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Income Tax Appellate Tribunal, DIVISION BENCH’B’, CHANDIGARH
Before: SMT. DIVA SINGH & MS. ANNAPURNA GUPTA
PER ANNAPURNA GUPTA, A.M.
The present appeal has been filed by the Revenue against the order of the Ld. CIT(A)-3, Gurgaon dt. 31/03/2017.
The Revenue in the above appeal is aggrieved by the action of the Ld. CIT(A) in deleting the addition made by the Assessing Officer in assessment proceeding conducted pursuant to search carried out at the premises of the assessee for the reason that no incriminating material was found during the course of search.
Briefly stated a search and seizure operation under section 132 of the Income Tax Act, 1961 was carried out on 04/10/2012 on the assessee. Thereafter assessment under section 153 A r.w.s 143(3) of the Act was framed disallowing set off claimed by the assessee of the Short Term Capital Loss (STCL) arising out of sale of shares against Short Term Capital Gain (STCG) for the year, holding that the transaction resulting in STCL was not a genuine transaction but arranged one so as to set off of the loss generated against the STCG for the year. Accordingly disallowance of STCL claimed by the assessee of Rs. 70 Lacs was made and the STCG earned during the year amounting to Rs. 5,75,000/- was brought to tax.
The matter was carried in appeal before the Ld. CIT(A) who found that at the time of search proceedings, assessment in the impugned year was not pending and had therefore not abated. He further found that no incriminating material or evidence was found and seized during the course of search nor any addition made emanating out of search proceedings. Therefore, relying on various judicial pronouncement, the Ld. CIT(A) held that the impugned addition could not have been made in the facts of the present case in the order passed under section 153A of the Act. The Ld. CIT(A) relied upon the decision of the Coordinate Bench of the Tribunal in the case of M/s Mala Builders Pvt. Ltd. Vs. ACIT in ITA No. 433 to 437/Chd/2014 and others cases wherein the Tribunal had further relied upon the decision of the Hon’ble Bombay High Court in the case of CIT Vs. Murli Agro Products Pvt. Ltd. in ITA No. 36 of 2009 and in the case of CIT Vs. Kabul Chawla 234 Taxman 300 (Del) in which the Hon’ble High Court had unanimously held that in the absence of any incriminating material found during the course of search action and where there is no pending assessment which could be said to have abated on the date of search, no addition could have been made.
Aggrieved by the same the Revenue has came up in appeal before us raising the following grounds of appeal challenging the deletion of addition made under section 153A merely on the basis that no incriminating material was found during the search operation. The grounds raised by the Revenue read as under:
i) "Whether on the facts and circumstances of the case the CIT(A) was right in concluding that there was a difference in scope of proceeding under section 153A of the Income Tax Act, 1961 for an abated assessment and for a completed assessment? ii) Whether on the facts and circumstances of the case the CIT(A) was right in holding that no addition can be made u/s 153A in respect of completed assessment of no incriminating material is found during search? iii) Whether there is any restriction on the powers of the Assessing officer under section 153A of the Income Tax Act, 1961 to confine only to the "incriminating material found during the search", even though such words or conditions are not mentioned in the section per se? iv) Whether on the facts and circumstance of the case the CIT(A) was correct in interpreting section 153A which started with a non-obstinate clause stating therein that the operation of section 139,147, 148, 149, 151 & 153 was deposed. Meaning thereby that in search cases the Assessing officer is duty bound to take up the assessment u/s 153A and that the above mentioned sections cannot be invoked. Therefore, even if incriminating material is not found during search, but if ant escaped income or under- assessed income undisclosed
income has to be assessed for such completed assessment, then it has to be done in the proceeding u/s 153A in search cases? v) Whether on the facts and circumstanced of the case the CIT(A) was right to bring in special procedure of block assessment as laid in chapter XIV B into the new procedure of search assessment u/s 153A introduced by Finance Act, 2003, w.e.f 1.06.2003, when chapter XIV B was scrapped to reduced litigation and dispute regarding treatment of a particular income as undisclosed and whether it is relatable to material found during search (Finance bill 2003 under head " Assessment in search cases- abolition of the special procedure in Chapter XIV-B and introduction of new provisions") vi) Whether on the facts and circumstances of the case the CIT (A) was right in ignoring the basic difference in search assessment u/s 153A and chapter XIVB being that in section 153A the "total income" has to be assessed or reassessed in six separate A.Ys., as opposed to assessing the "undisclosed income" in the scraped Chapter XIV B for block period in a single assessment? vii) whether on the facts and circumstanced of the case the CIT(A) was right in following Delhi High Court decision in the case of CIT vs. Kabul Chawla (61 taxman.com 412) when the Hon'ble HC itself admits in para 37 (iv) the "Although Section 153A does not say that additions should strictly made on the basis of evidence found in