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Before: SHRI N.K. SAINI & SMT. BEENA PILLAI
ORDER
PER BEENA PILLAI, JUDICIAL MEMBER:
The present appeal has been filed by the assessee against the order of the ld. CIT(A)’s-XXXII, New Delhi vide his order dated 07/10/2014 for A.Y. 2005-06 on the following grounds:
1. “The ld. CIT(A) without appreciating the correct facts of the case is not justified in law and facts and circumstances of the case in confirming the order passed by Assessing Officer as valid order which suffers from various irregularities in the eye of law which renders the reassessment order as void-ab-initio.
2. The ld. CIT(A) without appreciating the correct facts of the case is not justified in law and facts and circumstances of the case in confirming the addition of Rs. 2,25,000/- made by Assessing Officer u/s 153A of the I.T. Act on account of sale consideration of sale of property received by appellant, as income from other sources in absence of any adverse documentary evidence and more particularly under the circumstances when there was no seized material was found during the course of search proceedings, against the loss of Rs. 23,889/- declared by assessee under the head short term capital gain.
The ld. CIT(A) without appreciating the correct facts of the case is not justified in law and facts and circumstances of the case in confirming the disallowance of deduction u/s 24(a) of Rs. 16,860/- of the I.T. Act from income from house property u/s 153A of the I.T. Act in absence of any adverse documentary evidence and more particularly under the circumstances when there was no seized material was found during the course of search proceedings.
4. The ld. CIT(A) without appreciating the correct facts of the case is not justified in law and facts and circumstances of the case in confirming the disallowance of standard deduction of Rs. 30,000/- u/s 16(1) of the I.T. Act from salary income, made by the Assessing Officer u/s 153A of the I.T. Act in absence of any adverse documentary evidence and more particularly under the circumstances when there was no seized material was found during the course of search proceedings.
5. Appellant assessee has every right to make, add, delete, modify or alter any grounds of appeal
at the time of hearing.”
2. The brief facts are that search and seizure operation u/s 132 of the Act along with survey operation u/s 133A of the Act were undertaken at various residential and business premises of Aseem Kumar Gupta & Group and other beneficiaries group of cases on 26.3.2010. It was alleged that Shri A.K. Gupta was providing accommodation entries to several beneficiaries with the help of several bank accounts open in the name of several proprietary concerns and companies in which either he himself or his employees were directors or proprietors. The search and survey covered the premises of Shri A.K. Gupta, several associates/employees of Shri A.K. Gupta, several intermediatory companies and some beneficiaries including that of the assessee. Notice u/s 153A of the Act was issued and in response thereto the assessee filed its return of income declaring the same income as shown in its original return of income filed u/s 139 of the Act. The ld.AO completed the assessment by making the following additions; i) Addition on account of disallowance of Deduction u/s. 24(a) Rs. 48,410/- ii) Addition on account of standard deduction Rs. 30,000/- iii) Addition on account of income from other sources. Rs. 2,25,000/- 2.1. Aggrieved by the assessment order the assessee preferred an appeal before the ld. CIT(A.) The assessee had also raised the validity of assessment framed u/s 153 read with sec. 143(3) of the Act besides others on the basis that there was no incriminating material found during the course of search and original assessment proceedings were completed on the date of search. The ld. CIT(A) did not concur with this contention of the assessee and rejected the ground raised by the assessee in this regard before him.
