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Income Tax Appellate Tribunal, DELHI BENCH: ‘D’ NEW DELHI
Before: SHRI N. K. SAINI & MS SUCHITRA KAMBLE
PER SUCHITRA KAMBLE, JM
This appeal is filed by the assessee against the order dated 10/01/2013 passed by CIT (A)-1, New Delhi for Assessment Year 2004-05.
2. At the time of hearing it was found that the assessee has filed condonation of delay application for 589 days for which the assessee has filed through its Director, the affidavit along with the affidavit of the clerk because of whom the delay has been occurred. The application for condonation of delay is as under:- 1. “The applicant has filed an appeal before the Hon’ble Tribunal against the CIT(A) order dated 10/01/2013 which was received on 14/02/2013 for the assessment year 2004-05.
Therefore, the last date of filing the appeal before your honour was 15/04/2013.
3. The said appeal is filed on 25/11/2014, thus late by 589 days.
4. Applicant has filed his return of income for the assessment year 2004-05 in response to notice u/s 153A on 08.04.2011 declaring Rs. 6,52,24,390/- as his income.
In the present case, the assessment was concluded u/s 153A at an income of Rs.6,59,60,630/- vide order dated 30/12/2011, thereby disallowing an amount of Rs.7,36,244/- by invoking section 14A read with Rule 8D.
6. The Id. CIT(A) vide its order restricted the above said disallowance made by the Id. AO to Rs.3,33,495/-.
7. Thereafter, on receiving the Ld. CIT(A) order, applicant handed over the copy of the CIT(A) order to one of the clerks working in the office of its accountant for taking further appropriate action in the aforesaid case.
8. However, the clerk kept the above mentioned order in the drawer and forgot to file the appeal in the above mentioned case.
9. Later on when the applicant enquired from its accountant regarding the status of the appeal to be filed, it came to light at that time, that the clerk to whom the order was handed over has not filed the appeal against the CIT(A) order.
10. Thereafter, the applicant immediately took steps to file the appeal before the Hon'ble ITAT.
That due to this omission on the part of the clerk working in the office of its accountant, there is a delay in filing the appeal by 589 days. 12. Even otherwise, assessee’s case is squarely covered by the decision of the Jurisdictional High Court in the case CIT vs. Kabul Chawla [2016] 380 ITR 573 as well as in the case of assessee’s group concern, CIT vs. Jakson Engineers Ltd. dated 07/12/2015.
In the case of Jakson Engineers Ltd., Hon’ble High Court has quashed the assessment made by the AO, whereby similar additions u/s 14A was made. 13. That as explained above, it is humbly submitted that the delay in filing the appeal was unintentional and by reason beyond the control of the applicant. Accordingly, it is prayed that the delay in filing the appeal be condoned and appeal be heard on merit.”
The Affidavit of Clerk is as under:-
“AFFIDAVIT” I, Kuwar Kant Jha, aged 34 years, S/O Shri Baidya Nath Jha, residing at Flat No. 41/18, Pocket-7, Sector-82, Noida-201304, hereby solemnly affirm as under:-
1. 1. That I am working as an accountant in Jaksons Limited.
2. That the appeal before Hon’ble ITAST was filed on 25/11/2014 against the Ld.CIT(A) order dated 10/1/2013 which was received on 14/2/2013.
3. That the last date for filing the appeal before Hon’ble ITAT was 15/04/2013.
4. That on receiving the Ld.CIT(A) order, the order was handed over to me for taking further appropriate action in the aforesaid case.
5. That I kept the CIT(A) order in the drawer and forgot to file the appeal before Hon’ble ITAT.
6. That when it was enquired from me regarding the status of the appeal to be filed, it came to light at that time that I have not filed the appeal against the order of Ld.CIT(A) 7. Thereafter, immediate steps were taken to file an appeal before Hon’ble ITAT.
8. That due to this omission on my part, there was a delay in filing the appeal by 589 days.
9. That the delay in filing the appeal before Hon’ble ITAT against the Ld.CIT(A) order was unintentional.
That, I have read and understood and state that what is stated therein is true and correct to the best of my knowledge and belief.” Sd/- DEPONENT” The Ld. DR opposed the condonation of delay. Since the delay has been explained by the assessee along with the Affidavit of the clerk because whom the delay was caused, it will be appropriate in the interest of justice to condone the delay. We, therefore, condone the delay and proceed with the hearing of the appeal.
The grounds of appeal
are as under:-
1. On the facts and circumstances of the case, the order passed by the Learned Commissioner of Income Tax (Appeals) [CIT(A)] is bad both in the eye of law and on facts.
2. On the facts and circumstances of the case, the Ld.CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the order passed by the Learned A.O u/s 153A is bad and liable to be quashed as the same has been framed consequent to search which itself was unlawful and invalid in the eye of law.
