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Income Tax Appellate Tribunal, DIVISION BENCH, ‘A’ CHANDIGARH
Before: SHRI SANJAY GARG & Ms. ANNAPURNA GUPTA
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
The assessee has taken the following grounds of appeal:- 1. That the order of Ld. CIT(A), Gurgaon is bad and against the facts and law.
On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in upholding the order of Ld. Assessing officer, disallowing deduction of Rs.
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').
We have heard the rival submissions of the parties. So far as
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.
In our view, if the Assessing officer could not touch or look
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).
So far as the reliance of the Ld. counsel on the decision of
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
The assessee has taken the following grounds of appeal:- 1. That the order of Ld. CIT(A), Gurgaon is bad and against the facts and law.
On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in upholding the order of Ld. Assessing officer, disallowing deduction of Rs. 33,55,054/- u/s 54 on the ground that the same was not claimed at the time of filing return u/s 139(1).
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.
We have heard the rival submissions of both the parties. In
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.
The assessee has claimed deduction u/s 54 of the Income-tax
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.
The brief facts relating to the issue are that assessee had
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