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Income Tax Appellate Tribunal, DELHI BENCH ‘D’ : NEW DELHI
Before: HON’BLE, SHRI G.D. AGRAWAL & SHRI AMIT SHUKLA
Date of Hearing : 05.04.2017 Date of Pronouncement : 06.04.2017 O R D E R PER BENCH : The aforesaid appeals have been filed by the assessee against common order dated 13.10.2011 for the Assessment Years 2004-05 and 2005-06; and order dated 22.11.2011 for the Assessment Year 2001-02, passed by Ld. CIT (Appeals)-I, New Delhi for the quantum of assessment passed under section 143(3) r.w.s.153A of the Income-tax Act, 1961. Since common issues are involved in all the appeals arising out of identical set of facts, therefore, same were heard together and are being disposed off by way of this consolidated order. 2. We will first take up appeal for the Assessment Year 2004- 05, wherein the assessee has raised following grounds :- “
1. The Ld. CIT(A) has grossly erred on facts as well as in law in holding that the assessment order in the name of the appellant U/S 153A is not illegal inspite of the fact that there was no separate search warrant in the name of the appellant, there being search warrant only in the joint name of the appellant and Smt. Shashi Puri.
2. The Ld. CIT(A) has grossly erred on facts as well as in law in holding that the assessment order U/S 153A is not illegal inspite of the fact that no incriminating material was found during the search to enable the AO to frame reassessment u/s 153A against the already completed assessment.
3. The appellant craves leave to add, alter, modify and withdraw any ground of appeal before or during the appellate proceedings.”
3. At the outset, the ld. Counsel for the assessee submitted that so far as the issue raised in ground no.2 is concerned, the same stands covered by the decision of this Tribunal in the case of Shashi Puri vs. ACIT in & 991/Del/2012 for the AY 2001-02 & 2004-05, decided vide order dated 14.02.2017, wherein the Tribunal has held that in absence of any incriminating material found during the course of search, no addition can be roped in while reframing the reassessment u/s 153A. This decision of the Tribunal is based on the ratio and the principle laid down by the Hon’ble Delhi High Court in the case of CIT vs. Kabul Chawla - (2016) 380 ITR 573 (Del). Drawing our attention to the relevant observation and finding of the AO, he pointed out that in the assessment year 2004-05, the sole addition made by the AO, relates to gift received by the assesee which already stood disclosed in the return of income which was filed originally on 14.02.2005. No material whatsoever was found relating to the gift during the course of search carried on 28.02.2007. Even the ld. AO has not referred to any incriminating material while adding the amount of gifts. The ld. CIT (A) has rejected the assessee’s contention relying upon certain Tribunal decisions which no longer have any persuasive value in the light of the decision of Hon’ble jurisdictional High Court in the case of Kabul Chawla (supra).
4. On the other hand, the ld. CIT DR, strongly relied upon the order of the CIT (A), submitted that once reassessment is being made u/s 153A then it is open to the AO to assess any such income emanating from either the seized material or the return of income. 5. We have heard the rival contentions and perused the relevant finding given in the impugned orders. Here in this case, original return of income was filed on 14.02.2005 wherein the gifts amounting to Rs. 19,17,443/- was duly disclosed and such a return of income had attained finality at the time of search which took place on 28.02.2007. Thus, in view of the second proviso to section 153A, such assessment will not get abated, because no assessment or reassessment was pending on the date of initiation of search. Admittedly no incriminating material qua the gifts was found during the course of search so as to tinker with already completed assessment, that is, disturb the return income which has attained finality as per the provisions of law. In such situation, the law as laid down by the various High Courts including that of the jurisdictional High Court in case of Kabul Chawla (supra) would get squarely applicable, wherein it has been propounded that, if there is no incriminating material found during the course of search indicating any undisclosed income, then no addition can be roped in the assessment/reassessment u/s 153A. Once the assessment/s of any of the assessment years covered under section 153A which have attained finality and do not get abated in terms of second proviso, then in absence of any incriminating material, no further addition can be made and the assessment which already stands completed need to be reiterated. The completed assessment can only be interfered or tinkered with by the AO while making the assessment u/s 153A, is only when there is some incriminating material unearthed during the course of search. The Hon’ble Delhi High Court in the case of CIT vs. Kabul Chawla (supra), after discussing the entire law on this point and after referring to the various decisions of Delhi High Court as well as other High Courts including that of Hon’ble Bombay High Court in the case of CIT vs. Continental Warehousing Corporation, came to the following conclusion :- “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 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.
5 ITA No.482/Del./2012 & 5836/Del./2011 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 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.”
[Emphasis added is ours] Moreover, we find that on similar fact and on same issue in the case of Shashi Puri (wife of late Shri Vinay Puri), the Tribunal has reached to a similar conclusion. Thus, we hold that in absence of any incriminating material found during the course of search qua the gifts disclosed in the original return of income, no addition can be made in the assessment made u/s 153A.
In the result, the appeal of the assessee for AY 2004-05 is allowed.
Similarly, in the appeal for the AY 2005-06 also, the similar issue of gift disclosed in the original return of income of Rs. 4,09,983/- is the subject matter of addition in the impugned proceedings u/s 153A. Here, in this case also, admittedly the return of income filed originally had attained finality and in terms of section 153A read with second proviso, hence the assessment for the AY 2005-06 was unabated at the time of search conducted on 28.02.2007. For the said gift also nothing incriminating was unearthed during the search and therefore, in absence of any incriminating material relating to gift found during the course of search, we hold that such an addition cannot be roped in while completing the reassessment u/s 153A. Above finding given in the AY 2004-05 will apply mutatis mutandis and accordingly, appeal for assessment year 2005-06 is allowed.
In the appeal for the AY 2001-02, the addition relates to opening balance as on 01.04.2001 of Rs.3,03,309/- as reflected in Balance Sheet. For this addition also, from the perusal of the assessment order, it is quite apparent that no incriminating material has been found during the course of search that the opening balance as shown in the balance sheet as on 31.03.2001 in the form of cash in hand or bank balance of Rs.3,03,309/- is an undisclosed income which has been unearthed on the basis of any incriminating material found during the course of search. Moreover, the amount of opening balance cannot be added unless something incriminating is found qua the same amount of closing balance as reflected in the balance sheet of the earlier year. Thus, this addition cannot be made while making reassessment under the provisions of section 153A. Here again our finding given as above in the earlier two years will also apply to this year also and accordingly, the addition made by the AO and as sustained by the ld. CIT (A) is directed to be deleted. Consequently, the appeal of the assessee for AY 2001-02 is allowed.
To sum up: all the appeals of the assessee are allowed.