PR.COMMISSIONER OF INCOME TAX (CENTRAL)- 2 vs. M/S MEROFORM INDIA PVT. LTD.

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ITA/659/2019HC DelhiDLHC01029811201922 July 2019Bench: HON'BLE DR. JUSTICE S.MURALIDHAR,HON'BLE MR. JUSTICE TALWANT SINGH6 pages
AI SummaryDismissed

What did the High Court hold?

The Delhi High Court held that for AYs 2006-07 to 2008-09, the additions made under Section 153A were beyond the scope of the assessment, following the precedent set in CIT vs. Kabul Chawla. This was because assessments for these years were already completed under Section 143(3) before the search, and no incriminating material was found. Regarding AYs 2010-11 and 2011-12, the ITAT found that the expenses incurred by the Assessee were in the normal course of business. The court also noted that the statement from M/s Nitin Enterprises, relied upon by the Revenue, was recorded behind the assessee's back, and the person making the statement was not cross-examined. Furthermore, documents showing litigation and settlement between the assessee and M/s Nitin Enterprises were before the AO, who did not take an adverse view. Similar detailed examination of documents and evidence by the ITAT supported the deletion of additions related to purchases from M/s Kiran Furnitures. Given the concurrent findings of fact by the CIT(A) and ITAT, no substantial question of law arose.

What were the facts?

The Revenue (Pr. Commissioner of Income Tax) appealed against a common order dated July 31, 2018, passed by the Income Tax Appellate Tribunal (ITAT) for Assessment Years (AYs) 2006-07 to 2011-12. The appeals challenged the ITAT's upholding of the Commissioner of Income Tax (Appeals) [CIT(A)] decision to delete additions made under Section 153A of the Income Tax Act, 1961. The search and seizure occurred on October 19, 2010, and notices under Section 153A were issued on September 27, 2012. For AYs 2006-07 to 2008-09, assessments were already completed under Section 143(3) before the search. The ITAT followed the Delhi High Court's ruling in CIT vs. Kabul Chawla.

What were the issues?

1. Whether the additions made under Section 153A of the Income Tax Act, 1961, were valid for Assessment Years 2006-07 to 2008-09, where assessments were already completed under Section 143(3) prior to the search, and no incriminating material was found. Assessee's Contention: The assessee argued, and the CIT(A) and ITAT agreed, that the judgment in CIT vs. Kabul Chawla (2016) 380 ITR 573 applied, as no incriminating material was recovered for these assessment years, making the additions beyond the scope of Section 153A. Revenue's Contention: The Revenue contended that the additions were justified, particularly relying on a statement recorded during a survey under Section 133A in the case of M/s Nitin Enterprises, which alleged the assessee issued cheques against bogus bills and received cash later. 2. Whether the expenses shown by the Assessee for AYs 2010-11 and 2011-12, and purchases made from M/s Kiran Furnitures for AY 2011-12, were valid business expenses, warranting deletion of additions made by the Assessing Officer (AO).

Which sections of the Income-tax Act were involved?

Section 153A,Section 143(3),Section 133A

AI-generated summary — verify with the full judgment below

i. $~64 to 69 * IN THE HIGH COURT OF DELHI AT NEW DELHI + ITA 658/2019 PR. COMMISSIONER OF INCOME TAX _ (CENTRAL)-2 Appellant Through; Mr. Deepak Anand, Junior Standing Counsel for Mr. Zoheb Hossain, Senior Standing Counsel, both for Revenue versus M/S MEROFORM INDIA PVT. LTD. Respondent Through: Mr. Sameer Rohatgi, Mr. Akshit Pradhan and.Ms; P. Shree Banerjee, Advocates + ITA 659/2019 PR. COMMISSIONER OF INCOME TAX (CENTRAL)- 2 Appellant Through: Mr. Deepak Anand, Junior Standing Counsel, for Mr. Zoheb Hossain, Senior Standing Counsel, both for Revenue versus M/S MEROFORM INDIA PVT. ltd; Respondent , ' Through: Mr. Sameer Rohatgi, Mr. Akshit ^ Pradhan and Ms. P. Shfee Banerjee, ^ ' Advocates + ITA 660/2019 . PR.-COMMISSIONER OF INCOME TAX (CENTRAL)-2 ....; Appellant , Through: Mr. Deepak Anand, Junior Standing Counsel for; Mr. Zoheb Hossain, Senior Standing Counsel, both for Revenue JTA 658/2019 etc. Page I of 6 - Signed By:RAM DATT Signing Date:15.10.2024 16:15 Certify that the digital and physical file have been compared and the digital data is as per the physical file and no page is missing. Signature Not Verified

(p versus MEROFORM INDIA PVT.LTD. Respondent Through: Mr. Sameer Rohatgi, Mr. Akshit Pradhan and Ms. P. Shree Banerjee, Advocates + ITA 661/2019 PR. COMMISSIONER OF INCOME TAX (CENTRAL)-2 .....Appellant Through: Mr. Deepak Anand, Junior Standing Counsel for Mr. Zoheb Hossain, Senior Standing Counsel, both for O Revenue versus MEROFORM INDIA PVT. LTD. Respondent Through: Mr. Sameer Rohatgi, I^. Akshit Pradhan and Ms. P. Shree Banerjee, Advocates + ITA 663/2019 PR. COMMISSIONER OF INCOME TAX (CENTRAL)- 2 Appellant , Through: Mr. Deepak Anand, Junior Standing Counsel for Mr. Zoheb Hossain, Senior Standing Counsel, both for Revenue versus ,

M/S MEROFORM INDIA PVT. LTD. ..... Respondent Through: Mr. Sameer Rohatgi, Mr, Akshit Pradhan and Ms. P. Shree Banerjee, Advocates + ITA 664/2019 PR. COMMISSIONER OF INCOME TAX (CENTRAL)-2 .....Appellant Through: Mr, Deepak Anand, Junior Standing ITA 658/2019 etc.

