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Income Tax Appellate Tribunal, DELHI BENCH ‘G’ NEW DELHI
Before: SHRI I.C. SUDHIR & SHRI L.P. SAHU
ORDER
Per L.P. Sahu, Accountant Member:
These four appeals by different assessees arise out of separate orders of the ld. CIT(A)-XXXIII, New Delhi dated 24.12.2013 for the assessment years 2006-07 and 2007-08 respectively, challenging the assessment orders u/s. 153A of the IT Act, 1961 (‘the Act’ for short).
Since common issue is involved in all these appeals and the grounds and arguments advanced by both the parties are also common barring the amounts of disallowance u/s. 40A(3), hence, all these appeals are being disposed of by this consolidated order for the sake of convenience and brevity and to avoid repetition. We, therefore, reproduce the grounds raised
in ITA No. 2409/Del./2014 as under :
1. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. A.O. in making disallowance of a sum of Rs. 1,50,000/- under provisions of the section 40A(3) of Income Tax Act, 1961.
2. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in assuming jurisdiction to pass impugned assessment order under section 153A, more so in making impugned disallowance which ought not to have been made under the law.
3. That in any case and in any view of the matter, action of Ld. CIT(A) in confirming the action of Ld. A.O in making the impugned disallowance and framing the impugned assessment order is contrary to law and facts, void ab initio, beyond jurisdiction and the same is not sustainable on various legal and factual grounds.
4. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in not reversing the action of Ld. AO in charging interest u/s 234B of the Income Tax Act, 1961.”
The brief facts common to all these appeals of both the assessees are that a search and seizure operation u/s. 132 of the Act was carried out on 21.01.2011 in DS group of cases including the assessees. In response to the notices u/s. 153A, both the assessees filed their returns of income on 04.10.2012 declaring losses of Rs.17,225/-, 24,293/-, 27,362/- and Rs.22,789/- respectively for A.Yrs. 2006-07 and 2007-08. The primary objects of the assessee companies are purchase, sale, exchange, lease, mortgage, hire, lands or immovable or movable property and real estate promotion. During the course of assessment proceedings u/s. 153A, the AO noticed that both the assessee had made purchases of lands for substantial amounts, out of which some of the payments were made in cash in defiance of the provisions of section 40A(3) of the Act. The details of the same are as under : Name A.Y. total amount Amounts paid Amounts of purchase in cash disallowed of lands u/s. 40A(3) ---------- --------- ----------------- ------------- --------------- Sunrise Dwellers 2006-07 3,15,19,793 7,50,000 1,50,000 2007-08 9,47,26,978 70,10,000 14,02,000 Sabhrant Estates 2006-07 2,80,78,144 66,78,051 13,35,610 2007-08 2,79,77,325 36,79,375 7,35,875 The ld. AO after considering the provisions of section 40A(3) and the exceptions enumerated in relevant Rule 6DD(J), disallowed the aforesaid amounts u/s. 40A(3) vide assessment orders u/s. 153A of the Act. Both the assessees challenged these assessment orders in appeals before the ld. CIT(A), who vide impugned orders confirmed the orders of the AO and dismissed the appeals of both the assessees. Aggrieved by the orders of ld. CIT(A), both the assessees have come up in present appeals before the Tribunal.
During the course of hearing, the ld. AR of the assessee at the outset submitted that since the impugned disallowances made by the Assessing Officer are not based on any incriminating material found during the course of search, the same is not sustainable in view of the decision of Hon’ble Delhi High court in the case of CIT v. Kabul Chawla (2016) 380 ITR 573 (Del.). It is submitted that none of the authorities below has recorded any finding as to the material found in the search which resulted into impugned disallowances. The ld. AR further submitted that the present issue is squarely covered by the decision of ITAT, Delhi Bench ‘E’ in the case of other concern of DS group, i.e., M/s. Nilay Infrastructure (P) Ltd. vs. DCIT Central Circle 4, New Delhi (ITA No. 5297/Del./2013) wherein the co-ordinate Bench vide order dated 10.06.2016 has deleted similar disallowances u/s. 40A(3) which were made on the basis of same search operation.
The ld. DR relied upon the orders of the authorities below and submitted that the ld. CIT(A) has passed the reasoned order, which needs no interference.
Having considered the rival submissions and perused the entire material on record, we find that the issue under consideration is squarely covered by the decision of co-ordinate Bench in the case of Nilay Infrastructure (P) Ltd. (supra). A perusal of this decision, it reveals that in that case disallowance u/s. 40A(3) was made in the identical facts and on the basis of same search. M/s. Nilay Infrastructure is also one of the group concerns of DS group as the assessees in the present appeals. The assessment order, order of CIT(A), contentions of parties, grounds of appeal
etc. in that case are verbatim to those in the present appeals. The ITAT has deleted the disallowance in the said decision observing as under : “8. Considering the above submissions especially ratios laid down in its recent decision of Hon'ble jurisdictional High Court of Delhi in the case of Kabul Chawla (supra), we find that the Hon'ble High Court has been pleased to summarized the application of provisions under sec. 153A of the Act as under in para No. 37 of the decision: “Summary of the legal position
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”.
9. Respectfully following the ratios laid down in the above decision when we examine the facts of the present case, we find that like in the case of Kabul Chawla, in the present case return of income originally filed was processed under section 143(1) of the Act, undisputedly, no notice under sec. 143(2) was issued within the prescribed time limit and thus processing of original return of income under sec. 143(1) of the Act had acquired the status of assessment. On the date of search undisputedly no assessment was pending for the abatement and it is also an undisputed fact of the present case that no incriminating material was found during the course of search. On fulfillment of these two conditions i.e. no incriminating material was found during the course of search and no assessment was pending on the date of search, framing of assessment under sec. 153A in the present case thus cannot be justified as valid. We thus respectfully following the ratios laid down in the above cited decision in the case of Kabul Chawla hold that the assessment in question was not valid and it was void ab initio. The same is quashed as such. The ground Nos. 1 and 2 are thus allowed in favour of the assessee. 10. In view of the above finding holding the very assessment order as void ab initio, remaining grounds questioning the action of the Assessing Officer in making the disallowance under sec. 40A(3) of the Act do not survive. These grounds are thus disposed off as having become infructuous.
7. Respectfully following the decision of co-ordinate Bench, we find that the impugned disallowances made by the authorities below are not sustainable and we have no reason to take a different view in the matter. Accordingly, all the four appeals of both the assessees are fit to be allowed.