod Talwani, Advocate. For the Respondent: SN. Soparkar, Advocate.



Judgment Text

1. These two appeals, filed by the Assessing Officer, are directed against the consolidated order dated 2nd November 2016 passed by the CIT(A) in the matter of assessment under sections 143(3) r.w.s. 153A(1)(b) of the Income Tax Act, 1961, for the assessment years 2008-09 and 2010-11.

2. Grievances raised in these appeals are common, but for difference in the figures, and are as follows:

"1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law and/or on facts in not appreciating the provisions of section 153A of the I.T. Act which requires the total income to be brought under tax without any restrictions.

2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law and/or on facts in holding that such assessment or reassessment u/s 153A is to be restricted only to the incriminating materials found during the search.

3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in holding that as the ground on legality of additions is allowed, the other grounds on merits are considered not necessary to be adjudicated as the same are purely academic.

4. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law and/or on facts in deleting the addition of unexplained cash credit u/s 68 of Rs.2,14,50,000/- (AY 2008-09) & Rs.4,65,00,000/- (AY 2010-11).

5. On the facts and in the circumstances of the case and in taw, the Ld. CIT(A) has erred in law and/or on facts in deleting the addition of unexplained expenses u/s 69C of Rs.1,07,250/- (AY 2008-09) & Rs. 2,32,500/- (AY 2010-11).

6. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) ought to have upheld the order of the A.O.

7. It is, therefore, prayed that the order of the Ld. CIT (A) be set aside and that of the A.O. be restored to the above extent."

3. To adjudicate on these appeals, only a few undisputed facts need to be taken note of. A search and seizure operation under section 132 was carried out in Jayesh Steel Group of cases, of which this assessee is also a part, on 13th October 2011. So far as the present assessment years, i.e. 2008-09 and 2010-11, are concerned, the related income tax returns were filed on 29th September 2008 and 14th October 2010 respectively, these income tax returns were processed, under section 143(1), on 3rd November 2009 and 28th February 2011 respectively, and the time limit for issuance of notices under section 143(2) was completed on 30th September 2009 and 30th September 2011 respectively. These assessments thus achieved finality even before the search operation was carried out. There is no dispute that no discriminating material was found during the search operation, so far as relatable to the additions made in the impugned assessments under section 153A r.w.s. 143(3) are concerned. Yet, the Assessing Officer, during the impugned assessment proceedings for the assessment year 2008-09, made additions of Rs 2,14,50,000, on account of share capital having been treated as unexplained credits, and of Rs 1,07,250 as commission paid for the alleged bogus capital. In the assessment year 2010-11, similar additions were made for Rs 4,65,00,000 and Rs 2,32,500 respectively. Aggrieved by the additions so made in the course of impugned assessment proceedings under section 153A r.w.s. 143(3), the assessee carried the matter in appeal before the CIT(A). Grievances were raised, inter alia, in respect of jurisdiction of the Assessing Officer to disturb the completed assessment on basis other than incriminating material found during the search operations. Accepting this plea, the CIT(A) quashed the impugned additions by observing as follows:

"6.1 The search was carried out on 13/10/2011. The time limit for issuance of notice u/s 143(2) for these two assessment years under appeal, therefore, had indisputably expired as per column 4, much before the date of search. The Ld. AR is therefore right, which of course has also not been disputed by the AO, that the assessment for the year under reference had attained finality as on the date of the search and indeed did not abate within the meaning of second proviso to section 153A. The Ld. AR is also right in putting reliance on Kabul Chawla (supra) and on jurisdictional High Court decision in Saumya Construction (supra) for the proposition that no addition unfounded on and de hors the incriminating seized documents could have been made by the AO while refraining u/s 153A/ 153C those assessments which had remained unabated within the meaning of second proviso to section 153A. The AO's reliance on Shivnath Rai Hamarain (India) Ltd., 117 ITD 74 (Del) in his report dated 21/10/2016, is, in my considered opinion, totally misplaced in view of the same remaining no longer a good law as emphatically ruled by both Delhi HC in Kabul Chawla and Gujarat HC in Saumya Construction (supra). The AR is thus right that the AO erred in "interfering with" assessments which remained unabated as on the date of search.

