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Facts
The assessee's original income tax return for AY 2014-15 was filed. A search operation was conducted at the assessee's group premises in December 2015. Subsequently, the Assessing Officer completed an assessment under Section 153A read with 143(3), making additions, including Rs. 48,49,782/- for bogus Long Term Capital Gain (LTCG) claimed under Section 10(38), which was later confirmed by the CIT(A).
Held
The Tribunal held that the additions made by the AO and confirmed by the CIT(A) under Section 153A were without jurisdiction and bad in law, as no incriminating material was found during the search operation pertaining to the completed assessment for AY 2014-15. Relying on Supreme Court and High Court precedents, the Tribunal affirmed that additions under Section 153A cannot be made for completed/unabated assessments in the absence of incriminating material unearthed during the search.
Key Issues
Whether additions made under Section 153A of the Income Tax Act, 1961, are valid for a completed assessment year when no incriminating material is found during the search operation.
Sections Cited
10(38), 132, 132A, 139, 142(1), 143(2), 143(3), 147, 148, 149, 151, 153, 153A, 153C, 250, Rule 34(4)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, JODHPUR BENCH, JODHPUR.
Before: DR. MITHA LAL MEENA & DR. S. SEETHALAKSHMI
ORDER PER DR. S. SEETHALAKSHMI, J.M. This is an appeal filed by the assessee against the order of ld. CIT (Appeals), Jaipur-5 dated 17th October, 2023 passed under section 250 of the I.T. Act, 1961, for the assessment year 2014-15. 2. The assessee has raised the following grounds of appeal :-
1. That on the facts and circumstances of the case, the ld. CIT (A) erred in confirming the AO’s order dated 28.12.2017 passed for the AY 2014-15 u/s Raj Kumar Golecha vs. ACIT. 153A r.w.s. 143(3) of the Act without appreciating true and correct facts of the case and documentary evidences brought on record by the assessee.
2. That on the facts and circumstances of the case, the ld. CIT (A) erred in confirming the addition of Rs. 48,49,782/- by upholding the AO’s action in treating the long term capital gain exempted u/s 10(38) as undisclosed income.
3. That on the facts and circumstances of the case, both the AO and ld. CIT (A) erred in rejecting the documentary evidences found and seized during the course of search from which it was clearly manifest that the assessee certainly purchased and sale equity shares of scripts Sun Asian. No incriminating documents found during the course of search proceedings.
4. That on the facts and circumstances of the case, both the AO and ld. CIT (A) erred have not brought on record any concrete material on record before holding the LTCG claimed at Rs. 48,92,782/- u/s 10(38) of the Act as bogus and entire addition is based on hypothetical presumption. Thus, the addition so made deserves to be deleted.
The appellant craves leave to add or to amend the foregoing ground of appeal, if it becomes necessary to do so in the interest of justice.
