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Income Tax Appellate Tribunal, CHANDIGARH BENCH ‘B’, CHANDIGARH
Before: SHRI SANJAY GARG & SMT.ANNAPURNA GUPTA
आदेश/ORDER Per Annapurna Gupta, Accountant Member
The present appeal has been preferred by the assessee against the order dated 9.10.2013 of the Commissioner of Income Tax (Appeals)(Central), Gurgaon [hereinafter referred to as CIT(A)], passed u/s 250(6) of the Income Tax Act,1961(hereinafter referred to as “Act”).
Briefly stated, search operation u/s 132(1) of the Act was carried out on the Mittal group of cases on 16.1.2009 in which the residential premises of the assessee was also covered. Thereafter notice u/s 153A of the Act was issued to the assessee in response to which return declaring income of Rs.2,08,940/- was filed by the assessee. Notices were issued
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thereafter for assessing the income of the assessee u/s
142(1) and 143(2) of the Act alongwith detailed
questionnaire. Meanwhile it was seen that the accounts of
the group concern and the seized documents were complex in
nature and hence in the interest of revenue the case of the
group including the assessee was referred to the special
auditor u/s 142(2A) of the Act. The audit report u/s 142(2A)
was submitted by the assessee and thereafter the income
was assessed at Rs.17,93,536/- after making additions u/s
68 of the Act on account of unexplained cash found
deposited in two bank accounts of the assessee amounting
to Rs.8,70,000/- and unexplained loan of Rs.5,00,000/- and
additions u/s 69C on account of unexplained expenses
emanating from certain documents found during search.
The matter was carried in appeal before the Ld.CIT(A)
where the assessee contested only the additions made u/s
68 of the Act which were all upheld by the Ld.CIT(A) on
merits holding that the assessee had been unable to explain
the same .
Aggrieved by the same the assessee has come up in
appeal before us, raising the following grounds of appeal:
That the order of Ld. Commissioner on Income (Appeal) (Central), Gurgaon is contrary to the facts of the case and legally incorrect and without any basis of proper justification. 2. That the Ld. Commissioner on Income (Appeal) (Central), Gurgaon grossly erred and his action is unjustified and illegal in addition of Rs. 3,70,000/- on account of unexplained cash credit u/s 68 on the basis of Bank statement. As in replied by the assessee that section 68 did not apply to assessee, along with bank statement did not constitute any books of accounts, but Ld. CIT (A) ignored
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it. So, this addition is highly unjustified. Therefore, the addition of Rs. 3,70,000/- is prayed to be deleted. 3. That the Ld. Commissioner on Income (Appeal) (Central), Gurgaon grossly erred and his action is unjustified and illegal in addition of Rs. 5,00,000/- on account of unexplained cash credit u/s 68 on the basis of Bank statement. As in replied by the assessee that section 68 did not apply to assessee, along with bank statement did not constitute any books of accounts and that the cash deposit in bank account by all three joint holders, but Ld. CIT (A) ignored it. So, this addition is highly unjustified. Therefore, the addition of Rs. 5,00,000/- is prayed to be deleted. 4. That the Ld. Commissioner on Income (Appeal) (Central), Gurgaon grossly erred and his action is unjustified and illegal in addition of Rs. 5,00,000/- on account of unexplained cash credit u/s 68 on the basis of Bank statement. As in replied by the assessee that section 68 did not apply to assessee, along with supporting documentary evidence, but Ld. CIT (A) ignored it. So, this addition is highly unjustified. Therefore, the addition of Rs.5,00,000/- is prayed to be deleted. 5. Charging interest under section 234 A, 234 B and 234 C are not warranted due to the facts of the case. 5. The assessee has also raised additional ground before
us which reads as under:
“That the Ld. CIT (A) is not justified in confirming the additions / disallowances in assessment made u/s. 153A (1) (b) r.w.s. 143 (3) of the I. T. Act, 1961 in the absence of incriminating material found during the course of Search as no assessment was pending for the A. Y. 2006- 07 on the date of initiation of search.” 6. Vis a vis the same it was contended that since the issue
raised in the additional ground was a legal issue and
further since no new fresh facts were required to be
considered for adjudicating the same, it may be admitted for
adjudication. In support the assessee relied upon the
decision of the Hon'ble Apex Court in the case of NTPC
Limited Vs. CIT, 283 ITR 390.
