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Income Tax Appellate Tribunal, DELHI ‘E’ BENCH,
Before: SHRI N.K. BILLAIYA, & SHRI K.N. CHARY
PER N.K. BILLAIYA, ACCOUNTANT MEMBER,
This appeal by the Revenue and cross objection by the assessee are directed against the order dated 03.08.2015 of Commissioner of Income Tax [Appeals] - 23, New Delhi pertaining to assessment year 2006-07.
The sole grievance of the Revenue is that the CIT(A) erred in deleting the addition of Rs. 3 crores made by the AO on account of share capital/premium.
In its cross objection, the assessee has alleged that the CIT(A) ought to have quashed the assessment order framed u/s 153A of the Income-tax Act, 1961 [hereinafter referred to as 'the Act'] since no document, much less incriminating material was found during the course of search.
Since the cross objection by the assessee goes to the root of the matter, we take up the cross objection first.
Briefly stated, the facts of the case are that a search and seizure operation u/s 132 of the Act was carried out in the case of SMC Power Generation Ltd belonging to SMC Group on 04.08.2011. The A.Y before us is A.Y 2006-07. It would be pertinent to mention here that a search and seizure operation was carried out in the case of the assessee on 06.03.2006 also. Earlier, an assessment was framed u/s 143(3) of the Act for A.Y under consideration vide order dated 28.12.2007. In the order so passed, no adverse inferences have been made regarding share capital. While framing the assessment order, the AO has also called for the assessee to prove the identity, credit worthiness and genuineness of the share capital issued during the year. After verifying the details and on being satisfied, the AO framed the assessment u/s 143(3) of the Act vide order dated 28.12.2007.
During the course of search operation conducted on 04.08.2011, no incriminating documents in respect of share capital have been found by the AO. The assessment has been framed u/s 153A of the Act by revisiting the share application money amounting to Rs. 3 crores which was considered in detail while framing the assessment u/s 143(3) of the Act vide order dated 28.12.2007.
In our considered opinion, the ratio laid down by the Hon'ble Delhi High Court in the case of Kabul Chawla 380 ITR 573 clearly applies 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.”
The ld. DR tried to support the findings of the lower authorities by drawing support from the judgment of the Hon'ble Supreme Court in the case of Jayprakash Singh [1996] AIR 1303. However, this judgment is misplaced in as much as in this case, the Hon'ble Supreme Court was seized with the following question:
"Whether on the facts and in the circumstances of the case, the Tribunal was correct in holding that non-service of notice under section 143(2) of the Income-tax Act, 1961, against nine out of the ten legal representatives of the deceased Shri B.N. Singh did not invalidate the assessment orders of the Income-tax Officer relating to the assessment years 1965-66, 1966- 67 and 1967-68 and that it was at best an irregularity for which the Appellate Assistant Commissioner was justified in setting aside the assessments and it was not a case fit for cancellation of the assessments"?
The question itself shows that this judgment will do no good to the Revenue on the facts of the case in hand.
Considering the past assessment history as mentioned elsewhere and considering the fact that no incriminating material was found at the time of search and drawing support from the judgment of the Hon'ble Delhi High Court in the case of Kabul Chawla [supra], we have no hesitation to quash the assessment order framed u/s 153A of the Act.
In the result, the cross objection filed by the assessee is allowed whereas the appeal of the Revenue is dismissed.
The order is pronounced in the open court on 13.08.2018.