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Income Tax Appellate Tribunal, DELHI BENCH “D”, 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 28.6.2013 of the Ld. CIT(A)-XXXI, New Delhi relevant to assessment year 2006-07.
The grounds raised in the Revenue ‘s Appeal read as under:-
1. 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. 25,433/- made by AO u/s. 35D of the I.T. Act, 1961 on account of preliminary expenses.
On the facts and circumstances of the case the ld. CIT(A) has erred in law in deleting the disallowance of Rs. 9,659/- made
by AO u/s. 14A of the I.T. Act, 1961.
4. On the facts and in circumstances of the case the Ld. CIT(A)
has erred in law in deleting the disallowance of Rs. 7,46,762/- made by AO u/s. 36(1)(iii) of I.T. Act, 1961.
5. On the facts and in circumstances of the case the ld. CIT(A)
has erred in law in deleting the disallowance of Rs.
2,41,50,000/- made by AO on account of Share Capital.
6. 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:-
That notice u/s. 153C of the Act has been issued
without satisfying the statutory preconditions contained in the Act therefore the assumption of jurisdiction to initiate proceedings u/s. 153C of the Act and frame assessment u/s. 2
153C/143(3) of the Act was not in accordance with law and thus, be held to invalid.
1.1 That the Ld. CIT(A) has failed to appreciate that since no money, bullion jewellery or other valuable article or thing or books of accounts or documents belonging to the appellant were seized as a result of search on Gee Ispat Group of cases the assumption of jurisdiction u/s. 153C of the Act was illegal, invalid and unsustainable.
It is, therefore, prayed that, it be held that, assumption of jurisdiction to initiate proceedings u/s. 153C of the Act and frame assessment u/s. 153C/143(3) of the Act was not in accordance with law and thus, be held to invalid.”
The brief facts of the case are that the case of the assessee company was centralized consequent upon an action under section 132 of the Income Tax Act, 1961 on 7.1.2010. Notice under section 153C was issued on 19.7.2011. Return declaring income of Rs. 75,742/- was filed on 29.9.2011. Thereafter, a questionnaire was issued on 19.10.2011 under section 142(1) alongwith notice under section 143(2) of the I.T.
Act, 1961. The Authorised Representative of the assessee attended the assessment proceedings and furnished the information from time to time before the AO. Thereafter the case was assessed at an income of Rs. 2,50,07,600/- after making certain disallowances vide his order dated 22.12.2011 passed u/s. 153C/143(3) of the I.T. Act, 1961.
Against the aforesaid assessment order dated 22.12.2011, assessee preferred an appeal before the Ld. CIT(A), who vide impugned order dated 28.6.2013 has allowed the appeal of the asseseee.
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. 153C/143(3) of the I.T. Act, 1961 on 22.12.2011, 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 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 dispute in a proceeding under section 153C, 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. 153C of the I.T. Act. In support of his contention, he relied upon the following orders/judgments of the Hon’ble High Court and the ITAT.
i) Decision of the Delhi Bench in the case of Jasjit Singh vs.
ACIT in AY 2009-10 dated 5.11.2010 affirmed by the Hon’ble Delhi High Court in ITA No. 337/2015 dated 11.8.2015 CIT vs. Jasjit Singh. ii) Decision of Hon’ble Delhi High Court in the case of CIT vs.
Kabul Chawla reported in 234 Taxman 300 (Del.) (380 ITR 573). iii) Delhi High Court decision in the case of CIT vs. RRJ Securities Ltd. reported in 62 taxmann.com 391 (Del.) (380 ITR 612)
In view of the above, he requested that 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 153C has rightly been applied in the case of the assessee on the material available with them.
He relied upon the following judgments of the Hon’ble High Court and hence, requested that the appeal of the Assessee may be dismissed.
- SSP Aviation Ltd. vs. DCIT (20 taxmann.com 214) - Filatex India Ltd. vs. CIT (2014) 49 taxmann.com 465 (Delhi) - CIT vs. Anil Kumar Bhatia (24 taxmann.com 98)
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 and the Ld. DR. We find that the additions made by the AO are beyond the scope of section 153C 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 noted that 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. We also find that the case laws cited by the Ld. CIT(DR) are not relevant to the present case. 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 8 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. 153C 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 in the Open Court on 09/01/2017.