The Ld. DR, on the other hand, filed his objections to
the admission of the additional ground in writing stating
that incriminating material were seized during search and,
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therefore, there was no illegality in the assessment framed
in the present case. It was pointed out that an document
having notification marked A-2 was found and seized, pages
82 to 89 of which pertained to a sale deed in respect of land
purchased by the assessee in village Dhakoli alongwith the
other co-owners. The Ld. DR also pointed out that the
assessee has made disclosure of Rs.1,63,400/- on account of
the same.
Having heard the rival contentions, we agree with the
Ld. counsel for assessee that the additional ground raised
before us is a legal ground and since no fresh facts need to
be considered for adjudication of the same, we have no
hesitation to admit the same for adjudication. The objection
of the Ld. DR is only an argument for the purpose of
adjudicating the issue raised in the additional ground and,
therefore, cannot be considered at the stage of admission of
the additional ground. The objection of the Ld.DR is
therefore, dismissed and the additional ground raised by
the assessee is admitted for adjudication.
Since the additional ground raised challenges the
validity of the addition made u/s 68 of the Act, we shall deal
with the same first.
During the course of hearing before us, , the Ld.
counsel for assessee pointed out that in the assessment
framed subsequent to the search conducted on the assessee
additions were made on account of unexplained cash
deposits in the bank account of the assessee amounting to
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Rs.3,70,000/- and Rs.5 lacs, in two separate bank accounts
of the assessee and further on account of unexplained cash
credit in the form of unsecured loan received from one Shri
Devinder Singh of Rs.5 lacs and further on account of an
document found during search pertaining to a sale deed in
respect of purchase of land made by the assessee amounting
to Rs.1,63,000/- and Rs.31,100/-.The Ld. counsel for
assessee pointed out that it was not pressing against the
addition made vis-à-vis documents seized during search. It
was stated by the Ld. counsel for assessee that it was only
contesting the addition made on account of unexplained
cash in bank and unexplained cash credit and its solitary
argument against the same was that no incriminating
material relating to these additions was found during the
course of search and that it was simply based on documents
procured during the course of post search enquiry when the
copies of bank accounts were submitted and it was noted
therefrom that there were cash deposits and unsecured loans
taken by the assessee in the bank accounts, the explanation
of which was sought from the assessee and found to be
unsatisfactory. The Ld.Counsel for the assessee thereafter
pointed out that there was no pending assessment relating
to the impugned year as on the date of search and,
therefore, in view of the above facts and in view of various
judicial decisions in this regard, no addition unconnected
with any material seized during the course of search could
have been made in the hands of the assessee. Our attention
was drawn to paras 6, 7 and 8 of the assessment order
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wherein the additions on account of cash deposits in the
bank and unsecured loan found deposited in bank was
discussed and made. The Ld. counsel for assessee also drew
our attention to the fact that the assessment year involved
in the impugned case was assessment year 2006-07 and
statutorily specified period for issuing notice for initiating
assessment proceedings u/s 143(2) of the Act expired on
31.3.2007 and no such notice was issued to the assessee.
Therefore, there were no ongoing assessment proceedings
when the search was conducted on the assessee on
16.1.2009, which would have abated for the purpose of
framing assessment as per the provisions of section 153A of
the Act.
The Ld. DR, on the other hand contended that though
undeniably the bank books in which the cash credits entries
were found and pertaining to which additions were made,
were not found during the course of search but the fact of
the matter was that the accounts of the group cases and the
seized documents were complex in nature and, therefore,
case of the group was referred for special audit u/s 142(2A)
of the Act which was not objected to by the assessee also
and it was in terms of the report submitted by the special
auditors to whom no explanation of the cash deposits was
furnished and on his recommendation the assessee was show
caused as to why the impugned additions be not made and
which resulted in the impugned additions. It was further
pointed out that seized document were found during the
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course of search relating to purchase of land which the
assessee had contended that the payment was made out of
the very same bank account in which there were unexplained
cash deposits. In these facts and circumstances, therefore,
the Ld. DR contended that the addition made on account of
unexplained cash deposits in the bank could not be seen in
isolation but were related to the investment found to have
been made by the assessee from earlier undisclosed cash
credits during the course of search and, therefore, it could
not be said that the addition was not based on any
incriminating material found during the course of search.