3. The brief facts of the case are that the assessee is an Individual who had filed his original return of income under section 139(1) of the Income Tax Act, 1961 on 31.07.2014 for the assessment year 2014-15 declaring total income at Rs. 7,50,190/-. A search under section 132 of the I.T. Act, 1961 was carried out by the Investigation Wing of the Income Tax Department at the business/residential premises of Pali based Golecha Group consisting of Shri Raj Kumar Golecha and his family members on 17.12.2015. During the course of search proceedings several incriminating documents along with cash, jewellery and other valuables Raj Kumar Golecha vs. ACIT. were found/seized from the various premises of the Group searched. Some loose papers were seized from the residence of Shri LabhchandGolecha (father of the assesseed) and his statement under section 132(4) of the IT Act was also recorded. Notice under section 153A of the IT Act was issued on 04.07.2016 for filing the return of income for AY 2014-15 which was duly served upon the assessee. In response, the assessee filed the return of income on 05.10.2017 declaring total income at Rs. 7,40,190/- as was originally declared. Subsequently, notice under section 142(1) of the IT Act, 1961 along with a detailed questionnaire were issued on 11.07.2017, which was duly served upon the assessee. Notice under section 143(2) of the Act was issued on 06.10.2017. In compliance to the notices issued, the authorized representative of the assessee attended and submitted some of the required details. The AO completed the assessment under section 153A read with section 143(3) of the I.T. Act, 1961 on 28.12.2017 by making total addition of Rs. 2,33,25,782/- to the returned income of Rs. 7,50,190/-. While completing the assessment, the AO made a protective addition of Rs. 1,84,76,000/- in the hands of the assessee. Besides, the AO also made an addition of Rs. 48,49,782/- on account of bogus Long Term Capital Gain after disallowing the claim under section 10(38) of the IT Act, 1961. The assessee being aggrieved by the order of the AO, preferred an appeal before the ld. CIT (A). The ld. CIT (A) vide his order dated 17.10.2023 has deleted the protective addition noting that in a separate order he has Raj Kumar Golecha vs. ACIT. confirmed the substantive addition of Rs. 1,84,76,000/- in the case of the father of the assessee Shri Labhchand Golecha. The ld. CIT (A) confirmed the addition of Rs. 48,49,782/- under section 10(38) of the IT Act, 1961, on account of bogus Long Term Capital Gain. Now, the assessee has filed the present appeal before the Tribunal.
The first ground of appeal
before us is a legal ground relates to passing the order under section 153A read with section 143(3) of the IT Act, 1961 without appreciating true and correct facts of the case and documentary evidences brought on record by the assessee.
5. Aggrieved from the order of the ld. CIT(A) the assessee has preferred this appeal before us on the grounds as reiterated in para 2 above. In support of the grounds of appeal the ld. AR of the assessee has relied upon the following written submission:- “That search actions were carried out at the residential as well as business premises of assessee and his family on 17.12.2015. (AY 2016-17). The impugned order of assessment dated 28.12.2017 passed by the Assessing Officer is wholly incorrect in law as well as facts and circumstances of the case and without jurisdiction, therefore, the same is liable to be cancelled. The appellant respectfully submits that the observations, findings and/or allegations made by the Assessing Officer in his order of assessment and the inferences and conclusions drawn by him based on these findings are factually incorrect, patently erroneous, based on mere assumptions and presumptions, surmises and conjectures, pure guess, doubts and suspicions, irrelevant extraneous and considerations. The relevant provisions of section 153A is reproduced as under :-
Raj Kumar Golecha vs. ACIT. 153A. (1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003, the Assessing Officer shall— (a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139; (b) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made : Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years: Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this sub-section pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate …………………………………”
From the plain reading of section 153A of the Act, it is clear that the Assessing Officer shall pass order of assessment for six assessment years, immediately preceding the assessment years relevant to the previous year, in which search is conducted and of the relevant assessment year or books of accounts, other documents or any assets requisitioned under section 132A of the Act. The section specifically stressed on the fact that before assessing or reassessing the income under this section there has to be some books of accounts, other documents or any assets requisitioned under section 132A of the Act. Under section 153A of the Act, an assessment has to be made in relation to the search or requisition, namely, in relation to material disclosed during the search or requisition. If in relation to any assessment year, no incriminating material is Raj Kumar Golecha vs. ACIT. found, no addition or disallowance can be made in relation to that assessment year in the exercise