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Income Tax Appellate Tribunal, DELHI BENCH ‘E’, NEW DELHI
Before: SHRI H.S. SIDHU & SHRI ANADI N. MISHRA
This appeal is filed by the assessee against the Order dated 13.08.2012 passed by the Ld.CIT(A)-XXXII, Delhi for Assessment Year 2004-05 on the following grounds:-
1. “On the facts and in the circumstances of the case, Ld. CIT(A) erred in holding that there was no infirmity in the action of the A.O. assuming jurisdiction and passing order u/s 153A/143 (3) of the Income-tax Act despite the fact that there was no undisclosed income and no materials found during the search showing undisclosed income:
2. The Ld. CIT(A) erred in declining to justify and fairly adjudicate Appellant’s contention that since there was no separate search warrant in Appellant’s case the search operation u/s 132 was illegal:
3. The Ld. CIT(A) erred in holding that there was no violation of the principles of natural justice by the AO in completing the assessment without giving adequate opportunity and issuing show cause regarding the additions made.
The Ld. CIT(A) erred in confirming the addition of Rs. 19,82,660/- on account of deemed dividend u/s 2 (22) (2) of the I.T. Act:
The Ld. CIT(A) erred in ignoring and not considering the material evidences to the effect that the amount was received as share application money and was not loan or advance:
The Ld. CIT(A) erred in confirming the interest charged by the AO u/s 234A and 234B of the Act.
Appellant craves leave to add, alter, amend and/or rescind any of the grounds of appeal.”
In the first ground of appeal, the assessee is contesting the action of the Ld. Assessing Officer (AO) in assuming jurisdiction u/s 153A of I.T. Act despite the fact that no materials were found during the search showing undisclosed income. The brief facts of the case are that assessee company is in the business of Computer hardware, computer software and trading in foreign exchange currency. In this case search and seizure operation u/s 132 of the Income-tax Act was conducted on 26.3.2010. Subsequent to the search, notice u/s 153A of the Act was issued on 20.4.2011 asking the appellant to file the return of income. Assessee filed a return of income on 8.9.2011 showing total income of Rs. 47,36,871/-. AO completed the assessment u/s 153A read with section 143(3) of the I.T. Act, 1961 and added an amount of Rs. 19,82,660/- as deemed dividend u/s 2(22)(e) of the Act in asstt. year 2004-05. Aggrieved with the order of the Assessing Officer, assessee preferred an appeal before the Ld. CIT(A) and submitted that the jurisdiction assumed by the AO u/s 153 is not as per law vide order dated 13.8.2012, Ld. CIT(A) dismissed this ground of appeal by holding that assessment u/s 153A is mandatory even where no incriminating material is found in the course of search u/s 132. The assesee is in appeal before us against order of Ld. CIT(A) and the first ground of appeal is on this issue.
2.1. We have heard both the sides and perused the relevant records. After perusing the order of Ld. CIT(A), we find that the relevant discussion is at paragraph 2.2 of order dated 13.8.2012 of Ld. CIT(A). The Ld. CIT(A) has not disputed the fact claimed by the assesee that no incriminating material was found during search u/s 132 of I.T. Act showing undisclosed income. The Ld. AR of the assesee placed reliance on orders of jurisdictional High Court in the case of CIT vs. Kabul Chawla 380 ITR 573 (Delhi). The Ld. CIT(DR) who appeared on behalf of Revenue supported the orders of lower authority ; but did not dispute the fact that no incriminating material was found against the assessee at the time of search u/s 132 of I.T. Act showing any undisclosed income. Thus, the addition of Rs. 19,82,660/- as deemed dividend u/s 2(22)(e) of I.T. Act – is made by Assessing Officer not on the basis of any incriminating material found in the course of search u/s 132 of I.T. Act.
Under these facts and circumstances, we find that the issue is covered in favour of the assesee and against the Revenue by the decision dated 28.8.2015 of the Hon’ble Delhi High Court in the case of CIT vs. Kabul Chawla 380 ITR 573 (Delhi) wherein the Hon’ble jurisdictional High Court held as 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 ITA Nos.
707, 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 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 completed. Since no incriminating material was unearthed during the search, no additions could have been made to the income already assessed.”
2.2. We further find that issue is also covered by decision of Honorable jurisdictional High Court in the case of Principal Commissioner of Income Tax v/s. Kurele Paper Mills P. Ltd. 380 ITR 571 (Delhi) . Honourable Supreme Court has dismissed the Special Leave petition filed by the Department against this decision of Honourable Delhi High Court.
2.3 Respectfully following the binding precedents of the Hon’ble Jurisdictional High Court in CIT vs. Kabul Chawla ( supra) and in Principal Commissioner of Income Tax v/s. Kurele Paper Mills P. Ltd. ( supra ) , we allow the first ground of appeal as addition of Rs. 19,82,660/- as deemed dividend u/s 2(22)(e) of I.T. Act is not based on any incriminating material found or seized during the course of search; and the addition is beyond the scope of provisions of Section 153A of the Act. Hence, the aforesaid addition of Rs. 19,82,660/- is hereby deleted.
2.4. As the addition of Rs. 19,82,660/- already stands deleted ; grounds 2,3,4 and 5 of appeal are infructuous. Hence these grounds are not adjudicated.
2.5. Ground 6 of appeal is consequential in nature.
In the result, appeal filed by assessee is allowed.