MRS. SHASHI PURI,NEW DELHI vs. ACIT, NEW DELHI

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

The brief facts of the case are as under:

Assessing Officer for assessment year 2001-02 made an addition of Rs.2,78,231/- on the ground that the cash in hand and bank balances found in the balance sheet of assessee, could not be explained to the satisfaction of Ld. AO. For assessment year 2004-05, Ld. AO observed from the returns filed that assessee had received gift from Sh. Dikshant Sukhija who was a British citizen. Ld. AO came to the conclusion that the gift received by assessee was not out of natural love and affection arising out of blood relation. Ld. AO, thus made addition and passed order under section 153A read with section 143(3) of the Act for both the assessment years under consideration.

Aggrieved by the orders of assessing officer assessee preferred an appeal before Ld. CIT (A). It was argued before Ld. CIT (A) that the additions made by Ld. AO are not based on any incriminating material that has been unearthed during the search proceedings. As assessment for the years under consideration has not abated there must be incriminating material for making any addition in the hands of assessee. Assessee argued that the assessment made by Assessing Officer is bad in law and without jurisdiction. Ld. CIT(A) however, decided the appeal against assessee.

Aggrieved by the orders of Ld. CIT (A), assessee is in appeal before us now.

Ld. AR submitted that for assessment under section 153A, additions could be made only if there are incriminating materials that has been unearthed during the course of search, where assessment has not abated. Ld. AO submitted that what was found during the course of search was only some jewellary which was not ceased being fully explained. He drew attention to page 10 of paper book, where the punchnama has been enclosed. From the punchnama he argued that nothing has been seized from the premises of assessee and the jewellary that was found has been handed over back to assessee. Ld. AR submitted that the addition made by Assessing Officer is based on documents already on record being balance sheet, profit and loss account and the return of income filed by assessee. He placed his reliance upon decision of Hon’ble Delhi High Court in the case of CIT Vs Kabul Chawla, reported in (2016) 380 ITR 573. He submitted that under such circumstances, Assessing Officer was without any jurisdiction to make additions under section 153A of the Act and the assessment so made is bad in law.

On the contrary, Ld. DR relied upon the decision of Hon’ble Kerela High Court in the case of E.N.Gopa Kumar vs. CIT, reported in (2016) 75 Taxmann.com 215. Ld. DR submitted that section 153A clearly shows that notice could be issued calling for filing of return even when no incriminating material has been unearthed, as against assessee as or as against any third person during the course of search under section 132. Ld. DR places reliance upon the orders passed by the authorities below and submitted that the assessment made by the assessing officer may be upheld.

We have perused the submissions advanced by both the sides in the light of the records placed before us.

On perusal of the assessment order for both assessment years under consideration we agree with the contentions of Ld. AR that the additions made by the assessing officer is based on the details that is available on record that is from documents like balance sheet, profit and loss account, returns filed by the assessee. It is also observed that no material has been ceased from the premises of assessee, or elsewhere, that is belonging to assessee, which could be a basis of making addition in the hands of assessee. There is no mention regarding any such incriminating materials by the assessing officer in the assessment order.

Further for assessment year 2004-05 it is observed that intimation under section 143(1) was processed by the assessing officer on the basis of the original returns filed by and time limit for issuance of notice under section 143(2) has passed in case of both assessment years. Under such circumstances assessments had not abated as on the date of search and in the absence of any incriminating material a completed assessment cannot be interfered with, by the assessing officer while completing assessment under section 153A. In a peculiar case like this the additious has to be based on 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 was not produced.

As far as the decision of Hon’ble Kerela High Court in the case of E.N. Gopa Kumar vs. CIT (supra) relied upon by Ld. DR and the decision of Hon’ble Delhi High Court in the case of CIT vs. Kabul Chawla (supra) relied upon by Ld. AR is concerned, we find that the judgment of the Hon’ble Delhi High Court is in favor of the assessee, and the decision and the order of Hon’ble Kerela High Court and is against assessee. In such circumstances, the rule of Judicial Precedence demands that the view favorable to the assessee must be adopted, as held by the Hon’ble Supreme Court in the case of CIT vs. Vegetable Products Ltd., 88 ITR 192. Following the above fundamental rule declared by the Hon’ble Supreme Court, we have to follow the judgment of the Hon’ble Delhi High Court also being the jurisdiction High Court, which is in favor of the assessee. Accordingly, we hold that assessing officer did not have jurisdiction to frame assessment for the years under consideration. Consequentially, we hold the assessment orders passed with reference to section 153A of the Act are unsustainable in law. Accordingly, the grounds raised by the assessee for assessment year 2001-02 and 2004-05 are allowed