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Income Tax Appellate Tribunal, DELHI BENCHES “B”: NEW DELHI
Before: SHRI BHAVNESH SAINI & SHRI L.P. SAHU
Date of Hearing : 04.12.2017 Date of Pronouncement : 07.12.2017 ORDER PER BHAVNESH SAINI, J.M.
This appeal by the Revenue has been directed against the order of the Ld. CIT(A)-30, New Delhi, dated 25th January, 2016, for the A.Y. 2007-2008, challenging the deletion of addition under section 68 of the I.T. Act, 1961, on account of unexplained cash credit.
Briefly, the facts of the case are that a search and seizure operation under section 132 of the I.T. Act, was initiated by the 2 ITA.No.2041/Del./2016 Shri Ankush Saluja Investigation Wing of the Department on 12th January, 2011 in Saluja group of cases. Cash and jewellery belonging to the assessee were found and seized from the residence of assessee’s father Shri Vinod Saluja in whose name search warrant of authorisation was issued. The A.O. accordingly, issued notice under section 153C r.w.s.
153A of the I.T. Act. The assessee in response to the said notice, filed return of income declaring income of Rs.4,97,60,870. The A.O. during the assessment proceedings, found that assessee has taken unsecured loans from different parties. The A.O. after considering the explanation of assessee treated the unsecured loans in a sum of Rs.11,90,57,300 as unexplained under section 68 of the I.T. Act and made the addition. The assessment was completed under section 153C r.w.s.153A of the I.T. Act, dated 14th March, 2014.
The assessee challenged the aforesaid addition before the Ld. CIT(A) and it was explained before the Ld. CIT(A) that no addition can be made in the absence of recovery of any incriminating material during the course of search and seizure operation. The assessee relied upon the decision of Hon’ble Delhi High Court in the case of CIT vs. Kabul Chawla 380 ITR 573 (Del.) and submitted that in this 3 ITA.No.2041/Del./2016 Shri Ankush Saluja case original assessment had already framed under section 143(3) of the I.T. Act. Therefore, in the absence of recovery of any incriminating material of the unexplained cash credit, no addition could be made because no assessment was pending on the date of the search. The Ld. CIT(A) considering the explanation of assessee in the light of material on record, deleted the addition following the decision of the Hon’ble Delhi High court in the case of Kabul Chawla (supra). The findings of the Ld. CIT(A) in paras 5.3 and 5.4 of the order are reproduced as under :
5.3 “Findings: The findings are as under :-
5.4 I have carefully considered assessment order, written submissions, case laws relied upon and oral arguments of Ld. AR. The objections/arguments of the appellant, are discussed as under:-
(i) It has been submitted by the Appellant that the original assessment u/s 143(3) was completed on 18.12.2009, consequent of search and seizure action u/s 132 on 12.01.2012. In the assessment order, no addition was made and the assessment was completed at returned income of Rs.4,97,60,866/-.
4 ITA.No.2041/Del./2016 Shri Ankush Saluja However, in the subsequent search and seizure action u/s 132 of the Act on 12.01.2012, no incriminating document was found. It has been further submitted that the earlier assessment u/s 143(3), was completed on 18.12.2009, before initiation of action u/s 132 on 12.01.2012 and therefore, the assessment was not abated at the time of initiation of second search on 12.01.2012, consequence of which, the assessment order passed by the A.O. on 14.3.2014, is challenged in this appeal.
(ii) It has been further submitted by the Appellant that subsequent to the search and seizure action u/s 132 of the act, assessment u/s 153A/153C was completed on 14.3.2014, at total income of Rs.16,88,18,170/-, after making addition u/s 68 as unexplained cash credit on account of unsecured loan, but without referring any incriminating document found/seized during the search and seizure action u/s 132. Therefore, it is submitted that addition made by the A.O., is without any jurisdiction for making such illegal and untenable addition u/s 68 of the Act. In view of the above facts, it is submitted by the appellant that decision of the Hon’ble jurisdictional High Court of Delhi, in the case of CIT vs. Kabul Chawla 61 Taxmann.com 412 (Del.), is squarely applicable to the facts of the appellant.
5 ITA.No.2041/Del./2016 Shri Ankush Saluja CONCLUSION: In view of the above, it is clear that:
(a) The original assessment order dated 18.12.2009, passed u/s 143(3), was completed before the initiation of search and seizure action u/s 132, on 12.01.2012. Therefore, I hold that no assessment/ reassessment proceedings, were abated as on 12.01.2012 i.e. the date of initiation of action u/s 132 of the Act.. (b) It is also clear from the assessment order that the addition made by the A.O. u/s 68, is not based on any incriminating document found/seized during the search action u/s 132 and therefore, I hold that the A.O. has no jurisdiction to make an addition u/s 68, while passing order u/s 153A/153C. This view is also supported by the ratio laid down by the Hon'ble Jurisdictional High Court of Delhi, in the case of C1T Vs. Kabul Chawla 61 Taxmann.com 412 (Del), which is squarely applicable to the facts of the appellant. In view of the above, I agree with the arguments of the appellant and therefore, addition made by the A.O. u/s 68, in absence of any incriminating document/evidence, cannot be sustained.
Accordingly, ground no. 3 and 8, are hereby, allowed.”
6 ITA.No.2041/Del./2016 Shri Ankush Saluja 4. The Ld. D.R. relied upon the order of the A.O. and also filed written submissions in which it is briefly highlighted that the provisions of Sections 153A/153C are clear and did not mandate requirement of incriminating documents for the purpose of finalising the assessment or re-assessment under the above provisions. The Ld. D.R. submitted that the tax statute should be interpreted strictly.
The Ld. D.R. submitted that the other High Courts have held that there is no need for recovery of any incriminating material during the course of search and relied upon the decision of the Allahabad High Court in the case of Raj Kumar Arora dated 11th July, 2014 in ITA.No.56 of 2011, decision of Kerala High Court in the case of E.N.
Gopakumar vs. CIT (2016) 75 taxmann.com 215, decision of Allahabad High Court in the case of CIT vs. Kesarwani Zarda Bhandar Sahson ITA.No.270 of 2014, decision of Kerala High Court in the case of CIT vs. St. Francis Clay Décor Tiles 385 ITR 624 and decision of Hon’ble Delhi High Court in the case of Smt. Dayawanti Gupta vs. CIT 390 ITR 496. The Ld. D.R. submitted that the department has not accepted the decision of Hon’ble Delhi High
7 ITA.No.2041/Del./2016 Shri Ankush Saluja Court in the case of Kabul Chawla (supra) and SLP is pending before the Hon’ble Supreme Court.
However, none appeared on behalf of the assessee despite notifying the date of hearing through registered post.
We have considered the submissions of the Ld. D.R. and perused the material on record. The Hon’ble Delhi High Court in the case of CIT vs. Kabul Chawla 380 ITR 573 held as under :
“Completed assessments can be interfered with by the A.O. 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”
6.1. The Hon’ble Delhi High Court in its recent decision in the case of Pr. CIT vs. Meeta Gutgutia 395 ITR 526 considering its earlier decisionS in the case of Kabul Chawla (supra) and Smt. Dayawanti Gupta vs. CIT (supra) held as under :
“69. What weighed with the Court in the above decision was the “habitual concealing of income and indulging in clandestine
8 ITA.No.2041/Del./2016 Shri Ankush Saluja operations” and that a person indulging in such activities “can hardly be accepted to maintain meticulous books or records for long.” These factors are absent in the present case. There was no justification at all for the AO to proceed on surmises and estimates without there being any incriminating material qua the AY for which he sought to make additions of franchisee commission.
The above distinguishing factors in Dayawanti Gupta (supra), therefore, do not detract from the settled legal position in Kabul Chawla (supra) which has been followed not only by this Court in its subsequent decisions but also by several other High Courts.
For all of the aforementioned reasons, the Court is of the view that the ITAT was justified in holding that the invocation of Section 153A by the Revenue for the AYs 2000-01 to 2003-04 was without any legal basis as there was no incriminating material qua each of those AYs.
Conclusion 72. To conclude : (i)Question (i) is answered in the negative i.e., in favour of the Assessee and against the Revenue. It is held that in the facts and circumstances, the Revenue was not justified in invoking Section 153 A of the Act against the Assessee in relation to AYs 2000-01 to AYs 2003-04.”
9 ITA.No.2041/Del./2016 Shri Ankush Saluja 7. The assessee submitted before Ld. CIT(A) that original return of income was filed under section 139(1) of the Act on 30th May, 2008 which was assessed under section 143(3) on returned income of Rs.4,97,60,866. It is, therefore, clear that prior to the search the assessment under section 143(3) was completed. It is also an admitted fact that during the course of search and seizure no incriminating evidence as regards the addition under section 68 of the act were found and seized during the course of search. Therefore, no assessment/re-assessment were pending as on the date of search.
In the absence of any incriminating material during the course of search, the Ld. CIT(A) was justified in relying upon the decision of the Hon’ble Delhi High Court in the case of Kabul Chawla (supra) for the purpose of deleting the addition. Merely because departmental SLP is pending before the Hon’ble High Court is no ground to take a contrary decision against the decision of the jurisdictional Delhi High Court. We may also refer to judgment of Hon’ble Gujrat High Court in the case of Vijay Bhai N. Chandrani vs. ACIT 333 ITR 436 in which it was held as under :
10 ITA.No.2041/Del./2016 Shri Ankush Saluja “Held, Allowing the petition, that admittedly, three loose papers recovered during the course of search proceedings did not belong to the petitioner. It was not the case of the Revenue that three documents were in hand-writing of the petitioner. In the circumstances, when the condition precedent for issuance of notice was not fulfilled, action taken under section 153C of the Act stood vitiated.”
In the present case, even no incriminating document was found during the course of search so as to make the addition under section 68 of the I.T. Act on account of unexplained cash credit. The Ld. CIT(A) in view of these findings did not decide the issue on merit.
The above discussion clearly show that department has no case for interference. The Ld. D.R. has not pointed out any infirmity in the order of the Ld. CIT(A).
In the result, appeal of the department stands dismissed.
Order pronounced in the open Court.