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Income Tax Appellate Tribunal, DELHI BENCHES : H : NEW DELHI
Before: SHRI J. SUDHAKAR REDDY, AM & SHRI SUDHANSHU SRIVASTAVA, JM
ORDER PER J. SUDHAKAR REDDY, AM: All these appeals by the Revenue are directed against the separate identical orders passed by the CIT(A)-III, New Delhi, dated 07.05.2010 for the assessment years 2000-01 to 2002-03.
The facts in brief are that a search u/s 132 of the IT Act, 1961 was conducted in the flex group of cases on 23.02.2006 in the course of which premises of the assessee company were also covered.
Accordingly, notice u/s 153A of the Act was issued by the assessing officer on 4.9.2006 calling upon the assessee to file returns of income for the immediately preceding six assessment years including the assessment year under consideration. Thereafter, assessment proceedings, as provided under sections 142(1) and 143(2) of the IT Act, 1961, were taken up. In the course of assessment proceedings, the ld. Assessing Officer noticed that the assessee company has claimed advances of Rs. 10,42,786/- received from its customers. Accordingly, necessary enquiries in this regard were made by him and being not satisfied with regard to the genuineness of the aforesaid claim of advances, addition of identical amount was made u/s 68 of the Act as under:-
"From the perusal of the balance sheet of the year under consideration, it is seen that the assessee has received Rs. 10,42,786/- on account of advances from customers. The assessee was asked vide order sheet entry dated 7.11.2007 to file confirmation from the customers from whom advances have been received during the year along with their ledger account, date and mode of payments. Further, notices U/S 133(6) of the IT Act for information were issued to parties to whom the assessee company has been making sales. However, neither the assessee has furnished any confirmation asked for. There are also no details regarding the parties from whom advances have been received. Most of the sale parties are thus found to be non-traceable. It may be pertinent to mention that majority of the sales made by the assessee is in cash which is known as 'counter sale'. Thus Rs. 10,42,786/- is added back to the total income of the assessee u/s. 68 of the IT Act and taxed under the head "Income from other sources".
Being aggrieved by the aforesaid action of the A.O., the assessee company challenged the addition made by the assessing officer before the learned CIT(A)-III, New Delhi. A perusal of the impugned appellate order reveals that during the appellate proceedings, the appellant company raised additional ground in order to challenge the validity of the assessment made by the assessing officer U/S 153A of the Act. The additional ground raised by the appellant company was accepted by the learned first appellate authority and after taking into consideration the various submissions and case laws relied upon by the assessee company, the learned CIT(A) in Para 5 of his order dated 07-05-2010, held that no addition can be made to the income of the appellant company u/s. 153A in the absence of incriminating material found or seized during the course of search.
Aggrieved, the Revenue is in appeal before us.
We have heard the parties and perused the relevant material on record. The undisputed fact is that the assessments in these cases have not abated and the findings of the ld.CIT(A) that the additions in question are not based on incriminating material is not controverted on facts. The jurisdictional High Court in the case of CIT, Central-III vs. Kabul Chawla in vide judgment dated 20th April, 2015, at paras 37 and 38 held as follows:-
“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. 4
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 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. Conclusion 38. The present appeals concern AYs, 2002-03, 2005-06 and 2006- 07.On the date of the search the said assessments already stood completed. Since no incriminating material was unearthed during the search, no additions could have been made to the income already assessed.”
Respectfully following the judgement of the Hon’ble jurisdictional High Court in the case of Kabul Chawla (supra), we uphold the decision of the ld.CIT(A).
In the result, the appeals of the Revenue are dismissed.
The order pronounced in the open court on 17.11.2015.