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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI CHANDRA MOHAN GARG & SHRI B.M. BIYANI
आदेश/ O R D E R
Per B.M. Biyani, A.M.:
Feeling aggrieved by appeal-order dated 22.11.2018 passed by learned Commissioner of Income-Tax (Appeals)-3, Bhopal[“Ld. CIT(A)”], which in turn arises out of assessment-order dated 23.08.2017 passed by learned ACIT, Central, Gwalior,[“Ld. AO”] u/s 153A read with section 143(3) of Income-tax Act, 1961 [“the Act”] for Assessment-Year[“AY”] 2010-11, the assessee has filed this appeal on following grounds:
“(1) That the Ld. AO was not justified either in law or in facts in making addition u/s 153A for A.Y.2010-11 on the basis of return of income filed
Anand Prakash Kamdar ITANo.58/Ind/2019 A.Y. 2010-11 Page 2 of 8 u/s 139(1) without any incriminating evidences found in search. The proceeding for A.Y.2010-11 stood completed on the date of search 01.07.2015 and hence no addition u/s 153A on the basis of income disclosed in the return could have been made.
2. That the LPS-3 page 67 to 69 was in fact corroborative evidence of exemption claimed u/s 54B by the assessee in the return filed u/s 139(1) on 26.10.2010 and by no stretch of imagination can be termed as an incriminating document so as to invoke an addition u/s 153A.
That there is no jurisdiction either in law or on facts for the Ld. AO & the Ld. CIT(A) to levy tax on sale of land by treating the same as short term capital gain as claimed by the assessee in its return filed u/s 139.
4. That there is no justification either in law or on facts for CIT(A) or AO to deny exemption u/s 54B to the assessee.
5. The Appellant humbly craves leave to add, alter, and or supplement any ground or grounds, if necessary, at any time during the Appellant proceeding.”
Heard the learned Representatives of both sides at length and case- records perused.
3. Briefly stated the facts are such that a search u/s 132 was conducted on the assessee on 01.07.2015 in consequence of which the case of AY 2010-11 involved in present-appeal was assessed u/s 153A read with section 143(3). While completing assessment, the Ld. AO computed taxable gain at Rs. 37,38,356/- and disallowed exemption u/s 54B claimed by assessee on account of investment in agricultural land. Being aggrieved, the assessee filed first-appeal to Ld. CIT(A) but could not succeed. Now, the assessee has come in next-appeal before us assailing the order of first-appeal.
We will proceed in seriatim of grounds.
Ground No. 1 and 2:
In these grounds, the crux of grievance of assessee is that the addition has been made in the proceeding of section 153A without having any Anand Prakash Kamdar ITANo.58/Ind/2019 A.Y. 2010-11 Page 3 of 8 incriminating material seized during the course of search and, therefore, the addition is illegal.
Referring to the material held on record including the orders of lower- authorities, the Ld. AR instantly pointed out that the AY 2010-11 involved in present-appeal is a non-abated assessment-year. Then, Ld. AR submitted that the assessee filed original return u/s 139 declaring a long-term capital gain of Rs. 36,76,886/- derived from sale of urban agricultural land and claiming exemption of Rs. 36,76,886/- u/s 54B on the basis of investment made in another agricultural land and thereby offering taxable gain at Rs. Nil, which was accepted by the authorities. Thereafter, during the course of search- proceeding undertaken by department, a document marked as “LPS-3 / Page 67 to 69” was seized by authorities, which is a Purchase-Agreement dated 30.08.2010 on the basis of which the assessee made investment in the agricultural land and claimed impugned exemption u/s 54B. A copy of this document is placed at Paper-Book / Page No. 3 to 7. Analysing this document which is in the form of Purchase-Agreement, the Ld. AR submitted that it is executed on a stamp-paper of Rs. 100/- and duly signed and witnessed by parties. Ld. AR further submitted that Page No. 2 of this Agreement clearly demonstrates that the assessee made investment eligible for exemption u/s 54B through banker cheque. Ld. AR submitted that this Purchase-Agreement is a legal document; the transaction made therein was done by banking channel; and the revenue-authorities having allowed exemption to the assessee in the original assessment, hence it cannot be said to be an “incriminating material” for the purpose of section 153A. Ld. AR stressed that there is no other material except this Purchase-Agreement, found / seized by authorities during the course of search. Thus, according to Ld. AR, the Ld. AO has re- computed taxable gain as also disallowed exemption u/s 54B without having any recourse to incriminating material. Ld. DR could not rebut this factual submission of assessee and hence we do not need to elaborate further on the Page 3 of 8
Anand Prakash Kamdar ITANo.58/Ind/2019 A.Y. 2010-11 Page 4 of 8 same, suffice it to accept that the revenue-authorities have made the impugned addition without any incriminating material in possession.
