DCIT, NEW DELHI vs. M/S. NOVA CORPORATION LTD., NEW DELHI

PER T. S. KAPOOR, ACCOUNTANT MEMBER,

1. “On the facts and in the circumstances of the case, the CIT(A) has erred in law and on facts in holding that the additions made without any material found during the course of search are outside the scope of section 153A/153C of the Act, when section 153A mandates the AO to ‘assess or reassess the total income’ as against ‘assess or reassess such income (escaping assessment) u/s 147’.

2. On the facts and in the circumstances of the case, the CIT(A) has erred in law and on facts in holding that primary onus u/s 68 was discharged by simply furnishing the copy of certain document which in fact do not prove the identity and creditworthiness of the creditor in the light of clear finding that such creditors were simply paper companies used to give accommodation entries only.

3. The order of the CIT(A) is erroneous and is not tenable on facts and in law.” 2. At the time of hearing, none was present on behalf of the assessee.

The Ld. DR at the outset, submitted that in view of the directions of the Hon’bleTribunal, the Revenue has tried to serve notice of hearing to the assessee but the assessee was not found at his place and therefore, the notice was served through affixture and in this respect filed a copy of such affixture notice. On going through the order sheet recorded by the Tribunal on various dates, starting from November, 2017, we observed that none was appearing on behalf of the assessee and therefore, we decided to dispose of the appeal by hearing the Revenue and therefore, the Revenue was asked to proceed with their arguments. The ld. DR submitted that the additions were made in view of reopening of the case of the assessee u/s 153A of the Act and u/s 153A of the Act, the Assessing Officer is empowered to assessee or reassess the total income and therefore, the Assessing Officer had rightly made the additions u/s 68 of the Act and which the ld. CIT(A) had wrongly deleted by holding that addition was not made on the basis of documents seized during search. It was argued that section 153A mandates the AO to assess or reassess the total income as against assess or reassess such income escaping assessment u/s 147 of the Act and therefore it was argued that the order of the ld. CIT(A) should be set-aside.

The assessee is one of the group concerns of Today Group of assessees and during search and seizure operation at various premises of Today Group many books of accounts or documents belonging to the assessee company were found and seized and therefore proceedings u/s 153C of the Act were initiated against the assessee. In view of notice u/s 153C, the assessee submitted that the original return filed by it may be treated as return filed u/s 153C of the Act. The Assessing Officer, during the course of assessment proceedings, observed that the assessee had made certain cash deposits during the financial year 2005-06 amounting in all to Rs.4,54,80,000/- and therefore the Assessing Officer held that assessee had received such amounts in the books of accounts and therefore the assessee was asked to prove the identity and creditworthiness of the creditors. In response, the assessee did not give any explanation and therefore, the AO relying upon various case laws made the addition u/s 68 of the Act. While making the addition, the AO did not referred to any seized material on the basis of which the addition was made and it was made only on the basis of entries in the cash book.

1.1 I have considered the grounds raised in appeal and the facts of the case. I have also considered the submission filed by the AR of the appellant. 1.2 Thus the position that emerges, is that where assessment or reassessment proceedings are pending completion when the search is initiated or requisition is made, they will abate making way for the Assessing Officer to determine the total income of the assessee in which the undisclosed income would also be included. 1.3 However in cases where the assessment or reassessment proceedings have already been completed and assessment orders have been passed determining the assessee's total income and such orders are subsisting at the time when the search or the requisition is made, there is no question of any abatement since no proceedings are pending. 1.4 In this latter situation, the Assessing Officer will reopen the assessments or reassessments already made and determine the total income of the assessee. Such determination in the orders passed under Section 153A would be similar to the orders passed in any reassessment, where the total income determined in the original assessment order and undisclosed income, if any, unearthed during the search are clubbed together and assessed as the total income. 1.5 As far as completed assessments are concerned, the issues already examined by the Assessing Officer in such completed assessment would be difficult for re-examining in assessments u/s,153A unless some material is found in the course of search action. 1.6 Applying the aforesaid legal position, addition has been made without reference to any material having been found during the course of search and therefore is clearly outside the scope of proceedings under section 153C of the Act.”

5. The Ld. CIT(A) has allowed relief to the assessee on the basis that the assessment of the assessee stood completed at the time of search and no material having relation with the addition was found during the search and therefore he has allowed relief to the assessee. We find that the year under consideration relates to AY 2006-07, whereas the search took place on 26/11/2009. Therefore, at the time of search, the assessment of the assessee stood completed and therefore Ld. CIT(A) has rightly allowed relief to the assessee by holding that in a completed assessment the addition can only be made on the basis of some seized documents. The case law of Kabul Chawla decided by the Hon’ble Delhi High Court is squarely applicable to the facts of circumstances of the case. In view of the above, we do not find any infirmity in the order of the ld. CIT(A).

The order is pronounced in the open court on 06/08/2019.