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Income Tax Appellate Tribunal, DELHI BENCH: ‘G’ NEW DELHI
Before: SH. H.S. SIDHU & SH. O.P. KANT
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: ‘G’ NEW DELHI BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER AND SH. O.P. KANT, ACCOUNTANT MEMBER ITA No. 57/Del/2014 Assessment Year: 2006-07 ACIT, Central Circle-3, New Vs. M/s. Starlight Realtors (P) Delhi Ltd., BA-17A, DDA Flats, Ashok Vihar, Delhi GIR/PAN :AAJCS3398H (Appellant) (Respondent) And C.O. No. 235/Del/2014 [In ITA No. 57/Del/2014] Assessment Year: 2006-07 M/s. Starlight Realtors (P) Vs. ACIT, Central Circle-3, New Ltd., BA-17A, DDA Flats, Delhi Ashok Vihar, Delhi GIR/PAN :AAJCS3398H (Appellant) (Respondent) Department by Smt. Pramita M. Bhishwash, CIT(DR) Assessee by Sh. S.K. Gupta, CA Date of hearing 30.06.2016 Date of pronouncement 29.07.2016 ORDER PER O.P. KANT, A.M.: This appeal by the Revenue and the cross objection by the assessee are directed against order dated 24/10/2013 of the learned Commissioner of Income-tax (Appeals)-I, New
2 ITA No. 57/Del/2014 & C.O. No. 235/Del/2014 AY: 2006-07 Delhi for assessment year 2006-07. The grounds of appeal raised by the Revenue are as under: “1. The Commissioner of Income Tax (Appeal) erred in law and on facts in deleting the addition of Rs.50,00,000/- u/s 68 of the Act w.r.t. procurement of accommodation entries through share application money from non-descript companies. 2. The Commissioner of Income Tax (Appeal) erred in law and on facts in deleting an addition of Rs.25,000/- made by the AO w.r.t. commission paid @ 5% for procurement of accommodation entries through share application money from non-descript companies. 3. The Commissioner of Income Tax (Appeal) erred in admitting additional evidence under Rule 46A. 4. (a)The order of the CIT(A) is erroneous and not tenable in law and on facts. (b)The appellant craves leave to add, alter or amend any/all the grounds of appeal before or during the course of the hearing of the appeal.”
The cross objection raised by the assessee are as under: “The Ld. CIT(A) erred both in law and on facts in not quashing the addition of Rs. 15,75,000/- on the ground that the additions in question have no relation whatsoever to the material or evidence found in the course of search and there were no pending assessment proceedings on the date of search abating under second proviso to Section 153A(1).”
The facts in brief are that the assessee filed return of income on 28/11/2006, declaring loss of Rs. 15,870/-. Subsequently, a search action under section 132 of the income tax Act, 1961 (in short “the Act”) was carried out at the premises of the assessee alongwith the cases of Mahesh Gupta Group on 30/06/2009. The Assessing Officer issued notice
3 ITA No. 57/Del/2014 & C.O. No. 235/Del/2014 AY: 2006-07 under section 153A of the Act for filing return of income. In response, the assessee filed a letter on 18/04/2011 stating that the return of income filed originally might be treated as return filed in response to notice under section 153A of the Act. Thereafter, notices under section 143(2) and 142(1) of the Act were issued. In the assessment proceedings, the Assessing Officer observed the receipt of share application money amounting to Rs. 50 Lacs from three share applicants, however, he held that the assessee could not discharge its onus under section 68 of the Act as the amount received was in the nature of accommodation entry, therefore, he made addition of Rs. 50 Lacs in terms of section 68 of the Act. The Assessing Officer also added commission at the rate of 0.5% on the amount of accommodation entry of Rs. 50 Lacs which amounted to Rs. 25,000/- on the presumption that assessee has paid commission for procuring the accommodation entries of Rs. 50 lakhs. Other additions against brokerage etc. were also made. Aggrieved, the assessee challenged the proceeding under section 153A of the Act on the ground that no incriminating material was found in the course of search and the regular assessment was already completed. The assessee also challenged additions on merit. The learned Commissioner of Income-tax (Appeals) upheld the validity of assessment under section 153A of the Act, however, allowed relief in respect of additions on merit. Aggrieved, both the Revenue and the assessee are before us in appeal and cross objections respectively raising the grounds as reproduced above.
4 ITA No. 57/Del/2014 & C.O. No. 235/Del/2014 AY: 2006-07 4. Both the parties, agreed to first take the cross objection of the assessee as the same goes to the root of the assessment proceedings. 5. The learned counsel of the assessee addressing the cross objection submitted that no incriminating material was seized in respect of the year under consideration. He further submitted that original return of income in the case was filed on 28/11/2006 and search proceeding were carried out by the Department on 30/06/2009, therefore, in view of the fact, no proceedings were pending for the assessment year in question as on the date of search, the assessment proceedings were deemed to be completed. Therefore, he submitted that where the assessment of the assessee is deemed to have attended finality under section 143(1) of the Act, the Assessing Officer was authorized to make addition to the income only based of the evidence found in the course of search. In support of his contention, he relied on the judgment of the Hon’ble Jurisdictional High Court in the case of Commissioner of Income Tax (Central)-III Vs. Kabul Chawla, ITA No. 707, 709 & 713 of 2014, dated 28th August, 2015.
On the other hand, the learned Commissioner of Income Tax (Departmental Representative) relied on the authorities below.
We have heard the rival submissions and perused the material on record. We find that in the case of Kabul Chawla
5 ITA No. 57/Del/2014 & C.O. No. 235/Del/2014 AY: 2006-07 (supra) cited by the assessee of jurisdictional High Court, the Hon’ble High Court has held that no addition can be made in case of completed assessments without any incriminating material seized during the course of search. The relevant findings of the Hon’ble High Court are reproduced as under: “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
6 ITA No. 57/Del/2014 & C.O. No. 235/Del/2014 AY: 2006-07 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.”
In the instant case, the original return of income was filed on 28/11/2006 and case was not selected for scrutiny, whereas the search was conducted on 30/06/2009, therefore, the intimation sent under section 143(1) of the Act attained finality. There is no dispute on this fact. There was no incriminating material found in respect of assessee for the year under consideration. There is no dispute on this fact also. Only dispute is whether any addition can be made dehorse the incriminating material found during the course of search. Respectfully following the judgment of the Hon’ble High Court in the case of Kabul Chawla (supra), we are of considered opinion that no
7 ITA No. 57/Del/2014 & C.O. No. 235/Del/2014 AY: 2006-07 addition can be made in respect of the assessment, which has attained finality and no incriminating material related to said assessment year is found during the course of search. Accordingly, we hold that in the case of assessee no addition could be made in the instant assessment year. The ground of the cross objection is accordingly allowed. 9. Since we have already allowed the cross objection of the assessee and held that no addition could be made in the case of the assessee in the instant assessment year, the appeal of the Revenue is rendered infructuous and accordingly dismissed. 10. In the result, appeal of the Revenue is dismissed and cross objection of the assessee is allowed. The decision is pronounced in the open court on 29th July, 2016.
Sd/- Sd/- (H.S. SIDHU) (O.P. KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 29th July, 2016. Laptop/- Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi