ACIT, NEW DELHI vs. SMT. ARCHANA SALUJA, NEW DELHI

consolidated Order for the sake of convenience because similar / another related Assessments are inward in these appeals. Appeal vide is against impugned Order dated 25.01.2016 in the case of Smt. Archana Saluja in Appeal No. 25/14-15/1602 for Assessment Year (AY for short) 2006-07. Appeal vide is filed against Order dated 25.01.2016 in the case of Mr. Ankush Saluja in Appeal No. 21/14-15/1598 for AY 2006-07. Appeal vide ITA No. 2050/Del/2016 filed against separate Order dated 25.01.2016 of Ld. Commissioner of Income Tax (Appeals) [CIT(A) for short] in the case of M/s Saluja Construction Co. Ltd. in Appeal No. 28/14-15/1605 for AY 2006-07. The grounds of appeal in these three appeals filed by Revenue are as under:

1. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and on facts in directing the A.O to delete the addition made u/s 68 of the I T. Act on account of unexplained cash credits.

2. On the facts and in the circumstances of the case, the Ld. CIT(A) had erred in law and on facts by relying on the decision in the case of Sh. Kabul Chawla by the jurisdictional High Court which has not been accepted by the department and SLP against the same has been filed before Hon’ble Supreme Court. 3. On the facts and in the circumstances of the case, the Ld. CIT(A) had erred in law and on facts in arriving at the conclusion that the words ‘total income’ as used in Section 153A would only mean undisclosed income discovered from seized / FIT For Publication Sd/- Sd/- (AM) (JM) ITA Nos.-2046, 2045 & 2050/Del/2016. Saluja Construction Co. Ltd.

incriminating material.

4. On the facts and in the circumstances of the case, the Ld. CIT(A) had erred in law and on facts in adopting a restrictive and pedantic interpretation of the scope of assessment u/s 153A of the Act.

5. On the facts and in the circumstances of the case, the Ld. CIT(A) had erred in law and on facts in not appreciating that the decision of Hon'ble High Court in the case of CIT(Central)-lll vs Kabul Chawala is equivalent to a parallel legislation as the word ‘Incriminating document’ is not defined anywhere in the Act and is open to various interpretations.

6. On the facts and in the circumstances of the case, the Ld. CIT(A) had erred in law and on facts in arriving at the conclusion that the words ‘total income’ as used in section 153A would only mean income unearthed during search when the decision of the Hon’ble High Court of Karnataka in the case of Canara Housing Development Company Vs. DCIT dated 09-08-2014 has held that total income includes income unearthed during search and any other income.

7. That the order of the CIT(A) is perverse, erroneous and is not tenable on facts and in law.

8. That the grounds of appeal

are without prejudice to each other.

9. That the appellant craves leave to add, amend, alter or forgo any ground(s) of appeal either before or at the time of hearing of the appeal. ITA No. 2046/Del/2016:-

1. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and on facts in directing the A.O. to delete the addition made u/s 68 of the I.T. Act on account of unexplained cash credits.

2. On the facts and in the circumstances of the case, the Ld. CIT(A) had erred in law and on facts by relying on the decision in the case of Sh. Kabul Chawla by the jurisdictional High Court which has not been accepted by the department and SLP against the same has been filed before Hon’ble Supreme Court. 3. On the facts and in the circumstances of the case, the Ld. CIT(A) had erred in law and on facts in arriving at the conclusion that the words ‘total income’ as used in Section 153A would only mean undisclosed income discovered from seized / incriminating material. 4. On the facts and in the circumstances of the case, the Ld. CIT(A) had erred in law and on facts in adopting a restrictive and pedantic interpretation of the scope of assessment u/s 153A of the Act. 5. On the facts and in the circumstances of the case, the Ld. CIT(A) had erred in law and on facts in not appreciating that the decision of Hon’ble High Court in the case of CIT(Central)-lll vs Kabul Chawala is equivalent to a parallel legislation as the word ‘Incriminating document’ is not defined anywhere in the Act and is open to various interpretations. 6. On the facts and in the circumstances of the case, the Ld. CIT(A) had erred in law and on facts in arriving at the conclusion that the words ‘total income’ as used in section 153A would only mean income unearthed during search when the decision of the Hon’ble High Court of Karnataka in the case of Canara Housing Development Company Vs. DCIT dated 09-08-2014 has held that total income includes income unearthed during search and any other income. 7. That the order of the CIT(A) is perverse, erroneous and is not tenable on facts and in FIT For Publication Sd/- Sd/- (AM) (JM) ITA Nos.-2046, 2045 & 2050/Del/2016. Saluja Construction Co. Ltd.

law. 8. That the grounds of appeal are without prejudice to each other.

