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Income Tax Appellate Tribunal, DELHI BENCH “G”, NEW DELHI
Before: SHRI H.S. SIDHU & SHRI O.P. KANT
Assessee by : Ms. Sumangla Saxena, Adv. Department by : Sh. Satpal Gulati, CIT(DR) Date of Hearing : 22-09-2016 Date of Order : 07-10-2016 ORDER PER H.S. SIDHU, JM Assessee has filed these appeals against the separate Orders both dated 12.12.2013 passed by the Ld. Commissioner of Income Tax (Appeals)-XII, New Delhi pertaining to assessment years 2003-04 and 2007-08. Since the issues involved in these appeals are common and identical, hence, were heard together and are being disposed of by this common order for the sake of convenience, by dealing with (AY 2003-04).
The grounds raised in (AY 2003-04) read as under:-
That on the fact and circumstances of the case the order passed by Ld. CIT(A) is bad in law and nature and therefore it is liable to be quashed.
2. That on the facts and circumstances of the case the Ld. CIT(A) grossly erred in confirming the penalty of Rs. 951,245/- levied u/s. 271(1)(c) of the Act which was levied on the addition made in the quantum order framed by the AO. 3. The appellant craves leave for addition, modification, alteration, amendment of any of the grounds of appeal.
3. The grounds raised in (AY 2007-08) read as under:-
1. That on the fact and circumstances of the case the order passed by Ld. CIT(A) is bad in law and nature and therefore it is liable to be quashed.
2. That on the facts and circumstances of the case the Ld. CIT(A) grossly erred in confirming the penalty of Rs. 3,17,45,629/- levied u/s. 271(1)(c) of the Act which was levied on the addition made in the quantum order framed by the AO. 3. The appellant craves leave for addition, modification, alteration, amendment of any of the grounds of appeal.
The facts narrated by the Revenue Authorities are not disputed by both the parties, therefore, the same are not repeated here for the sake of convenience.
At the time of hearing, Ld. Counsel of the Assessee, Ms. Sumangla Saxena, Advocate stated that in the quantum proceedings on which the penalty has been imposed has already been decided by the ITAT, Delhi Bench in favour of the assessee and against the Revenue by quashing the assessment in 2915, 2916/Del/2012 (AYrs 2005-06, 2003-04 & 2007-08) title SVIL Mines Ltd. vs. DCIT; ITA No. 672/Del/2011 (AY 2006-07) title SVIL Mines Ltd. vs. DCIT and ITA Nos. 2965, 2966, 29067/Del/2012 (Ayrs. 2003- 04, 2004-05, 2007-08) & others vide order dated 30.5.2014. She has also filed the copy of the order dated 30.5.2014 passed by the ITAT, Delhi Bench ‘G’ in above mentioned Appeals in assessee’s own case. 6. She further stated that aggrieved with the order of the Tribunal dated 30.5.2014, Revenue filed Appeal before the Hon’ble High Court and the Hon’ble High Cuort of Delhi in its common judgment dated 30.11.2015 in the following cases has upheld the order of the Tribunal by dismissing the Appeals filed by the Revenue. a) CIT vs. JH Finvest Pvt. Ltd. in ITA No. 27 to 31, 33, 39/2015 b) CIT vs. Texfeb Marble Industries in ITA Nos. 32, 34, 38/2015. 3 c) CIT vs. SVIL Mines Ltd. in ITA Nos. 35 to 37, 47 to 48/2015.
She has also filed the copy of the aforesaid judgment dated 30.11.2015 passed by the Hon’ble High Court of Delhi in assessee’s own case. In view of the above, she requested that since the Tribunal has treated the assessment as not valid and also the Hon’ble High Court of Delhi has upheld the action of the ITAT and dismissed the Appeal of the Revenue, hence, the penalty in dispute in both the years may be deleted.
7. On the other hand, Ld. DR relied upon the orders of the authorities below.
We have carefully considered the submissions and perused the records.
