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Income Tax Appellate Tribunal, DELHI BENCH “G”, NEW DELHI
Before: SHRI H.S. SIDHU & SHRI PRASHANT MAHARISHI
ORDER PER H.S. SIDHU : JM The Revenue has filed the Appeal and Assessee has filed the Cross Objection against the Order dated 18.6.2014 of the Ld. CIT(A)-I, New Delhi relevant to assessment year 2008-09.
2. The grounds raised in the Revenue ‘s Appeal read as under:-
The order of the Ld. CIT(A) is not correct in law and facts.
2. On the facts and circumstances of the case the Ld. CIT(A) has erred in deleting the addition of Rs. 1,46,38,000/- made by AO on account of deemed dividend u/s. 2(22)(e) of the I.T. Act.
3. On the facts and circumstances of the case the ld. CIT(A) has erred in deleting the addition of Rs. 18,72,000/- made by the AO on account of benefit/ perquisite u/s. 2(24)(iv) of the I.T. Act.
4. The appellant craves leave to add, amend any / all the grounds of appeal before or during the course of hearing of the appeal.
3. The grounds raised in the Assessee’s Cross Objection read as under:-
1. On the facts and circumstances of the case and in law, the notice u/s 153A issued in this case is illegal & without jurisdiction and accordingly, the assessment order passed on the foundation of such notice is not sustainable and is liable to be quashed. On the facts and circumstances of the case and in law, the Commissioner of Income Tax (Appeals) should have held that the assessment order passed by the Assessing Officer is bad-in-law and void.
On the facts and circumstances of the case and in law, the initiation of assessment proceedings and issue / service of notices by the assessing officer is not in accordance with the provisions of law and accordingly the assessment order passed is liable to be quashed.
On the facts and circumstances of the case and in law, the addition of RS.1,46,38,000/- made by AO by applying
provisions of section 2(22)(e) of Income Tax Act, 1961 is totally erroneous. On the facts and circumstances of the case and in law, the assessing officer has misapplied the provisions of section 2(22)(e) of Income Tax Act, 1961.
4. On the facts and circumstances of the case and in law, the addition of RS.1,46,38,000/- made by AO by the assessing officer is beyond the scope of provision of section 153A of Income Tax Act, 1961.
On the facts and circumstances of the case and in law, the addition of Rs.18,72,000/- made by AO by applying provisions of section 2(24)(iv) of Income Tax Act, 1961 is totally erroneous. On the facts and circumstances of the case and in law, the assessing officer has misapplied the provisions of section 2(24 )(iv) of Income Tax Act, 1961.
6. On the facts and circumstances of the case and in law, the addition of Rs.18,72,000/- made by AO by the assessing officer is beyond the scope of provision of section 153A of Income Tax Act, 1961.
The appellant craves leave to add, alter, modify or delete one or more ground before or at the time of hearing of appeal.
The brief facts of the case are that a search and seizure operation u/s. 132 of the I.T. Act, 1961 in the Amarpali Group of Cases on 09/09/2010. The assessee was also covered in the search. Return declaring income of Rs. 91,10,630/- was filed on 20.8.2008. Notice u/s. 153A was issued on 20.7.2011, in response to which the assessee filed a letter dated 8.8.2011 stating that returns filed originally be treated as return in response to the said notice. Notice u/s. 142(1) with questionnaire was issued on 8.2.2012. Notice u/s. 143(2) and 142(1) of the I.T. Act, 1961 with questionnaire was issued on 12.9.2012. Further notices were issued on 29.10.2012, 8.11.2012 and 17.1.2013. The case was assessed at an income of Rs. 2,56,20,630/- after making additions vide order dated 26.3.2013 passed u/s. 153(a) r.w.s. 143(3) of the I.T.
Act, 1961.
5. Against the aforesaid assessment order dated 26.3.2013, assessee preferred an appeal before the Ld. CIT(A), who vide impugned order dated 18.6.2014 has allowed the appeal of the asseseee for statistical purposes.
Aggrieved with the order of the Ld.CIT(A), Revenue is in appeal and assessee is in Cross Objection before the Tribunal.
At the threshold, Ld. Counsel of the assessee has stated that the Cross Objection filed by the assessee has involved the legal issue and therefore, the same may be first decided. Hence, we first deal with the Assessee’s Cross Objection and adjudicate upon the legal issue.
At the threshold, Ld. Counsel of the assessee stated that the issues in dispute relating to upholding the validity of the order of assessment passed u/s. 153A on 26.3.2013, is squarely covered in favor of the assessee by the decision dated 28.8.2015 of the Hon’ble Delhi High Court passed in the case Commissioner of Income Tax vs. Kabul Chawla reported (2016) 380 ITR 573 (Del.) wherein the Hon’ble High Court has held that if the additions are made, but not based on any incriminating 4 material found during search operation, then these additions are not sustainable in the eyes of law. He further stated in the present case the AO has made the addition in a proceeding under section 153A, without there being any incriminating material found during the course of the search in respect of such addition. He further stated that the additions have no relation with any incriminating material found and undisclosed income or property discovered in the course of search and as such are bad in law being beyond the scope of jurisdiction u/s. 153A of the I.T. and therefore, the assessment order passed by the AO, is bad in law and is liable to be quashed.
On the other hand, Ld. DR relied upon the order of the authorities below and stated that the provision of section 153A has rightly been applied in the case of the assessee on the material available with them.
We have heard both the counsel and perused the relevant records available with us, especially the orders of the revenue authorities and the cases referred by the Ld. Counsel of the Assessee. 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 transactions. It was noticed that as on the date of search i.e. 09.9.2010, 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 our considered opinion, the action of the AO is based upon conjectures and surmises and hence, the additions made 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 Commissioner of Income Tax vs. Kabul Chawla (2016) 380 ITR 573 (Del.) wherein the Hon’ble High Court of Delhi has held has 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 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 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 ITA Nos.
707, 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 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.”
Respectfully following the precedent of the Hon’ble Jurisdictional High Court in the case of CIT vs. Kabul Chawla, as aforesaid, we quash the assessment made u/s. 143(3) r.w.s. 153A of the I.T. Act and decide the legal issue in favour of the Assessee and accordingly, allow the Cross Objection filed by the assessee.
As regards, the Revenue’s appeal is concerned, since we have already quashed the assessment while dealing with Assessee’s Cross Objection, as aforesaid, hence, the Revenue’s Appeal has become infructuous and as such the same is dismissed.
In the result, the Assessee’s Cross Objection stands allowed and Revenue’s Appeal is dismissed.
Order pronounced on 19/05/2017.