course of search " there by interpreting the statute in the manner which were never worded or intended by the legislature? viii) Whether on the facts and circumstanced of the case the CIT(A) has erred in ignoring the Principle of Strict interpretation of statues when the words used on the statue i.e. sec 153(1)(b) of the IT Act, 1961 are Assess or Reassess the "Total Income" ix) Whether on the facts and circumstances of the case the CIT(A) right in not following the Hon'ble SC judgment on interpretation of statue in the case of Smt. Tarulata Shyam & Others vs. CIT (108 ITR 345), Keshavji Ravji And Co vd. CIT (183 ITR 1). Padamsundara Rao (Deed.) & others vs State of Tamil Nadu 255 ITR 147, Prakash Nath Khanna & Others vs CIT 266 ITR 1, Institute of Charted Accountants of India vs. Price water House 93 Taxman 588? x) Whether on the facts and circumstances of the case the CIT(A) is right in not following the Hon'ble HC judgment on the issue of additions in search case u/s 153A in the case of CIT vs. Anil Kumar Bhatia 352 ITR 493 (Delhi HC), Madugula Venu vs. DIT 49 Taxman.com 200 (Delhi HC), CIT vs. Raj Kumar Arora 367 ITR 517 (Allahabad HC), canara Housing Development Company vs. DCIT 49 taxman.com98 (Karnataka HC), Filatex India Ltd. vs. CIT 229 Taxman 555 (Delhi HC) Sunny Jacob Jewellers and wedding centre, 362 ITR 664 (Kerala HC) and CIT vs. Continental Warehousing Corporation 64 taxman.com 34(SC)?" xi) Whether the Hon'ble CIT(A) was justified in following the decision of the Hon'ble Delhi High Court dated 28.05.2015 in the case of CIT Vs Kabul Chawla, when the said decision was distinguished in the Revenue favoring judgment of the Hon'ble Delhi High Court dated 27.10.2016 in the case of Smt. Dayawanti through Smt. Sunita Gupta (L/H) Vs CIT."
During the course of hearing before us Ld. Counsel for the assessee at the outset mentioned that the present appeal was squarely covered in its favour by the decision of the ITAT Chandigarh Bench in the case of DCIT Vs. M/s SCM Fintrade Pvt. Ltd in ITA No. 981 & 982/Chd/2017 dt. 05/01/2018 wherein identical grounds had been raised by the Revenue . Copy of the order was placed before us.The Ld. Counsel for the assessee further stated that the Ld. CIT(A) had rightly deleted the addition made, following the orders of the Coordinate Bench
in the case of M/s Mala Builders(supra) and the decision of the Hon’ble High Court in the case of Kabul Chawla(supra), since clearly the addition in the impugned case was not based on any incriminating material found during the course of search.
The Ld. DR, when confronted with the findings of the Ld. CIT(A), fairly admitted that no incriminating material was found during the search action and the original assessment proceeding stood completed on the date of search. But at the same time stressed that the Revenue has come up in appeal challenging the deletion of disallowance merely on the basis that no incriminating material was found during the course of search and further inviting our attention to ground no. xi taken by the Revenue wherein it has been stated that the decision of the Hon’ble Delhi High Court in the case Kabul Chawla(supra) it has been distinguished by the Hon’ble Delhi High Court in the case of Smt. Dayawanti Vs. CIT in ITA No. 357/2015 & Others dt. 27/10/2016.Ld. DR further also conceded that these aspects had already been dealt with by the ITAT Chandigarh Bench in the case of M/s SCM Fintrade Pvt. Ltd. (supra) referred to by the Ld. Counsel for the assessee as above.
We have heard the contention of both the parties. We do not find any merit in the present appeal of the Revenue. The fact that search was carried out on the assessee on 04/10/2012 and at the time of search action no assessment or reassessment proceedings were pending is undisputed. It is also not disputed that no incriminating material , document or record or any other evidence were found or seized during the course of search which resulted in any addition in the case of the assessee.Therefore, the CIT(A) we hold has rightly deleted the addition made, following the various judicial pronouncements in this regard. Further, as rightly pointed out by the Ld. Counsel for the assessee, the contention of the Ld. DR that the decision of the Hon’ble Delhi High Court in the case of Kabul Chawla has been distinguished in the case of Smt. Dayawanti and others (supra),we find, has been dealt with by the ITAT Chandigarh Bench in the case of M/s SCM Fintrade Pvt. Ltd. (supra).The ITAT in the said case dismissed this contention following the decision of ITAT Chandigarh Bench in case of DCIT Vs. M/s Bharatnet Technology Ltd. in ITA No. 983 & 984/Chd/2017 dt. 13/11/2017, wherein it was observed that the case of Smt. Dayawanti (supra) was subsequently discussed by the Hon’ble Delhi High Court in the case of Pr.
CIT Vs. Meeta Gutgutia Prop. M/s Ferns ‘N’ Petals in ITA No. 306/2017 & others dt. 25/05/2017 holding that while in the case of Smt. Dayawanti (supra) incriminating material was found during the search action however, in the case of Meeta Gutgutia(supra) no incriminating material was found during the search action and hence addition made was not justified. In view of the above we do not find any infirmity in the order of the Ld. CIT(A) while dealing the impugned addition.
In the result appeal filed by the Revenue is dismissed.
Order pronounced in the open court.
Sd/- Sd/- (DIVA SINGH) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated : 11/05/2018 AG Copy to: The Appellant, The Respondent, The CIT, The CIT(A), The DR