SHRI DINESH DUA,DELHI vs. DCIT, CHANDIGARH

Per Sanjay Garg, Judicial Member:

The captioned appeals preferred by the assessee for different

assessment years are interlinked / identical, hence, the same are

being disposed of by this common order. First, we take up ITA No.

1474/Chd/2017 for assessment year 2008-09.

ITA No. 1474/Chd/2017

ITA Nos. 1474 to1476/Chd/2017 & 378, 379 & 395/Chd/2016- Dinesh Dua, Delhi 3

1,32,533/- u/s 24(b) on the ground that the same was not claimed at the time of filing return u/s 139(1).

3 The sole issue raised in this appeal is regarding disallowance

of deduction from the income of the assessee while making

assessment u/s 153A of the Income-tax Act, 1961 (in short 'the

Act') pursuant to the search action carried out u/s 132 of the Income-

tax Act, 1961 (in short 'the Act').

the law relating to the validity of the addition made into the income

of the assessee in the assessment proceedings carried out u/s 153A

of the Act is concerned, the issue is no more res integra in the light

of the various case laws and decisions of Hon'ble High Courts of the

county wherein the Hon'ble High Courts have been unanimous to

hold that in the absence of any incriminating material found during

the search action, when there was no pending assessment which can

be said to have abated on the date of search, the additions cannot be

made. Reliance in this respect can be placed on the decisions of

Hon’ble Bombay High Court in the case of ‘CIT Vs. Murli Agro

Products Pvt Ltd’ ITA No.36 of 2009, ‘CIT Vs. Continental

Warehousing Corporation’ ITA No. 523 of 2013 reported in (2015)

279 CTR 0389 (Bombay), ‘CIT Vs. Kabul Chawla’ 234 Taxman 300

(Delhi) and subsequent decision in the case of ‘Principal CIT Vs.

Meeta Gutgutia Prop M/s Ferns ‘N’ Petals (supra)’.

However, in this case the assessee has not agitated the

additions made by the Assessing officer in the assessment proceeding

ITA Nos. 1474 to1476/Chd/2017 & 378, 379 & 395/Chd/2016- Dinesh Dua, Delhi 4

u/s 153A in the absence of any incriminating material found during

search action, rather, the assessee has claimed that he may be

allowed deduction u/s 24(b), which was not claimed in the original

return filed u/s 139(1) of the Act. Admittedly, the assessment year

involved in this case is 2008-09. The return u/s 139(1) of the Act

was filed by the assessee on 29.7.2008 and the date of issuance of

notice u/s 143(2) had expired on 30.09.2009 whereas the search

action u/s 132 of the Act was carried out on the premises of the

assessee on 17.9.2010, which means the assessment for the

assessment year under consideration stood completed and not abated

as on the date of search Hence, as laid down by the Hon'ble High

Courts of the Country, the Assessing officer could not have made

addition into the income of the assessee in respect of any aspect

relating to which no incriminating material was found under the

search action.

into any other aspect in the absence of any incriminating material

and he has precluded to make any addition in the absence of the

recovery of any incriminating material relating to that issue during

the search action carried out u/s 132 of the Act, then that proposition

will also have to be applied reversely also debarring the assessee to

make claim of any deduction or exemption or otherwise, which issue

cannot be looked into by the Assessing officer in the absence of any

incriminating material found during the search action. The

proposition of law laid down by the various High Courts in this

respect is to be applied to both the parities i.e. Revenue as well to

ITA Nos. 1474 to1476/Chd/2017 & 378, 379 & 395/Chd/2016- Dinesh Dua, Delhi 5

the assessee. The Hon’ble Rajasthan High Court in the case of “Jai

Steel (India) v. ACIT” (2013) 259 CTR 281 has held that in case

nothing incriminating is found on account of search or requisition,

the question of reassessment of the concluded assessment does not

arise. Under such circumstances, it is not open to the assessee to seek

deduction or claim expenditure which has not been claimed in the

original and already concluded assessment, in the case of assessment

u/s. 153A in pursuance of search action. Hon’ble High Court rejected

the argument of the learned counsel for assessee to the effect that

once the notice u/s. 153A is issued, the assessments for six years are

at large both for the AO and the assessee. It has been further held by

the Hon’ble High Court that the provisions of section 153A to 153C

cannot be interpreted to be further innings to the AO and/or assessee

beyond the provisions of section 139(return of income), 139(5)

