Assistant Commissioner Of Income Tax, Circle 2, Patna v. M/S G R D Construction Pvt. Ltd

IN THE HIGH COURT OF JUDICATURE AT PATNAMiscellaneous Appeal No.642 of 2018 ====================================================== Assistant Commissioner Of Income Tax, Circle 2, Patna ... ... Appellant/s Versus M/s G R D Construction Pvt. Ltd. ... ... Respondent/s ======================================================withMiscellaneous Appeal No. 643 of 2018 ======================================================Assistant Commissioner Of Income Tax, Central Circle 2, Patna ... ... Appellant/s... ... Respondent/s Versus M/s G R D Construction Pvt. Ltd. ====================================================== withMiscellaneous Appeal No. 644 of 2018 ====================================================== Assistant Commissioner Of Income Tax, Central Circle 2, Patna ... ... Appellant/s Versus M/s G R D Construction Pvt. Ltd. ... ... Respondent/s ====================================================== withMiscellaneous Appeal No. 645 of 2018 ====================================================== Assistant Commissioner of Income Tax, Central Circle- 2 Patna. ... ... Appellant/s Versus M/s Ganesh Ram Dokania 207, Basudeo Vihar Apartment, NageshwarColony, Patna. ... ... Respondent/s ====================================================== withMiscellaneous Appeal No. 646 of 2018 ====================================================== Assistant Commissioner of Income Tax, Central Circle-2, Patna Patna. ... ... Appellant/s VersusM/s Ganesh Ram Dokania 207, Basudeo Vihar Apartment, NageshwarColony, Patna. ... ... Respondent/s ====================================================== with Miscellaneous Appeal No. 648 of 2018 ====================================================== Assistant Commissioner of Income Tax, Central Circle- 2 Patna. ... ... Appellant/s Versus M/s Ganesh Ram Dokania 207, Basudeo Vihar Apartment, NageshwarColony, Patna. ... ... Respondent/s ====================================================== withMiscellaneous Appeal No. 649 of 2018 ====================================================== Assistant Commissioner of Income Tax Central Circle-2 Patna. ... ... Appellant/s Versus M/s Ganesh Ram Dokania 207, Basudeo Vihar Apartment, NageshwarColony, Patna. ... ... Respondent/s ====================================================== Appearance :(In Miscellaneous Appeal No. 642 of 2018)For the Appellant/s: Mrs. Archana Sinha @ Archana Shahi, Sr. SC For the Respondent/s: Mr.(In Miscellaneous Appeal No. 643 of 2018)For the Appellant/s: Mrs. Archana Sinha @ Archana Shahi, Sr. SC For the Respondent/s: Mr.(In Miscellaneous Appeal No. 644 of 2018)For the Appellant/s: Mrs. Archana Sinha @ Archana Shahi, Sr. SC For the Respondent/s: Mr.(In Miscellaneous Appeal No. 645 of 2018)For the Appellant/s: Mrs. Archana Sinha @ Archana Shahi, Sr. SC For the Respondent/s: Mr.(In Miscellaneous Appeal No. 646 of 2018)For the Appellant/s: Mrs. Archana Sinha @ Archana Shahi, Sr. SC For the Respondent/s: Mr.(In Miscellaneous Appeal No. 648 of 2018)For the Appellant/s: Mrs. Archana Sinha @ Archana Shahi, Sr. SC For the Respondent/s: Mr.(In Miscellaneous Appeal No. 649 of 2018)For the Appellant/s: Mrs. Archana Sinha @ Archana Shahi, Sr. SC For the Respondent/s: Mr. ====================================================== CORAM: HONOURABLE THE CHIEF JUSTICE and HONOURABLE MR. JUSTICE PARTHA SARTHYCAV JUDGMENT(Per: HONOURABLE THE CHIEF JUSTICE) Date : 06-08-2024 ====================================================== CORAM: HONOURABLE THE CHIEF JUSTICE and HONOURABLE MR. JUSTICE PARTHA SARTHYCAV JUDGMENT(Per: HONOURABLE THE CHIEF JUSTICE) Date : 06-08-2024 The above appeals are with respect to two entities;sister concerns, challenging the order of the Tribunal which setaside the assessments based on a single search conducted in theresidential and business premises on 01.08.2014 at Banka andKolkata. Subject assessment years are also different insofar asMA No. 642, 643 and 644 of 2018 being respectively concernedwith assessment years 2009-10, 2010-11 and 2011-12, withrespect to the assessee M/s. G.R.D Construction PrivateLimited. M.A. Nos. 645, 646, 648 and 649 of 2018 with respectto M/s. Ganesh Ram Dokania are respectively concerned withassessment years 2012-13, 2013-14, 2009-10 and 2015-16. 