3. Aggrieved by the order of the ld.CIT(A), the assessee is in appeal before us now.
2.2. Before us, the ld. AR has placed reliance on the decision of this Tribunal in the case of Raj Kumar Chawla Vs. ACIT in ITA No. 1683/D/13, ITA No. 5087/D/12, ITA No. 1698/D/13, ITA No. 1683/D/13 for asstt. years 2004-05, 2007-08, 2008-09 and 2009-10 respectively vide order dated 17.02.2015. The Ld.AR submitted that in the case of Raj Kumar Chawla(supra), being the brother of assesse herein, issue regarding validity of the search have been considered on identical facts. The ld. AR reiterated the contentions of the assessee made in this regard before the ld. CIT(A), that merely because a search has been carried out u/s 132, a notice u/s 153A for reassessment of income cannot be issued in absence of incriminating material found during the course of search and when no incriminating material was found relating to the assessee during the course of search of his premises and the return of income originally filed under sec. 139 of the Act was processed under sec. 143(1) and no statutory notice under sec. 143(2) of the Act was issued within the prescribed time limit. 3.1. In support of the issue regarding validity of the assessment in Question, the ld.AR placed reliance on the following decisions in support: i) Al-Cargo Global Logestic Ltd. vs. ACIT – 137 ITD 287(Mum.)- (S.B); ii) DCIT vs. Devi Dayal Petro-Chemical Pvt. Ltd. – ITA Nos.5430 to 5436/Del/2013, C.O. Nos. 83 to 88/Del/14 dated10.9.2014; iii) SSP Aviation Ltd. vs. DCIT – 346 ITR 177; iv) Kusum Gupta vs. DCIT – ITA No. 4873/Del/2009 dt.28.3.2013; v) ACIT vs. Asha Kataria – ITA No. 3105/Del/2011 dated 20.5.2013; vi) Sanjay Aggarwal vs. DCIT – ITA No. 3184/Del/2013 dt.16.2.2014; vii) Jai Steel India vs. ACIT – 259 CTR 281 (Raj.); & viii) CIT vs. Anil Kumar Bhatia – 352 ITR 493 (Del.). 3.2 On the contrary ld. DR on the other hand submitted that there is no need of finding of incriminating material during the course of search to justify the validity of assessment framed under sec. 153A read with sec. 143(3) of the Income-tax Act, 1961 and the only requirement is that search has been conducted at the premises of the assessee under sec. 132 of the Act. 3.3. In support, he placed reliance on the following decisions: i) CIT vs. Fila Tex India Ltd. – ITA No. 269/2014 dated14.7.2014 (Del.); ii) Canara Housing Development Co. vs. DCIT – ITA No. 38/2014 dated 25.7.2014 (Karnataka).
Having gone through the orders of the authorities below, we find that the Learned CIT(A) has rejected the contentions of the assessee on the issue of validity of assessment framed under sec. 153A read with sec. 143(3) of the Income-tax Act, 1961 in absence of incriminating material found during the course of search. We find that the ld.CIT(A) has rejected the contention of the assessee that framing assessment under sec. 153A is invalid as on the date of search the assessment was pending.
4.1. The short issue that needs to be considered is as to whether the scope of 153A, encompasses additions, not based on incriminating materials found during the course of the search. 4.2. Similar issue arose before Spl. Bench of the Tribunal in the case of AL Cargo Global Logistic Ltd. vs. CIT reported in 137 ITD 287 (Mum.) (SB) and Hon’ble Jurisdictional High Court in the case of CIT vs. Anil Kumar Bhatia reported in (2012) 211 Taxmann 453 (Del.) has also considered the issue and the ratio laid down therein supports the contentions of the assessee. 4.3. Having gone through the decisions of this Tribunal cited by the learned AR, we find that the ratio laid down therein, supports the contentions of the assessee on the issue. 4.4. In the case of Kusum Gupta (supra) also the return was processed u/s 143(1) of the Act and time limit for issuance of notice u/s 143(2) had expired on the date of search and it was held that no assessment was pending in that case and thus there was no question of abatement of assessment. Therefore, the addition in the assessment u/s 153A would be made only on the basis of incriminating material found during the search. The Delhi Bench of the Tribunal in its recent decision on the issue in the case of Shri Kabul Chawla (supra) and others vide order dated 23.5.2014 has expressed the similar view. The decision this Tribunal in the case of Kabul Chawla has been confimed by the Hon’ble Delhi High Court, which has been reported in (2015) 61 taxman.com 412. It has also discussed the decision of Hon’ble Jurisdictional Delhi High Court in the case of CIT vs. Anil Kumar Bhatia (2012) 211 Taxmann 453 (Del.), while deciding the issue. The relevant para No. 8 & 9 in this regard is being reproduced as under :- “8. We are unable to accept the contention advanced on behalf of the Revenue for the reason that if both the pending and completed assessment were to be taken on same pedestal, then there was no need to enshrine second proviso to sec. 153A(1) providing that the pending assessments within the period of six assessment years shall abate. The Hon'ble Delhi High Court in the case of Anil Kumar Bhatia (supra) dealt with a situation in which some incriminating material was found in respect of a non- pending assessment. It was in that background that the Hon'ble High Court held that sec. 153A applies if incriminating material is found even if assessments are completed. The question as to whether any addition can be made in respect of completed assessments when no incriminating material was found, was apparently left open. However, we find that there are sufficient indirect hints given by the Hon 'ble Delhi High Court in the case of Anil Kumar Bhatia (supra) about not making of any addition in respect of an assessment year for which the assessment is already completed unless some incriminating material is found during the course of search. This can be seen from the following observations of the Hon'ble High Court:- "20. A question may arise as to how this is sought to be achieved where an assessment order had already been passed in respect of all or any of those six assessment years, either under Section 143(1)(a) or Section 143(3) of the Act. If such an order is already in existence, having obviously been passed prior to the initiation of the search/requisition, the Assessing Officer is empowered to reopen those proceedings and reassess the total income, taking note of the undisclosed income, if any, unearthed during the search.”