(revised return of income), 147 (income escaping assessment) and

263(revision of orders) of the Act. The Hon’ble High Court has

further observed that the words “assess” or “re-assess” have been

used at more than one place in the section and a harmonious

construction of the entire provision would lead to an irresistible

conclusion that the word ‘assess’ has been used in the context of

abated proceedings and ‘reassess’ has been used for completed

assessment proceedings, which would not abate as they are not

pending on the date of initiation of the search or making of

requisition and which would also necessarily support the

interpretation that for the completed assessments, the same can be

tinkered only on the basis of the incriminating material found during

ITA Nos. 1474 to1476/Chd/2017 & 378, 379 & 395/Chd/2016- Dinesh Dua, Delhi 6

the course of search or requisition of documents. The Hon’ble High

Court while reproducing the proposition of law laid down by the

Hon’ble Supreme Court in the case of “K P Varghese v. ITO” (1981)

24 CTR 358 “that it is recognized rule of construction that a

statutory proviso must be so construed, if possible, that absurdity and

mischief may be avoided” has observed that if the argument of the

counsel for the assessee was to be accepted, it would mean that even

in case where the appeal arises out of the completed assessment has

been decided by the CIT(A) or Tribunal and the High Court, on a

notice issues u/s. 153A of the Act, the AO would have power to undo

what has been concluded by the High Court. Any interpretation which

leads to such conclusion has to be repelled and/or avoided as held by the Hon’ble Supreme Court in the case of K P Varghese (supra).

Coordinate Bench of the Tribunal in the case of Mr. A. Srinivas

Rama Raju, Hyderabad Vs. DCIT , ITA No. 975/Hyd/2015 order

dated 19.8.2016, we find that in the said case, the assessment year

involved was 2010-11 and the return was field on 31.7.2010,

whereas the search action was carried out on the premises of assessee

on 17.9.2010, which means that the assessment for the assessment

year 2010-11 stood abated on the date of search and, hence, it was

open before the Assessing officer to look into each and every aspect

relating to the assessment of the income of the assessee. However, in

the case in hand, the original assessment had since been completed

on the date of search and not abated, hence, as per the settled law, it

was not open to the Assessing officer either to make any addition or

ITA Nos. 1474 to1476/Chd/2017 & 378, 379 & 395/Chd/2016- Dinesh Dua, Delhi 7

to allow claim of any deduction to the assessee on an issue in the

absence of any incriminating material in that respect found during

the search action. So, in the light of various decisions of Hon'ble

High Courts as discussed above, there is not merit in the appeal of

the assessee and the same is accordingly dismissed.

In the result, the appeal of the assessee is hereby dismissed.

ITA No. 1476/Chd/2017

8 The brief facts of the case are that a search action was carried

out u/s 132 of the Income-tax Act, 1961 (in short 'the Act') at the

premises of the assessee on 17.9.2010. In response to the notice u/s

142(1) of the Act, the assessee revised his return of income and

voluntarily disclosed interest income of Rs. 3,89,655/- being income

under the head ‘income from other sources’ and long term capital

gain of Rs. 33,55,054/- on sale of residential house property.

Further, the assessee had claimed exemption u/s 54 of the Act with

respect to the said Long Term Capital Gain of Rs. 33,55,054/- on

the sale of residential house property since he had invested the

amount of capital gain in the purchase of another residential house

ITA Nos. 1474 to1476/Chd/2017 & 378, 379 & 395/Chd/2016- Dinesh Dua, Delhi 8

within the stipulated time period as per the requirements of the Act.

