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Income Tax Appellate Tribunal, DELHI BENCHES : “H” NEW DELHI
Before: SHRI INTURI RAMA RAO & SHRI SUDHANSHU SRIVASTAVA
PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER This department’s appeal is against the order dated 28.02.2011 passed by the Ld. CIT(A) -I, New Delhi. The only issue involved is deletion of an addition of Rs. 21 lacs by the Ld. CIT(A) on account of gifts received by the assessee. The brief facts of the case as borne out from the records are that a search and seizure operation u/s 132 of the Income Tax Act was carried out on 16.3.2007. It is AO’s contention that as per material seized /impounded during the course of search and connected survey operations it was discovered that the assesssee had received gifts of Rs. 21
ACIT vs. Shri Kamal Kishore Aggarwal lacs from one Shri Jagdish Mangla on 11.1.2001. Summons was issued to Shri Jagdish Mangla but they could not be served upon him as he had already expired on 24.6.2002. It is the Department’s contention that Shri Jagdish Mangla was an entry operator and the entries in the bank statement of the assessee (Account No. 988) were not related to any business dealings of Shri Mangla as claimed by the assessee but were accommodation entries. It is also the Department’s contention that as Shri Jagdish Mangla was not related to the assessee or to any other member of the family there was no justification for the gifts made. The Department also relied on the assessment proceedings of M/s. K.K. Aggarwal & Sons (HUF) and M/s.
Manish Aggarwal & Sons (HUF) for financial year 2008-09 wherein it was concluded by the AO that Shri Jagdish Mangla did not have the creditworthiness to make such gifts. The Ld. CIT(A) however deleted the entire addition of Rs. 21 lacs on the ground that a similar addition of Rs. 10 lacs was deleted by him in the case of M/s.
K.K. Aggarwal & Sons (HUF) for AY 2001-02 wherein the assessee had received a gift of Rs. 10 lacs from Shri Jagdish Mangla.
Before us the Ld. AR for the assessee submitted that it is not the case of the Department that the addition of Rs. 21 lacs has been made on account of any incriminating material found during the course of search and seizure proceedings. He drew our attention to pages 278 , 279 and 280 of the paper book filed by him which contain intimation u/s 143(1) of the Act for assessment year 2001-02 in the case of the assessee and the balance sheet and the capital account of the assessee for AY year 2001-02 respectively. It is seen at page 280 of the paper book that the capital account of the assesee reflects a gift of Rs. 21 lacs under the credits. It was further submitted by the Ld. AR that as per the second proviso of section 153 A only the ACIT vs. Shri Kamal Kishore Aggarwal assessments which were pending on the date of initiation of search u/s 132 of the Act will abate and the assessment proceedings which have become final as on the date will not stand abated. It was further submitted that no incriminating material was found during the course of search to show that the gifts were not genuine. Ld. AR also drew our attention to the decision of the Hon’ble High Court of Delhi in CIT Central-III vs. Kabul Chawla in 709/2014 and 713/2014.
Ld. DR on the other hand supported the order of the AO.
We have carefully considered the material placed before us and the issue involved. Section 153A of the Act provides that where a search is initiated u/s 132 of the Act, the AO shall “ assess or reassess the total income of the six assessment years immediately preceding the assessment year “ relevant to the previous year in which the search is conducted or requisition is made. The first proviso states that the AO shall “” assess or reassess the total income in respect of each assessment year falling within such six assessment years “. The second proviso states that the assessment or reassessment relating to the said six assessment years pending on the date of initiation of the search u/s 132 shall abate. It is seen that in assessee’s case search action was initiated and assessments u/s 153A were framed for six assessment years making various additions. It is assessee’s claim that the addition of Rs. 21 lacs was not tenable as the regular return had been filed where the particulars relating to the addition has been disclosed and the same had been accepted u/s 143 (1) of the Act and that no material has been found during the search to justify the addition. In our considered opinion section 153A does not authorise the making of a denovo assessment in this particular assessment year.
ACIT vs. Shri Kamal Kishore Aggarwal While under the first proviso, the AO is empowered to frame assessment for six years , under the second proviso only assessments which are pending on the date of initiation of search abate. The effect is that completed assessments do not abate.
The assessments can be said to be pending only if the AO is statutorily required to do something further. If the section 143(2) notice has been issued, the assessment can be said to be pending. However the assessment in respect of a return processed u/s 143(1) is not pending because the AO is not required to do anything further about such a return. The power given by the first proviso to assess income for six assessment years has to be confined to the undisclosed income unearthed during search and cannot include items which are disclosed in the original assessment proceedings .
It is seen on facts that as the return for the year had been processed u/s 143 (1) the assessment was not pending and as no material was found during the search, the addition has been rightly deleted by the Ld. CIT(A). It will also be worthwhile to reproduce para 37 of the judgment of the Hon’ble High Court of Delhi in the case of CIT Central – III vs. Kabul Chawla (supra) which lays down the entire law with regard to section 153A 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 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.
ACIT vs. Shri Kamal Kishore Aggarwal 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 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 finding 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.”
Thus on the facts of the case and respectfully following the Hon’ble High Court of Delhi in CIT Central –III vs. Kabul Chawla (supra) we find that the addition of Rs.
ACIT vs. Shri Kamal Kishore Aggarwal 21 lacs has been rightly deleted and there is no reason for interference with the order of Ld. CIT(A).
In the result the appeal filed by the Department is dismissed.