DCIT, CENTRAL CIRCLE-18, NEW DELHI vs. GURU PRASAD SHARMA, GHAZIABAD
Facts
A search and seizure operation was conducted on M/s NKG group, including the assessees, for assessment years 2008-09 to 2010-11. The Assessing Officer made additions based on audit reports and discrepancies, and the CIT(A) further estimated commission income, even though assessments for these years were completed or unabated at the time of search. The assessee contested these additions, arguing a lack of incriminating material.
Held
The Tribunal, relying on the Supreme Court's ruling in PCIT vs. Abhisar Buildwell (P) Ltd., held that no additions can be made in completed/unabated assessments under section 153A of the Income-tax Act without incriminating material found during the search. As no such material was found or referred to, all additions made by the Assessing Officer and the CIT(A) were deleted.
Key Issues
Can additions be sustained in completed/unabated assessments under section 153A of the Income-tax Act when no incriminating material is found during a search and seizure operation?
Sections Cited
132, 153A, 144, 142(2A), 147, 148, 132A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH “B”: NEW DELHI
Before: SHRI SAKTIJIT DEY & SHRI NAVEEN CHANDRA
1 ITA 713/Del/2019 & ors. C.O. nos. 61/Del/2019 & ors. IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “B”: NEW DELHI
BEFORE SHRI SAKTIJIT DEY, VICE PRESIDENT AND SHRI NAVEEN CHANDRA, ACCOUNTANT MEMBER
ITA Nos. 713, 714 & 715/DEL/2019 (Asstt. Yrs: 2008-09, 2009-10 & 2010-11)
DCIT, Central Circle-18, Vs Dheer Chand Sharma New Delhi. B-373, Swarajyanti Puram, Ghaziabad-201002 PAN: BDLPS 0502 C APPELLANT RESPONDENT
AND C.O. nos. 61, 62 & 63/Del/2019 ( In ITA Nos. 713, 714 & 715/DEL/2019) (Asstt. Yrs: 2008-09, 2009-10 & 2010-11)
Dheer Chand Sharma Vs DCIT, Central Circle-18, B-373, Swarajyanti Puram, New Delhi. Ghaziabad-201002 PAN: BDLPS 0502 C CROSS OBJECTOR RESPONDENT
AND ITA Nos. 718, 719 & 720/DEL/2019 (Asstt. Yrs: 2008-09, 2009-10 & 2010-11)
DCIT, Central Circle-18, Vs Shri Guru Prasad Sharma New Delhi. B-373, Swarajyanti Puram, Ghaziabad-201002 PAN: AAACN 1659 D APPELLANT RESPONDENT
2 ITA 713/Del/2019 & ors. C.O. nos. 61/Del/2019 & ors. AND C.O. nos. 66, 67 & 68/Del/2019 ( In ITA Nos. 718, 719 & 720/DEL/2019) (Asstt. Yrs: 2008-09, 2009-10 & 2010-11)
Shri Guru Prasad Sharma Vs DCIT, Central Circle-18, B-373, Swarajyanti Puram, New Delhi. Ghaziabad-201002 PAN: AAACN 1659 D CROSS OBJECTOR RESPONDENT
AND ITA Nos. 723, 724 & 725/DEL/2019 (Asstt. Yrs: 2008-09, 2009-10 & 2010-11)
DCIT, Central Circle-18, Vs Smt. Geeta Sharma New Delhi. B-373, Swarajyanti Puram, Ghaziabad-201002 PAN: AAACN 1659 D APPELLANT RESPONDENT
AND
C.O. nos. 71, 72 & 73/Del/2019 ( In ITA Nos. 723, 724 & 725/DEL/2019) (Asstt. Yrs: 2008-09, 2009-10 & 2010-11)
Smt. Geeta Sharma Vs DCIT, Central Circle-18, B-373, Swarajyanti Puram, New Delhi. Ghaziabad-201002 PAN: AAACN 1659 D CROSS OBJECTOR RESPONDENT
3 ITA 713/Del/2019 & ors. C.O. nos. 61/Del/2019 & ors. AND
ITA Nos. 710, & 711/DEL/2019 (Asstt. Yrs: 2009-10 & 2010-11)
DCIT, Central Circle-18, Vs Vinay Sharma New Delhi. B-373, Swarajyanti Puram, Ghaziabad-201002 PAN: BDQPS 4406 L APPELLANT RESPONDENT
AND
C.O. nos. 58 & 59/Del/2019 ( In ITA Nos. 710 & 711/DEL/2019) (Asstt. Yrs: 2009-10 & 2010-11)
Vinay Sharma Vs DCIT, Central Circle-18, B-373, Swarajyanti Puram, New Delhi. Ghaziabad-201002 PAN: BDQPS 4406 L
CROSS OBJECTOR RESPONDENT
Assessee represented by Shri Anand Chaudhuri, Adv. ; Shri Deepanshu Mehta, Adv.; & Shri Kumailabbas, Adv.
