M/S JAIPURIA INFRASTRUCTURE DEVELOPERS P.LTD.,NEW DELHI vs. ACIT, NEW DELHI

Briefly stated, the facts of this case are : on the basis of search and seizure operation conducted under section 132 of the Income-tax Act, 1961 (for short ‘the Act’) on M/s. Jaipuria Group of cases on 27.03.2012, the assessee filed return of income for Assessment Year 2006-07 declaring an income of Rs.2,58,59,845/- on 29.08.2013 in response to the notice u/s 153 of the Act.

In response to the notice u/s 142(1) and 143(2) along with questionnaire, Shri V.K. Jain and Shri Sanjeev Aggarwal, AR of the assessee attended proceedings. Assessee company is into the business of builders and developers of residential and commercial projects and filed the detail on record. From the pre-search/post- search enquiry, it has come on record that assessee company is involved in the real estate business of S.K. Jaipuria group and is indulged into inflating the cost of project by debiting bogus expenses by raising bill from non-existing parties or entry providers, namely:-

Assessee was called upon to furnish the details of the transactions with the aforesaid parties along with supporting documents viz. agreements, copies of bills, details of site and nature of work executed, etc. to prove the genuineness of the transactions and the assessee accordingly filed the details of transactions as under :-

In order to verify the genuineness of the transactions, summons were issued to the aforesaid parties to produce the details of the transactions, value and TDS with the assessee company for the last six years along with their ledger account and copies of agreement, however summons issued to M/s. Roshan Buildtech Pvt. Ltd. and M/s. Gautam Buddha Buildtech Pvt. Ltd. received back unserved. Despite directions, the assessee has failed to produce the aforesaid parties. Even the notices issued u/s 133(6) to the aforesaid parties received back unserved with remarks “incomplete address, without house number”. During assessment proceedings, Shri Surya Kant Jaipuria, one of the Directors of the assessee company got recorded the statement and failed to produce the parties for examining to prove the genuineness of the transactions. Consequently, the amount of Rs.2,34,54,000/- is treated as bogus expenses and added to the total income of the assessee.

Briefly stated, the facts of this case are : on the basis of search and seizure operation conducted under section 132 of the Acton M/s. Jaipuria Group of cases on 27.03.2012, the assessee filed return of income for Assessment Year 2007-08 declaring an income of Rs.21,23,62,060/- on 29.08.2013 in response to the notice u/s 153 of the Act. Assessee, however, declared deemed dividend income u/s 115JB to Rs.21,19,53,090/- and tax payable at Rs.2,11,95,309/-.

However, during the year under consideration, assessment was completed u/s 143(3) on 29.12.2009 making an addition of Rs.1,18,81,368/- on account of trading addition and Rs.5,78,78,830/- on account of disallowance of compound fee paid to GDA, which are stated to have been deleted by CIT (A).

In response to the notice u/s 142(1) and 143(2) along with questionnaire, Shri V.K. Jain and Shri Sanjeev Aggarwal, AR of the assessee attended proceedings. Assessee company is into the business of builders and developers of residential and commercial projects and filed the detail on record. From the pre-search/post- search enquiry, it has come on record that assessee company is involved in the real estate business of S.K. Jaipuria group and is indulged inflating the cost of project by debiting bogus expenses by raising bill from non-existing parties or entry providers, namely:-

Assessee was called upon to furnish the details of the transactions with the aforesaid parties along with supporting documents viz. agreements, copies of bills, details of site and nature of work executed, etc. to prove the genuineness of the transactions and the assessee accordingly filed the details of transactions as under :-

However, summons issued to the aforesaid parties except M/s. Rupayan Developers Pvt. Ltd. and M/s. Matrix Buildcon Pvt. Ltd. received back unserved and consequently was asked to show cause as to why the transactions with aforesaid parties be treated as bogus one. Even, the summons issued u/s 133 (6) of the Act to the aforesaid 8 parties to furnish the details of their transactions with the assessee company were neither received back unserved nor any reply has been sent by the parties. During assessment proceedings, Shri Surya Kant Jaipuria, one of the Directors of the assessee company got recorded the statement on 18.02.2014 and due to failure of the assessee company to produce the aforesaid parties for examination, an amount of Rs.7,12,00,000/- is treated as bogus expenses and added to the total income of the assessee.