of powers under section 153A of the Act and the earlier assessment shall have to be reiterated. In the present case, no certain incriminating documents or loose papers related to the appellant were found and seized during the course of search. In case of assessment under section153A, the addition or disallowance can only be made from the materials found during the time of search. It is in violation of the principles of natural justice, arbitrary, mechanical and without any independent application of mind and theAO has not discharged the burden of proof, proving that the income determined and sought to be taxed were not from the materials seized during the time of search. Since in the instant case, no incriminating materials were seized during the time of search and therefore, no addition or disallowance can be made in an assessment under section 153A of the Act and, therefore, the impugned assessment order were bad in law. The appellant further submits the reading of provisions of section 153A would reveal that the time limit for issuance of notice under section 143(2) stood expired for the year under appeal and therefore, no assessment was pending at the time when search was conducted in this case and therefore additions, if any, to be made via assessment under section 153A would be restricted to incriminating documents found during the course of search. In other words, no routine additions would be permitted to be made havingno nexus with any incriminating documents found during the search. In this regard, we wish to place reliance upon the following judicial precedents :- a. Your humble appellant also places his reliance on decision of the Hon’ble Apex Court in the case of PCIT vs. Abhisar Buildwell (P) Ltd (2023) 149 taxmann.com 399 (sC)/(2023) 293 Taxman 141 (SC)/92023) 454 ITR 212 (SC)(24.04.2023) wherein the Hon’ble Supreme Court specifically held that in respect of completed assessments/unabated assessments no addition can be made by Assessing Officer in absence of any incriminating material Raj Kumar Golecha vs. ACIT. found during course of search under section 132 or requisition under section 132A. The head note from this judgment is reproduced as under :- “ Section 153A read with sections 132 and 143 of the Income-tax Act, 1961 – Search and seizure – Assessment in case of (Conditions precedent) in Whether object of section 153A is to bring under tax undisclosed income which is found during course of search or pursuant to search or requisition; therefore, only in a case where undisclosed income is found on basis of incriminating material, Assessing Officer would assume t6he jurisdiction to assess or reassess total income for entire six years block assessment period even in case of completed/unabated assessment – Held, yes – Whether in case of search under section 132 or requisition under section 132A, Assessing Officer assumes jurisdiction for block assessment under section 153A and that all pending assessments/reassessments shall stand abated – Held, yes – Whether in respect of completed assessments/unabated assessments no addition can be made by Assessing Officer in absence of any incriminating material found during course of search under section 132 or requisition under section 132A – Held, yes – Whether, however, completed/unabated assessments can be reopened by Assessing Officer in exercise of powers under section 147/148 subject to fulfillment of conditions as envisaged/mentioned under section 147/148 and those powers are saved – Held, yes [Paras 8, 12 to 14] [In favour of assessee]” b. CIT v. continental Warehousing Corpn. Ltd. [2015] 58 taxmann.com 78/232 Taxman 270/374 ITR 645 (Bom.) The Hon’ble Bombay High Court in the case of Continental Warehousing Corporation (Nhava Sheva) Ltd. (supra), wherein considering the judgment of the Special Bench of the Mumbai Tribunal in the case of All Cargo Global Logistics 137 ITD 287 (SB) (Mum.), considered this issue that, once assessment has attained finality, then the assessing officer while passing independent assessment order under section 153A/143(3) of the Raj Kumar Golecha vs. ACIT. Act could not disturb the assessment order which has attained finality unless the material gathered in the course of search under section 132/153A of the Act established that the finality attained in the assessment were contrary to the facts unearthed during the course of search. c. CIT vs. Kabul Chawla [2015] 61 taxmann.com 412/234 Taxman 300/[2016] 380 ITR 573 (Delhi)
Held that no assessment/reassessment proceedings were pending on 30- 03-2-12 when search action took place and hence no assessment was abated. The addition made by the AO is not based on any incriminating document/seized material found during the course of search and seizure action under section 132 of the Act and accordingly the same were deleted. In further appeal preferred by the Revenue before the ITAT, the findings of the CIT (A) were confirmed. d. CIT v. St. Francis Clay Décor Tiles [2016] 70 taxmann.com 234/240 taxman 168/385 ITR 624 (Ker.) e. CIT vs. Smt. Dayawanti Dupta [2016] 75 taxmann.com 308/[2017] 245 Taxman 293/[2016] 390 ITR 496 (Delhi) f. CIT v. Meeta Gutgutia [2017] 82 taxmann.com 287/248 taxman 384/395 ITR 526 (Delhi) g. Pr. CIT v. Best Infrastructure (India)(P.) Ltd. [2017] 84 taxmann.com 287/397 ITR 82 (Delhi)
Jai Steel (India) v. Asstt. CIT [2013] 36 taxmann.com 523/219 Taxman 223 (Raj.)