The Ld. Assessing officer, however, disallowed exemption u/s 54 of

the Act from the said capital gain on the ground that the same was

not claimed at the time of filing return u/s 139(1) and the said Long

Term Capital Gain of Rs. 33,55,054/- was added back in computation

of total income of the assessee.

the case in hand, the assessment year involved is 2011-12. The

assessment proceedings in relation to the original return filed by the

assessee u/s 139(1) of the Act stood abated on the date of search.

Hence, it was open to the Assessing officer to look into and examine

each and every aspect relating to the income of the assessee in the

assessment proceedings carried out u/s 153A of the Act.

Admittedly, no incriminating material was found in relation to the

income declared by the assessee in his return of income filed u/s

153A of the Act. The return filed by the assessee u/s 153A declaring

the additional income at the most can be said to be a revised return of

income and the Assessing officer was required to look into each and

every aspect of the income of the assessee including the exemptions

or deductions as available to the assessee under the relevant

provisions of the Act. The assessment year under consideration is not

a year relating to which the assessment stood completed, rather it

was a year in relation to which the pending assessment, if any, stood

abated on the date of search action. In view of this, the assessee is

legally entitled to claim deduction as available to him under the

ITA Nos. 1474 to1476/Chd/2017 & 378, 379 & 395/Chd/2016- Dinesh Dua, Delhi 9

relevant provisions in relation to the income declared in the return

filed u/s 153A of the Act.

Act. However, the lower authorities have denied the deduction on the

ground that the investment in the new residential house was made

prior to the date of sale of the asset in question. At this stage, the Ld.

Counsel for the assessee has made a statement at Bar that the

assessee had made the payment in installments to a builder for house

to be constructed / under construction. The Ld. Counsel has stated

that the assessee will be satisfied if he may be allowed deduction u/s

54 / 54F of the Act in respect of investment / payments made after

the date of sale of the asset. We accordingly direct the Assessing

officer to allow the assessee the deductions as may be available to

the assessee under the provisions of sections 54 / 54F in respect of

investment made / payments made to the builder / developer after

the date of sale of asset in question.

In the result, the appeal of the assessee is treated as partly

allowed.

ITA No. 1475/CHD/2017 and ITA Nos. 378, 379 & 395/CHD/2016 11. Since the issue involved in these appeals is identical, these

have been heard together and are being disposed of by this common

order. For the sake of convenience, the ITA No. 1475/Chd/2017 is

taken as a lead case for discussion.

shown certain additional income in the return filed u/s 153A of

ITA Nos. 1474 to1476/Chd/2017 & 378, 379 & 395/Chd/2016- Dinesh Dua, Delhi 10

the Act pursuant to the search action carried out at the preemies of the assessee u/s 132 of the Act. Admittedly, no incriminating material was found during the search in respect of income declared by the assessee voluntarily in the return filed u/s 153A of the Act. In view of this, it cannot be said that it is a case of furnishing of inaccurate particulars of income or concealment of income on the part of the assessee. In our view, it is not a fit case of levy of penalty and the same is accordingly ordered to be deleted. These appeals of the assessee are hereby allowed. 14. To sum up, the appeals of the assessee are decided as under:- 1. ITA No. 1474/Chd/2017 – dismissed. 2. ITA No. 1476/Chd/2017 – partly allowed. 3. ITA No. 1475/Chd/2-017 – Allowed. 4. ITA Nos. 378, 379 & 295/Chd/2016 – Allowed.

Order pronounced in the Open Court on 07.09.2018

Sd/- Sd/- (ANNAPURNA GUPTA) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated : 07.9.2018 Rkk

Copy to: • The Appellant • The Respondent • The CIT • The CIT(A) • The DR