As such, when the examination of seized material by the AO did not lead him to any incriminating document/entry for the year under reference, he was indeed duty-bound to "reiterate' the total income which had attained finality before the date of search, and he indeed exceeded his jurisdiction in firstly taking up the roving enquiries unfounded on incriminating seized documents, and secondly, in making the impugned additions. This view in Kabul Chawla (supra) has been reiterated by Ahmedabad Bench of Tribunal in Saumya Construction (supra), which in turn, and eventually, has also now been approved and reiterated by the Hon. Gujarat High Court. In Saumya Construction, Ahmedabad Tribunal disapproved the AO's action of making addition of Rs. 11,05,51,000/- u/s 68 as unexplained investment in "unabated" assessment being refrained u/s 153A on the ground that the AO's action of making addition u/s 68 was not based on any incriminating seized documents. Tribunal, while relying on Sanjay Agarwal 47 taxmann.com 210 (Del), observed that the AO while refraining "unabated" assessment u/s 153A, is not authorized to "get influenced" by items of income other than those based on material "unearthed during the course of search". This view of the Hon. Tribunal is further approved authoritatively by Hon. High Court by observing that in "unabated" assessments being refrained u/s 153A, in the absence of incriminating seized material enabling the AO for the year under reference to enquire/make addition, the AO is duty-bound merely to "reiterate" the concluded assessment which had attained finality before the date of search. I would only quote from these decisions of Hon. Tribunal and Hon. High Court in the case of Saumya Construction:

Saumya Construction Pvt Ltd. IT(SS)A. No. 3/Ahd/2014 Dated:-

21-8-2015 "......

6. We have noted that, as teamed counsel fairly accepts, the grievance of the assesses is not against framing of the assessment u/s 153A but is confined to making of any additions or disallowances other than on the basis of incriminating material found during search operations. In effect thus, additions cannot be made other than on the basis of incriminating material found during search operations. That plea stands approved by a coordinate bench of the tribunal, in the case of Sanjay Aggarwal Vs. DCIT 1(2014) 47 taxmann.com 210 (Del)], by observing as follows:

13. The above extracted observations of the Hon. High Court, which are though obiter dicta, make the point clear that where an assessment order has already been passed for a year (s) within the relevant six assessment years, then also the AO is duty bound to reopen those proceedings and reassess the total Income but by taking note of the undisclosed income If any 'unearthed during the search'. The expression 'unearthed during the search' is quite significant to denote that in respect of completed or non-pending assessments, the Assessing Officer is albeit duty bound to assess or reassess the total income but there is a cap on the scope of additions in such assessment, being the items of income 'unearthed during the search'. In other words, the determination of 'total income', in respect of the assessment years for which the assessments are already completed on the date of search, shall not be influenced by the items of income other than those based on the material unearthed during the course of search-...,....

7. We see no reasons to take any other view of the matter than the view so taken by the coordinate bench. Respectfully following the same, and having noted that the additions of Rs.11,05,51,000/- is not based on any incriminating material found during search operations on the assessee, we delete the said addition.,...."

Saumya Construction TA No.24/2O16 dated 14/3/2O16) (Gujarat HC) "....18. In this case, it is not the case of the appellant that any incriminating material in respect of the assessment year under consideration was found during the course of search. At the relevant time when the notice came to be issued under section 153A of the Act, the assessee filed its return of income. Much later, at the fag end of the period within which the order under section 153A of the Act was to be made, in other words, when the limit for framing the assessment as provided under section 153 was about to expire, the notice has - been issued in the present case seeking to make the proposed addition of Rs.11,05,51,000/-on the basis of the material which was not found during the course of search, but on the basis of a statement of another person. In the opinion of this court, in a case like the present one, where an assessment has been framed earlier and no assessment or reassessment was pending on the date of initiation of search under section 132 or making of requisition under section 132A, while computing the total income of the assessee under section 1S3A of the Act, additions or disallowances can be made only on the basis of the incriminating material found during the search or requisition. In the present case, it is an admitted position that no incriminating material was found during the course of search, however, it is on the basis of some material collected by the Assessing Officer much subsequent to the search, that the impugned additions came to be made.

