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Income Tax Appellate Tribunal, DELHI BENCH ‘G’, NEW DELHI
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘G’, NEW DELHI Before Sh. N. K. Saini, AM And Sh. A. T. Varkey, JM to 605/Del/2013 : Asstt. Years : 2003-04 to 2006-07 Deputy Commissioner of Income Vs M/s Swastic Piples Ltd., Tax, Central Circle-13, 4, Central Market, West Avenue New Delhi Road, West Punjabi Bagh, New Delhi-110026 (APPELLANT) (RESPONDENT) CO Nos. 46 to 49/Del/2013 : Asstt. Years : 2003-04 to 2006-07 M/s Swastic Piples Ltd., Vs Deputy Commissioner of Income 4, Central Market, West Avenue Tax, Central Circle-13, Road, West Punjabi Bagh, New Delhi New Delhi-110026 (APPELLANT) (RESPONDENT) PAN No. AAACS0322C Assessee by : Sh. Ved Jain, Adv. Revenue by : Smt. Sunita Kejriwal, CIT DR Date of Hearing : 17.11.2015 Date of Pronouncement : 05.02.2016 ORDER Per Bench:
These appeals by the department and Cross Objections by the assessee are directed against the order dated 19.11.2012 of ld. CIT(A)-1, New Delhi for the assessment years 2003-04 to 2006-07.
2 to 605/Del/2013 CO Nos. 46 to 49/Del/2013 Swastic Pipes Ltd. 2. Firstly we will deal with the Cross Objections filed by the assessee for the assessment year 2003-04 in CO No. 46/Del/2013. Following grounds have been raised in this Cross Objection:
“1. On the facts and circumstances of the case, the order passed by the learned Commissioner of Income Tax (Appeals) CIT(A) under Section 153A/143(3) is bad both in the eye of law and on facts.
On the facts and circumstances of the case, the CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the proceedings initiated under Section 153A against the appellant are in violation of the statutory conditions and the procedure prescribed under the law and as such the same is bad in law and likely to be quashed.
3. On the facts and circumstances of the case, the CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the notice issued under Section 153A by the AO is in violation of the provisions of the Act and as such the assessment framed in consequence thereof is bad.
4. On the facts and circumstances of the case, the CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the assessment framed under Section 153A/143(3) being 3 to 605/Del/2013 CO Nos. 46 to 49/Del/2013 Swastic Pipes Ltd. against the statutory provision of the Act and the procedure prescribed under the law, is bad and the same is liable to be quashed. 5(i) On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in confirming the various additions made by the AO by indulging in surmises and conjecture without any adverse material being found during the course of the search. (ii) That the assessment framed is against the spirit of Section 153A of the Act whereby the reassessment is to be confined to the additions and disallowances consequent to the material found during the course of the search and does not give power to the AO to re-appraise the already settled issues and assessment.
6. The appellant craves leave to add, amend or alter any of the grounds of appeal
.”
3. From the aforesaid grounds it is gathered that the assessee had challenged validity of the proceedings initiated u/s 153A of the Income Tax Act, 1961 (hereinafter referred to as the Act) and the assessment order passed u/s 153A/143(3) of the Act. On the ground that no incriminating material was found during the course of search.
4 to 605/Del/2013 CO Nos. 46 to 49/Del/2013 Swastic Pipes Ltd.
Facts of the case in brief are that a search u/s 132 of the Act was conducted in Swastic Pipes Group of cases on 28.08.2008. The assessee was covered in the said search and a notice u/s 153A of the Act was issued on 30.12.2009. In response to the said notice, the assessee filed the return of income on 28.01.2010 declaring an income of Rs. 2,64,37,930/-. However, the assessment was framed vide order dated 30.10.2010 at an income of Rs.3,59,56,153/- making certain disallowances. The original return in this case was filed on 28.11.2003 and the assessment was framed at an income of Rs.2,66,98,210/- u/s 143(3) of the Act vide order dated 31.01.2006. Against the said order the assessee preferred an appeal to the ld. CIT(A) and as a consequence of the relief allowed by the ld. CIT(A), the order u/s 250 of the Act was passed on 24.11.2006 determining a total income of Rs.2,64,37,928/-
Being aggrieved from the assessment order dated 30.10.2010 the assessee carried the matter to the ld. CIT(A) and submitted that the assessment framed was against the spirit of section 153A of the Act whereby the reassessment was to be confined to the additions and disallowance consequent to the material found during the course of search 5 to 605/Del/2013 CO Nos. 46 to 49/Del/2013 Swastic Pipes Ltd. and did not give power to the AO to re-appraise the already settled issues and assessment. The assessee also challenged the various disallowances/additions made by the AO.
The ld. CIT(A), however, allowed the relief in part to the assessee, against which the department is in appeal and the assessee has filed the Cross Objection against the sustenance of the additions/disallowances.
The ld. Counsel for the assessee at the very outset stated that no incriminating material was found during the course of search, therefore, the additions/disallowances made by the AO were not justified particularly when the assessment was already framed vide order dated 30.11.2006 u/s 143(3) of the Act. The reliance was placed on the judgment of the Hon’ble Jurisdictional High Court in the case of CIT (Central-III) Vs Kabul Chawla reported at 2015 (9) TMI 80 (HC), copy of the said order was furnished which is placed on the record. It was further submitted that the AO also accepted in his remand report that no incriminating material was fund during the course of search. A reference was made to page nos. 465 to 475 of the assessee’s paper book.
