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Income Tax Appellate Tribunal, DELHI BENCH “C”, NEW DELHI
Before: SHRI H.S. SIDHU & SHRI L.P. SAHU
Date of Hearing : 08-09-2016 Date of Order : 03-10-2016
ORDER PER H.S. SIDHU : JM The Revenue has filed the Appeal and Assessee has filed the Cross Objection against the Order dated 09.1.2013 of the Ld. CIT(A)-I, New Delhi relevant to assessment year 2006-07.
2. 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. 57,00,000/- made by AO
as unexplained receipts.
3. On the facts and circumstances of the case the ld. CIT(A) has erred in law in holding that the agriculture land in question is rural agriculture land instead of urban agriculture land as held
by the AO that it is a capital asset within the meaning of section 2(14) of the I.T. Act, 1961.
4. 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:-
On the facts and circumstances of the case, the learned
Commissioner of Income Tax (Appeals) [CIT(A)] has erred both on facts and in law in rejecting the contention of the assessee that the proceedings initiated under Section 153A against the appellant are in violation of the statutory conditions and the procedure prescribed under the law and as such the same is bad in law and likely to be quashed.
On the facts and circumstances of the case, the learned
CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the notice issued under Section 153A by the AO is in violation of the provisions of the Act and as such the assessment framed in consequence thereof is bad.
On the facts and circumstances of the case, the learned
CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the assessment framed under Section 153A/143(3) being against the statutory provision of the Act and the procedure prescribed under the law, is bad and the same is liable to be quashed.
4. On the facts and circumstances of the case, the learned
CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the assessment framed is against the spirit of Section 153A of the Act whereby the reassessment is to be confined to the additions and, disallowances consequent to the material found during the course of the search and does not give power to the AO to make additions and disallowances without any incriminating material found during the course of search.
5. That the appellant craves leave to add, amend or alter
any of the grounds of cross objection.
The brief facts of the case are that a search and seizure operation u/s. 132 of the I.T. Act, 1961 in the Swastik Pipes group of cases on 28.8.2008. The assessee was covered in the search. Notice u/s. 153A was issued on 30.12.2009, in response to which the assessee filed return on 29.1.2010 declaring total income of Rs. 12,96,251/-. Notice was issued u/s. 143(2) on 10.2.2010 and 26.7.2010 and u/s. 142(1) ON 11.8.2010.
These notices were duly complied with and necessary details / clarifications were filed. The case was assessed at an income of Rs. 59,06,457/- after making certain disallowances vide his order dated 27.12.2010 u/s. 143(3) r.w.s. 153A of the I.T. Act, 1961.
Against the aforesaid assessment order dated 27.12.2010, assessee preferred an appeal before the Ld. CIT(A), who vide impugned order dated 09.1.2013 has partly 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. 153A on 27.12.2010, is squarely covered in favor of the assessee by the decision dated 28.8.2015 of the Hon’ble Delhi High Court 4 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 of Rs. 57,00,000/- in a proceeding under section 153A, 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. 153A 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) Delhi High Court decision in the case of CIT-7 vs. RRJ Securities Ltd. passed in dated 30.10.2015. ii) Principal Commissioner of Income Tax-18 vs. Ms. Lata Jain
2016 (5) TMI 1273- Delhi High Court. iii) Principal Commissioner of Income Tax-18, vs. Ms. Lata Jain
2016 (5) TMI 292-Delhi High Court. iv) Commissioner of Income Tax (Central)-I vs. Jakson
Engineers Ltd. 2015 (12) TMI 1523. v) M/s Tegh International vs. ACIT 2016 (6) TMI 450 vi) Baba Global Ltd. vs. DCIT, Central Circle-29, New Delhi
(2016) 70 taxmann.com 338 (Delhi Tribunal) vii) Parvnath Developers Ltd. vs. DCIT (ITA NO. 5188/Del/2013) dated 31.10.2014. viii) Sanjay Aggarwal vs. DCIT (ITA No. 3184/Del/2013 dated
16.6.2014)
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 153A 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.
- Filatex India Ltd. vs. CIT (2014) 49 taxmann.com 465 (Delhi)
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 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. 28.8.2008, 6 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. We also find that the case law cited by the Ld. CIT(DR) in the case of Filatex India Ltd. vs. CIT (Supra) is 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 8 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 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. 153A 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 03/10/2016.