PCIT vs. Bhadani Financiers Pvt. Ltd. (Delhi High Court ) – Completed assessments could be interfered with by AO while making the assessment under section 153A 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 … The Hon’ble Delhi High Court in the case of PCIT vs. Jaypee Financial Services Ltd. [2021] 130 taxmann.com 218 (Delhi) held that where addition was not based on any incriminating material found during course of search and assessment was not pending on date of search, addition was to be deleted.
Since the assessing officer has not fulfilled the mandatory conditions prescribed under section 153A/153C of the Act and therefore he can not assume the valid jurisdiction under the provisions of section 153A of theAct, therefore, the impugned assessment made under section 153A of the Act is wholly without jurisdiction and patently invalid. Sir, the ld. CIT (A) ought to have considered our submissions in this regard but he did not record specific findings. Prayer : Hon’ble Sir in the light of this, the ld. CIT (A)’s order findings recorded in order dated 17.10.2023 holding additions of Rs. 48,49,782/- made during the course of assessment proceedings; without any incriminating documents, may be held as erroneous and the same needs to be reversed.”
On the other hand, the ld. DR relied on the order of the ld. CIT (A). The ld. D/R in his written submission at para 4 submitted as under :-
Raj Kumar Golecha vs. ACIT. “ 4. It is noted that CIT (A) has not recorded his specific findings on the ground raised before him regarding the proceedings u/s 153A.” He, further, cited the following case laws for consideration : Smt. Asha Rajendra Gupta vs. ACIT In Aakruti Ketan Mehta vs. ITO dated 31.01.2024 Meenu Ajay Pathak vs. ITO dated 18.07.2023. ITO 24(2)(1), Mumbai, Piramal vs. Kailash Chandra Gupta (HUF) In dated 26.07.2024.
We have heard the rival contentions, perused the material available on record and gone through the orders of the lower authorities and the case laws cited by both the parties. Before us, the ld. A/R for the assessee has contended that the impugned assessment order is nullity, being without jurisdiction, in as much as, even when no incriminating material whatsoever found in course of search which could suggest any undisclosed income so as to initiate proceedings u/s 153A of the Act. Furthermore, it has even been contended that in case of assessment under section153A, the addition or disallowance can only be made from the materials found during the time of search. It is in violation of the principles of natural justice, arbitrary, mechanical and without any independent application of mind and the AO has not discharged the burden of proof, proving that the income determined and sought to be taxed were not from the materials seized during the Raj Kumar Golecha vs. ACIT. time of search. Accordingly, Ld. A/R for the appellant has urged that the impugned assessment order deserves to be set aside. The ld. A/R submitted that during the course of assessment proceedings, in light of provisions of Section 153A of the I.T Act, 1961, six years cases of assessee were reopened, however, no incriminating documents whatsoever, were recovered from the assessee for the year under consideration. Therefore, being an unabated assessment, the original assessment cannot be disturbed. The AO made the addition treating the long term capital gain as undisclosed income merely on the basis of information received from Investigation Wing, Kolkata. The addition so made is neither based on any incriminating material found during the course of search nor based on any other evidence, but it is merely because of the hypothetical presumption of the AO. The AO has not brought on record any cogent material/evidence in support of the addition made by him. On perusal of the first appellate order, we do not find any specific reference or discussion relating to the addition made by the AO. It is well settled principle laid down in the case of Principal Commissioner of Income Tax, Central-3, vs. Abhisar Buildwell P. Ltd. {2023 (4) TMI 1056 - SUPREME COURT} {Other Citation: [2023] 454 ITR 212 (SC), (2024) 2 SCC 433}, that:-
Raj Kumar Golecha vs. ACIT. “Para 14 (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 fulfillment of the conditions as envisaged/mentioned under sections 147/148 of the Act and those powers are saved.”