6 to 605/Del/2013 CO Nos. 46 to 49/Del/2013 Swastic Pipes Ltd.
In her rival submissions the ld. DR strongly supported the order of the AO and further submitted that during the course of assessment proceedings the assessee did not furnish the evidence to prove the creditworthiness of the lenders and genuineness of the transactions and that accommodation entries were incorporated as income in its books of account. Therefore, the AO rightly made the additions and the ld. CIT(A) was not justified in deleting the same. It was further submitted that the facts of the case of Sh. Kabul Chawla relied by the ld. Counsel for the assessee are distinguishable from the facts of the assessee’s case.
We have considered the submissions of both the parities and carefully gone through the material available on the record. In the present case, It is an admitted fact that original assessment of the assessee was framed by the AO u/s 143(3) of the Act vide order dated 30.11.2006 at a total income of Rs.2,66,98,210/-. Thereafter a search and seizure action u/s 132 of the Act was carried out on 28.08.2008 in the Swastic Pipes Group of cases to which the assessee belonged, however, no incriminating material was found. The AO made the disallowances/additions on account of 7 to 605/Del/2013 CO Nos. 46 to 49/Del/2013 Swastic Pipes Ltd. unsecured loans/share application money and also disallowed the interest and credit card expenses. However, all information relating to loans, interest and credit card expenses out of which disallowances/additions were made, were already available on the record. This fact has also been admitted by the AO in his remand report (copy of which is placed at page nos. 465 to 475 of the assessee’s paper book) wherein the relevant submission of the AO is mentioned at paras 1 to 3 and read as under: “1. In Para no. 9 of the submission, the assessee has challenged the proceedings under Section 153A of the I.T. Act, 1961 in the absence of any incriminating material found during the course of search against the assessee. In this regard it is submitted that as per the provisions of the Act, once a search has been carried out, the assessing officer gets the jurisdiction to assess/reassess the income of the assessee and is duty bound to assess/reassess the income of the assessee for the last 6 assessment years immediately preceding the A.Y. relevant to the previous year in which search is conducted. Accordingly the proceedings initiated under Section 153A of the Act are valid under law. 2. It is further submitted that the notice under Section 153A has been issued after following the due procedure. The assessee has pointed out that 8 to 605/Del/2013 CO Nos. 46 to 49/Del/2013 Swastic Pipes Ltd. the notice is defective. However, there is no defect in the notice even if the defect regarding status of company as pointed out by the assessee in the written submissions is to be considered the same will not affect the validity particularly in view of the provisions of Section 292BB of the Act and the fact that these objections were not taken during the pendency of the proceedings.
The assessee has further raised an issue regarding additions being made beyond the incriminating material found during the course of the search. In this regard it is submitted that once a jurisdiction under Section 153A is assumed by the AO, the AO has got all the powers to assess the income of the assessee and such assessment need not be confined to the material fund during the course of the search. Section 153A of the I.T. Act, 1961 does not put any such restriction at all. Reliance is further placed on Shivanath Rai Harnarain India Ltd. Vs DCIT (ITAT, Del) 304 ITR (AT) 271; 117 ITD 74 and Shyam Lata Kaushik Vs ACIT (ITAT, Del) 114 ITD 305. In these case laws, it has been held that assessment can be made u/s 153A even if no material found during search.” (Emphasis supplied) 10. From the above submissions of the AO before the ld. CIT(A) in the remand report, it is crystal clear that the AO himself admitted that he got all the powers to assess the income of the assessee and such assessment need not be confined to the material found during the course of search.
9 to 605/Del/2013 CO Nos. 46 to 49/Del/2013 Swastic Pipes Ltd.
Recently on a similar issue the Hon’ble Jurisdictional High Court in the case of CIT (Central-III) Vs Kabul Chawla in ITA Nos. 707, 709 & 713/2014 order dated 28.08.2015 reported at 2015 (9) TMI 80 held 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 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 10 ITA Nos. 602 to 605/Del/2013 CO Nos. 46 to 49/Del/2013 Swastic Pipes Ltd. 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 11 to 605/Del/2013 CO Nos. 46 to 49/Del/2013 Swastic Pipes Ltd. 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 present case also no incriminating material was unearthed during the course of search, therefore, completed assessment could not have been inferred by the AO and no addition/disallowance could have been made on the basis of the material already disclosed or made known in the course of original assessment. Therefore, in view of the ratio laid down by the Hon’ble Jurisdictional High Court in the aforesaid referred to case of CIT (Central-III) Vs Kabul Chawla (supra). the additions/disallowances made by the AO were not justified. In that view of the matter, the appeal of the department is dismissed and the Cross Objection of the assessee is allowed.
The facts involved in the another appeals of the department in to 605/Del/2013 and CO Nos. 47 to 49/Del/2013 for the assessment years 2004-05 to 2006-07 respectively are identical to the facts involved in CO No. 46/Del/2013 for the
In the result, appeals of the department are dismissed and the Cross Objections of the assessee are allowed. (Order Pronounced in the Court on 05/02/2016)