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Income Tax Appellate Tribunal, DELHI BENCH “F” NEW DELHI
Before: SHRI CHALLA NAGENDRA PRASAD & SHRI PRADIP KUMAR KEDIA
आदेश /O R D E R PER C.N. PRASAD, J.M.
This appeal is filed by the Assessee against the order of learned Commissioner of Income Tax (Appeals)-25, New Delhi dated 24.03.2015 for the AY 2007-08. The assessee raised the following grounds of appeal:
1. “That the learned Commissioner of Income Tax (Appeals) has grossly erred both in law and on facts in upholding the order of assessment framed under section 153A/143(3) of the Income Tax Act, determining the total income of the appellant company at Rs. 2,41,07,470/- as against Rs.41,07,440/-.
I.T.A.No.5178/Del/2015
2. That the learned Commissioner of Income Tax (Appeals) has erred both in law and on facts in failing to appreciate that during the course of search, admittedly no incriminating material was found as a result of search conducted under section 132(1) of the Act, as such, learned Deputy Commissioner of Income Tax has no jurisdiction" to initiate the proceedings under section 153 A of the Act. a. That the learned Commissioner of Income Tax (Appeals) has erred in upholding the order of assessment failing to appreciate that since for valid initiation of proceedings under section 153A of the Act, the preconditions as envisaged u/s 153A of the Act has not been satisfied, as such, initiation of proceedings u/s 153A of the act as also the assessment made u/s 153A/143(3) of the Act are without jurisdiction. b. That while upholding the order of assessment, learned Commissioner of Income Tax (Appeals) has failed to appreciate that since no incriminating material was found as a result of search, as such, addition made is outside the scope of section 153 A of the Act.
3. That the learned Commissioner of Income Tax (Appeals) has grossly erred in law as well as on facts in making additions of Rs. 1,35,00,000/- on account of sale of shares to Kimsuk Krishna Sinha u/s 69 of the Act because: a. The investment was fully explained and the same was held to be genuine in the earlier assessment made u/s 153A/143(3) and no addition was made.
b. No fresh material or any evidence found to conclude different stand. c. Section 69 cannot be applied on the investments already recorded in the books of accounts. d. The assessee is not required to explain source of the source. e. The assessing officer has not made any enquiry on its own. f. No addition can be made merely on surmises and guess work. g. Assessment u/s 153 A cannot be made merely on change of opinion.” 2
I.T.A.No.5178/Del/2015
Briefly stated facts are that the assessee individual filed return of income originally on 31.03.2008 declaring income of Rs.41,07,470/-. The assessment was completed u/s 143(3) of the Act on 24.12.2009 determining the income of the assessee at Rs.1,06,07,470/-.
Subsequently search and seizure operations u/s 132 of the Act was carried out in the case of the assessee on 03.03.2011 along with group companies. In response to notice u/s 153A of the Act dated 08.02.2012 assessee filed his return of income on 11.06.2012 declaring net taxable income of Rs.41,07,470/- as was declared in the original return filed.
The assessment u/s 143(3) read with section 153A of the Act was completed on 28.03.2013 determining the income of the assessee at Rs.2,41,07,470/-. While determining the income of the assessee for the AY 2007-08 the Assessing Officer made addition of Rs.1,35,00,000/- as undisclosed investment u/s 69 of the Act.
The assessee filed appeal before the Ld. CIT(Appeals) challenging the addition made by the Assessing Officer u/s 69 of the Act, firstly contending that in the absence of any incriminating material no addition can be made and secondly there is no justification in treating Rs.1,35,00,000/- as unexplained investment on the shares purchased and sold by the assessee. The Ld. CIT(Appeals) dismissed the appeal of the assessee and sustained the addition made u/s 69 of the Act by the Assessing Officer.
I.T.A.No.5178/Del/2015
Before us the Ld. Counsel for the assessee submits that search took place on 03.03.2011 in the premises of the assessee as well as the group concerns and the panchnama was prepared wherein no incriminating material was found in the course of search. Referring to pages 20 to 42 of the Paper Book which is the copy of panchnama the Ld. Counsel for the assessee submits that as a matter of fact jewellery and cash were found not seized and released. Ld. Counsel submits that as can be seen from the panchnama search had commenced on 03.03.2011 at 12.30 pm and the proceedings were concluded on 04.03.2011 at 4.15 pm which continued for around 28 hours and in spite of such a long period of search nothing was found or seized during the course of search. The ld. Counsel for the assessee, therefore, submits that in the absence of any incriminating material impounded by the authorities in the course of search the addition made u/s 69 of the Act as undisclosed investment regarding purchase and sale of shares by the assessee has no legs to stand. Reliance was placed on the decision of the Jurisdictional High Court in the case of CIT Vs. Kabul Chawla [380 ITR 573].
The Ld. Counsel for the assessee further submits that in the case of Sanjay Jain who is the family member of the assessee the Tribunal in for the very same AY i.e. 2007-08 by order dated 20.05.2022 following the decision of the Hon’ble Jurisdictional High Court in the case of CIT Vs. Kabul Chawla (supra) deleted the addition in the absence of any incriminating material found in the course of search.
I.T.A.No.5178/Del/2015 Therefore, the Ld. Counsel for the assessee submits that the addition in the present case was made in the absence of any incriminating materials found in the course of search and following the decision of the Jurisdictional High Court the same is liable to be deleted.
On the other hand, the Ld. DR strongly placed reliance on the orders of the authorities below. The ld. DR also filed written submissions in which reliance was placed on various decisions.
Heard rival submissions, perused the orders of the authorities below and the judgments relied upon. On perusal of the panchnama which is placed at page 20 of the Paper Book, we find that search warrant was issued in the names of Shri Sanjay Jain, Rajiv Jain, Neena Jain, Priti Jain, Nitika Jain, M/s Surya Vinayak Industries Pvt. Ltd., SVIL Mines Ltd. and M/s Allied Perfumes Ltd. Column 5(a) of the panchnama at page 21 of the Paper Book reveals that nothing has been found and seized and column 5(b) of panchnama reveals that inventory of jewellery of Rs.32,25,706/- was found and released. Similarly inventory of cash of Rs.1,80,500/- was found and released. According to the panchnama nothing has been found and seized by the authorities in the course of search.
We also noticed that identical issue came up before the Tribunal in the case of Sanjay Jain who is also the family member of the assessee and the Tribunal in dated 20.05.2022 deleted the I.T.A.No.5178/Del/2015 addition made u/s 69 of the Act in respect of shares purchased and sold following the decision of the Jurisdictional High Court in the case of CIT vs. Kabul Chawla (supra) observing as under:
“9. It is found from the records that, the second search has been conducted on 03/03/20.11. As per the Panchnama, no material were found and seized and following material were found but not seized i.e. the jewellery of Rs.32,25,706/- and cash of Rs. l,80,500/-have been found and released. On going through the impugned assessment order, it is further found that the addition was made on the ground that, the purchase and sale of shares between assessee and SRD Resources are not genuine to the extent of Rs1,15,00,000/- and another addition made on the ground that, the assessee has not submitted the required documents as asked for regarding Rs.3,00,00,000/- deposited from one Kismu Krishna Sinha in his bank account, therefore, the same have been treated as unexplained u/s 69 of the Act.
10. In view of the above facts, it is clear that second assessments order passed u/s 153A dated 28/03/2013 is made not based on any incriminating material found during the search, hence the decision of the Delhi High Court in case of CIT vs. Kabul Chawla, 380 ITR 573 (Del.) is squarely applicable, wherein it is held as under: “Summary of the legal position”
On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and m the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: i. Once a search takes place under Section 132 of the Act, notice under Section 153 A (1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place.
ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise.
I.T.A.No.5178/Del/2015 iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs "in which both the disclosed and the undisclosed income would be brought to tax". iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment "can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material." v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153A is relatable to abated proceedings (i.e. those 6 & 2155/Del/2015 pending on the date of search) and the word 'reassess' to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment.
I.T.A.No.5178/Del/2015 Conclusion 38. The present appeals concern AYs, 2002-03, 2005-06 and 2006-07. On the date of the search the said assessments already stood completed. Since no incriminating material was unearthed during the search, no additions could have been made to the income already assessed. Since no incriminating material was found in the assessee’s case, no addition can be made in the present case. Besides this, the assesses has made investment in prior period and sold the said investment in this particular year which was clearly set out from the submissions and the evidences produced before the Assessing Officer and the CIT(A). Therefore, the appeal of the assessee being for Assessment Year 2005-06 is allowed.
In the present case the addition made by the Assessing Officer in the absence of incriminatory material seized during the search, therefore, respectfully following the ratio laid down in the case of Kabul Chawla (supra), i.e. in the absence of incriminating material seized during the search from the assessee no addition can be made, we inclined to allow the grounds of appeal
and quash the Orders passed by the lower authorities, resultantly, the addition stands deleted.”
9. We observed that the search warrant and panchnama issued/prepared is common in both these cases and no incriminating material were found and impounded in the course of search proceedings.
Therefore, the decision of the Tribunal in the case of Sanjay Jain applies to the facts of the assessee’s case. The ratio of the decision of the Hon’ble Jurisdictional High Court in the case of CIT Vs. Kabul Chawla (supra) squarely applies to the facts of the assessee’s case. Thus, respectfully following the binding decision of the Jurisdictional High Court, we set aside the order of the Ld. CIT(Appeals) and direct the Assessing Officer to delete the addition made u/s 69 of the Act. The 8
I.T.A.No.5178/Del/2015 decisions relied on by the Ld. DR in the written submissions cannot be followed in view of the binding decision of the Jurisdictional High Court.
Ground no. 2 of grounds of appeal of the assessee is allowed. Since the appeal of the assessee is allowed on the jurisdictional ground, we are not going into the merits of the addition as the same would become academic at this stage.
In the result, appeal of the assessee is partly allowed as indicated above.
Order pronounced in the open court on 10/02/2023