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Income Tax Appellate Tribunal, DELHI BENCH “C”: NEW DELHI
Before: SHRI KUL BHARAT & SHRI PRASHANT MAHARISHI
O R D E R PER PRASHANT MAHARISHI, A. M.
These are the two appeals filed for Assessment Year 2009-10 and 2010- 11 by the ld Asst. Commissioner of Income Tax, Central Circle-4, New Delhi against the combined order passed by the ld CIT(A)-23, New Delhi dated 02.06.2017, wherein, he has deleted the addition made by the ld AO in the hands of the assessee for both the years holding that the addition has been made by the ld AO in concluded assessment u/s 153A of the Act without any incriminating material found during the course of search.
The revenue has raised the following grounds of appeal in “1. The order of the Ld.CIT(A) is not correct in law and facts.
2. On the facts and circumstances of the case, the Ld.CIT(A) has erred in quashing the order u/s 143(3) r.w.s. 153A for assessment year 2009-10.
3. On the facts and circumstances of the case, the Id.CIT(A) has erred in relying on the order of Hon'ble Delhi High Court in case of Sh. Page | 1 Kabul Chawla as Section 153A does not restrict the assessment of incriminating documents.” 3. The revenue has raised the following grounds of appeal in “1. The order of the Ld.CIT(A) is not correct in law and facts.
2. On the facts and circumstances of the case, the Ld.CIT(A) has erred in quashing the order u/s 143(3) r.w.s. 153A for assessment year 2010-11.
3. On the facts and circumstances of the case, the Id.CIT(A) has erred in relying on the order of Hon'ble Delhi High Court in case of Sh. Kabul Chawla as Section 153A does not restrict the assessment of incriminating documents.”
4. Brief facts of the case shows that the a search was conducted on 29.12.2015 on Sanjay Duggal, Rajneesh Talwar and others and simultaneously, survey u/s 133A of the Act was also conducted on various premises of the assessee. Based on the survey report the ld AO noted that there is a discrepancy in rebate and discount in the books of account of the assessee and in the ledger account of the assessee in the books of account of some of its distributors of state of Haryana therefore, disallowance of rebate was made for Assessment Year 2009-10 of Rs. 56.57 crores, for Assessment Year 2010-11 of Rs. 13.91 crores. Consequently, the notices were issued and assessment u/s 153A was passed for Assessment Year 2009-10 on 30.12.2016 wherein, the addition of Rs. 12,63,38,814/- was made in the hands of the assessee over and above the income assessed by the assessee as per assessment order dated 02.09.2011 passed u/s 143(3) of the Act on the return income filed by the assessee u/s 139(1) of the Act on 25.09.2009 wherein, the loss of Rs. 11,18,64,911/- was determined. Thus, the total taxable income u/s 153A of the Act was determined at Rs. 1,45,68,916/-. The ld CIT(A), on appeal filed by the assessee, has held that assessment u/s 153A of the Act for all the above two assessment years were completed assessment year and there is no incriminating material found during the course of search u/s 132 of the Act. Therefore, respectfully following the decision of the Hon'ble Delhi High Court vide para No. 4.2 of his order he deleted the addition on this issue only. Consequently, he did not deal with the merit of the addition.