Department represented by Shri T. James Singson, CIT(DR)
Date of hearing 29.05.2024
Date of pronouncement 31.05.2024
4 ITA 713/Del/2019 & ors. C.O. nos. 61/Del/2019 & ors. O R D E R PER BENCH: This bunch of 22 appeals and cross-objections, respectively, by the Revenue
and the assessees, arise out of separate orders of learned Commissioner of Income
Tax (Appeals)-29, New Delhi, pertaining to assessment years 2008-09, 2009-10 &
2010-11. Since, the issues in all these appeals are common and culminate out of
common search and seizure operation, carried out u/s 132 of the Income-tax Act,
1961, the appeals have been clubbed together and disposed of in a consolidated
order, for the sake of convenience.
The grounds raised in the appeals and cross objections are more or less
identical, except variation in figures. Facts relating to the issues in dispute are also
more or less identical. Therefore, we take up ITA no. 713/Del/2019 and C.O. no.
61/Del/2019 as the lead cases.
In so far as the cross objection is concerned, the assessee in addition to the
grounds raised in the memo of appeal has subsequently filed revised grounds
which are as under:
"1. The Ld.CIT(A) has erred in law by not quashing the impugned assessment order passed under section 153A/144 of the Income-tax Act, 1961 in the absence of any incriminating material seized during search on Assessee/Respondent and the same also not being based on any seized incriminating material.
5 ITA 713/Del/2019 & ors. C.O. nos. 61/Del/2019 & ors. 2. The Ld.CIT(A) has erred in law by making the impugned addition of alleged commission income of the Assessee/Respondent as a new source of income despite said income being outside the subject-matter of impugned assessment order. 3. Without prejudice to Ground no.2 above, the Ld.CIT(A) has erred in law and facts by making the addition of alleged commission income in the absence of any evidence or material to establish that the said income was earned by the Assessee/Respondent. 4. Without prejudice to Ground no.3 and 4 above, the Ld.CIT(A) has erred in law in arbitrarily determining the rate of alleged commission income at 2.5 percent and the same being contrary to settled range between 0.15 and 0.5 percent as per case law precedent. 5. The Ld.CIT(A) has rightly deleted the other additions made against the Assessee/Respondent vide impugned assessment order."
In ground no. 1 of revised grounds, the assessee has raised a legal issue,
challenging the validity of the additions made in the assessment order passed u/s
153A/144 of the Act.
At the outset learned Departmental Representative submitted that this
ground was not raised by the assessee originally, hence at this stage such ground
should not be admitted.
Having considered the submissions of the parties, we are of the view that the
issue raised in ground no. 1 is a purely legal and jurisdictional issue going to the
root of the matter. Moreover, facts relevant for deciding this issue, are available on
record, hence do not require investigation into fresh facts. It is further noted, the
6 ITA 713/Del/2019 & ors. C.O. nos. 61/Del/2019 & ors. assessee had raised this issue even before learned First Appellate Authority.