We find that in assessee’s own case the ITAT, Delhi Bench in quantum proceedings has decided the issue in favour of the assessee and against the Revenue by quashing the assessment in 2915, 2916/Del/2012 (AYrs 2005-06, 2003-04 & 2007-08) title SVIL Mines Ltd. vs. DCIT; ITA No. 672/Del/2011 (AY 2006-07) title SVIL Mines Ltd. vs. DCIT and ITA Nos. 2965, 2966, 29067/Del/2012 (Ayrs. 2003-04, 2004-05, 2007-08) & others vide order dated 30.5.2014. The relevant portion of the ITAT order dated 30.5.2014 are reproduced as under:- “…12.3 When we examine the facts of the present case in view of the ratio laid down in the above cited decisions, we find that it is an admitted fact in the present case that no addition was made which was based on the incriminating material found during the course of search. It is also an admitted fact that the assessment were made on 24/12/2009 or by 11.2.2009 (as the case may be) in pursuance to the search conduced on 21/3/2007 on the basis of authorization dated 20/13/2007. In the case of Shri Anil Kumar Bhatia & ors (supra) revenue had preferred appeal before the Hon'ble High Court against the order of the Tribunal and the issue raised before the Hon'ble High Court was as to whether even if assessment order had already been passed in respect of any of those 6 assessment years either U/S 143(1) (a) or Section 143(3) prior to intimation of search requisition, still Assessing Officer is empowered to reopen those proceedings uls 153A without any fetters and reassess total income taking note of undisclosed income, if any, unearthed during the search. The expression "unearthed during the search is very significant to indicate that in respect of completed or non-pending assessments the Assessing Officer is duty bound to assess or reassess the total income but to the extent of 5 income "unearthed during the search" It was answered by the Hon'ble High Court in affirmative and in favour of the Revenue. In that case, the Hon'ble High Court has been pleased to hold that the Assessing Officer has the power U/S 153A to make assessment for all the prescribed 6 years and compute the total income of the assessee, including the undisclosed income, notwithstanding that the assessee had filed return before the date of search which stood processed uls 143(1) (a) of the Act. The Tribunal had held that since the returns of income by the assessee for all the 6 years under consideration before the search took place were processed uls 143(1) (a) of the Act, provisions of Section 153A cannot be invoked.
The Hon 'ble High Court did not agree with this, nor it agree with the finding of the Tribunal that no material was found during the search. The Hon'ble High Court observed in that case that in the entire case the argument before the Departmental Authorities as well as the Tribunal, it was contended by the assessee that no document embodying the transaction with Mohini Sharma was recovered from the assessee and the 6 Tribunal had proceeded on that basis but the same is not correct the reason being that in the order of the Tribunal itself it was mentioned that no document much less incriminating material was found during the search of the assessee's premises except unsigned undertaking for loan. The Hon'ble High Court taking note of this material fact held that if it is not undisputed that the document was found in the course of search of the assessee, then Section 153A is triggered. Once the Section is triggered, it is mandatory for the Assessing Officer to issue notices uls 153A calling upon the assessee to file returns for the prescribed six assessment years preceding the year in which the search took place. The contention of the Ld. AR remained that under this premise that some document was found in the course of the search of the assessee's premises, the Hon'ble High Court was pleased to justify the assessment made U/S 153A of the Act. In other words, in absence of finding of any incriminating material during the course of search where assessment has already been framed uls 143(3) of the Act or return filed U/S 139 has already been 7 processed uls 143(1) and no notice uls 143(2) has been issued, addition cannot be made in the assessment framed u/s 153 A of the Act, contended the Ld. AR. The facts of that case before the Hon'ble Delhi High Court were thus different. In the present case before us it is an admitted fact that no addition was made based on the incriminating material found during the course of search. The other decision relied upon by the Ld. CIT-DR having distinguishable facts are also not helpful to the revenue. If the decision in the case of CIT vs. Chetan Das Lachman Das (supra) relied upon by the Ld. CIT-DR is gone through iIl its totality, it help the assessee. In para 11 it has been made clear that an assessment has to be made under section 153A only on the basis of seized material. We thus respectfully following the ratio laid down in the above cited decisions especially the decision of Special Bench of the Tribunal in the case of All Cargo Global Logistics Ltd Vs. CIT (Supra) and the decision of Bombay Bench of the Tribunal in the case of ACIT vs. Pratibha Industries Ltd. (supra) and others of Delhi Benches I we hold that in absence of 8 incriminating material found during the course of search the AO was having no jurisdiction in the case of present assessees to frame assessment U/S 153A of the Act. The assessment in question are thus not valid in the eyes of law. The same are quashed as such. The ground is thus allowed in favour of the assessees.
In view of the above findings on the validity of assessments being time barred and being in contravention of the provisions of Section 153A, the remaining grounds and objections involving several issues on merits of the case in the appeals as well as cross-objections preferred by the parties, have become academic and thus do not need any adjudication by the tribunal.
In the result, appeals preferred by the Revenue questioning the relief given by the Ld. CIT(A) to the present assesses are dismissed and cross Objections preferred by the Assessees are allowed.”
8.1 We also find that aggrieved with the aforesaid order of the Tribunal dated 30.5.2014, Revenue filed Appeal before the Hon’ble High Court of Delhi and the Hon’ble High Court of Delhi in its common judgment dated 30.11.2015 in the following cases has upheld the order of the Tribunal by dismissing the Appeals filed by the Revenue. a) CIT vs. JH Finvest Pvt. Ltd. in to 31, 33, 39/2015 b) CIT vs. Texfeb Marble Industries in ITA Nos. 32, 34, 38/2015. c) CIT vs. SVIL Mines Ltd. in ITA Nos. 35 to 37, 47 to 48/2015.
8.2 The relevant portion of the Hon’ble High Court of Delhi judgment dated 30.11.2015 is reproduced as under:- “6. The first question that arises for consideration was whether in terms of Section 153B, the assessments were completed within the time stipulated therein. The case of the Assessees, which has been accepted by the ITA T in the impugned order, was that the assessment ought to have been completed by 31st December 2008, but was completed on 31 st December 2009, i.e., beyond the period of twenty one months from the end of the financial year in which the last authorisation for the search under Section 132(3) was issued. This is in terms of Clause (i) of the second proviso to Section 153B (1) of the Act. It is pointed out that the names of the Assessees were included in the panchnama drawn up on 15th May 2007 although no fresh search authorisations qua any of them 10 were issued. The case of the Revenue has been that the search did not conclude on 23rdMarch 2007 but on 15th May 2007. This was on account of the restraint orders claimed to have been validly passed on 23rd March 2007 in peculiar circumstances where either the person searched was not present or the witnesses were not present or the keys of some of the cupboards were not available.
The ITAT has in the impugned order, after discussing the earlier decisions of the IT AT and the High Courts, noted that mere passing of a restraint order would not extend the time limit available for completion of the assessment pursuant to the search.
It has been noted that Section 132(3) of the Act for passing a restraint order can be only resorted to if there is any practical difficulty in seizing the item which is liable to be seized. If all actions of the search were completed and nothing was left to be done by the search party, then the action of the authorized officer under Section 132(3) would be illegal and consequently any panchnama prepared on the extended date of search, after lifting the restraint, would be of no consequence, for the purposes of computation of limitation under Section 153B of the Act. In particular, the IT AT referred to the decision of this Court in V.L.S.
Finance v Ltd. Vs. CIT 289 ITR 286 (Del). 11
8. The ITAT correctly concluded that where there are various authorisations issued and various panchnama prepared, it would be the last panchnama prepared in respect of the last authorisation which would be relevant for computing the limitation period .
9. In the present case, as noted by the IT AT, there is only one authorisation which was issued on 20th March 2007. Although, the ITAT in para 10.5 of the impugned order noted that "in the authorization letter dated 20/3/2007, names and address of the assesses in question have not been mentioned but in Panchnama dated 15/5/2007 drawn in pursuance to the executive of the said authorization letter dated 20103/2007 names of all these assessees have been mentioned", the original authorisation letters issued on 20th March 2007 are not before the Court. The Court, therefore, proceeds on the that such authorisation had indeed been issued in the names of each of Assessees. The panchnama drawn up on 23rd March 2007 shows that the search that commenced on that date i.e., 23rd March 2007 stood finally concluded on that date itself. It appears that no further authorisation had been issued for the search of the Assessees who are the Respondents in these appeals. Consequently, the Revenue cannot take advantage of the restraint orders passed in respect of other persons in order to seek extension of the time period for completion of the assessment proceedings in terms of section 153B qua the Respondent Assessees herein.
Even assuming that the restraint orders were validly passed, once the search stood concluded on 23 rd March 2007 in respect of these Assessees, in the absence of a fresh authorisation for another search, the time period for conclusion of the assessment in terms of clause (i) of the second proviso to Section 153 B (1) of the Act does not get extended only because their names were included in the panchnama drawn up on 15th May 2007. It is possible that their names were included in the said panchnama drawn up on 15th May 2007 in order to avoid the consequence of expiry of the period of limitation which, as far as these Assessees are concerned, commenced on 23 rd March 2007, when the search "finally concluded".
11. Consequently, the impugned order of the ITAT, holding that the assessments in question were barred by limitation, and therefore liable to be quashed, does not call for any interference. 12. The second ground on which the ITAT has invalidated the assessments is that there was no incriminating material found in the course of the search against any of the Respondents/ Assessees in these appeals. In this context, reference only need be made to a recent decision of this Court in CIT v. Kabul Chawla (2015) 234 Taxman 300, which holds that in the absence of any incriminating material found in the course of search the framing of assessment under Section 153A or 153 C of the Act, as the case may be, would not be valid. 13. It may be mentioned here that in the case of JH Finvest Pvt. Ltd., the Revenue has not even urged a question regarding the absence of any incriminating material having been found against the said Assessee invalidating the assessment.
14. No substantial question of law arises from the impugned order of the ITAT in these cases. The appeals are accordingly dismissed.”
Keeping in view of the facts and circumstances of the case as explained above, we find that penalty in dispute will not survive. Accordingly, we set aside the orders of the authorities below and delete the penalty in dispute by allowing the Appeal No. 832/Del/2014 (AY 2003-04) filed by the Assessee.
10. Following the consistent view, as taken in ITA No. 832/Del/.2014 (AY 2003-04), the (AY 2007-08) also stand allowed.
In the result, both the appeals filed by the Assessee stand allowed.
Order pronounced in the Open Court on 07/10/2016.