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Income Tax Appellate Tribunal, DELHI ‘E’ BENCH,
Before: SMT DIVA SINGH, & SHRI N.K. BILLAIYA
PER N.K. BILLAIYA, ACCOUNTANT MEMBER,
This appeal by the assessee is preferred against the order of the Commissioner of Income Tax [Appeals] –XXIII New Delhi dated 10.04.2015 pertaining to assessment year 2008-09.
The sum and substance of the grievance of the assessee is that the ld. CIT(A) erred in upholding the assessment framed u/s 153A of the Income-tax Act, 1961 [hereinafter referred to as 'the Act' for short] despite the fact that there was no incriminating document was found during the course of search. The ld. CIT(A) further erred in upholding the disallowance of depreciation amounting to Rs. 2,42,281/.
Briefly stated, the facts of the case are that a search and seizure operation u/s 132 of the Act was conducted on 24.02.2012. Facts on record show that earlier, an assessment was framed u/s 143(3) of the Act for A.Y under consideration vide order dated 20.12.2010 and the returned income of Rs. 1,51,19,520/- was assed at Rs. 9,85,43,381/-.
We have given careful consideration to the orders of the authorities below. As mentioned elsewhere, the date of search is 24.12.2012 and the assessment was framed u/s 143(3) of the Act on 20.12.2010. Thus, the completed assessment can be reopened and reframed u/s 153A of the Act only when some incriminating material is found at the time of search. For this proposition, we find support from the ratio laid down by the Hon'ble Delhi High Court in the case of Kabul Chawla 380 ITR 573 wherein the Hon'ble High Court has 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 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.
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.”
As is evident from the assessment order, the disallowance of depreciation has nothing to do with the search and seizure proceedings and is not based on any incriminating material relating to the search.
The ld. DR could not point out any incriminating material found at the time of search nor we find anything in the assessment order. Therefore, it can be safely concluded that even the ld. DR was unable to refer to any incriminating material.
Respectfully following the ratio laid down by the Hon'ble Jurisdictional High Court in the case of Kabul Chawla [supra], we set aside the order of the ld. CIT(A) and direct the Assessing Officer to delete the disallowance of Rs. 2,42,281/-.
In the result, the appeal filed by the assessee in is allowed.
The order is pronounced in the open court on 16.08.2018.