2. The questions of law arising in the above appealsare re-framed as follows: - (i) Whether the Tribunal was right in having foundthe assessment under Section 153A to be notpossible by reason of the second proviso havingmandated that any assessment or reassessmentrelating to any assessment year falling within the period of six assessment years, pending on the dateof limitation of search under Section 132 or makingof requisition under Section 132A, shall abate? (ii) Whether the assessment under Section 153Abased on the search and conducted in the premisesof the assessee, can be set at naught on the strengthof the second proviso, merely because theassessment of the said year was completed prior tothe search? (iii)Whether the finding of the Tribunal; of noincriminating material found on search, is factuallycorrect, especially in the context of the FirstAppellate Authority also having found enoughmaterials to have been recovered in search for thepurpose of proceeding for assessment under Section153A of the Income Tax Act and is not the findingperverse in the fact and circumstances? 3. In all the appeals, the issue arises with respect tothe additions made by the assessing officer based on the searchand seizure operation carried out under Section 132(1) of theIncome Tax Act, 1961 in the residential and business premisesof Sri Krishna Kumar Dokania and his family on 01.08.2014 at Banka and Kolkata. The family is in management of a businessgroup engaged in civil construction and real estate which hasM/s Dinesh Ram Dokania as the flaghship company engaged incivil construction work whereas M/s GRK Construction PrivateLimited is engaged in real estate business. Notice under Section153 of the Income tax Act was issued and the assessee filedreturn of income. From the examination of the books ofaccounts produced by the assessee, allotment of shares in thefinancial year 2008-09 was found to the extent of Rs.4,78,10,000/-. The existence of the entities to whom such shareswere allotted, from whom the amounts were received for suchallotment, were asked to be proved alongwith theircreditworthiness and the genuineness of the transaction. Theassessee did not do anything to establish the three aspects whichwere specifically asked to be proved, in which circumstance thesaid amounts were added to the income of the assessee. 4. The 1[st] Appellate Authority made a remand and based on the remand report found that the assessee produced thebooks of accounts and filed report as also acknowledgment offiled ITR of third parties, bank statements and confirmation ofloans from various parties; pursuant to summons issued aftersearch. However, the fresh introduction of share capital of Rs. 95,62,000/- on a premium of Rs. 4,78,00,000/- was not foundproved. The 1[st] Appellate Authority found that a sum of Rs. 1.74Crores has been received by the appellants in the earlierassessment year which was deleted from the instant assessmentyear and directed to be included in the earlier assessment yeari.e. AY 2008-09. 4. The 1[st] Appellate Authority made a remand and based on the remand report found that the assessee produced thebooks of accounts and filed report as also acknowledgment offiled ITR of third parties, bank statements and confirmation ofloans from various parties; pursuant to summons issued aftersearch. However, the fresh introduction of share capital of Rs. 95,62,000/- on a premium of Rs. 4,78,00,000/- was not foundproved. The 1[st] Appellate Authority found that a sum of Rs. 1.74Crores has been received by the appellants in the earlierassessment year which was deleted from the instant assessmentyear and directed to be included in the earlier assessment yeari.e. AY 2008-09. 5. The Tribunal laid down the procedure underSection 153A of the Income Tax Act correctly in paragraph no.8, which we would extract hereunder: - “37. i. Once a search takes placeunder Section 132 of the Act, notice underSection 153 A (1) will have to be mandatorilyissued requiring him to file returns for six AYsimmediately preceding the previous yearrelevant to the AY in which the search takesplace. ii Assessments and reassessmentspending on the date of the search shall abate.The total income for such AYs will have to becomputed by the AOs as a fresh exercise. iii. The AO will exercise normalassessment powers in respect of the six yearsprevious to the relevant AY in which the searchtakes place. The AO has the power to assess andreassess the 'total income' of the aforementionedsix years in separate assessment orders for eachof the six years. In other words there will beonly one assessment order in respect of each ofthe six AYs "in which both the disclosed and the undisclosed income would be brought to tax". iv. Although Section 153A doesnot say that additions should be strictly made onthe basis of evidence found in the Course of