Having found that the Ld. AO has made addition in an unabated assessment year without having incriminating material, we straightaway observe that the position is directly covered by the decision of Hon’ble Jurisdictional High Court of Madhya Pradesh in the case of PCIT Vs. Gahoi Dal & Oil Mills (2021) 11 ITJ Online 314 (MP), 31 & 32 of 2019, order dated 12.07.2019,wherein relying upon the decision of Hon’ble Delhi High Court in CIT Vs. Kabul Chawla (2016) 2 ITJ Online 869 (Trib. – Delhi) : (2016) 380 ITR 573 : (2015) 281 CTR 45 : (2015) 234 Taxman 300, the Hon’ble jurisdictional High Court has dismissed the revenue’s appeal by holding that no addition can be made u/s 153A in a non-abated assessment year in absence of incriminating material found during search. The relevant paras of the decision are reproduced below:
“8. Dwelling on the scope of sub-section (1) of Section 153A of the Act, a Division Bench of Delhi High Court in CIT Vs. Kabul Chawla (2016) 2 ITJ Online 869 (Trib. – Delhi) : (2016) 380 ITR 573 : (2015) 281 CTR 45 : (2015) 234 Taxman 300 observed: “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. 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". Page 4 of 8
Anand Prakash Kamdar ITANo.58/Ind/2019 A.Y. 2010-11 Page 5 of 8 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. In so far 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.”
9. We are in respectful agreement with the view expressed.
In the given facts of present case as no incriminating documents during course of search are found, the order in appeal cannot be said to have suffered the illegality as would give rise to the proposed substantial question of law.
11. Consequently, appeals fail and are dismissed. No costs.”
Ld. DR representing the revenue filed a Written-Submission running over 21 pages. Briefly referring to the same, the Ld. DR, with due respect to all Hon’ble Courts, submitted that there had been a change in the scheme for assessment of search cases from time to time. He submitted that in the case of searches conducted upto 31.05.2003, scheme of “Block-assessment” prescribed under Chapter-XIV-B consisting of section 158B to 158BH was applicable, but in respect of searches conducted after 31.05.2003, a new scheme prescribed u/s 153A to 153D is applicable. Ld. DR would further
Anand Prakash Kamdar ITANo.58/Ind/2019 A.Y. 2010-11 Page 6 of 8 explain that while in older scheme u/s 158B to 158BH, there was assessment only of “undisclosed income”, the newer scheme u/s 153A to 153D prescribes assessment of “total income including undisclosed income”. He would further submit that due to this material change, the present scheme u/s 153A to 153D is a “full-fledged” type of assessment wherein the concept of “incriminating material” is not applicable because the AO has power to assessee full power to assess total income, which may or may not be based on incriminating material. According to him, in the present case of assessee where assessment had been made by Ld. AO u/s 153A and not u/s 158BC, the addition made, even without having incriminating material, must be viewed as legal.
We observe that the Hon’ble jurisdictional High Court in Gahoi Dal & Oil Mills (supra) has clearly held that in absence of incriminating material, addition cannot be made in an assessment of unabated year u/s 153A. Ld. DR is not able to demonstrate any decision of Hon’ble Supreme Court holding against the decision of Hon’ble jurisdictional High Court. In fact, having made his own submission as recorded in foregoing paragraph, Ld. DR himself agreed to the decision of Hon’ble jurisdictional High Court with full respect.
10. At this stage, we would also like to mention that in their later decision in the case of Pr. CIT and ors. Vs. MeetaGutgutia, Prop. Ferns ‘N’ Patels and Ors. (2017) 395 ITR 526 (Delhi), the Hon’ble Delhi High Court reiterated with approval their observations in Kabul Chawala’s case (supra) that completed assessments could be interfered with by AO while making assessment u/s 153A only on basis of incriminating material unearthed during course of search. If in relation to any assessment year, no incriminating material was found, no addition or disallowance could be made in relation to that assessment year in exercise of powers u/s 153A and earlier assessment should have to be reiterated. This later decision of Hon’ble Delhi High Court has also Anand Prakash Kamdar ITANo.58/Ind/2019 A.Y. 2010-11 Page 7 of 8 been affirmed by Hon’ble Supreme Court by dismissing Revenue’s SLP in PCIT vs. MeetaGutgutia (2018) 96 taxmann. Com 468 (SC).
In view of above discussion, respectfully following the decision of Hon’ble jurisdictional High Court in Gahoi Dal & Oil Mills (supra), we are of the view that in the present appeal, the addition made by Ld. AO without having any incriminating material, is beyond the purview of section 153A and, therefore, clearly unsustainable. Hence, we have no hesitation in deleting the same. The assessee succeeds in Ground No. 1 and 2.
Ground No. 3 to 5:
Since we have already deleted addition by accepting legal ground No. 1 and 2, there is no necessity to adjudicate ground No. 3 and 4 which are on merits of the addition. Further, ground No. 5 is general and no pleading has been made before us, hence the same also does not require any adjudication.
Resultantly, this appeal of assessee is allowed.
Order pronounced as per Rule 34 of I.T.A.T. Rules, 1963 on 20/01/2023. Order pronounced in the open court on ….../……/2023.