DCIT, NEW DELHI vs. M/S. LANDCRAFT DEVELOPERS PVT. LTD., DELHI

ORDER Per L.P. Sahu, A.M.: This is an appeal filed by the Revenue against the order of ld. CIT(A)- XXIX, New Delhi dated 26.11.2016 for the assessment year 2010-11 on the following grounds :

1. That on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs. 75,00,000/- and Rs. 1,30,00,000/- u/s 68, made on account of unexplained share application money by the AO, without discussing the merit of the case.

2. That on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in hiding that the assessment stood completed on the date of search as the CBDT as the assessment stands completed when the assessment order is passed as explained by the Circular No. 3/2008 dated 12.03.2008 read with Circular No. 16/2014 dated 17.11.2014 of CBDT.

ITA No. 460/Del./2016 2

3. That on the facts and in the circumstances of the case, the Ld. CIT(A) failed to appreciate that the Hon'ble Allahabad High Court has held in the case of Commissioner of Income Tax, Central Kanpur V. Raj Kumar Arora [2014] 52 taxmann. Com 172 (Allahabad), after considering the judgement given by the Hon'ble Delhi High Court in the case of CIT v. Anil Kumar Bhatia [2012] 211 Taxman 453/24 taxmann. Com 98, that the AO has power to reassess returns of assessee not only for undisclosed income, which was found during search operation but also with regard to material that was available at time of original assessment.

4. That the order of the CIT(A) is perverse, erroneous and is not tenable on facts and in law.

2. The brief facts of the case are that search and seizure operation u/s. 132 of the Act was carried out on 23.08.2012. Notice u/s. 153A was issued to the assessee on 23.05.2014 and other statutory notices were issued to the assessee from time to time. In the assessment proceedings, the Assessing Officer observed that the assessee had received an amount of Rs.75.00 lacs towards share application money from M/s. Rufell Mercantile Pvt. Ltd. and Rs.1.30 crores from M/s. Purshottam Vinimay Pvt. Ltd. In support this, the assessee produced their confirmations, bank statement, copies of balance sheets alongwith relevant schedules showing investments. The Assessing Officer issued show cause notice dated 20.03.2015. In response, the assessee submitted the detailed reply. Notices u/s. 133(6) were also issued to both the companies who replied the notices. The Assessing Officer was not satisfied with the reply of assessee and enhanced the encome of the assessee by Rs.2.05

ITA No. 460/Del./2016 3 crores. The ld. CIT(A) after considering the submissions of the assessee and relying on some case laws, deleted the addition. Aggrieved, the Revenue is in appeal before the Tribunal.

Therefore, there was no assessment passed for the year under consideration.

As per section 153A, the AO has rightly made assessment u/s. 153A read with section 143(3) of the Act. She submitted that the assessee shall be deemed to be completed on the date on which the assessment order is passed. In this case there was no assessment order passed earlier under any provision of the Act and only the return was processed. The case law relied by the ld. CIT(A) are not applicable in the present case.

5. After hearing the submissions of both the sides and perusing the materials available on record, we find that the search was conducted on 23.08.2012, but the case relates to the assessment year 2010-11. We observe from the assessment order that the assessing officer has not referred any incriminating material found in the search. During the course of appellate proceedings before the ld. CIT(A), the ld. CIT(A) specifically asked the Assessing Officer for clarifying the status of assessment on the date of search for the impugned assessment year. The Assessing Officer vide his reply dated 16.10.2015 mentioned “after perusal of record, it is observed that as on the date of search, assessment in this case was not pending, hence, it was unabated”. The case law relied by the assessee, as noted above is fully applicable. The ld. CIT(A) has made a reasoned order. The findings reached by the ld. CIT(A) are as under :

I have cafefutty considered the submissions made by AO and the appellant. As reported, no notice under section 143(2) is available on record, though it has been mentioned in the assessment order and order sheet. It is a settled law now that there is no need to issue a separate notice under section 143(2) for proceedings related to 153A of the Act. Accordingly, looking to the provisions of section 153A of the Act and also respectfully following the judgment in the case of Ashok Chadda vs. Income Tax Officer, as cited above, the proceedings under section 153A read with section 143(3) is held to be valid as it is not necessary to ITA No. 460/Del./2016 5 issue and serve notice under section 143(2) of the Act. Thus, the assessment proceedings are found to be in order and this ground of appeal is not maintainable.