Therefore, the issue arises out of the order of the First Appellate Authority. In view
of the aforesaid, we are inclined to admit the ground raised by the assessee. Since
the issue raised in this ground is a legal and jurisdictional issue, we deem it
appropriate to address this issue at the very outset.
Relevant facts, necessary for deciding this issue are stated hereinafter
briefly.
The assessees hitherto are individuals. A search and seizure operation u/s
132 of the Act was carried out on 23.08.2012 on M/s NKG group of cases. The
assessees in appeal were also covered under the said search and seizure operation.
Consequent to search and seizure operation, the Assessing Officer initiated
proceedings u/s 153A of the Act calling upon the assessees to file their returns of
income. In compliance with the notices issued u/s 153A of the Act, the assessees
filed their respective returns of income. In course of assessment proceedings, in
response to the queries raised by the Assessing Officer, the assessees furnished
their books of account, computation of income, balance-sheet, profit & loss
account, audit report, bank statement and various other documents. After
examining the documents filed, the Assessing Officer, as alleged, found various
discrepancies in them. Hence, he made reference for special audit u/s 142(2A) of
7 ITA 713/Del/2019 & ors. C.O. nos. 61/Del/2019 & ors. the Act. Based on the Special Audit report the Assessing Officer ultimately
concluded that the books of account are not reliable, accordingly, rejected them.
Further, alleging non-compliance on the part of the assessee, he proceeded to
complete the assessment u/s 153A read with section 144 of the Act. While doing so
he made a number of additions on account of bogus purchases, unexplained cash
credit, disallowance of expenses etc. Ultimately he concluded the assessments in
like manner for all the assessees under appeal.
Against the assessment orders so passed, assessees preferred appeals before
learned First Appellate Authority. While deciding the appeals, learned First
Appellate Authority held that the Assessing Officer has found the assessees to be
only entry operators, providing accommodation entries to NKG group without
carrying out any real trading activity. Therefore, he held that no addition on
account of bogus purchases, unexplained cash credit could have been made.
Thereafter, he proceeded to estimate commission income @ 2.5% on the total
accommodation entries provided to M/s NKG Infrastructure Ltd., in the form of
sales.
Before us, it is the specific case of the assessee that the additions made by
the Assessing Officer were not based on any incriminating material found in
course of search and seizure operation. Learned counsel for the assessee submitted
8 ITA 713/Del/2019 & ors. C.O. nos. 61/Del/2019 & ors. that on the date of search, assessments in respect of impugned assessment years
stood completed. Hence, there was no abetment of assessment on the date of
search. He submitted that in a case of unabated assessment, the Assessing Officer
has no power to make additoins, not based on incriminating material found as a
result of search. Drawing our attention to the assessment order, he submitted that
nowhere in the assessment order, the Assessing Officer has referred to a single
piece of incriminating material. He submitted, even the panchnama does not reveal
seizure of any document or valuables. Thus, he submitted, the additions having
been made in absence of any incriminating material, are not sustainable. In support
of such contention, learned counsel relied upon the judgment of Hon’ble Supreme
Court in the case of PCIT vs. Abhisar Buildwell (P) Ltd. [2023] 149 taxmann.com
399 (SC).
The learned Departmental Representative, though agreed that neither the
assessment order nor the panchnama refer to any seized/incriminating material,
however, he submitted, there could be some incriminating material found as a
result of search on NKG group leading to the additions made by the Assessing
Officer.
We have considered rival submissions and perused the material available on
record. We have also applied our mind to the judicial precedents, cited before us.
9 ITA 713/Del/2019 & ors. C.O. nos. 61/Del/2019 & ors. As far as primary facts are concerned, there is no dispute that as on the date of
search, no assessment proceedings for the impugned assessment years were
pending. Thus, it is a case of unabated assessment. On a careful scrutiny of the
impugned assessment order, it is observed that the Assessing Officer has not
referred to any incriminating material qua the additions made. On the contrary, the
additions have been made either on the basis of documents furnished by the
assessee in course of assessment proceedings including bank statements or based
on the special audit report. There is not even a single reference to any
incriminating material found as a result of search in the assessment order.
