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Income Tax Appellate Tribunal, DEHRADUN BENCH: DEHRADUN
ORDER PER SUDHANSHU SRIVASTAVA, JM:
This appeal is preferred by the assessee against order dated 28.02.2017 passed by the Learned Commissioner of Income Tax (Appeals) Dehradun, {CIT(A)} and pertains to Assessment Year 2011-12.
2.0 The brief facts of the case are that the assessee is a partnership firm and had filed its return of income declaring income at Rs. Nil after claiming deduction of Rs.57,86,300/- u/s 80IC of the Income Tax Act, 1961 (hereinafter called ‘the Act). A search and seizure operation u/s 132 of the Act was conducted on 22.09.2011 on the residential and official premises of M/s Kanatal Resorts and Spa Pvt. Ltd. and residences of Sh. Ashwani Mittal and Sh. Deepak Mittal. During the course of search, certain documents relating to the assessee firm were also found and seized by the search party.
Thereafter, the issue was referred to the Assessing Officer of the assessee by the Assessing Officer of M/s. Kanatal Resorts and Spa Pvt. Ltd. and proceedings u/s 153C of the Act were initiated.
Admittedly, no incriminating material for the year under consideration was found or seized during the course of search.
However, the Assessing Officer proceeded to disallow the assessee’s claim made u/s 80IC of the Act as well as a part of the depreciation claimed. The assessment was completed at an income of Rs.58,62,260/-.
2.1 The assesee’s appeal before the Ld. CIT (A) was partly allowed with the Ld. CIT (A) holding that the disallowance with respect to depreciation was not warranted. The Ld. CIT (A), however, upheld the disallowance of assessee’s claim u/s 80IC of the Act. The Ld. CIT (A) also upheld the action of the Assessing Officer in making the assessment disallowing the assessee’s claim of deduction u/s 80IC without there being any incriminating material having been found during the course of search.
2.2 Now, the assessee has approached this Tribunal challenging the action of the Ld. CIT (A) in upholding the order of assessment and has raised the following grounds of appeal:
“1. That on facts and circumstances of the case, the order passed u/s 153C by Ld. CIT (Appeals) is bad in the eyes of law and on facts. 2. On the facts and under the circumstances of the case the order of AO is bad in law as no satisfaction u/s 153C of the Act has been recorded by the AO of search person before handling over the material pertaining to the assessee.
The Order of AO as upheld by the CIT (A) is not tenable as requisite conditions prescribed under section 153C has not been followed before assuming jurisdiction of section 153C of the Act.
That on facts and circumstances of the case, the order passed by Ld. CIT (Appeal) is bad in the eyes of law and on facts as the assessment order passed u/s 153C itself is invalid and liable to be quashed as there was no incriminating material belonging to the assessee being found during the search.
On the facts and circumstances of the case, the order u/s 153C being passed in violation of the principle of natural justice and without giving adequate time and opportunity to the assessee to represent its case and to file its replies and clarification, is bad in the eye of law and liable to be quashed.
That the Ld. CIT (A) has erred on facts and in law in making an addition of Rs. 57,86,300/- on account of disallowance of deduction u/s 80IC of the Income Tax Act, 1961.
That the Ld. CIT (A) has erred on facts and in law in making the impugned addition by not treating hotel business as a component or part and parcel of ‘Eco- Tourism’ activity/project.
That the impugned addition is not sustainable as the same is already been made in the order U/s 143(3) of the Income Tax Act, 1961 vide order dated 25.03.2013 which is subject matter of appeal before ITAT New Delhi in ITA No.3071/2015.
That the impugned appellate order is arbitrary, illegal, bad in law and in violation of rudimentary principles of contemporary jurisprudence.
That the Appellant craves leave to add/alter any/all grounds of appeal before or at the time of hearing of the Appeal.”
3.0 The Ld. Authorized Representative (AR) submitted that action u/s 153C of the Act was initiated in the case of the assessee from Assessment Years 2006-07 to 2012-13. It was submitted that the documents relating to the assessee were handed over to the Assessing Officer on 17.02.2014 i.e., relevant to Assessment Year 2014-15 and, therefore, the year of search for the assessee was to be considered as Assessment Year 2014-15 and not Assessment Year 2012-13 as has been done by the Assessing Officer. Reliance was placed on the judgment of the Hon’ble Delhi High Court in the case of CIT vs. RRJ Securities reported in 380 ITR 612 (Del.) and it was submitted that by virtue of first proviso to Section 153C of the Act, the date of handing over of the documents would become the date of search in the case of other person and the previous six years period would have to be reckoned from this date. It was submitted that since the date of handing over the documenst was 17.02.2014, Assessment Year 2014-15 will be the year of search for the assessee and, therefore, the time limit for issuing the notice u/s 143(2) of the Act vis a vis the return filed on 27.09.2011 stood expired on 30.09.2012 i.e., six months from the end of financial year in which the return was filed.
3.1 It was further submitted that it is now well settled that assessment of those years which were not pending on the date of search can only be tinkered with only if there was any incriminating material unearthed during the course of search which is admittedly not so in the case of assessee. Reliance was placed on the judgment of the Hon’ble Delhi High Court in the case of CIT vs. Kabul Chawla reported in [2016] 380 ITR 573 (Del.) and it was submitted that the Assessing Officer has not referred to any incriminating material while framing the assessment and has rather made additions/disallowances of those items which had already been disclosed by the assessee in its return of the income.
3.2 On merits of the case regarding the assessee’s claim u/s 80IC of the Act, it was submitted that the ITAT has already settled the issue in assessee’s favour in Assessment Years 2010-11 and 2011-12. Our attention was drawn to the orders of the Tribunal placed in Paper Book in this regard.
4.0 Per contra, the Ld. Sr. Departmental Representative (DR) submitted that the language of section 153A/153C does not require any incriminating material to be found during the course of search for the purposes of making the addition. It was also submitted that the Department had every right to examine the assessee’s claim u/s 80IC of the Act. The Ld. Sr. DR also relied on the judgment of the Hon’ble Kerala High Court in the case of E.N.Gopakumar Vs. CIT reported in [2016] 75 Taxman.com 215 (Kerala) wherein it had been held that assessment proceedings generated by issuance of a notice u/s 153A (1)(a) can be concluded against the interest of the assessee including making additions even without any incriminating material being available against the assessee in search u/s 132 of the Act. The Sr. DR submitted that in view of the facts and settled law, the assessee’s appeal deserved to be dismissed.
5.0 We have heard the rival submissions and have also perused the material on record. As far as the legal issue of the impugned addition being based on any incriminating material found during the course of search is concerned, it is seen that even the Ld. CIT (A) has stated in paragraph 3 page 2 of the impugned order that there was no incriminating material relevant to the assessment year under consideration. The Ld. CIT (A) has also observed that the assessment was completed on the basis of material already available on record and as furnished by the assessee during the course of assessment proceedings. Thus, it is undisputed that no incriminating material pertaining to the assessment year under consideration was found during the search which was relating to or belonging to the assessee. In such a situation the law has already been crystallized by the judgment of the Hon’ble Apex Court in the case of CIT vs. Singhad Technical Education Society (2017) 397 ITR 344 (SC) wherein the Hon’ble Apex Court dismissed the Special Leave Petition of the Revenue for the assessment years where no incriminating material was found during the course of search. The revenue’s reliance on the judgment of the Hon’ble Kerala High Court in the case of E.N. Gopakumar (supra) also does not come to the aid of the Revenue in view of the judgment of the Hon’ble Apex Court in the case of Singhad Technical Education Society (supra). Our view is also fortified by the judgment of the Hon’ble Delhi High Court in the case of CIT vs. Kabul Chawla (supra) as, undisputedly, no reference has been made to any incriminating material while framing the assessment and the assessment has been completed on the basis of information/documents filed along with the return of income or furnished during the course of assessment proceedings.
Therefore, in absence of incriminating material having been found during the course of search which could be said to be relating to or belonging to the assessee and which was relevant for the assessment year under consideration, we have no hesitation in holding that the impugned additions were bad in law and the same cannot be sustained. Before parting, we may also mention that as far as the issue of assessee’s claim of deduction u/s 80IC of the Act on merits is concerned, the same also stands covered in favour of the assessee by the order of this Tribunal for Assessment Year 2010-11 in vide order dated 11.10.2017 and for Assessment Year 2012-13 in ITA No.2719/Del/2017 vide order dated 04.08.2020. We also note that in Assessment Year 2010-11 the Tribunal had duly considered the factual matrix of the assessee’s claim u/s 80IC before holding that the assessee was eligible for such claim of deduction. In such a situation we find no reason to go again into the merits of the claim made u/s 80IC and respectfully following the orders of the co-ordinate Bench of the Tribunal in assessee’s own case in Assessment Years 2010-11 and 2011-12 as aforesaid, we refuse to interfere on the issue. Therefore, the order of the Ld. CIT (A) cannot be sustained on merits also.
6.0 In the final result, the appeal of the assessee stands allowed.
Order pronounced on 27th November, 2020.