5. Therefore, revenue aggrieved with the order of the ld CIT(A) has preferred this appeal before us.
We have heard the ld DR as well as the ld AR and also perused the orders of the lower authorities. The ld CIT(A) has dealt with the issue in para No. 4.2 as under:- “4.2 In ground no. 02 the appellant has challenged the assessment made u/s 153A of the Act on the ground that the reassessments in all the above two assessment years were “completed” and not abated and therefore reassessments u/s 153A of the Act could not have been made since no incriminating document/information belonging to the appellant and related to the issues considered for assessment/addition was found from the premises of the searched person at the time of search u/s 132 of the Act. 4.2.2 The fact of the case are that a search & seizure operation was conducted in the Jaiswa1 Group cases including the appellant company on 06.05.2014. The return of income of the appellant was filed originally u/s 139(1) of the Act on 25.09.2009 and 27.09.2010 at loss of Rs. 11,18,64,911/- and Rs.82,59,91,016/- respectively in the two assessment years. In fact the assessments in both the assessment years had been made u/s 143(3) of the Act on 02.09.2011 and 04.05.2012 respectively assessing the loss at Rs. 11,17,69,898/- and Rs.82,11,93,685/- in the two assessment years. The assessments for these two years were not pending as on 06.05.2014, the date of search, and therefore stood “completed” within the meaning of the 2nd Proviso to S.153A(1) of the Act. On perusal of the assessment order it is observed that the additions made in the order u/s 153A of the Act under consideration are based on survey u/s 133A of the Act conducted by the DDIT(lnv.) Faridabad against the appellant company consequent upon search conducted against Sh. Sanjay Duggal, Sh. Rajneesh Talwar and others on 29.12.2015 (date not available in the assessment order) and the survey report of the DDIT(lnv.) Faridabad. The AO at paras-5.3.2 to 5.36 has discussed the facts relating to the matter and he has observed that “undisclosed income detected by DDIT was Rs.56,67,894/- arising on account of deposits in the bank account of M/s Alfa India and subsequent debit in the account of family members of Duggal family” which were dummy concerns controlled and managed by Sh. Sanjay Duggal and Sh. Rajneesh Talwar, ex-employees of the appellant company, and that the funds were transferred from these concerns (M/s Alfa India, M/s Alpine India and M/s KCC Enterprises) to the bank accounts of the Duggal and Talwar family members from where cash had been withdrawn Page | 3 by them. He has further observed that the receipts in bank accounts of the above three concerns were on account of sale proceeds of liquor to the (major) distributors of Haryana while the account of these parties in the books of the appellant company were “balanced” through journal entries by way of transfer of “balance” from the account of other (minor) distributors but neither has the AO brought out in the assessment order as to whose accounts had been adjusted, nor the details of the transactions involved and how did the respective transaction impact the accounts, and profitability/income, of the appellant. In fact, no facts of the matter relating to the transactions are available in the assessment order except for the total amount of sales promotion expenses of Rs. 12,63,38,814/- and Rs.13,91,81,212/- respectively in the two assessment years. The AO has also observed that there is difference in the rebate and discount (sales promotion) as appearing in the accounts of the distributors in the books of appellant as compared to the account of the appellant in the books of the distributors and that lot of adjustment entries had been made through journal entries, but the AO has not brought out any fact in this regard as well. Ironically, from the 11 pages of assessment order (which include reply of the appellant before the AO at pages-04 to 09) I am unable to find any reference to a single seized material seized during the search against the appellant group cases on 06.05.2014 or that seized during the search against the Duggal and Talwar family on 29.12.2015 or even impounded during the survey u/s 133A of the Act against the appellant (date not available in the assessment order). In fact, except for reference to the survey report of the DDIT(lnv.) (mentioned as Chandigarh at para- 5.1 while at para-1 Faridabad is mentioned) at para-5.1 of the assessment order and the scan copy of the data available in the survey report relevant to FYs 2008-09 to 2013-14 there is no discussion or mention of any other evidence, seized or otherwise, least any incriminating material relevant to the additions made by the AO. 4.2.3 Thus, from the reassessment orders it is observed that there is no reference of any seized material, least incriminating documents, in the reassessment order, and the additions made as per (ii) & (iii) above in the order u/s 153A of the Act were already disclosed in the original return of income, and the addition is not based on any seized material, least incriminating documents. In CIT (C)-lll vs. Kabul Chawla (Delhi) [2015] 61 taxmann.com 412 (Delhi), 234 Taxman 300 the Hon’ble jurisdictional High Court of Delhi have held that an assessment has to be made under this section only on the basis of seized material and in absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made, and that 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 Page | 4 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, and concluded that since no incriminating material was unearthed during the search, no additions could have been made to the income already assessed. This judgment has been considered in all the existing judgments on the matter, some of which have been referred to by the appellant in his submissions. 4.2.4 In view of the facts of the case discussed above and the position of law enunciated by the jurisdictional High Court in the case of Kabul Chawla (supra), CIT (Central)-I Vs Jakson Engineers Ltd. 2015 TIOL 2789 HC DEL IT order dated 07.12.2015 in to 913/2015 and Praveen Kumar Jolly and TJG Holding Pvt. Ltd. vs. Director General Of Income Tax(investigation) Delhi & Others 2016(3) TMI 976-Delhi High Court, and the judgments of the Hon’ble Bombay High Court in CIT vs Continental Warehousing Corporation (374 ITR 645) (2015), (2015) 58 taxmann.com 78 (Bom) and All Cargo Global Logistics Ltd. vs DCIT in ITA No. 1969 of 2013, and other judgments relied upon by the appellant’s AR mentioned in his written submission, it is held that the AO was not within the jurisdiction bestowed on him by law to make the impugned additions as per (ii) & (iii) of para-4.2.2 above in the assessment u/s 153A of the Act, and therefore the impugned additions made in the assessment order cannot be sustained. The re-assessment orders under reference for both the assessment years are accordingly quashed.”