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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
This Appeal is filed by the Assessee against the Order dated 26.7.2013 of the Ld. CIT(A)-XXXIII, New Delhi relevant to assessment year 2007-08 on the following grounds:-
1. On the facts and in the circumstances of the case, the ld. CIT(A) erred in upholding the validity of order passed by the AO u/s. 153A on 3.7.2012.
2. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in partly allowing the appeal as he ought to have fully allowed the appeal.
3. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in not giving a finding that wherever the cash payments did not exceeds Rs. 20,000/-, no disallowance can be made u/s. 40A(3).
4. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in holding that “wherever he land is shown as work in progress, to extent of disallowance u/s. 40A(3), will reduce. This view is in conformity with the decision of the Hon’ble Supreme Court in the case of Attar Singh. In case where land is shown as investment, however, subsequently it is converted into stock-in-trade, to the extent of disallowance u/s. 40A(3) value of work in progress would reduce at the time of conversion. 5. The appellant may kindly be allowed to raise any additional ground in the course of hearing of the appeal.
2. The brief facts of the case are that a search and seizure operation u/s. 132 of the I.T. Act, 1961 was carried out on 23.3.2011 in the case of Amtek Group of Cases. The assesses M/s Sumitra Builders and Developers Pvt. Ltd., 910, Answal Bhawan, 16, KG Marg, New Delhi – 110 001 which was also covered u/s. 132(1) of the Income Tax Act, 1961. Subsequently, the case was centralized and accordingly, notice u/s. 153A of the I.T. Act, 1961 was issued to the assessee on 2.12.2011. In response to the said notice, return declaring an income of Rs. 3,15,190/- was filed on 30.1.2012. Further, notice u/s. 143(2) and 142(1) of the I.T. Act, 1961 were issued alongwith a questionnaire dated 17.2.2012 and in response thereto assessee’s A.R. attended the proceedings and filed the necessary details/information as called from time to time. After considering the same, AO made the addition of Rs. 7,58,360/- u/s. 40A(3) of the I.T. Act and completed the assessment at an income of Rs. 10,73,550/- vide his order dated NIL passed u/s. 153A/143(3) of the I.T. Act, 1961.
3. Against the aforesaid assessment order, assessee preferred an appeal before the Ld. CIT(A), who vide impugned order dated 26.7.2013 has partly allowed the appeal of the assessee.
4. Aggrieved with the order of the Ld. CIT(A), the Assessee is in appeal before the Tribunal.
During the hearing, Ld. Counsel of the assessee has filed a Paper Book containing pages 1 to 37 having the copy of the assessment order of M/s Marichika Properties Pvt. Ltd. for AY 2009-10 dated 3.7.2012; copy of order of Ld. CIT(A) for AY 2009-10 dated 26.7.2013; copy of grounds of appeal filed by the assessee as well as by the Department before ITAT; copy of order passed by the ITAT, Delhi Bench in the case of M/s Marichika Properties Pvt. Ltd., dated 30.10.2015 and stated that the issues in dispute in the present case are exactly similar and identical to the case of M/s Marichika Properties Pvt. Ltd. for AY 2009-10 by the Tribunal on 30.10.2015 wherein the various decisions of the Hon’ble High Court including the Hon’ble Jurisdictional High Court decision in the case of CIT vs. Kabul Chawla have been followed. He further stated that relating to upholding the validity of the order of assessment passed u/s. 153A is squarely covered in favor of the assessee by the decision 3 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 material found during search operation, then these additions are not sustainable in the eyes of law. 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. Act.
At the time of hearing, 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. Hence, the appeal of the Assessee may be dismissed.
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 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 transactions. It was noticed that as on the date of search i.e. 21.1.2011, 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 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 6 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.”
7.1 We also note that in the case of M/s Marichika Properties Pvt. Ltd. for AY 2009-10, the ITAT, Delhi vide its order dated 30.10.2015 has quashed the assessment by which the issue in dispute is also covered, because the facts and circumstances of the case are exactly similar and identical to that case of M/s Marichika Properties, as aforesaid and also the group on which the search and seizure operation was carried was similar i.e. Amtek Group of Cases.
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 was 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.
In the result, the Appeal filed by the Assessee stand allowed.
Order pronounced in the Open Court on 03/03/2017.