3. On the facts and circumstances of the case, the Ld.CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the proceedings initiated u/s 153A/143(3) are in violation of the statutory conditions of the Act and the procedure prescribed under the law and as such the same is bad in the eye of law and liable to be quashed.
On the facts and circumstances of the case, the proceedings initiated u/s 153A are bas in law in the absence of any incriminating material belonging to the assessee being found during the course of the search.
5. On the facts and circumstances of the case, the Ld.CIT(A) has erred both on facts and in law in confirming the disallowance to the extent of Rs.3,33,495/- u/s 14A of the Act read with Rule 8D.
6. On the facts and circumstances of the case, the Ld.CIT(A) has erred, both on facts and in law, in confirming the disallowance ignoring the fact that no evidence/document was found/seized during the course of search which could lead to the disallowance made by the Assessing Officer .”
4. A search and seizure u/s 132 was initiated on the Jakson Group and its associate on 10/02/2010. The assessee was covered in the said search and notice u/s 153A was issued on 12/11/2010 in response to which the assessee, filed a return on 8/4/2011 declaring income of Rs.6,52,24,319/-. Notices u/s 143(2) and 142(1) along with questionnaire were issued on 10/6/2011. The notices were complied with and the income of the assessee was assessed at Rs.6,59,60,630/- which included an addition of Rs.7,36,244/- under Rule 8D being expenses relating to exempt income.
5. Being aggrieved by the assessment order, the assessee filed appeal before the CIT(A) and the CIT(A) partly allowed the appeal of the assessee.
At the time of hearing, the Ld. AR submitted that the assessee involved in the present appeal is squarely covered by the judgment of the Hon'ble Jurisdictional High Court in case of CIT Vs. Kabul Chawla (2016) 380 ITR 573 in which it was held that no addition can be made u/s 153A we have heard both the parties and perused the material available on record not incriminating mater was found during the course of search. The Ld. AR submitted that there was no incriminating material found which was pointed out by the Ld. AR through the decision of the Tribunal in case of the assessee for Assessment Year 2006-07 being order dated 27/5/2015 wherein the same search operation which was conducted on 10/02/2010 was under challenge. There is a finding of the Tribunal that there was no incriminating material found during the search which is confirmed by the Hon’ble Delhi High Court in assessee’s own case being ITA 910 to 913/2015 order dated 07.12.2015 for A.Y. 2006-07 and 2007-08. Thus, in the absence of any incriminating material the decision of the Kabul Chawla will, in totality applicable in assessee’s own case.
The Ld. DR relied upon the Assessment Order and the order of the CIT(A) but could not controvert the submissions of the Ld. AR that no incriminating material was found.
We have heard both the parties and perused the material available on record. In Assessment Year 2006-07, the Tribunal dealt the search conducted on 10/02/2010 on Jakson Group and has given categorical finding that no incriminating material was found against the assessee Company which is confirmed by the Hon’ble High Court in assessee’s own case being ITA 910 to 913/2015 order dated 07.12.2015 for A.Y. 2006-07 and 2007-08. The Hon’ble High Court held as under: “12. However, as far as the present appeals are concerned, although the ITAT may have erred in holding that the issuance of notice under Section 153(1)(a) of the Act was invalid, it is not in dispute that qua the Respondent Assessee no incriminating material was found during the search so as to justify the addition made in the assessment order passed pursuant to the issuance of such notice. As held in several decisions including Kabul Chawla (supra), no assessment can be framed in terms of the Section 153A of the Act
in the absence of the any incriminating material found during the search. Consequently, the net result is that the assessment order will in any event have to remain quashed.”
The Ld. AR relied on the decision of the CIT vs. Kabul Chawla (2016) 380 ITR 573 wherein it is held as under:
“37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned and 713 of 2014 of decisions, the legal position that emerges is as under: i. Once a search takes place under Section 132 of the Act, notice under Section 153 A (1) will have to be mandatory issued to the person searched requiring him to file returns for six Ays immediately preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. 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 icnoem would be brought to tax” iv. Although Section 153A 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 ITA Nos. 707, 709 and 713 of 2014 of assessment has to be made under this Section only on the basis of seized material.” 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 153A 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 153A 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.
The present appeals concern AYs, 2002-03, 2005-06 and 2006-07. On the date of the search the said assessments already stood completed. Since no incriminating material was unearthed during the search, no additions could have been made to the income already assessed.”
Thus, in the absence of any incriminating material found from the premises of the assessee, additions made in the year is outside the scope of Section 153A of the Act. The present case is squarely covered by the decision of the Hon’ble Jurisdictional High Court in case of CIT vs. Kabul Chawla (supra). Thus, as per the ratio laid down by the decision of the Hon'ble Jurisdictional High Court in case of Kabul Chawla (Supra), the same will be applicable in the present case. Thus, the assessee succeeds on legal ground; hence there is no need to adjudicate the issues contested on merit. The appeal of the assessee is allowed.
In result, the appeal of the assessee is allowed.