19. On behalf of the appellant, it has been contended that if any incriminating material is found, notwithstanding that in relation to the year under consideration, no incriminating material is found, it would be permissible to make additions and disallowance in respect of all the six assessment years. 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 separate and distinct assessment under section 153A of the Act, an has to be made in relation to the search or requisition, namely, in relation to material disclosed during the 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 the Act and the earlier assessment shall have to be reiterated. In this regard, this court is in complete agreement with the view adopted by the Rajasthan High Court in the case of Jai Steel (India), Jodhpur v. Assistant Commissioner of Income Tax (supra). Besides, as rightly pointed out by the learned-counsel for the respondent, the controversy involved In the present case stands concluded by the decision of this court in the case of Commissioner of Income-tax-1 v. Jayabe Ratilal Sorathia (supra) wherein it has been held that while it cannot be disputed that considering section 153A of the Act, the Assessing Officer com reopen and/or assess the return with respect to six preceding years; however, there must be some incriminating material available with the Assessing Officer with respect to the sale transactions in the particular assessment year.

20. For the foregoing reasons, it is not possible to state that the impugned order passed by the Tribunal suffers from any legal infirmity so as to give rise to a question of law, much less, a substantial question of law, warranting interference. The appeal, therefore, fails and is, accordingly, dismissed."

7. In view of the above, and in view of by now settled legal position as enunciated by Jurisdictional HC, the AO, in re-assessments of any of unabated and finally concluded assessments framed u/s 153A/153C, is not authorized to "interfere" except on the basis of and except having been prompted by incriminating seized documents relatable to that assessment year. It is deaf that the additions as unexplained share capital made by the AO ore not based on any seized documents. As such, as per even the AO in the assessment order, the additions are based on "post-search" enquiry on and verification of information which was already available in the pre-search return of income filed by the appellant which had attained finality as on the date of search. It is also clear that the assessment under reference had attained finality and therefore remained unabated as on the date of search. These facts are not disputed by the AO in his report dated 21/10/2016. Thus and therefore, the Ld. AR is absolutely right in contending that the additions, de hors any incriminating seized documents, made by the Ld. AO in these unabated assessments refrained by him u/s 153A, are without requisite authority in law and are therefore not sustainable in law. In view of this, and respectfully following the Jurisdictional High Court mandate, I have no hesitation in deleting the additions as under:

AY Additions deleted

2008-09 Rs.2,15,57,250/-

2010-11 Rs.4,67,32,500/-

8. The appellant would get relief of equivalent amount.

Legal ground no.(ii) is thus allowed for both the years under appeal."

4. The Assessing Officer is aggrieved of the relief so granted by the CIT(A) and is in appeal before us.

5. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position.

6. The question that really calls for our consideration is whether, in the absence of any incriminating material found during the search operations as a result of which the assessments under section 153A are framed, the completed assessments can be disturbed by making the additions on the basis of material other than incriminating material found during the search operations.

7. This issue is no longer res integra. Upholding the stand of this Tribunal that during the post search assessment proceedings under section 153 A in respect of completed assessments "additions cannot be made other than on the basis of incriminating material found during search operations", Hon'ble jurisdictional High Court, in the case of PCIT Vs Saumya Constructions Pvt Ltd [(2016) 387 ITR 529 (Guj)] has observed as follows:

..........it is not the case of the appellant that any incriminating material in respect of the assessment year under consideration was found during the course of search. At the relevant time when the notice came to be issued under section 153A of the Act, the assessee filed its

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return of income. Much later, at the fag end of the period within which the order under section 153A of the Act was to be made, in other words, when the limit for framing the assessment as provided under section 153 was about to expire, the notice has been issued in the present case seeking to make the proposed addition of Rs.11,05,51,000/- on the basis of the material which was not found during the course of search, but on the basis of a statement of another person. In the opinion of this court, in a case like the present one, where an assessment has been framed earlier and no assessment or reassessment was pending on the date of initiation of search under section 132 or making of requisition under section 132A, while computing the total income of the assessee under section 153A of the Act, additions or disallowances can be made only on the basis of the incriminating material found during the search or requisition. 8. Once it is no in dispute that the additions in questions are not based on any incriminating material found during the search operation, as is the undisputed factual position in this case, the very foundation of the additions ceases to be sustainable in law. That is precisely what the learned CIT(A) has held. 9. In view of the above discussions, as also bearing in mind entirety of the case, we approve the conclusions arrived at by the learned CIT(A) and decline to interfere in the matter. 10. As the additions stand deleted on the short legal ground discussed above, there is no occasion to deal with the merits. That aspect of the matter, given the findings above, is wholly academic at this stage. 11. In the result, the appeals are dismissed.
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