Pertinently, on perusal of panchnama prepared at the time of search and
seizure operation, a copy of which is placed at page 60 of the paper book, it is
observed that it does not refer to any incriminating material found in course of
search and seizure operation. Thus, it is established on record that the additions
made by the Assessing Officer were not based on any incriminating material found
as a result of search and seizure operations. In fact, learned First Appellate
Authority has given a completely new dimension to the case by deleting the
additions made by the Assessing Officer and making a completely new addition of
commission income, that too, on purely estimate basis by applying the rate of 2.5%
on the alleged accommodation entries provided to M/s NKG Infrastructure Ltd., by
way of sales.
10 ITA 713/Del/2019 & ors. C.O. nos. 61/Del/2019 & ors. 14. Thus, it is a proven fact on record that no addition in the assessment order
was based on any incriminating material found as a result of search. In the above
said factual background, the issue that arises for our consideration is, whether in
case of unabated assessment any addition can be made in assessment order passed
u/s 153A of the Act without any incriminating material found as a result of search.
In our view, the issue is no more res-integra by virtue of law laid down by the
Hon’ble Apex Court in the case of PCIT vs. Abhisar Buildwell (P) Ltd. (supra).
While affirming the decision of the Hon’ble Delhi High Court in the case of CIT
vs. Kabul Chawla [2015] 61 taxmann.com 412, the Hon’ble Supreme Court has
laid down following ratio:
“(i) that in case of search under section 132 or requisition under section 132A, the AO assumes the jurisdiction for block assessment under section 153A: (ii) all pending assessments/reassessments shall stand abated; (iii) in case any incriminating material is found/unearthed, even, in case of unabated/completed assessments, the AO would assume the jurisdiction to assess or reassess the 'total income' taking into consideration the incriminating material unearthed during the search and the other material available with the AO including the income declared in the returns; and (iv) in case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabated assessments. Meaning thereby, in respect of completed/unabated assessments, no addition can be made by the AO in absence of any incriminating material found during the course of search under section 132 or requisition under section 132A of the Act, 1961. However, the completed/unabated assessments can be re-opened by the AO in exercise of powers under sections 147/148 of the Act, subject to fulfilment
11 ITA 713/Del/2019 & ors. C.O. nos. 61/Del/2019 & ors. of the conditions as envisaged/mentioned under sections 147/148 of the Act and those powers are saved.”
As could be seen from the observations of the Hon’ble Supreme Court in
para (iv) above, the Assessing Officer cannot assess or reassess the income relating
to completed/unabated assessment, in case no incriminating material is unearthed
during the search. Thus, the above said ratio laid down by the Hon’ble Supreme
Court clinches the issue in favour of the assessee. Once it is established on record
that the additions made by the Assessing Officer are not with reference to any
incriminating material found as a result of search, such additions cannot survive.
That being the factual and legal position we have no hesitation in deleting the
additions made by the Assessing Officer.
For the very same reasons, the addition of commission income directed to be
made by learned First Appellate Authority must also stand deleted as it is not
based on any incriminating material found as a result of search and seizure
operation. Ground no. 1 is allowed.
In view of our decision in ground no. 1 in assessee’s cross-objection, appeal
filed by the Revenue becomes redundant.
In the result, cross objection stands partly allowed, whereas appeal by the
Revenue is dismissed.
12 ITA 713/Del/2019 & ors. C.O. nos. 61/Del/2019 & ors. 19. Our decision above will apply mutatis mutandis to all other appeals and
cross-objections.
Resultantly, cross objections by the assessee are partly allowed and
Revenue’s appeals are dismissed.
Order pronounced in open court on 31.05.2024.
Sd/- Sd/- (NAVEEN CHANDRA) (SAKTIJIT DEY ) ACCOUNTANT MEMBER VICE PRESIDENT Dated: 31.05.2024. *MP* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI
