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Income Tax Appellate Tribunal, DELHI BENCH: ‘A’ NEW DELHI
Before: SHRI N. K. SAINI & MS SUCHITRA KAMBLE
The appeal has been filed by the assessee against the order dated 20/1/2014 passed by CIT(A)-XXXII, New Delhi for the Assessment Year 2007- 08.
The grounds of appeal are as under:- ‘1. On the facts and circumstances of the case and in law, the addition of Rs. 46,19,000/- made by the Assessing Officer on account of alleged bogus purchase is beyond the jurisdiction of provisions of Section 153A of Income Tax Act, 1961 and Commissioner of Income Tax (Appeals) erred in not holding so.
2. On the facts and circumstances of the case and in law, the Commissioner of Income Tax (Appeals) erred in confirming the addition of Rs.46,19,000/- made by the Assessing Officer on account of alleged bogus purchases.”
3. The assessee firm is engaged in the business of manufacturing and export of artificial jewellery. Although the assessee’s registered address is ¾ South Industrial Area, Kirti Nagar, New Delhi, the main business activity of the firm is carried out from 49, Udyog Vihar Ph-IV, Gurgaon. Besides, the assessee firm is also using Plot No. 110, Sector 8, Manesar, Gurgaon, Haryana as go down for storing the goods. A search and seizure operation u/s 132 of the Act, 1961 was conducted by the Investigation Wing of the Department in M/s Tegh group of cases on 26/4/2010 and simultaneously the appellant’s business premises at 49, Udyog Vihar, Phae-IV, Gurgaon, Haryana, was also covered u/s 132(1) of the Income Tax Act, 1961. A notice u/s 153A of the IT Act, 1961 dated 13/4/2011 was issued and served upon the assessee. In response to which the assessee filed return on 2/5/2011 declaring a total income of Rs.38,07,540/-. Subsequently, notices u/s 142(1) along with a detailed questionnaire and u/s 143(2) were issued and served upon the assessee. In response to the same, the ARs of the assessee attended the assessment proceedings from time to time and file the necessary details, information and documents which were examined by the Assessing Officer and the case was discussed. Thereupon, the assessment was completed in terms of an order u/s 153A read with Section 143(3) dated 22/3/2013 at a total income of Rs.84,26,540/- as against the returned income of Rs.38,07,540/- wherein the Assessing Officer made an addition of Rs. 46,19,000/- on account of bogus purchases made through accommodation entries.
The assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee whereby confirming the addition of Rs.46,19,000/- on account of bogus purchases.
The Ld. AR submitted that search and seizure operation u/s 132 of the Income-tax Act, 1961 is carried out in the case of the assessee on 26/4/2010 while completing the assessment u/s 153A/143(3). The Assessing Officer made the addition on account of bogus purchase. The Ld. AR submitted that the addition made by the Assessing Officer is beyond the scope of jurisdiction of Section 153A of the Act. The Ld. AR submitted that no incriminating material or evidence was found during the course of search so as to doubt the purchases. On date of search i.e. 26th April 2010 no assessment proceedings were pending for the year under consideration. The Ld. AR submitted that the Assessing Officer was not justified in disturbing the concluded assessment without there being any incriminating material found during the search. In- fact, in the entire assessment order, the Assessing Officer has not referred any seized material or other material for the year under consideration, having found. Thus, the action of the Assessing Officer was based on conjecture and surmises. Therefore, the addition made by the Assessing Officer on account of bogus purchases is not sustainable. The Ld. AR relied upon the Delhi High Court decisions in case of CIT Vs. Kabul Chawla 61 Taxman.com 412 & also PCIT Vs. Meeta Gulgutia as well as ITAT decision in case of M/s Tegh International vs. ACIT (1462 & 1463/Del/2014) order dated 27/5/2016.
The Ld. DR relied upon the order of the Assessing Officer and the CIT(A). He submitted that both the authorities are proper in making and sustaining the addition made by the Assessing Officer.
We have heard both the parties and perused the material available on record. From the order of the Assessing Officer it can be clearly seen that no incriminating material is found during the search activities. In-fact the group is engaged in the business of manufacturing and started through flag ship concerned M/s Tegh International. In-fact, the assessment was long back concluded and the same was not disputed by the Revenue authorities. The ITAT in case of M/s Tegh International (supra) has allowed the appeal of the assessee therein and by applying the ratio of the Hon’ble Delhi High Court decision in case of Kabul Chawla, the relevant findings are given in para 8 and 9 of the order dated 27.05.2016 which reads as under: “8. We have heard both the counsel and perused the relevant available with us, especially the orders of the revenue authorities and the cases referred by the Ld. Counsel of the Assessee in the shape of Paper Book. We find that the additions made by the AO are beyond the scope of section 153A of the Income Tax Act, 1961, because no incriminating material or evidence had been found during the course of search so as to doubt the purchases. It was noticed that as on the date of search i.e. 26.4.2010, no assessment proceedings were pending for the year under consideration and the AO was not justified in disturbing the concluded assessment without there being any incriminating material being found in search. In fact, in the entire assessment order, the AO has not referred to any seized material or other material for the year under consideration having being found during the course of search in the case of assessee, leave alone the question of any incriminating material for the year under appeal. Therefore, in out considered opinion, the action of the AO is based upon conjectures and surmises and hence, the additions made on the assessed bogus purchases is not sustainable in the eyes of law, because this issue in dispute is now no more res-integra, in view of the decision dated 28.8.2015 of the Hon’ble Delhi High Court in the case of CIT vs. Kabul Chawla passed in and 713/2014 wherein the Hon’ble High Court of Delhi 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 ITA Nos. 707,709 and 713 of 2014 of 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 mandatory 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 icnoem would be brought to tax” iv. Although Section 153A 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 709 and 713 of 2014 of 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 153A 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 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.
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.”
Respectfully following the precedent of the Hon’ble Jurisdictional High Court in the case of CIT vs. Kabul Chawla, as aforesaid, we allow the appeal of the Assessee, because AO has completed the assessment and made the addition in dispute without any incriminating material found during the search and seizure operation and the addition in this case purely based on the material already available on record. Hence, the addition in the case is deleted and the ground raised by the assessee in the appeal is allowed”.
So, respectfully following the aforesaid order in the case of M/s. Tegh International (supra) the appeal of the assessee is allowed.
In the result, the appeal of the assessee is allowed.
Order pronounced in the Open Court on 22nd November, 2017.