DEPUTY COMMISSIONER OF INCOME TAX, DELHI vs. KAWATRA TENT AND CATERERS PRIVATE LIMITED, DELHI
Income Tax Appellate Tribunal, DELHI BENCH ‘C’, NEW DELHI
Before: Sh. Satbeer Singh Godara & Sh. Avdhesh Kumar Mishra
Per Satbeer Singh Godara, Judicial Member:
This Revenue’s appeal for Assessment Year 2012-13, arises against the CIT(A)-26, New Delhi’s in case No. 10363/2019-20
dated 11.07.2023, in proceedings u/s 147 r.w.s. 143(3) of the Income Tax Act, 1961 (in short “the Act”).
Case called twice. None appears at the assessee’s behest. It is accordingly proceeded ex-parte.
Learned CIT-DR vehemently argues during the course of hearing that the CIT(A)’s herein has erred in law and on facts in reversing assessment findings adding an amount of Kawatra Tent and Caterers Pvt. Ltd.
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Rs.5,25,65,017/- representing the assessee’s unaccounted suppressed sale as under:
“5.2 I have considered the facts of the case and the material available on record. The appellant is engaged in the business of providing banquet services. A search and seizure operation u/s 132 of the Act was conducted on 03.05.2018 on the business and residential premises of the Kawatra Tent Group and incriminating documents were found and seized from the premises of the assessee. I he case of appellant was reopened u/s 147 of the Act. 1961 on the basis of information received by the juri ictional AO from the investigation wing of I T
Department. The assessment was completed at an income of Rs. 5.20.96.210/- after making addition of suppressed sales of Rs.5.25.65.017/- by applying suppression factor of 3.8234. On perusal of the assessment record, it has been found that the suppression factor was computed on the basis of accounted and unaccounted sale of the assessee which were detected during the search operation on the business premises of the assessee on 03.05.2018. The appellant contented that there was not even a single document seized pertaining to AY 2012-13. There are entries from 18.01.2013 to 16.02.2013 and 18.04.2016
to 14.04.2018 which are relevant to AY 2013-14, 2017-
18, 2018-19 and 2019-20. There are no other documents mentioned by the assessing officer in the assessment order. The assessing officer in the assessment order has nowhere mentioned that the impounded material belongs/
pertains to AY 2012-13. The assessing officer has calculated the sale suppression factor of 3.8234 and estimated the suppressed sales of Rs.5,25,65,017/- as against the sales of Rs. 1,86,17,630/- as booked in the regular books of accounts.
2.1 I have considered the submissions made and the arguments advanced during the course of hearing. Provisions of section I53A inter alia reads:-
“153A. (1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151
and section 153, in the case of a person where a search is initiated under section 132 or hooks of account, other documents or any assets arc requisitioned under section Kawatra Tent and Caterers Pvt. Ltd.
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132A after the 31st day of May, 2003, the Assessing
Officer shall—
(a) issue notice to such person requiring him to furnish within such period, as may he specified in the notice, the return o f income in respect of each assessment year falling within six assessment years and for the relevant assessment year or years referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be apply accordingly as if such return were a return required to be furnished under section 139:
(b) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made and for the relevant assessment year or years:
Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years and for the relevant assessment war or years.
Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years and for the relevant assessment year or years referred to in this sub-section pending on the date of initiation of the search under section 132
or making of requisition under section 132A, as the case may be.
shall abate:
Provided also that the Central Government may by rules made by it and published in the Official
Gazette (except in cases where any assessment or reassessment has abated under the second proviso), specify the class or classes of cases in which the Assessing Officer shall not be required to issue notice for assessing or reassessing the total income for six assessment years immediately preceding the assessment year relevant Io the previous year in which search is conducted or requisition is made and for the relevant assessment year or years:
Kawatra Tent and Caterers Pvt. Ltd.
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Provided also that no notice for assessment or reassessment shall he issued by the Assessing
Officer for the relevant assessment year or years unless-
(a) the Assessing Officer has in his possession books of account or other documents or evidence which reveal (hat the income, represented in the form of asset, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more in the relevant assessment war or in aggregate in the relevant assessment years:
(b) the income referred Io in clause (a) or part thereof has escapedd assessment for such year or years:
and (c) the search under section 132
is initiated or requisition under section I32A is made on or after the 1 st day of April, 2017. Explanation I.— For the purposes of this sub- section, the expression "relevant assessment .war "
shall mean an assessment year preceding the assessment year relevant to the previous year in which search is conducted or requisition is made which falls beyond six assessment years but not later than ten assessment years from the end of the assessment year relevant to the previous year in which search is conducted or requisition is made.
Explanation 2.— For the purposes of the fourth proviso, "asset" shall include immovable property being land or building or both, shares and securities, loans and advances, deposits in bank account."
Perusal of the above section demonstrate that it starts with non-obstante clause therefore provisions of this section will override provisions of section 147 & 148. Further above provisions also authorize assessing officer co assess or reassess and issue notice under section I53A beyond six years which arc termed as relevant assessment year or years subject to compliance of the requirement of the fourth proviso to section 153A before issuing notice beyond six years from the end of assessment year relevant to the preceding year in which search is conducted or requisition is made.
Kawatra Tent and Caterers Pvt. Ltd.
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5.2.2 From the facts on record, it is further observed dial there was no incriminating material found during the course of search pertaining to the relevant assessment year which was a completed assessment and the estimated addition were made on the basis of sales suppression factor computed on the basis of evidences found during search pertaining to other the relevant
Assessment year. However, as per the provisions of Section 153A, the assessment beyond six assessment year from the AY in which search was conducted can only be done U/s 153A if the Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income, represented in the form of asset (in the form of immovable property being land or building or both, shares and securities, loans and advances, deposits in bank account) which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more in the relevant assessment year or in aggregate in the relevant assessment years. In this case no incriminating documents was found and seized and the addition was made on estimated basis. Further.
Hon’ble Supreme Court of India in the lead matter PCIT
Vs Abhisar Buildwell Pvt. Ltd. [2023 SCC Online SC 481]
in their judgment dated 24/04/2023 held that in case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabated assessments. Meaning thereby, in assessments, no addition can be made by the AO in absence of any incriminating material found during the course of search. The relevant AY 2012-13 was a completed assessment in the ease of the assessee.
2.3 Further, on perusal of assessment order, it is evident that sole basis for reopening of assessment proceedings under section 148 is the information of search of the appellant and no other information or material relevant to the year under appeal was before the assessing officer for invoking provisions of section 148. First para of the assessment order inter alia reads:-
"During the F.Y. 2018-19, information was passed on DCIT, Circle-14(1), New Delhi, the erstwhile juri iction of the assessee that Kawatara Tent Group was searched on 03.05.2018 and incriminating documents were found and seized from (he premises of the assessee."
CHAWLA & SONS (HUF) ITA No.2724/Dei/2015 in their judgment dated 18/05/2021 was considering the similar issue as to whether assessment under section 147 of Act.
could be made when the provisions of section 153C of Act, are applicable. Hon’ble ITAT in para 9 held that assessment, based upon incriminating documents found during the course of search of 3rd party premises, can be made u/s 153C of the Act and held that notice under section 148 of Act and the consequent assessment proceedings and order passed under section 147 of Act, are null and void.
2.4 Even if it is considered that the proceedings U/s 148 can be initiated, then also there are a plethora of judgement by the Hon'ble SC & I ICs including that of juri ictional High Court which states that if there was no new tangible material to justify reopening, reassessment proceedings being a case of change of opinion were not justified; Jetair (P.) Ltd. v. Deputy Commissioner of Income-tax [2023] 148 taxmann.com 185 (Bombay). In the instant case, no new information pertaining to the relevant financial year was with the AO. but the proceedings U/s 148 r.w.s. 147 was initiated on the basis of information received from the DDIT(Inv.) that the appellant had been suppressing its business receipts and hence its sales should be estimated on the basis of sales suppression factor computed by the DDIT pertaining to the documents other than the relevant financial Year. The A.O. has not brought on record any material on record which supports its claim of suppression of sale during the relevant FY.
In the case of Jindal Photo Films Ltd. v. Deputy
Commissioner of Income-tax [1998] 234 ITR 170 (Delhi), the Hon'ble Juri ictional High Court has held that since in instant case, between date of orders of assessment sought to be reopened and date of forming of opinion by Kawatra Tent and Caterers Pvt. Ltd.
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ITO, nothing new had happened, no change of law was there, no new material had come on record or no new information had been received, it had to be held that this was a case of mere change of opinion which did not provide juri iction to Assessing
Officer to initiate proceedings under section 147 and. hence, notices issued under section 148 were to be quashed.
2.5 In view of the above, it is obvious that the proceedings U/s 148 r.w.s. 147 can only be initiated if there is some tangible material on record. There w as no new material which had come to notice of Assessing Officer and entire reference in reasons recorded was only the report from the DDIT (Inv.) and on the basis of the same the addition was made estimating the unaccounted sales applying the sales suppression factor. I he A.O. has not applied its mind before initiating the proceedings U/s 148 and nothing adverse were brought on record during the proceedings under Section-148 of the Act. Considering the facts of the case and discussion made above. I am of the opinion that the addition made on estimated basis without any evidence or material on record pertaining to the relevant Financial Year is not sustainable. Hence, die addition of Rs.5,25,65,017/- on accounted of unaccounted suppressed sale made by the AO is deleted. Accordingly, the Grounds raised by the appellant is allowed.”
The Revenue could hardly dispute that the learned Assessing Officer had made the impugned addition of the assessee’s alleged unaccounted/suppressed sales based on extrapolation method only, after the search in question, which is no more res integra going by PCIT vs. Abhisar Buildwell Pvt. Ltd. (2023) 454 ITR 212 (SC). Their lordships have admittedly settled the law that any such addition ought to be made based on the specific incriminating/seized material only. We thus express our concurrence with the learned CIT(A) detailed Kawatra Tent and Caterers Pvt. Ltd.
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discussion deleting the impugned addition in the assessee’s favour and against the department in very terms therefore.
No other ground or argument has been pressed before us.
This Revenue’s appeal is dismissed. Order Pronounced in the Open Court on 01/10/2025. (Avdhesh Kumar Mishra) (Satbeer Singh Godara) Accountant Member Judicial Member Dated: 01/10/2025 *Subodh Kumar, Sr. PS*