Assessee carried the matter before the ld. CIT (A) challenging the assessment order dated 28.03.2014 qua the Assessment Years 2006-07 & 2007-08 who have partly allowed the appeal. Feeling aggrieved, the assessee has come up in appeal before the Tribunal by way of filing the present appeal.

We have heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case.

Ld. AR for the assessee challenging the impugned order contended inter alia that the Assessing Officer has no seized material to reassess the total income on the basis of search operation conducted on 27.03.2012; that since on the date of search, assessment already stood completed and no fresh material was unearthed to make reassessment, the assessment order is not sustainable and relied upon the judgment cited as CIT vs. Kabul Chawla - 380 ITR 173 (Del.).

However, on the other hand, ld. DR to repel the contentions raised by the ld. AR also relied upon Kabul Chawla (supra) by specifically emphasizing its paras 37 (iv), (vi) and (vii), reproduced for ready reference at para no.18 of this order, and also contended that provisions contained u/s 153A is enabling provisions having inherent powers with the AO to make an assessment on the basis of post-search material or information already available with him which could be related to the evidence found.

Undisputed facts necessary to adjudicate upon the controversy at hand, are inter alia that the return of income was filed by the assessee company qua the AY 2006-07 on28.11.2006, which was processed u/s 143(1) and no notice u/s 143(2) was issued till the date of search i.e. 27.03.2012; that assessment qua the AY 2007-08 was completed u/s 143(3) on 29.12.2009; that the assessment orders under challenge bear no reference of material, if any, unearthed during the search operation.

In the backdrop of the aforesaid undisputed facts, the first question arises for determination in this case is as to whether the AO is justified to complete the assessment u/s 153A by making an addition of Rs.2,34,54,000/- for AY 2006-07 and Rs.7,12,00,000/- for AY 2007-08 even in the absence of any incriminating material deemed found during the search conducted u/s 132 of the Act?”

Identical issue has come up before the Hon’ble jurisdictional High Court in the case cited as Kabul Chawla (supra) wherein all the earlier decisions delivered by the Hon’ble High Courts have been considered and legal position decided by the Hon’ble jurisdictional High Court is summarized for ready reference as under :-

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.”

Now, adverting to the case at hand, so far as assessment for the AY 2006-07 is concerned, the assessment was though completed u/s 143(1) but undisputedly no notice was issued u/s 143(2) within the period of limitation on the date of search, meaning thereby no assessment was pending in this case as on date of search i.e. 27.03.2012 and question of abatement does not arise and in these circumstances, addition could be made on the basis of incriminating material unearthed during the search only. However, assessment qua AY 2007-08 was admittedly completed u/s 143(3) prior to the date of search i.e. 27.03.2012.

Ld. DR for the revenue by laying emphasis on paras 37 (iv), (vi) and (vii) vehemently contended that section 153 does not mandate to make an addition strictly on the basis of evidence found during the course of search rather assessment can be made on the basis of evidence found in the course of search or other post-search material or information available with the AO which can be related to the evidence found. Ld. DR further emphasized that even completed assessment can be interfered with by the AO u/s 153A on the basis of requisition of documents or undisclosed income or property discovered in the course of search which was not produced or not already disclosed or made known in the course of original assessment.

However, in the backdrop of aforesaid undisputed facts discussed in the preceding paras and law laid down by Hon’ble jurisdictional High Court in the case cited as Kabul Chawla (supra), we are of the considered view that completed assessment interfered with by the AO u/s 153A and confirmed by the ld. CIT (A) are not sustainable in the eyes of law for the following reasons:-