ACIT, NEW DELHI vs. M/S. ORCHID INFRASTRUCTURE DEVELOPERS PVT. LTD., GURGAON

The present cross appeals have been filed by the assessee as well as the Revenue against the order dated 27.08.2013 passed by Ld. CIT(A) III, New Delhi for the Assessment Year 2007-08 on the following grounds of appeal: I.T.A.No. 5150/Del/2013 (Assessee’s appeal):

That on the facts and circumstances the Ld AO in rejecting the Audited books of accounts maintained in regular course of business and duly accepted in earlier Assessment proceedings without pointing out any defects in same which is contrary to principles of natural justice, facts and provision of law as such the action of Ld. AO need to be undone and the book result should be accepted.”

At the outset, Ld. A.R. submitted that in the appeal filed by the assessee, ground Nos.1, 2 & 7 are general in nature. Grounds No.2 & 3 are legal issues challenging the validity of the assessment proceedings u/s 153A of the Act. The Revenue has preferred an appeal against the additions deleted by Ld. CIT(A). 2.1 The legal issues raised b the assessee in pertains to the validity of assessment proceedings. It is necessary to deal with the legal issue first. Accordingly, we take up the legal issue raised by the assessee in its appeal.

The brief facts of the case are as under: 3.1 Search and seizure proceedings took place at Shri Ram Hari Ram group of cases and thereby assessee was also searched on 26.02.2009. The assessee filed its original return declaring its income at Rs.12,41,50,220/- on 06th November 2007 and the assessment order u/s 143(3) was passed on 30.12.2008.

Ld. A.R. submitted that as such no assessment was pending for the year under consideration, as on the date of search. He further submitted that during the search, the Assessing Officer could not find any incriminating material that could lead to the addition being made in respect of interest expenses and difference in valuation of W.I.P. He further submitted that since no assessment was pending, there was no question of abatement of proceedings for assessment to be conducted u/s 153A without referring to any incriminating materials. Ld. A.R. relied upon the decision of Hon'ble Delhi High Court in the case of CIT Vs Kabul Chawla reported in 380 ITFR 573.

On the contrary, Ld. D.R. relied upon the order passed by the authorities below. 6. We have perused the details and record placed before us vis-à-vis the rival contentions raise by the Ld. A.R. The legal dispute raised by the assessee is, ‘As to whether on a completed assessment, can there be addition in subsequent assessment proceedings initiated u/s 153A pursuant to search, without there being any incriminating material? As per the ratio laid down by Hon'ble Delhi High Court in case of Kabul Chawla (supra), only pending assessment can abate and completed assessment remain unaffected unless Assessing Officer has any seized material that can justify the addition.

In this case, return of income for the year under consideration was filed on 06.11.2007 has attained finality on passing the assessment order u/s 143(3) on 30.12.2008. As it is observed from the records placed before us that there has been no reference to any incriminating document in respect of the addition made by the Assessing Officer. The Assessing Officer has completed the assessment and made addition without there being any seized material / documents.

The Ld. D.R. could not controvert the submissions made by the Ld. A.R. that there was no incriminating material that was found or seized during the search and seizure proceedings. Hence, the additions made in the assessment order by the Assessing Officer in admittedly not based on any material found or seized during the course of search. 9. We are, therefore, of the opinion that the case o the assessee is squarely covered by the decision of CIT Vs Kabul Chawla (supra). For the reasons set out above, we uphold ht legal issue raised by the assessee in the cross objection and hold the impugned assessment as null and void. 10. As the assessment proceeding has been quashed and set aside, the other grounds raised by the assessee as well as the Revenue, stand infructuous without going into the merits.

Accordingly, the appeal filed by the assessee stands allowed on the legal issue raised and appeal filed by the Revenue stands dismissed. Order pronounced in the open court on 09th Sep., 2016.