Further, following the decision of Apex Court, the Coordinate Bench of Tribunal Jodhpur in the case of Pradeep Soni, Pushpa Devi Soni, Leela Devi, Parvati vs. DCIT, CENTRAL CIRCLE-01, JODHPUR {2024 (2) TMI 1162 - ITAT JODHPUR} {ITA Nos. 530/Jodh/2023, 531/Jodh/2023, 532/Jodh/2023 and 533/Jodh/2023} has held that:
Merely the statement cannot be made base to make the addition and thedecision of the apex court that in search assessment u/s 153A, AO cannot assess or reassess the total income filed under s. 153A of the Act unless some incriminating material was found during the search. Revenue has not demonstrated the nature of material found in the course of search which led to impugned additions in the absence of any incriminating material. The cost of land incurred and recorded in the books has been duly accepted and reduced from the fair value derived by the valuer in the order passed under section 154 of the Act. The sustained addition is based on the valuation report of the DVO which is also considering the CPWD rates instead of PWD rates. Thus, the addition made Raj Kumar Golecha vs. ACIT. towards the alleged difference in cost of construction made in the order of the assessment deserves to be deleted as the addition on cost of construction is based on valuation report which is in the realm of estimations without any nexus to any incriminating documents per se. Hence, in the absence of any incriminating material found, therefore, we see no perceptible reason to confirm the addition and therefore, the same is directed to be deleted. Appeal of the assessee is allowed.
Further, in the case of CIT v. Continental Warehousing Corpn.(Nhava Sheva) Ltd. [2015] 58 taxmann.com 78/232 Taxman 270/374 ITR 645 (Bom.), the Hon’ble Bombay High Court while considering the judgment of the Special Bench of the Mumbai Tribunal in the case of All Cargo Global Logistics 137 ITD 287(SB) (Mum), considered this issue that, once assessment has attained finality, then the assessing officer while passing independent assessment order under section 153A/143(3) of the Act could not disturb the assessment order which has attained finality unless the material gathered in the course of search under section 132/153A of the Act established that the finality attained in the assessment were contrary to the facts unearthed during the course of search.
The Hon’ble Delhi High Court in the case of CIT Vs. Kabul Chawla (supra) has considered the issue under section 132/153A and observed in para 37 and 38 as 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 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 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.
Conclusion 38. 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.
Raj Kumar Golecha vs. ACIT. Thus, the Hon'ble High Court has ruled that the Assessing Officer while making the assessment U/s 153A of the Act can make the addition only on the basis of some incriminating material unearthed during the course of search or requisition of documents, which were not produced or not already disclosed or made known in the course of original assessment.( The SLP filed by the Revenue was dismissed by the Hon'ble Supreme Court on 7-12-2015 ).
The Hon’ble Rajasthan HighCourt in the case of Jai Steel (India) vs ACIT reported in 259 CTR (Raj.) 281 has observed as under :
“….. The requirement of assessment or reassessment under the said section has to be read in the context of sections 132 or 132A, in as much as, in case nothing incriminating is found on account of such search or requisition, then the question of reassessment of the concluded assessments does not arise, which would require more reiteration and it is only in the context of the abated assessment under second proviso which is required to be assessed.
Accordingly, in view of the above facts and circumstances of the case as well as the binding precedents on this issue, we are of the view that the impugned order passed by the ld. CIT (A) is bad in law as no addition can be made in the absence of incriminating material so far as the assessment under section 153A in respect of the assessment years already completed before the date of search and not abated by virtue of search. We, therefore, set aside the order of ld. CIT (A). The ground no. 1 is allowed.
Raj Kumar Golecha vs. ACIT.
Since, pursuant to the allowing of ground no. 1, the entire search assessments framed in the hands of the assessee is to be declared illegal and bad in law, the other grounds on merits raised by the assessee need not be gone into as adjudication of the same would be merely academic in nature only. In the result, appeal of the assessee is allowed. Order pronounced under Rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1963 by placing the details on the notice board.