10. As per ground no. 2,4(A/B,C,D,E and F) and 5(A,B,C,D,E and F), the appellant raised the issue regarding addition of Rs.75 lacs and Rs.1.30 crores respectively, made under section 68 of the Act, considering the unsecured loan/share application money received from M/s Raffle Mercantile P. Ltd. and M/s Pu- .ishottam Vinimay P. Ltd. as unexplained. The addition has been disputed on legal ground as well as on the merits. 10.1 The appellant has raised the legality of the addition made by stating that these two additions amounting to Rs.2.05 crores are not emanating from any incriminating material found/seized during search, therefore these additions are outside the scope of assessment under section 153A of the Act, since the proceedings for the AY 2010-11 stands completed and unabated at the date of search. 10.2 Search was conducted in this case on 23.08.2012. Original return was submitted by the appellant on 15.10.2010, declaring nil income. This was processed under section 143(1) of the Act. 10.3 Looking to the argument put forth by the appellant that assessment proceedings were complete and unabated the AO was specifically asked to clarify the status of assessment on the date of search. Vide his reply dated 16.10.2015 it has been mentioned by the AO i.e. ACIT, Central Circle-27 that:- Y ' ."After perusal of records, 'it is observed that as on the date -of search, assessment in this case was not pending. Hence, it was unabated/' 10.4 From the above submissions of the AO it is clear that the assessment pioceedings were complete on the date of search and hence the proceedings are unabated. 10.5 With respect to the fact that whether this additions of Rs.2.05 crores are emanating from any incriminating material found/seized during search, nowhere it has been mentioned in the assessment order that any such seized material or otherwise has been found during search to conclude that this amount Ts unexplained cash credit in the hands of the company. Further, nothing has been mentioned in the assessment order to show that during search any unaccounted income, cash, jewellery or any other asset has been found/seized. No trace of any generation of unaccounted income has also been pointed out. Therefore, AO was specifically asked whether the addition made in assessment order is arising out of any incriminating material found/seized during the search, as nothing has been mentioned in the assessment order. 10.6 Vide letter dated 16.10.2015 it was submitted that "with regard to point 2 of your letter, it is submitted that an addition of Rs.2.05 crores was made on the ITA No. 460/Del./2016 6 grounds that the assessee simply filed copy of confirmation and bank statement of M/s Raffle Mercantile P. Ltd. and Purshottam Vinimay P, Ltd. but failed to prove the genuineness and creditworthiness of the transaction. Although the number of opportunities were provided to the assessee to explain the transactions. On examination of the bank statement submitted by the assessee, it was observed that funds were transferred M/s Landcraft Developers P. Ltd. after the receipts of funds from another entity within a few days of deposit During the course of assessment proceedings, it was observed by the AO that M/s Raffle Mercantile P. Ltd. was registered in Kolkata and it was observed by the AO that M/s Reffle Mercantile P, Ltd. used to arrange bogus entries for the different companies. Notices under section 133(6) were issued in M/s Raffle Mercantile P.' Ltd. for the AY 2011-12. However, the reply was not found satisfactory. Since the company involved is same, it was held by the AO that the credentials of the company are dubious/' However no such seized material or incriminating document was referred by the AO, based on which the addition has been made. 10.7 In its rejoinder dated 05.11.2015 it was stated by the appellant that all the relevant information and documents were furnished to the AO as well as to the investigation wing and the director of Raffel was also produced. Information under section 133(6) of the Act was also furnished by Raffel and Purushootam Vinimay P. Ltd. and no discrepancy has been found even though the source of SGurts 1 as been explained. Therefore, nothing is available with the AO in the form of seized documents or any other evidence which formed the basis for such additions.

10.8 It has also been stated by the appellant that in paragraph 5.4 and 6.3 of the assessment order AO has mentioned about the "unqualified admission of the nssessee company" regarding the addition, which is incorrect. No such admission has been made by anybody on behalf of the company and they are vigorously contesting the addition. 10.9 The AO in his report has stated that this expression in the assessment order is with respect to the introduction of share capital of Rs.2.05 crores, not found satisfactory by the AO and used in that context which is otherwise not connected with any type of admission by the appellant. Therefore, the said expression of AO in the assessment order is not considered as any such admission of undisclosed income by the appellant. 10.10 From the above discussions it is clear that there is no material or evidence found or seized during the course of search proceedings of the appellant nor any evidence found for generation of unaccounted income nor any undisclosed/unaccounted asset, cash, jewellery and investment etc. has been discovered.

ITA No. 460/Del./2016 7 1.0.11 Therefore, looking to the facts of this case where the assessment proceedings were already completed and unabated and. no such incriminating material or evidence found/seized during search to conclude the generation of' undisclosed income of the appellant, the decision ,of Hon'ble Delhi High Court relied upon by the appellant in the case of Kabul Chawla vs. CIT dated 28.08.2015 is applicable in this case. 10.12 Accordingly, respectfully following the decision of the jurisdtctional high court where it has been held that in an unabated assessment under section 153A of the Act, the addition can be made only on the basis of incriminating material found and seized during the course of search, whereas the addition made in the present case is without having any incriminating material/seized document is not sustainable.

10.13 Therefore, the addition cannot be sustained in view of the legal provisions as defined by the Hon'ble Jurisdictions! High Court in the above -eferreci case law. 10.14 Since, the issue has been decided on the legal grounds regarding jurisdiction of AO to make such additions under section 153A of the Act and the addition has not been sustained, the ground relating to the merit of this case has not been considered.

Order pronounced in the open court on 26th February, 2018.