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Income Tax Appellate Tribunal, DELHI BENCH “E” NEW DELHI
Before: SHRI I.C. SUDHIR & SHRI PRASHANT MAHARISHI
ORDER
PER I.C. SUDHIR: JUDICIAL MEMBER The assessee has questioned first appellate order on the following grounds: 1. That having regard to the facts and circumstances of the case, Learned CIT(Appeals) has erred in law and on facts in confirming the action of the Ld. A.O. in framing the impugned assessment order u/s. 153A/143(3) without assuming jurisdiction as per law and without obtaining requisite approval as per law and without complying with the other mandatory condition envisaged under the Act, more so when no incriminating material have been found as a result of search.
2 2. That having regard to the facts and circumstances of the case, Learned CIT(Appeals) has erred in law and on facts in making disallowance of Rs.27,20,000 u/s. 40A(3) and too without considering the submissions/evidences of the assessee, more so when such disallowance could not have been made in the proceedings u/s. 153A of the Act.
3. That in any case and in any view of the matter, impugned disallowance and impugned assessment order are bad in law, illegal, unjustified, barred by limitation, contrary to facts and law and based upon recording of incorrect facts and finding, without giving adequate opportunity of hearing, in violation of principles of natural justice and the same deserves to be quashed.
4. That in any case and in any view of the matter, action of the Learned CIT(Appeals) in confirming the action of the Ld. A.O. in framing the impugned assessment order is contrary to law and facts, void ab initio, beyond jurisdiction and the same is not sustainable on various legal and factual grounds.
Without prejudice to the above grounds, no disallowance could have been made in the present appeal because no incriminating material has been found as a result of search.
That having regard to the facts and circumstances of the case, Learned CIT(Appeals) has erred in law and on facts in not reversing the action of the Ld. A.O. in charging interest 234B of the Income-tax Act, 1961.
At the outset of hearing, Learned CIT(DR) requested for adjournment of hearing on the basis that the acknowledgement of filing of return of 3 income under sec. 139(1) of the Income-tax Act, 1961 on 14.11.2007 as claimed by the assessee is not coming from the orders of the authorities below. She submitted that in the Form No. 35, submitted before the Learned CIT(Appeals) against the column “statement of facts” , it has been written “as per assessment order” but in the assessment order, no where has been mentioned about the filing of the return under sec. 139(1) of the Act nor is there any mention about the filing of return on 14.11.2007 in the first appellate order. She thus wanted to verify the correctness of the claimed filing of return under sec.139(1) of the Act on 14.11.2007 to enable her to counter the submission of assessee on the issue raised in ground Nos. 1 and 2 questioning the validity of assessment framed under sec. 153A/143(3) of the Act.
The Learned AR vehemently objected the above request with the submission that the issue raised is fully covered by the decision of Hon'ble jurisdictional High Court of Delhi in the case of CIT vs. Kabul Chawla (2016) 310 ITR 573 (Del.) and the hearing is being adjourned since long on one basis or the other. He submitted further that no such objection was raised by the Learned CIT(DR) while seeking adjournment on 7.6.2016. He submitted that the acknowledgement of return of income filed on 14.11.2007 4 does not bear any signature in the acknowledgement of receipt by the Revenue since it is computer generated. He pointed out that it is in public domain on the available site of the department which can be verified on the basis of Electronically Digitalized Code given at the bottom of the acknowledgement. The Learned AR submitted that he is still trying to procure some more documents to support his submission that return of income under sec. 139(1) of the Act was filed on 14.11.2007, which will be furnished during the course of hearing of the appeal itself. He contended that the acknowledgement of return of income has been issued by the Revenue itself. In the acknowledgement of the return, electronically filed, data of return of income is transmitted electronically without digital signature under Rule 12 of the Income-tax Rules, 1962. He referred the assessment order wherein in para No.2, the Assessing Officer has mentioned that in response to statutory notice under sec. 153A of the Act issued on 9.1.2012, the assessee company