Counsel for Mr. Zoheb Hossain, Senior Standing Counsel, both for Revenue versus M/S MEROFORM INDIA PVT. LTD. Respondent Through: Mr. Sameer Rohatgi, Mr. Akshit Pradhan and Ms. P. Shree Banerjee, Advocates CORAM: JUSTICE S. MURALIDHAR JUSTICE TALWANT SINGH ORDER o/„ 22.07.2019 CM APPLs. 32137/2019. 32138/2019. 32139/2019, 32140/2019, 12142/2019 3nd 32143/2019 (delay in rp-filinP the appeals) 1. For the reasons explained in the applications, the delay in re-fihng t ,e appeals is condoned. The applications are allowed. TTA 658/2019. 6^9/2019. 660/2019. 6617201Q, fifil/2019. 664/2019 2.; These appeals by the Revenue are against common impugned order dated 3L' July, 2018 passed in ITR Nos. 4630, 4631, 4632, 4633, 4634, ' © 4635/Del/2014 for Assessment Years (AYs) 2006-07, 2007-08, 2008-09, 2009-10, 2010-11 and 2011-12. 3. The comiiion question of law that has been urged by the Revenue in all these appeals concerns the correctness of the impugned order of the Income Tax Appellate .Tribunal (TTAT') upholding the order of Commissioner of Income Tax (Appeals) ['CIT (A)'] that there was no incriminating material Page 3 of 6 ITA 658/2019 etc.

recovered against the Assessee during the eourse-of the search warranting re-op?ning of assessments and making the additions under Section 153 A of the Income Tax Act, 1961 ('the Act'). 4. The ITAT has noticed that search and seizure was conducted in the business premises of the Assessee on 19^'' October, 2010 and notices under Section 153 A of the Act were issued on 27/^ September, 2012. In each of the above Assessment Years for which notices were issued, as far as AYs 2006- 07 to 2008-09 were concerned, returns had been filed on the due date and even assessment had been completed under Section 143 (3) of the Act much before the date of the search. The learned CIT(A) agreed with the Assessee that the judgment of this Court in CITy. Kabul Chawla (2016) 380ITR 573 would apply, particularly since the Revenue was not able to dispute that-no incriminating material was found qua the additions made for . the AYs in question. 5. In the impugned order, the ITAT followed the judgment of this Court in. CIT V. Kabul Chawla (Supra) and for the AYs 2006-2007 to 2008-2009, it held that the additions were beyond the scope of assessment under Section 153,A of-the Act. 6. The ITAT then proceeded to discuss the additions for the remaining AYs i.e. 2009-2010, 2010-2011 and 2011-2012. As regards two of the AYs i.e. 2010-2011 and 201.1-2012, it found that the experises shown by the Ass.essee in its.books of accounts were incurred during the normal course of business. Page 4 of 6 IT'A 658/2019 etc.

Consequently, these additions were rightly held to have been deleted by the CIT (A). 7. Learned Counsel for the Revenue has drawn the attention of the Court to a statement recorded during a course of a suryey made under Sectioin 133A of the Act in the case of one M/s Nitin Enterprises by one of its partners, - The. statement adverted to the said Nitin Enterprises being engaged in the practice of issuing bogus bills to various parties. The statement was to the 0 effect that the Assessee had issued cheques against bogus bills for which cash had been later paid to the Assessee. 8. The IT AT has in the impugned order taken note of the fact that before the AO; the Assessee produced various docunients which showed that there was litigation between the Assessee and M/^itin Enterprises which ended in a settlement. These documents were before the AO who took no adverse view thereof. The ITAT noted that the statement had been recorded behind the ; Assessee's back and.the person making the statement was not subjected to cross-examination. In the circumstances, the ITAT concurred-with the detailed findings rendered by the CIT(A) on this issue. . 9. A similar view was taken by the ITAT in respect of purchases niade from . one M/s Kiran Furnitures. The ITAT has.in the impugned order examined the documents and evidence afresh and has given detailed reasons in support of its concurrence -with view expressed by the CIT (A). The additions made by the AO for AY 2011-2012, which have been deleted by the CIT (A),- " have also been discussed in detail by the ITAT in the impugned order and Page 5 of 6 ITA 658/2019 etc. ^ I

pressed by the CIT(A) have been findings concurring with the views ex' rendered. 10 In view of the concurrent findings of both the CXT(A) and ITAT .on facts, the court finds that m the present cases, no substantial question of law arises from the impugned common order of the ITAT. 0 11. These appeals are accordingly dismissed. S. MURALIDHAR, J. © JULY 22, 2019 T^^OTANT SINGH, ITA 658/2019 etc. Page 6 of 6

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