ACIT, NEW DELHI vs. SH. SHANTILAL WADHWA, NEW DELHI

Date of Hearing 02.11.2015 Date of Pronouncement 05.01.2016 ORDER The present appeal has been filed by the Revenue assailing the correctness of the order dated 10.12.2014 of CIT(A)-XXVII, New Delhi pertaining to 2005-06 assessment year on the following grounds:-

1. “The Ld. Commissioner of Income Tax (Appeals) has erred in law and on the facts in deleting Rs.12,33,847/- disallowed by the AO u/s 69C of the I.T.Act and added to the income of the assessee on account of expenses debited to P&L Account.

2. The Ld. Commissioner of Income tax (Appeals) has erred in law and on the facts in deleting Rs.61500/- disallowed by the AO and added to the income of the assessee on account of income from House Property.

3. (a) The order of the CIT(Appeals) is erroneous and not tenable in law and on facts.

I.T.A .No.-1541/Del/2015 & C.O.-226/Del/2015 (b) The appellant craves leave to add, alter or amend any/all of the grounds of appeal before or during the course of the hearing of the appeal.”

2. The grounds raised

in the cross objections filed by the assessee read as under:- 1. “That having regard to the facts and circumstances of the case, Ld. CIT(A has erred in law and on facts in confirming the action of Ld.AO in making additions/disallowances, more so when there was no incriminating material found as a result of search and in any case addition made by ld.AO were outside the scope of Section 153A.

2. That the cross objector craves the leave to add, amend, modify, delete any of the ground(s) of cross objection before or at the time of hearing.”

3. Inviting attention to the cross objection filed, it was submitted by the Ld. AR that the point at issue is covered in favour of the assessee by virtue of order dated 19.10.2015 in connected case of Smt. Rashmi Wadhwa vs DCIT in & 502/Del/2015 for 2008-09 & 2009-10 assessment years on similar facts and circumstances (copy filed). Inviting attention to the order sheet entry dated 25.08.2015 it was submitted that this position was canvassed by the assessee considering which on that date the appeal was adjourned to the next date. In the aforesaid order it was submitted reliance had been placed upon the decision of the Hon’ble High Court dated 28.08.2015 in the case of Kabul Chawla, considering which the Revenue’s appeal on similar facts and circumstances was dismissed. It was submitted that the point at issue is fully covered in favour of the assessee, consequently, the departmental appeal should be dismissed and the cross-objections following the decision in Smt. Rashmi Wadhwa deserves to be allowed.

4. Inviting attention to page 23 of the impugned order it was his submission that the position that there was no incriminating material relatable to the additions is a finding recorded by the CIT(A) himself and on this ground should have deleted the additions which have been instead deleted by him on merits. It was his submission that considering the grounds raised in the cross-objections the departmental appeal should be dismissed on this jurisdictional fact itself as it demolishes the correctness of the additions. For ready-reference, the relevant extract is reproduced hereunder:- Page 2 of 5 I.T.A .No.-1541/Del/2015 & C.O.-226/Del/2015

16. “I have considered the facts of the case written submissions and other material on record. The Assessing Officer made the impugned addition on the ground that the appellant did not furnish necessary details and documents pertaining to the business income earned. It may be mentioned that during the year under consideration the appellant was in the business of supplying of printing stationery to ATMs and declared a total sale of Rs.25,21,624/- in the profit and loss account. It is a fact that no incriminating material of any nature was found during the course of search and seizure operation and the disallowance of expenses made by the Assessing Officer not to make any enquiries pertaining to the accounts of the appellant u/s 153A. Vide letter dated 4.2.2013, the appellant was asked to furnish the details of purchase, and justification of the expenses claimed with supporting documents.” (emphasis provided in the present proceedings) 5. Confronted with the order dated 19.10.2015 in the case of Smt. Rashmi Wadhwa, the Ld. Sr. DR relied upon the assessment order. No decision controverting the above decision or the decision of the Hon’ble High Court in the case of CIT vs Kabul Chawla relied upon by the Co-ordinate Bench in the said decision was referred to on behalf of the Revenue for consideration of the Bench. 6. The relevant facts of the case are that search and seizure operation u/s 132 was conducted on 19.10.2010 at the business/residential premises of the assessee belonging to Nussli (Switzerland) Ltd. group of cases in response to notice u/s 153A issued on 19.09.2011. The assessee returned an income of Rs.2,04,680/- as an individual as a retired Government Officer working as a Director of M/s Comfort Net Traders (India) Pvt. Ltd. under the heads ‘salary/pension income’, income from business and from other sources. Subsequently after notice u/s 132(2)/142(1), the assessment was concluded u/s 153A r.w.s 143(3) at an income of Rs.14,81,580/-. In the facts of the present case the Ld. AR has relied upon the following finding arrived at by the Co-ordinate Bench in para 5 which position on fact in the present case also has not been disputed by the Revenue. The finding of the Co-ordinate Bench relied upon is reproduced hereunder:- 5. “Admittedly no incriminating material was found or seized during the course of search and seizure operation u/s 132 of the Act in the case of the assessee. It is also not in dispute, that the assessment for both these assessment years have not abated. Under the circumstances, I find that the issue is covered in favour of the assessee and against the Revenue by the Page 3 of 5 I.T.A .No.-1541/Del/2015 & C.O.-226/Del/2015 decision dated 28.8.2015 of the Hon’ble Delhi High Court in the case of CIT vs. Kabul Chawla passed in 709 and 713/2014 held has 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 ITA Nos. 707, 709 and 713 of 2014 of 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 ITA Nos. 707, 709 and 713 of 2014 of 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.

I.T.A .No.-1541/Del/2015 & C.O.-226/Del/2015