9. That the appellant craves leave to add, amend, alter or forgo any ground(s) of appeal either before or at the time of hearing of the appeal. ITA No. 2050/Del/2016:-

1. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and on facts in directing the A.O. to delete the addition made u/s 68 of the I.T. Act on account of unexplained cash credits.

2. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and on facts in determining that no incriminating document was found during search and seizure action u/s 132 of the I.T. Act and no addition can be made u/s 153A relying on the judgment of Hon’ble Delhi High Court in the case of CIT vs. Kabul Chawla and without considering the merits of the case. 3. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and on facts in not considering the fact that incriminating documents were found and seized from the business premises of the assessee during search and seizure action on 12.02.2012 and on the basis of these incriminating documents, the assessee itself disclosed an additional income of Rs. 1,00,00,000/- in assessment year 2012-13. 4. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and on facts in not appreciating that the ratio laid down by Hon’ble Jurisdictional High Court of Delhi in the case of CIT vs. Kabul Chawla is distinguishable to the facts of this case. 5. On the facts and in the circumstances of the case, the Ld. CIT(A) had erred in law and on facts in not appreciating that the decision of Hon’ble High Court in the case of CIT(Central)-lll vs Kabul Chawala is equivalent to a parallel legislation as the word ‘Incriminating document’ is not defined anywhere in the Act and is open to various interpretations. 6. That the order of the CIT(A) is perverse, erroneous and is not tenable on facts and in law. 7. That the grounds of appeal

are without prejudice to each other.

8. That the appellant craves leave to add, amend, alter or forgo any ground(s) of appeal either before or at the time of hearing of the appeal.

(2) A search under Section 132 of Income Tax Act (“I.T. Act” for short) was conducted on 12.01.2011 in the Saluja Group of cases. All the three Assessees are part of the aforesaid Saluja Group of cases. The premises searched U/s 132 of I.T.

Act included the premises of aforesaid M/s Saluja Construction Co. Ltd. and the premises of aforesaid Smt. Archana Saluja. Assessment Order U/s 153A of I.T. Act, dated 14.3.2014, was passed in the case of M/s Saluja Construction Co. Ltd. in FIT For Publication Sd/- Sd/- (AM) (JM) ITA Nos.-2046, 2045 & 2050/Del/2016. Saluja Construction Co. Ltd. which an addition of Rs. 22,17,50,000 was made U/s 68 of I.T. Act, 1962 towards unexplained cash credits. Separate Assessment Order U/s 153A, read with Section 143(3) of I.T. Act was passed on 14.03.2014 in the case of Smt. Archana Saluja wherein an addition of Rs. 24,74,32,560 was made U/s 68 of I.T. Act towards unexplained cash credits. Another separate Assessment Order was passed on 14.03.2014 in the case of Mr. Ankush Saluja U/s 153C, read with Section 153A of I.T. Act wherein an addition of Rs. 18,81,42,080 was made U/s 68 of I.T. Act towards unexplained cash credits. The three Assessees filed separate appeals before the Ld. CIT(A). Vide separate appellate Orders as mentioned earlier (The impugned Orders) the Ld. CIT(A) deleted the aforesaid additions in the cases of all the three Assessees; on the ground that these additions were not based on any incriminating document found during search U/s 132 of I.T. Act. The Ld. CIT(A) placed reliance on Order of Hon’ble Delhi High Court in the case of CIT vs. Kabul Chawla 61 Taxmann.com 412 (Delhi) / 380 ITR 0573 (Del) and another Order of Hon’ble Delhi High Court in the case of CIT vs. Jakson Engineers Ltd. 2015-T10L- 2789-HC-DEL-IT. The three appeals filed by Revenue are against the aforesaid impugned Orders of the Ld. CIT(A).

(3) During appellate proceedings in ITAT the Ld. Authorized Representatives for the Assessee filed two separate Paper Books. The contents of the Paper Books are as under:

FIT For Publication Sd/- Sd/- (AM) (JM) ITA Nos.-2046, 2045 & 2050/Del/2016. Saluja Construction Co. Ltd.

