ACIT, NEW DELHI vs. M/S. SHEELA FOAM PVT. LTD., GHAZIABAD

Common grounds are raised in these appeals which were heard together, so, these are being disposed off by this consolidated order for the sake of convenience and brevity.

The grounds raised

2. On the facts and circumstances of the case, the CIT(A) has erred in holding that there cannot be addition u/s 153A if there is no incriminating material.

Being aggrieved the assessee carried the matter to the ld. CIT(A) and submitted that the additions/disallowances made by the 3 & 1677/Del/2016 Sheela Foam Pvt. Ltd. AO were beyond jurisdiction for the reasons that those were not based on any incriminating material and that the additions/disallowances repeated in the assessment order had resulted in multiplicity of the appellate proceedings on identical issues. It was further stated that Section 153A of the Act clearly provides for a specific demarcation in respect of cases which had abated assessment on account of initiation of search proceedings u/s 132 of the Act and that the aforesaid Section provides for abatement of proceedings only in respect of assessment which are pending before the AO as on the date of initiation of search.

The ld. CIT(A) after considering the submissions of the assessee held that there was nothing which could have pursued the AO to reopen the completed assessment, and that the impugned assessment u/s 153A of the Act having been completed dehors incriminating material/documents being found/seized during the course of search conducted u/s 132 of the Act. Therefore, the AO was not within his jurisdiction in repeating the additions/disallowances merely for the purpose of maintaining consistency. He also held that the action of the AO in repeating the additions/disallowances made in the original assessment order passed u/s 143(3) of the Act was illegal beyond jurisdiction and bad in law. The reliance was placed on the judgment of the Hon’ble Jurisdictional High Court in the case of CIT Vs Kabul Chawla (2015) 234 Taxman 300.

In her rival submissions, the ld. Counsel for the assessee reiterated the submissions made before the authorities below and further submitted that the issue under consideration is squarely covered by the judgment of the Hon’ble Jurisdictional High Court in the case of CIT Vs Kabul Chawla (2016) 380 ITR 573 (Del).

We have considered the submissions of both the parties and perused the material available on the record. In the present case, it is an admitted fact that the assessment u/s 143(3) of the Act was completed by the AO on 24.12.2010 and the search took place on 28.11.2011. Therefore, the assessment already completed u/s 143(3) of the Act was not abated and attained finality. The AO repeated the additions/disallowances which were made while framing the assessment u/s 153A r.w.s. 143(3) of the Act which were earlier made in the original assessment framed u/s 143(3) of the Act, which clearly shows that no incriminating material was found during the course of search. 10. On a identical issue, the Hon’ble Jurisdictional High Court in the case of CIT Vs Kabul Chawla (2016) 380 ITR 573 (supra) 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 5 & 1677/Del/2016 Sheela Foam Pvt. Ltd. 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 6 & 1677/Del/2016 Sheela Foam Pvt. Ltd. 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.”

We, therefore, by keeping in view the ratio laid down by the Hon’ble Jurisdictional High Court, do not see any valid ground to interfere with the findings of the ld. CIT(A) and accordingly do not see any merit in this appeal of the department.

In for the assessment year 2006-07, the issues involved are identical which were there in 2008-09. Therefore, our findings given in former part of this order shall apply mutatis mutandis for both the assessment years.

In the result, the appeals of the department are dismissed. (Order Pronounced in the Court on 31/05/2018)