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Income Tax Appellate Tribunal, DELHI BENCHES : F : NEW DELHI
Before: SHRI R.S. SYAL & SMT. BEENA A. PILLAI
PER R.S. SYAL, VICE-PRESIDENT :
This appeal by the assessee arises out of the order passed by the CIT(A) on 31.3.2016 in relation to the assessment year 2007-08.
The only issue raised in this appeal is against the confirmation of addition made by the Assessing Officer for a sum of Rs. 24 lac under section 68 of the Income Tax Act, 1961 (hereinafter referred to as the Act).
Briefly stated facts of the case are that a search under section 132 of the Act took place in the business and residential place of the assessee on 14.3.2012. Notice under section 153A(1) was issued pursuant to which the assessee furnished the return declaring an income of Rs.5,73,620/-. The Assessing Officer made an addition of Rs. 24 lac on account of unexplained unsecured loan received by the assessee from Smt. Rubina Singh amounting to Rs. 15,00,000/- on 18.9.2006 and Rs. 9,00,000/- on 4.1.2007. The assessee remained unsuccessful before the learned CIT(A). This is how, the appeal has been preferred before the Tribunal.
We have heard both the sides and gone through the relevant material on record. Original assessment in this case was completed under section 143(1) by means of acknowledgment dated 31.3.2008.
Search took place on 14.2.2012. This shows that at the time of search, the assessment for assessment year 2007-08 stood completed as although assessment was not made under section 143(3) but the time limit for issuing notice under section 143(2) stood expired and thus the processing of return under section 143(1) of the Act attained finality. It is an admitted position that the addition of Rs. 24 lac has been made by the Assessing Officer only on the reason that the assessee could not furnish complete address of the party along with confirmation etc to prove the genuineness of the credits.
The Hon'ble jurisdictional High Court in the case of Kabul Chawla vs. CIT (2016) 380 ITR 573 (Del) considered the facts of a case in which a search was carried out u/s 132 on 15.11.2007 on BPTP Ltd., a leading real estate developer operating all over India and some of its group companies including the premises of the assessee, who owned and controlled the group. No assessment proceedings were pending for the assessment years 2002-03, 2005-06 and 2006-07 as on the date of the search. The assessments for such assessments years had already been made u/s 143(1) of the Act. The assessee filed returns for the three 3 assessment years declaring certain income. The assessments were completed u/s 153A for the concerned assessment years making additions, inter alia, on account of low household withdrawals and deemed deduction u/s 2(22)(e) of the Act. It was submitted before the ld. CIT(A) that no evidence was found during the course of search so as to warrant an addition u/s 2(22)(e) of the Act. The ld. CIT(A) held that the additions need not be restricted only to the seized material. The Tribunal concluded that: ‘If some incriminating material is found in respect of such assessment years for which the assessment is not pending, then, the total income would be determined by considering the originally determined income plus income emanating from the incriminating material found during the course of search’. That is how, the additions made u/s 2(22)(e), which were not based on any incriminating material found during the course of search, were held to be unsustainable in law and, hence, deleted. The Hon'ble High Court approved the view taken by the Tribunal. It summarized the legal position in para 37 of its judgment as under :-
`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 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 mandatorily 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 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.” 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.’ 5
It is evident from the ratio of the above judgment that once a search takes place u/s 132 of the Act, the assessee is obliged to file returns for the six assessment years immediately preceding the previous year relevant to the assessment year in which the search took place. In so far as the completed assessments as on the date of the search are concerned, the same are to be repeated as increased by additions, only if, based on incriminating material found during the course of search. In other words, if no incriminating material is found during the course of search, then, the amount of total income determined under the earlier completed assessments is to be adopted in a fresh assessments u/s 153A without making any further addition.
Adverting to the facts of the instant case, we find that the assessment year 2007-08 under consideration falls in the category of `completed assessments’. 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 the creditor in respect of whom addition of Rs.24.00 lac was made. In that view of the matter, the assessment cannot embrace any fresh 6 disallowance otherwise than that supported by any incriminating material found during the course of search. Respectfully following the judgment of the Hon’ble jurisdictional High Court in Kabul Chawla (supra), we hold that the ld. CIT(A) was not justified in sustaining the addition of Rs.24.00 lac, which is hereby deleted.
In the result, the appeal is allowed.
The order pronounced in the open court on 17.08.2018.