S. No. Particulars

1 DCIT vs. Ankush Saluja {51 CCH 0509} [Del Trib] for AY 07-08

3. Pr. CIT & Ors. vs. Meeta Gutgutia {395 ITR 0526} [Del]

5. Sanjay Aggarwal vs. DCIT {150 ITD 0692} [Del Trib] In DCIT vs. Saluja Construction Co. Ltd. (I.T.A 2051 /Del/2016) 6. for AY 07-08 and DCIT vs. Vinod Saluja (I.T.A 2052 & 2053/Del/2016) for AY 06-07 & 07-08 Assessment Order U/s 143(3) dated 28.12.2007 for AY 2006-07 in 7. the matter of M/s. Saluja Construction Co. Ltd. Assessment Order U/s 143(3) dated 28.12.2017 for AY 2006-07 in 8. the matter of Mrs. Archana Saluja.

(4) At the time of hearing before us the Ld. CIT(DR), while admitting that the disputed additions are covered in favour of Assessee by Order of Hon’ble Delhi High Court in the case of CIT vs. Kabul Chawla (Supra); however, relied on the Assessment Orders. Ld. AR of the Assessee, on the other side, drew our attention to order of Co-ordinate Bench of ITAT, Delhi in the case of Ankush Saluja, another Assessee of this Saluja Group, vide Order dated 07.12.2017, reported at (2017)

51CCH 0509 (DelTrib) for AY 2007-08 in which on identical facts, relying on Order of Hon’ble Delhi High Court in the case of CIT Vs. Kabul Chawla (Supra) and on Vijay Bhai N. Chandrani vs. ACIT 333 ITR 436 (Gujarat); and observing that no incriminating document was found during the course of search so as to make the addition U/s 68 of the I.T. Act on account of unexplained cash credit, Co-ordinate FIT For Publication Sd/- Sd/- (AM) (JM) ITA Nos.-2046, 2045 & 2050/Del/2016. Saluja Construction Co. Ltd. Bench of ITAT, Delhi, decided the issue in favour of the Assessee. The relevant portion of the aforesaid Order dated 07.12.2017 in the case of DCIT vs. Ankush Saluja (2017) 51CCH 0509 (DelTrib) is reproduced as under:

“….It is also an admitted fact that during the course of search and seizure no incriminating evidence as regards the addition under section 68 of the act were found and seized during the course of search. Therefore, no assessment/re- assessment were pending as on the date of search. In the absence of any incriminating material during the course of search, the Ld. CIT(A) was justified in relying upon the decision of the Hon'ble Delhi High Court in the case of Kabul Chawla (supra) for the purpose of deleting the addition. Merely because departmental SLP is pending before the Hon'ble High Court is no ground to take a contrary decision against the decision of the jurisdictional Delhi High Court. We may also refer to judgment of Hon'ble Gujrat High Court in the case of Vijay Bhai N. Chandrani vs. ACIT 333 ITR 436 in which it was held as under.] "Held, Allowing the petition, that admittedly, three loose papers recovered during the course of search proceedings did not belong to the petitioner. It was not the case of the Revenue that three documents were in hand-writing of the petitioner. In the circumstances, when the condition precedent for issuance of notice was not fulfilled, action taken under section 153C of the Act stood vitiated." In the present case, even no incriminating document was found during the course of search so as to make the addition under section' 68 of the I.T. Act on account of unexplained cash credit. The Ld. CIT(A) in view of these findings did not decide the issue on merit. The above discussion clearly show that department has no case tor interference The Ld. D.R. has not pointed out any infirmity in the order of the Ld. CIT(A). In the result, appeal of the department stands dismissed.”

(5) The Ld. AR of the Assessee also relied on the decision of Co-ordinate Bench of ITAT, Delhi in the cases of Saluja Construction Co. Ltd. for AY 2007-08 and in the case of Vinod Saluja for AYs 2006-07, 2007-08 vide consolidated Order dated 05.07.2018. The Ld. AR submitted that these Assessees are also of the aforesaid FIT For Publication Sd/- Sd/- (AM) (JM) ITA Nos.-2046, 2045 & 2050/Del/2016. Saluja Construction Co. Ltd. Saluja Group and on identical facts the Co-ordinate Bench of ITAT, Delhi decided the issue in favour of the Assessees. In particular the Ld. AR drew our attention to the following portion of the aforesaid consolidated Order dated 05.07.2018:

“It is apparent from the assessment order itself, as has been candidly admitted by the Ld. DR as well, that there is no reference to any incriminating material in the assessment order qua these creditors/advances in respect of which addition of Rs. 24.39 crore was made. Respectfully following the judgement of the Hon’ble jurisdictional High Court in Kabul Chawla (Supra), we hold that the Ld. CIT(A) was justified in deleting the addition of Rs. 24.93 crore and odd.”

