TMI Blog2018 (10) TMI 420X X X X Extracts X X X X X X X X Extracts X X X X ..... which was the subject matter of investigation by the Income Tax Department by the ADIT(inv)- Thane. These show cause notice of Central Excise Department dated 18.09.2007, which was in the possession of the Department before the date of search conducted under section 132 of the Act on 10.03.2010. It means that nothing new incriminating material was found during the course of search under section 132 of the Act and even now, the learned CIT DR, could not produce any incriminating material found during the course of search under section 132 of the Act on the assessee’s group of cases. Hence, in view of the given facts and the case law relied on the by the learned Counsel of the assessee in the case of Continental Warehousing Corporation (Nhava Sheva) Ltd. [2015 (5) TMI 656 - BOMBAY HIGH COURT], we quash the assessment in all the four years and allow the appeal of the assessee. - ITA No. 4024/Mum/2014, ITA No. 4025/Mum/2014, ITA No. 4026/Mum/2014, ITA No. 4027/Mum/2014 - - - Dated:- 28-9-2018 - Sri Mahavir Singh, JM And Sri Rajesh Kumar, AM For the Appellant : Shri K Gopal, AR For the Respondent : Shri DG Pansari, DR ORDER PER MAHAVIR SINGH, JM: These ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said order. 4. That, I requested the tax consultant to prepare the draft of appeal to be filed before the Hon ble Appellate Tribunal. 5. That, the tax Consultant finalized the appeal and forwarded the same for signing purpose in the last week of February. However, during that period I was out of town for finalizing some business deals. 6. That, as I am looking after the finance and tax related matters of the company, it's my responsibility to complete the requirements of assessment and appellate proceedings. However, I could not sign the appeal memo on time as I was out of town for business purposes 7. That, I returned back to Mumbai only in the last week of May. Immediately, after coming back I signed the appeal memo and send it to the tax consultant for filing the same before the Appellate Tribunal. Thereafter the appeal came to be filed before the Hon'ble Appellate Tribunal on 02.06.2014. However, by that time the appeal was barred by the limitation period of 72 days. 3. When this was pointed out to the learned CIT Departmental Representative, he opposed the condonation of delay and according to him, the Managing Director being out of town is no re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ating documents were seized and discrepancy in stock and raw material and finished goods was found and statement of company officials, directors, suppliers of raw material and transporters were recorded by the Central Excise Department. The finding of the search and post search investigation as per show cause notice by the Commissioner of Central Excise and Customs, Vapi dated 27/04/09 showed that unaccounted lamination material was received in the factory of M/s. Yogesh Associates (a division of the assessee company). The laminates are used for inner packing of the Gutkha. The Central Excise Department based on a formula, estimated the consumption of 1.2 kg of laminates for manufacture of 3315 pouches. Based on the total receipt of unaccounted laminates, the unaccounted packing material was estimated at ₹ 36.85 Crores. Similarly, unaccounted purchases of raw materials such as scented Supari, Katha, Cardamom, Tobacco and Perfume of the value of ₹ 16.73 Crores were estimated. Discrepancies in relation to unaccounted Woven Sacks valued at ₹ 68.53 lacs were noted. Excess stock of raw materials valued at ₹ 21.71 lacs and excess stock of finished goods valued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eipts. The AO estimated the gross profit at 10% and computed the unaccounted income for the respective assessment years as follows: Financial year Unaccounted Lamination (M.T) used for packing of inner 1.2 kg/ bag (inner Outer Ratio 87.13) No. of bags made (3315 pouches/ Bags) No. of Pouches clandestinely cleared M.R.P. ₹1/- Clandestinely removed sales Value (Rs.) 2004-05 439.49 318624 1056238560 1056238560 2005-06 496.87 360222 1194135930 1194135930 2006-07 518.50 375906 1246128390 1246128390 2007-8 489.54 354916 1176546540 1176546540 Total 1944.4 1409668 4673049420 4673049420 7. In view of the above, the AO estimated the income by taking an average gross profit of the com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the meanwhile, a remand report was called from the Assessing Officer vide this office letter dated 14/11/12, on the basis of the submissions of the appellant. The AO was also orally asked to ascertain the status of the action taken by