We have heard the rival contentions and perused the
orders of the authorities below. The assessee ,in its
additional ground has challenged the addition made u/s 68
of the Act of unexplained cash deposited in bank and
unexplained loan taken ,on the ground that the material on
which the addition was based was not found during search
,in other words the addition was not based on any
incriminating material found during search.
Vis a Vis the proposition of law that in assessments
made pursuant to search conducted in cases where earlier
assessment was completed, addition can be made only on the
basis of incriminating material found during search there is
no dispute. In fact courts have time and again in the cases
of CIT Vs. Continental Warehousing Corporation in ITA No.
523 of 2013 reported in (2015) 279 CTR 0389 (Bombay), CIT
Vs. Kabul Chawla, 234 Taxman 300 (Delhi). Principal CIT Vs.
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MeetaGutgutia Prop M/s Ferns ‘N’ Petals”, ITA 306/2017 and
others (Delhi) held that if no incriminating material is found
during the search action, the addition in the case of already
concluded assessment cannot be made while framing
assessment u/s 153A of the Act.
The only dispute is whether the addition made u/s 68
of the Act was based on any incriminating material or not.
The fact that the information relating to the impugned
additions emanated from bank accounts and bank book of
the assessee is not disputed. Further we find that the
assessment order does not mention the same having been
found during search, nor has the Ld.DR been able to
establish the said fact before us. In fact the Ld.DR has
admitted that the said documents were not found during
search but the information was obtained in the course of
special audit conducted u/s 142(2A) of the Act.
In the light of the above facts we find merit in the
contention of the Ld.Counsel for the assessee that the
addition u/s 68 of Rs13,70,000/-was not based on any
incriminating material found during search and since
admittedly the assessment for the impugned year had not
abated, no addition therefore could have been made on
account of the same.
We do not find any merit in the argument of the Ld.DR
that that the addition made on account of unexplained cash
deposits in the bank could not be seen in isolation but were
9 ITA No.238/Chd/2014 A.Y.2006-07
related to the investment found to have been made by the
assessee during the course of search and which were from
earlier undisclosed cash credits. The Ld.DR has not
substantiated his contention that the investment was from
undisclosed cash credit, with any cogent evidence. No nexus
has been shown to us by the Ld.DR between the unexplained
cash deposited in bank and the investment made for
purchase of land, documents pertaining to which were found
during search. In the absence of any link having been
established by the Ld.DR between the unexplained cash
deposits and the investments found to have been by the
assessee during search ,we see no reason to view the two
documents together to hold that the documents pertaining to
the cash credits were incriminating documents found during
search for the purpose of making addition u/s 153A of the
Act, as argued by the Ld.DR. We therefore dismiss the
contention of the Ld.DR.
In view of the above we hold that the addition u/s 68 of
the Act on account of unexplained cash deposit in Bank of
Rs.3,70,000/- & Rs.5,00,000/- and unexplained loan taken
of Rs. 5,00,000/- was not based on any incriminating
material found during search and could not be made u/s
153A of the Act. The addition so made is therefore directed
to be deleted.
The additional ground raised by the assessee is
therefore allowed.
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Since the addition has been deleted on the legal ground raised as above ,the grounds raised challenging the addition on merits are merely academic in nature and are therefore not being dealt with by us.
In the result, the appeal of the assessee is therefore allowed in above terms.
Order pronounced in the Open Court.
Sd/- Sd/- संजय गग� अ�नपूणा� गु�ता (ANNAPURNA GUPTA) (SANJAY GARG) �याय�क सद�य/Judicial Member लेखा सद�य/Accountant Member �दनांक /Dated: 29th March, 2019 *रती* आदेश क� ��त�ल�प अ�े�षत/ Copy of the order forwarded to : 1. अपीलाथ�/ The Appellant 2. ��यथ�/ The Respondent 3. आयकर आयु�त/ CIT 4. आयकर आयु�त (अपील)/ The CIT(A) 5. �वभागीय ��त�न�ध, आयकर अपील�य आ�धकरण, च�डीगढ़/ DR, ITAT, CHANDIGARH 6. गाड� फाईल/ Guard File
आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar