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Income Tax Appellate Tribunal, DELHI BENCH ‘A’ NEW DELHI
Before: SHRI G.D. AGRAWAL & SHRI SUDHANSHU SRIVASTAVA
PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER The present appeal has been preferred by the Department against the order dated 15.03.2013 passed by the Ld. CIT(A)-III, New Delhi for assessment year 2004-05 whereas the CO has been filed by the assessee. & C.O. 214/D/2015 Assessment Year 2004-05
The facts of the case, in brief, are that the above issues
emerge from the fact that a search and seizure action was carried on assessee's premises on 20.08.2009 which is a part of Unity
Group of companies. The other companies/concerns which were also searched along with the appellant are as under:-
S. No. Name of the appellant 1. North Delhi Projects Ltd. 2. Unity Buildwell Projects Ltd. 3. Unity Projects P. Ltd. 4. Unity Township P. Ltd. 5. Prestige Buildwell P. Ltd. 6. Sankalp Agencies P. Ltd. Aggarwal Tower P. Ltd. 7. Agarwal Entertainment P. Ltd. 8. •�•u \
9. New Horizon Buildwell P. Ltd.
10. Fun City Developers P. Ltd. 11. Mittaso Projects P. Ltd. 12. Aggarwal Plaza P. Ltd.
During the course of the proceeding under section 153A in the assessee’s case, the AO found that the assessee had received share capital/share application money of Rs. 12,52,00,000/- from 28 different entities. The AO made enquiries from 8 entities by sending 2 & C.O. 214/D/2015 Assessment Year 2004-05 the notices under section 133(6)/131 of the Act. Out of 8 entities, 5 entities filed their written confirmation and other related documents etc. However, remaining 3 entities namely Vikas Parafins Pvt. Ltd., Raf Steel Pvt. Ltd. and Universal Electrique Motors Pvt. Ltd, who had invested Rs. 10,00,000/-, Rs. 15,00,000/- and Rs. 25,00,000 respectively, did not comply with the notices issued under section
Accordingly Rs 50,00,000 invested by them were treated as unexplained credit and addition was made to assessee's income by the AO.
In the appeal before the Ld. First Appellate Authority, the assessee challenged the assessment framed u/s 153A on the ground that no incriminating documents were found relating to it and, therefore, no addition could be made. The addition was challenged on merits also. The Ld. CIT (A) rejected the assessee’s legal ground relating to the validity of proceedings u/s 153A but allowed the assessee’s appeal on merits and deleted the entire addition.
Now the Department has filed an appeal and has raised the following grounds:- & C.O. 214/D/2015 Assessment Year 2004-05 “1. On the facts and in the circumstances of the case, the CIT(A) has erred in deleting the addition of Rs. 50,00,000/- made U/s 68 of the Income tax Act 1961, on account of unexplained cash credits under the head share application money received.
2. On the facts and in the circumstance of the case, the C1T(A) has erred, in deleting this addition and ignoring the facts that the assessee had failed to prove the creditworthiness of the share applicants as well as genuineness of the transaction within the meaning of section 68 of the Act.
2. The order of the CIT (A) is erroneous and is not tenable on facts and in law.
3. The appellant craves leave to add, alter or amend any/all of the grounds of appeal before or during the course of the hearing of the appeal.”
In the CO, the assessee has raised the following grounds:-
“1. That on the facts and circumstances of the case, the Commissioner of Income Tax (Appeals) has erred both in law and on facts in confirming the proceedings initiated under Section 153A of I.T. Act, which is bad in law in the absence my incriminating material belonging to the assessee being found during the course of search.
2. That on the facts and circumstances of the case, the Commissioner of Income Tax (Appeals) has erred both in law and on facts in confirming the validate of impugned assessment order dated 29.12.2011 u/s 153A of I.T. Act as framed by the Assessing officer in respect of closed assessment for which no incriminating material seized during the course of search and seizure action.
3. That on the facts and circumstances of the case, the Commissioner of Income Tax (Appeals) has erred both in law and on facts in confirming the action and Procedure 4 & C.O. 214/D/2015 Assessment Year 2004-05
followed by the Assessing officer during the proceeding u/s 153A of the I.T. Act, which is invalid in eyes of law being based on incorrect postulate that search assessment u/s 153A is de novo in nature whereas the same is to be based and confined to incriminating material unearthed during search operations.