thesearch, or other post-search material orinformation available with the AO which can berelated to the evidence found, it does not meanthat the assessment can be arbitrary or madewithout any relevance or nexus with the seizedmaterial. Obviously an assessment has to bemade under this Section only on the basis ofseized material. v. In absence of any incriminatingmaterial, the completed assessment can bereiterated and the abated assessment orreassessment can be made. The word 'assess' inSection 153A is relatable to abated proceedings(i.e. those pending on the date of search) andthe word 'reassess' to completed assessmentproceedings. vi. Insofar as pending assessmentsare concerned, the jurisdiction to make theoriginal assessment and the assessment underSection 153A merges into one. Only oneassessment shall be made separately for eachAY on the basis of the findings of the searchand any other material existing or brought onthe record of the AO. vii. Completed assessments can beinterfered with by the AO while making theassessment under Section 153A only on thebasis of some incriminating material unearthedduring the course of search or requisition ofdocuments or undisclosed income or propertydiscovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment." (underlining by us for emphasis) 6. We are of the opinion that the Tribunal hascorrectly interpreted Section 153 of the Income Tax Act and ithas not been stated anywhere that merely because theassessment was completed prior to the search, there could be nofurther proceedings taken on the search effected under Section132 or the requisition made under Section 133 of the IncomeTax Act. We find the two questions of law sought to be framedby the learned Senior Standing Counsel for the assessee to havenot arisen in the above cases. not produced or not already disclosed or made known in the course of original assessment." (underlining by us for emphasis) 6. We are of the opinion that the Tribunal hascorrectly interpreted Section 153 of the Income Tax Act and ithas not been stated anywhere that merely because theassessment was completed prior to the search, there could be nofurther proceedings taken on the search effected under Section132 or the requisition made under Section 133 of the IncomeTax Act. We find the two questions of law sought to be framedby the learned Senior Standing Counsel for the assessee to havenot arisen in the above cases. 7. However, the Tribunal found that the panchnamarecorded in the search, refers only to the tendering documentsand other details which has no connection with the shareapplication money/share capital/share premium on account ofwhich the additions were made. It has been stated that there isno reference to the documents in detail from where theAssessing Officer has picked up the information regarding shareapplication money. In this context we have to specifically noticethat there was search conducted and requisition made and thespecific ground taken by the Assessing Officer on verification ofthe books of accounts produced by the assessee is that as for the shares allotted on a premium, the source, identity andgenuineness are not proved. The 1[st] Appellate Authority has alsonoticed the verification of the books of accounts, presumablyproduced on the requisition made which has led to the additions.In such circumstance, we are of the opinion that the Tribunalerred in appreciating the facts correctly and answering thequestion of law, 3[rd] raised, in favour of the revenue and againstthe assessee, we remand the matter for fresh adjudication beforethe Tribunal; which is the last fact finding authority. TheTribunal would do well to also examine the remand report filedbefore the 1[st] Appellate Authority. 8. Insofar as the other appeals are concerned, all ofthem relate to a fresh consideration of the return filed fromwhich the net profit was found to be comparatively low. Whilethe returns disclosed net profit of 5.29 per cent of the grossproceeds, the assessing officer applied 8 per cent on the grossproceeds; without any reasoning behind that and also not on thebasis of any material seized on search conducted. 9. We find absolutely no reason to entertain theabove appeals for the other years with respect to the twoentities; wherein no question of law arises and hence the appealsstand rejected. 10. MA No. 642 of 2018 is allowed to the limitedextent ordering remand and the other appeals stand rejected. (K. Vinod Chandran, CJ) Partha Sarthy, J: I agree. (Partha Sarthy, J) ranjan/-AFR/NAFRNAFRCAV DATENAUploading Date07.08.2024Transmission DateNA