The above extracted observations of the Hon'ble High Court, which are though obiter dicta, make the point clear that where an assessment order has already been passed for a year(s) within the relevant six assessment years, then also the A.O is duty bound to reopen those proceedings and reassess the total income but by 'taking note of the undisclosed income if any, unearthed during the search'. The expression 'unearthed during the search' is quite significant to denote that in respect of completed or non- pending assessments, the Assessing Officer is albeit duty bound to assess or reassess the total income but there is a cap on the scope of additions in such assessment, being the items of income 'unearthed during the search'. In other words, the determination of 'total income' in respect of the assessment years for which the assessments are already completed on the date of search, shall not be influenced by the items of income other than those based on the material unearthed during the course of search. There is not and cannot be any quarrel over the proposition that the Assessing Officer has no option but to determine the total income of the assessee in respect of the relevant six assessment years. However, the scope of such determination of total income is different in respect of the years for which the assessments are pending vis-vis the years for which assessments are non-pending. In respect to the assessment years for which the original assessments have already been completed on the date of search, the total income shall be determined by restricting additions only to those which flow from incriminating material found during the course of search. If no incriminating material is found in respect of such completed assessment, then the total income in the proceedings u/s 153A shall be computed by considering the originally determined income. If some incriminating material is found in respect of such assessment years for which the assessment is not pending, then the 'total income' would be determined by considering the originally determined income plus income emanating from the incriminating material found during the course of search. In the other scenario of the assessments pending on the date of search which would abate in terms of second proviso to sec. 153A( 1), the total income shall be computed afresh uninfluenced by the fact whether or not there is any incriminating material. In fact, this is the position which follows when we read the judgment of the Hon'ble Delhi High Court in Anil Kumar Bhatia (supra) in juxtaposition to the special bench order in the case of All Cargo Global Logistics Ltd. (supra). The other judgment relied by the Ld. DR in the case of Madugulu Venu (supra) also talks about the need for making fresh assessment in respect of the assessment years for which the assessments are not pending on the date of search but does not set out the scope of such assessment, which is the issue before use.” 4.5. We, thus, find that the decision of the Hon’ble Jurisdictional Delhi High Court in the case of Anil Kumar Bhatia (supra) supports the case of the assessee that in absence of incriminating material found during the course of search an addition u/s 153A of the Act cannot be made in the assessment framed thereunder. The decisions relied upon by the ld. CIT(A), in the cases of Canara Housing Development Company vs. DCIT (supra) of Hon’ble Karnataka High Court and Filatex India P. Ltd. vs. CIT (supra) of Hon’ble Delhi High Court having distinguishable facts are not applicable in the present case. 4.6. We, thus, reiterate that in absence of incriminating material found during the course of search no addition can be made in a case where original assessment was already framed on the date when search took place. 4.7. In absence of rebuttal of this material fact by the Revenue in the present case before us that no incriminating material was found during the course of search relating to the assessee for the assessment year under consideration to justify the additions made in these years by the Assessing Officer and assessment based on the original return of income filed under sec. 139 of the Act was pending as on the date of search, we following the above cited decisions by the learned AR discussed above hold that the assessments framed under sec. 153A read with sec. 143(3) of the Income-tax Act, 1961 for the assessment years under consideration are not valid and the same are accordingly held as null and void. The related ground on the issue is thus allowed.
In view of the above findings, whereby the assessment itself has been held null and void, the other issues raised in other grounds questioning the validity of the additions made during the assessment year in question have become infructuous and academic only. These grounds thus do not require any adjudication. The same are being disposed off as such.
In result, appeals are allowed.