4. That on facts and circumstances of the case the learned Assessing Officer has erred in charging interest of Rs. 16,68,188/- u/s 234B of I.T.Act.”
Before proceeding with the grounds of appeal of the Department, we deem it appropriate to first address and adjudicate on the CO of the assessee, we deem it appropriate to first address and adjudicate on the CO of the assessee as the legal issue raised by the assessee is germane to the entire assessment proceedings.
8. Before us the Ld. AR for the assessee submitted that it is not the case of the Department that the addition of Rs. 50 lacs has been made on account of any incriminating material found during the course of search and seizure proceedings. It was further submitted by the Ld. AR that as per the second proviso of section 153 A only the assessments which were pending on the date of initiation of search u/s 132 of the Act will abate and the assessment proceedings which have become final as on the date will not stand abated. It was further submitted that no & C.O. 214/D/2015 Assessment Year 2004-05 incriminating material was found during the course of search to show that the entries were not genuine. Ld. AR also drew our attention to the decision of the Hon’ble High Court of Delhi in CIT Central-III vs. Kabul Chawla in ITA Nos. 707/2014, 709/2014 and 713/2014. He also relied on the decision of the co-ordinate Bench of the Tribunal in assessee’s own case for AY 2006-07 in ITA No. 2290/Del/2013 and CO 140/Del/2013 wherein the deletion of addition of Rs. 2,20,00,000/- made u/s 68 of the Act by the First Appellate Authority was upheld.
Ld. DR supported the order of the AO.
We have carefully considered the material placed before us and the issue involved. Section 153A of the Act provides that where a search is initiated u/s 132 of the Act, the AO shall “assess or reassess the total income of the six assessment years immediately preceding the assessment year” relevant to the previous year in which the search is conducted or requisition is made. The first proviso states that the AO shall “assess or reassess the total income in respect of each assessment year falling within such six assessment years”. The second proviso states that the assessment or reassessment relating to the said & C.O. 214/D/2015 Assessment Year 2004-05 six assessment years pending on the date of initiation of the search u/s 132 shall abate. It is seen that in assessee’s case search action was initiated and assessments u/s 153A were framed for six assessment years making various additions. It is assessee’s claim that the addition of Rs. 50 lacs was not tenable as the regular return had been filed and the same had been accepted u/s 143 (1) of the Act and that no material has been found during the search to justify the addition. In our considered opinion section 153A does not authorise the making of a de novo assessment in this particular assessment year. While under the first proviso, the AO is empowered to frame assessment for six years, under the second proviso only assessments which are pending on the date of initiation of search abate. The effect is that completed assessments do not abate. The assessments can be said to be pending only if the AO is statutorily required to do something further. If the section 143(2) notice has been issued, the assessment can be said to be pending. However the assessment in respect of a return processed u/s 143(1) is not pending because the AO is not required to do anything further about such a return. The power given by the first proviso to assess income for six assessment years has to be confined to the I.T.A. No. 3445/D/2013 & C.O. 214/D/2015 Assessment Year 2004-05 undisclosed income unearthed during search and cannot include items which are disclosed in the original assessment proceedings.
It is seen on facts that as the return for the year had been processed u/s 143 (1) the assessment was not pending and as no material was found during the search, the addition has been rightly deleted by the Ld. CIT (A). It will also be worthwhile to reproduce para 37 of the judgment of the Hon’ble High Court of Delhi in the case of CIT Central – III vs. Kabul Chawla (supra) which lays down the entire law with regard to section 153A 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 decisions, the legal position that emerges is 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 8 & C.O. 214/D/2015 Assessment Year 2004-05 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 finding of the search and any other material existing or brought on the record of the AO.
& C.O. 214/D/2015 Assessment Year 2004-05 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 appeal it is undisputed that the impugned additions were made by the Assessing Officer without there being any finding that the additions related to any seized material.
There is no iota of any reference to any incriminating material in the assessment order u/s 153A/143(3) and therefore following the ratio laid down by the Hon'ble Delhi High Court in CIT Central-III vs Kabul Chawla (supra), we allow the CO of the assessee and quash the assessment order passed u/s 143(3)/153A.
In view of our findings in the CO, the appeal of the Department is dismissed. & C.O. 214/D/2015 Assessment Year 2004-05
In the final result, the appeal of the Department is dismissed and CO of the assessee is allowed.
Order pronounced in the open court on 29th June, 2016.