had filed its return of income on 25.1.2012 declaring loss of Rs.28,575. The Learned AR filed a copy of the said letter dated 24.1.2012 received by the Office of the Assessing Officer on 25.1.2012 under seal of acknowledgement dated 25.1.2012 addressed to the learned ACIT in reply for notice dated 9.1.2012 under sec. 153A of the Act. In the said letter, the assessee has submitted that original return of income under 5 section 139(1) of the Act filed vide acknowledgement No. 9149110141017 dated 14.11.2007 may be considered as a return of income furnished under provisions of sec. 153A of the Act in compliance of aforesaid notice. He submitted that since there was negative income during the year, hence, no income has been shown in the return of income filed under sec. 139(1) of the Act with computation of taxable income showing loss at Rs.28,575. He submitted that the said return of income filed under sec. 139(1) of the Act was processed under sec. 143(1) of the Act and no notice under sec. 143(2) was issued within the time limit prescribed. On the date of search on 31.1.2011, no assessment was pending on the basis of the said return of income filed on 14.11.2007. Since no incriminating material was found during the course of search, the Assessing Officer was not justified in framing the assessment under sec. 153A of the Act, validity of which has been questioned in ground Nos. 1 and 2. In support, he cited the following decisions: 1. CIT v. Kabul Chawla [2016] 380 ITR 573 (Delhi), 2. CIT v. Anil Kumar Bhatia [2013] 352 ITR 493(Del.)
The Learned CIT(DR) on the other hand tried to justify the action of the authorities below holding the assessment order framed under sec. 153A 6 read with 143(3) of the Act as valid. She submitted that processing of return cannot partake the character of assessment and since no assessment was framed in the present case, it cannot be said that on the date of search assessment was not pending. The ratios laid down in the case of Kabul Chawla (supra) is thus not helpful to the assessee. In support, she referred contents of para No. 37 of the decision of Hon'ble High Court.
5. On perusal of the above referred documents as well as the assessment order, we find that the Learned AR has been able to corroborate this fact that return of income under sec. 139(1) of the Act for the assessment year under consideration was filed by the assessee on 14.11.2007. The parties were thus directed to advance their respective arguments on the validity of assessment framed under sec. 153A/143(3) of the Act. 6. The Learned AR reiterated the above contention that on the date of search, no incriminating material was found relating to the assessee and on that date no assessment was pending for the abatement. In this regard, he referred orders of the authorities below wherein nothing incriminating has been mentioned found during the course of search. The disallowance under sec. 40A(3) of the Act in the assessment has been made not on the basis of any incriminating material found during the course of search. He placed reliance on the above cited decision of the Hon'ble jurisdictional High Court 7 of Delhi in the case of Kabul Chawla (supra) with this further submission that in that case also return was filed and processed under sec. 143(1) of the Act and no notice under sec. 143(2) was issued within the prescribed time limit. The Learned CIT(Appeals) has decided the issue against the assessee following the decision of Hon'ble jurisdictional High Court of Delhi in the case of Anil Bhatia, which has been distinguished in the case of Kabul Chawla. 7. The Learned CIT(DR) on the other hand placed reliance on the first appellate order with the submission that original assessment remains the issue of contention in the present case. She reiterated that return processed under sec. 143(1) of the Act cannot be termed as assessment order. In this regard, she placed reliance on the decision of Hon'ble Delhi High Court in the case of CIT vs. Punjab National Bank – 249 ITR 763. She submitted that provisions laid down under sec. 153A will come in operation only when the return originally filed and processed under sec. 143(1) is treated as assessment.
Considering the above submissions especially ratios laid down in its recent decision of Hon'ble jurisdictional High Court of Delhi in the case of Kabul Chawla (supra), we find that the Hon'ble High Court has been pleased 8 to summarized the application of provisions under sec. 153A of the Act as under in para No. 37 of the decision:
“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 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”.