(6) The Ld. AR of the Assessee also relied on the cases of CIT vs. Kabul Chawla {380 ITR 0573}[Del], Pr. CIT & Ors. vs. Meeta Gutgutia {395 ITR 0526} [Del], Excel Infotech Ltd. vs. DCIT {3492 to 3494/Del/2014}[Del Trib] and Sanjay Aggarwal vs. DCIT {150 ITD 0692}[Del Trib]. The Ld. AR of the Assessees also relied on consolidated Order dated 31.10.2018 of Co-ordinate Bench of ITAT, Delhi in the cases of Sh. Brij Bhushan Singal vs. ACIT [in for AY 2010-11; ITA No. 1413/Del/2018 for AY 2011- 12 and ITA No. 1414/Del/2018 for AY 2012-13], Smt. Ritu Singal vs. ACIT [in ITA No. 1476/Del/2018 for AY 2010-11; ITA No. 1477/Del/2018 for AY 2011-12 and ITA No. 1478/Del/2018 for AY 2012-13], Smt. Uma Singal vs. ACIT [ITA No. 1482/Del/2018 for AY 2010-11] and Sh. Neeraj Singal vs. ACIT [in ITA No. 1485/Del/2018 for AY 2010-11; ITA No. 1486/Del/2018 for AY 2011-12 and ITA No. 1487/Del/2018 for AY 2012- 13].

FIT For Publication Sd/- Sd/- (AM) (JM) ITA Nos.-2046, 2045 & 2050/Del/2016. Saluja Construction Co. Ltd. (7) We have heard both sides patiently. We have perused materials on record carefully. We have considered the judicial precedents mentioned in the records of these cases in ITAT and also the judicial precedents brought to our notice in the course of hearing before us. The facts of these cases are not in dispute. Both sides agree that the additions made by the AO, in the case of the three concerned Assessees, are not based on any incriminating materials found in the course of search U/s 132 of I.T. Act. Both sides agree that there was no pending assessment in the case of any of the three concerned Assessees on the date of search U/s 132 of I.T. Act i.e. on 12.01.2011. From perusal of records, we find that in the case of Saluja Construction Co. Ltd. earlier return U/s 139(1) of I.T. Act on 31.07.2006 pursuant to which Assessment Order U/s 143(3) of I.T. Act on 28.12.2007. No assessment proceeding was pending on date of search i.e. 12.01.2011. Therefore, the aforesaid Assessment Order dated 14.03.2014, was not in pursuance of an abated Assessment within the meaning of 2nd Proviso to Section 153A(1) of I.T. Act.

In the case of Smt. Archana Saluja earlier return U/s 139(1) of I.T. Act on 31.07.2006 pursuant to which Assessment Order U/s 143(3) of I.T. Act on 28.12.2007. No assessment proceeding was pending on date of search i.e. 12.01.2011. Therefore, the aforesaid Assessment Order dated 14.03.2014, was not in pursuance of an abated assessment within the meaning of 2nd Proviso to Section 153A(1) of I.T. Act. In the case of Ankush Saluja, earlier return U/s 139(1) of I.T.

Act was filed on 31.07.2006, however, this was not selected for scrutiny as notice U/s 143(2) of I.T. Act was not issued in respect of this return. Statutory time limit FIT For Publication Sd/- Sd/- (AM) (JM) ITA Nos.-2046, 2045 & 2050/Del/2016. Saluja Construction Co. Ltd. for issue of notice U/s 143(2) of I.T. Act expired on 31.07.2007. Thus, there was no pending assessment on the date of search i.e. 12.01.2011. Therefore, the aforesaid Assessment Order dated 14.03.2004 was also not in respect of any in pursuance of an abated assessment within the meaning of 2nd Proviso to Section 153A(1) of I.T.

Act.

(8) We find that the case of Kabul Chawla vs. CIT (Supra), Pr. CIT & Ors. vs. Meeta Gutgutia (Supra) relied upon by Ld. AR for Assessee; and the case of Smt. Dayawanti Gupta vs. CIT (2016) 390 ITR 496 (Del) were considered in the case of the HBN Dairies & Allied Ltd. Vs. ACIT and in accordance with the majority view of the Members of ITAT Delhi Benches, Delhi, the issue was decided in favour of the Assessee vide order dated 25.04.2018 read with order dated 24.05.2018 in 1394 & 1395/Del/2013 for Assessment Years 2004-05, 2005-06 & 2006-07 respectively. The relevant portion of the aforesaid order dated 25.04.2018 is reproduced as under:-

2. Before proceeding with the matter, it is relevant to note that both the learned Members, apart from differing on the merits of the case, also could not be in unison in making reference u/s 255(4) of the Act. The ld. JM, being the senior Member, proposed the following question for reference to the Third Member: - “Whether, in the absence of recovery of any incriminating material during the course of search against the assessee, when assessments have already completed, authorities below were justified in invoking section 153A of the I.T. Act for the purpose of making additions by disallowing claim of losses and brought forward of losses qua each of assessments under appeals i.e 2004-05, 2005-06 and 2006-07?

distinguishable facts of the two precedents are appreciated; and that the precedent which is closer to facts of the case before us, is preferred by us for our guidance? (b) Whether, additions can be made in assessments u/s 153A of I.T. Act even for those assessment years in respect of which no incriminating material was unearthed during search u/s 132 of I.T. Act even if no assessments or reassessments are pending for those assessment year(s) on the date of search u/s 132 of I.T. Act; provided some incriminating material in the case of the assessee for any assessment year(s) { referred to in clause (b) of section 153A(1) of Income Tax Act} is unearthed as a result of search u/s 132 of I.T. Act whether by way of statement u/s 132(4) of I. T. Act or by way of undisclosed investment, or by way of incriminating documents, or in any other manner?”

4. I have gone through the relevant material on record and considered the rival submissions in so far as understanding the difference of opinion between the two Members is concerned. In my considered view, the controversy on this issue gets properly reflected through following question: - “Whether on the facts and in the circumstances of the case and as per law, the ld. CIT(A) was justified in upholding the additions made by the AO for the years of completed assessments, which were not based on any incriminating material found during the course of search relating to such years and consequently denying the benefit of carry forward and set off of the resultant loss in subsequent year?”

the returns of income for these years. The ld. AM, who passed the draft order first, noticed that the Assessing Officer disallowed the loss claimed by the assessee for the assessment years 2004-05 and 2005-06 on the ground that claim of various expenses was not verifiable. In the absence of such details furnished before the ld. CIT(A) as well as the Tribunal, he approved the action of the authorities below. He, however, did not approve the view point of the Revenue in not allowing set off of loss for the assessment year 2003-04 against the income for the assessment year 2006-07 and for this limited purpose, remitted the matter to the file of Assessing Officer for fresh adjudication. The ld. JM did not concur with the view canvassed by the ld. AM in not allowing the loss for the assessment years 2004-05 and 2005-06. He opined that since no incriminating material was found during the course of search in respect of expenses claimed as deduction and, hence, the loss so determined was eligible for carry forward to be set off against the income for assessment year 2006-07. That is how, the matter has been placed before me for adjudication as third Member.

2006-07. The assessee’s Profit & Loss Account for the assessment year 2004-05 shows incurring of expenses at Rs.95.21 lac against which loss of Rs.24.30 lac was computed and claimed in the return of income. The return of the assessee was processed u/s 143(1) determining loss at the declared figure. Profit & Loss Account of the assessee for the assessment year 2005-06 shows incurring of expenses at Rs.1.31 crore and the assessee filed return at a loss of Rs.23,59,200/-. After making some disallowance, the Assessing Officer completed assessment u/s 143(3) on 30.11.2007 at a loss of Rs.18.17 lac. In so far as the assessment year 2006-07 is concerned, the assessee filed return and the assessment was completed u/s 143(3) on 02.12.2008 determining Nil income, but charging tax u/s 115JB on book profit of Rs.10,90,440/-. Thus, it is evident that the assessments for the assessment years 2004-05 to 2006-07 stood completed on the date of search on 20.11.2009.

FIT For Publication Sd/- Sd/- (AM) (JM) ITA Nos.-2046, 2045 & 2050/Del/2016. Saluja Construction Co. Ltd.

iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs “in which both the disclosed and the undisclosed income would be brought to tax”. iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment “can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material.”

FIT For Publication Sd/- Sd/- (AM) (JM) ITA Nos.-2046, 2045 & 2050/Del/2016. Saluja Construction Co. Ltd. v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. vii. 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 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.”