Central Excise authorities in respect of the SCN in this case. The AO vide her letter dated 27/12/13 forwarded the copy of order dated 30/05113 of Commissioner of Central Excise and Service Tax, Vapi issued on 10/06/13 in this matter. She also informed that the appellant has sought cross examination of following parties: 1. Shri Krishna Kumar Bagi 2. Shri Bharatveer Singh Deora 3. Shri Sushil Kumar Upadhyaya. Erswhile partner of M/s. Balaji Flexipack 4. Shri Ramniwas Pareek. Authorised Signatory of M/s. Balaji Flexipack 5. Mr. Tarun Kumar Mani, MIs. Montage Global Pvt. Ltd. 6. Shri Sunit Jam, Partner of M/s. Arihant Polysacks Summons were issued to these six parties on 19/02/13 fixing the hearing on 22/02/13. None of the other parties attended nor had any representative of the appellant company attended. Summons were again issued to all these parties to attend on but nobody from the appellant company attended for c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Gutkha produced has been confirmed in this order of the Commissioner of Central Excise, the same is accepted as valid basis for the computation of unaccounted income of the appellant by the Assessing Officer. Though the appellant submitted that they have flied appeal to the Customs. Excise Service Tax Appellate Tribunal (CESTAT). the same is still pending and the order of the Commissioner of Excise currently holds as far as facts are concerned. Thus, the position as it stands now is different than that prevailing at the time of assessment when only show cause notice had been issued by the Central Excise Authority. Now the matter has been adjudicated. The fads considered in the income tax proceedings cannot be different that that concluded by another government department, when there is no patent infirmity in the conclusion of facts by the other authority. No doubt an appeal has been filed against the adjudication by the Commissioner of Excise, but till the time the same is not upturned or modified, the facts to be considered in income tax assessment is correctly appreciated by the assessing officer. lithe AO were to reappraise each and every evidence unearthed by the central e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... round of appeal no 1 is dismissed. 8. Similarly, the CIT(A) also confirmed the assumption of jurisdiction by the AO for framing search assessment under section 153A r.w.s 143(3) of the Act by relying on the decision of Hon ble Delhi High Court in the case of CIT vs. Anil Kumar Bhatia (2013) 352 ITR 493 (Del) and Tribunal s decision in the case of Pratibha Industries in ITA No. 2197 to 2199/Mum/2008, ITA No. 2200 to 2201/Mum/2008 and ITA No. 2202/Mum/2008 vide order dated 19.12.2012 by observing as under: - In the case of Pratibha Industries ITA 2197 to 2199/Mum/2008, ITA no 2200 2201/Mum/2008 and ITA no 2202/MumI2008 decided vide order dated 19-12-2012, (hi Hon'ble Mumbai Bench in Para 54 held that: When we read section 153A along with the observations made in Anil Kurnar Bhatia (supra) and in All Cargo (supra) we are of the opinion that the AO was correct in law to issue the notices under section 153A for the years in consideration, as he was bound to in respect of all the concerned assessment years We cannot agree with the arguments of the AR that the proceedings under section 153A have to be quashed. because there was no material found in the search, indicati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of return of income 1. 2005-06 47,71,915/ 31.10.2006 47,71,915/ 05.07.2011 2. 2006-07 40,07,185/ 28.10.2007 40,07,185/ 05.07.2011 3. 2007-08 88,26,324 30.09.2008 88,26,324/ 05.07.2011 4. 2008-09 173,779,788 30.09.2008 173,779,788/ 05.07.2011 11. The assessee before the DDIT Investigation filed a letter dated 12.05.2010 explaining the contents of item A-1 of inventory on loose paper folder seized during the course of search on 10.03.2010 which contains show case notice bearing No. Thane/ ADIT (Investigation)-2/0910 dated 31.08.2009 issued by ADIT(Investigation)-2, Thane towards unexplained expenditure and suppression of sales as per show cause notice issued by Central Excise Department, Vapi Commissionerate and the copy of the same was forwarded to the investigation department of the Income Tax, Thane. The relevant letter mentioned as under: - This page contains a Show-Cause Notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t particularly when all the details were filed in the original return of income under section 139(1) on 31.10.2006 for the AY 2005-06 and no proceedings were pending as on the date of search. The learned Counsel for the assessee stated that at the time of search on 10.03.2010 by the Income Tax Department, the assessment proceedings for none of the above assessment years is in question is pending. The learned Counsel for the assessee stated that the AO s assumption of jurisdiction to issue notice under section 153A of the Act and to frame the assessment under section 143(3) read with section 153A of the Act, the AO can assume jurisdiction only when there is incriminating material found during the course of search conducted by the Income Tax Department under section 132 of the Act. The learned Counsel explained that the entire assessment is based on show cause notice issued by Income Tax Department on 31.08.2010 which was issued before the date of search by the Income Tax Department on 10.03.2010. 13. We have gone through the case law of Hon ble Bombay High Court in the case of CIT vs. Continental Warehousing Corporation (Nhava Sheva) Ltd. (2015) 374 ITR 645 (Bom). Despite a speci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd, it has been argued by the Ld. Standing Counsel that abatement of pending assessment is only for the purpose of avoiding two assessments for the same year, one being regular assessment and the other being assessment u/s 153A. In other words these two assessments coalesce into one assessment. The second proviso does not contain any word or words to the effect that no reassessment shall be made in respect of a completed assessment. The language is clear in this behalf and therefore literal interpretation should be followed. Such interpretation does not produce manifestly absurd or unjust results as section 153A (i)(b) and the first proviso clearly provide for assessment or reassessment of all six years. It may cause hardship to some assesses where one or more of such assessments has or have been completed before the date of initiation of search. This is hardly of any relevance in view of clear and unambiguous words used by the legislature. This interpretation does not cause any absurd etc. results. There is no casus omissus and supplying any would be against the legislative intent and against the very rule in this behalf that it should be supplied for the purpose of achieving legi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 132(1) employ the words books of account or other documents . For harmonious interpretation of this provision with provision contained in section 153A, all the three conditions on satisfaction of which a warrant of search can be issued will have to be taken into account. Having held so, an assessment or reassessment u/s 153A arises only when a search has been initiated and conducted. Therefore, such an assessment has a vital link with the initiation and conduct of the search. We have mentioned that a search can be authorised on satisfaction of one of the three conditions enumerated earlier. Therefore, while interpreting the provision contained in section 153A, all these conditions will have to be taken into account. With this, we proceed to literally interpret to provision in 153A as it exists and read it alongside the provision contained in section 132(1). The provision comes into operation if a search or requisition is initiated after 31.5.2003. On satisfaction of this condition, the AO is under obligation to issue notice to the person requiring him to furnish the return of income of six years immediately preceding the year of search. The word used is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... found in the course of search, and undisclosed income or undisclosed property discovered in the course of search. 4. It may be mentioned here that Ld. Counsel for All Cargo Global Logistics Ltd. was questioned about the scope of pending assessments as it was his contention that all six assessments are to be made, if necessary, on the basis of undisclosed income discovered in the course of search. He was specifically questioned about the jurisdiction of the AO to make original assessment along with assessment u/s 153A, merging into one. However he took an evasive view submitting that this question need not be decided in his case although the question of jurisdiction u/s 153A was vehemently pressed on account of which ground No.1 in the appeal for assessment year 2004-05 was admitted as additional ground. He also wanted the additional ground to be retained in case of any future contingency. 14. Further, we also find from the observations of Hon ble High Court in the case of Continental Warehousing Corporation (Nhava Sheva) Ltd. (supra) that the assessment can be made on the basis of search material and relevant para reads as under: - 37. We do not see as to how while a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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