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Income Tax Appellate Tribunal, DELHI BENCH “G” DELHI
Before: SHRI CHALLA NAGENDRA PRASAD & SHRI PRADIP KUMAR KEDIA
PER PRADIP KUMAR KEDIA, AM:
The captioned appeals have been filed by the assessee as well as Revenue for Assessment Year (A.Y.) 2011-12 in question: Sr. ITA/CO Nos. CIT(A) Assessment Remarks Nos. Order dated Order dated 1. ITA No.833/Del/2022 CIT(A)-27, Assessment Assessment Order under New Delhi order dated section 153A r.w.s
I.T.A. Nos. 833, 831 & 828/Del/2022 2 CO Nos.9 & 10/Del/2023 (in ITA Nos. 833 & 831/Del/2022)
order dated 27.12.2019 143(3) of the Income 28.01.2022 Tax Act, 1961. 2 CO No.9/Del/2023 -NA- -NA- Cross Objection in ITA No.833/Del/2022 3. ITA No.831/Del/2022 CIT(A)-27, Assessment Assessment Order under New Delhi order dated section 153A r.w.s order dated 27.12.2019 143(3) of the Income 28.01.2022 Tax Act, 1961. 4. CO No.10/Del/2023 -NA- -NA- Cross Objection in ITA No.831/Del/2022 5. ITA No.828/Del/2022 CIT(A)-27, Assessment Assessment Order under New Delhi order dated section 153A r.w.s order dated 27.12.2019 143(3) of the Income 28.01.2022 Tax Act, 1961.
ITA No. 833/Del/2022- & CO-9/Del/2023- AY 2011-12-Sumit Mittal:
To begin with, we shall take up ITA No.833/Del/2022 and Cross Objection No.9/Del/2023 thereon for adjudication purposes.
The grounds raised by the Revenue reads as under: “1. The Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs.2,60,71,350/- made by AO on account of unexplained money u/s 69A of the IT Act.
The Ld. CIT(A) has erred in law and on facts in stating that the addition made by AO on account of unexplained investment/money u/s 69A of the IT Act, 1961 is not sustainable and deserve to be deleted as the addition had been made during the regular course of assessment proceedings and not on the basis of incriminating material/evidence found during the search proceedings.
The Ld. CIT(A) has erred in law and on facts in deleting the addition made by the AO in view of the judgment in the case of CIT Vs Kabul Chawla (2016) 380 ITR 0573 as the said decision does not deal with the fact situation that arises in the present case.
3.2 The Ld. CIT(A) has erred by not considering the fact that the Valuation Report was duly called u/s 142A which clearly proved that the value of property is higher that the value shown by the assessee.
I.T.A. Nos. 833, 831 & 828/Del/2022 3 CO Nos.9 & 10/Del/2023 (in ITA Nos. 833 & 831/Del/2022)
3.3 The Ld. CIT(A) has erred in ignoring the fact that the assessee could not file any explanation to the said Valuation report.
4.(a) The Ld. Commissioner of Income Tax (Appeals) is erroneous and not tenable in law and on facts.
(b) The appellant craves leave to add, amend any/all the grounds of appeal before or during the course of hearing of the appeal.”
The Grounds raised in Cross Objection filed by the assessee reads as under: 1. “That the Ld. AO grossly erred in invoking provisions of Sec. 153A(1)(a) of the Act to the case of the assessee despite the fact that there existed no books of account or document or evidence in his possession on the basis of which it could have been alleged that the assessee had made unaccounted investment. 2. That the Ld. AO grossly erred in law and in facts of the case in relying upon an erroneous and incorrect valuation report prepared by valuer only on the basis of estimations without taking proper cognizance of facts and producing reliable comparable for valuation of land. 3. That the valuation report obtained u/s 142A of the Act in the case of assessee is void-ab- initio because of being obtained without any authority of law and in defiance of settled procedures of law. 4. That the valuation report obtained u/s 142A of the Act in the case of the assessee is void- ab-initio because of being obtained in violation of provisions of Sec. 56(2)(vii)(b) of the Act. 5. That the Ld. AO grossly erred in law and in facts of the case in relying upon a valuation report which was not prepared during the course of assessment proceedings. 6. That the assessee craves leave to add/ alter/ modify/ delete any grounds of appeal during the course of appeal proceedings.”
Briefly stated, a search and seizure operation under section 132 of the Act was undertaken in the case of assessee namely Sumit Mittal and other captioned assessees on 19.12.2017. Pursuant to the search action, a notice under section 153A of the Act was issued by the AO on 15.12.2019.
I.T.A. Nos. 833, 831 & 828/Del/2022 4 CO Nos.9 & 10/Del/2023 (in ITA Nos. 833 & 831/Del/2022)
Consequently, the assessee filed return of income under section 153A of the Act and the assessment was framed under section 153A of the Act by making addition of Rs.2,60,71,350/- to the return income of the assessee filed at Rs.7,82,700/-.
Relevant facts leading to such additions emerges as follows. In the course of search, the assessee and other family members captioned above were found to be owner of House no. 151 Deepali Enclave Sonepat. The cost of construction of such property was enquired in the course of search. As borne out from the notice under s. 142(1) dt. 19/12/2019, the AO observed that in the post search investigations, cost of these properties was subjected to valuation and report dated 19/07/2018 of Govt. approved valuer was obtained. It was thus observed from the valuation report that the cost of construction incurred is much higher that the cost reflected in the books. The value as per sale deed Rs. 90,33,000/-thus was deducted from the valuation of Rs. 8,72,47,050/- determined in the valuation report. It was estimated that source of excess cost of construction/ investment to the tune of Rs. 7,82,14,050/- has remained unexplained. It was found that Mrs. Kailash Mittal, Sumit Mittal & Aanshika Mittal are 1/3rd co-owners each in the residential property. The additions under s. 69A was made in the hands of respective assessee in the ratio of their respective ownership. The addition of Rs. 2,60,71,350/- was made by the AO on account of unexplained investment in the property on the basis of Valuation Report. Similar additions were made in the hands of Kailash Mittal and Aanishka Mittal being co-owners of the joint ownership property.
Aggrieved by the additions made by the AO under section 69A of the Act on account of unexplained source of investment towards properties, the assessee preferred an appeal before the learned CIT(A). Detailed submissions were filed on behalf of the assessee as reproduced in the First Appellate Order.
I.T.A. Nos. 833, 831 & 828/Del/2022 5 CO Nos.9 & 10/Del/2023 (in ITA Nos. 833 & 831/Del/2022)
One of the grounds taken by the assessee seeking to challenge the additions made in 153A proceedings was on the premise that the additions were carried out without any reference to incriminating material found in the course of search operation and the assessment of the assessee relevant to AY 2011-12 stood concluded at the time of search.
The aforesaid challenge has been adjudicated by the CIT(A) in favour of the assessee by placing reliance upon the judgment of the Hon’ble Delhi High Court in the case of CIT vs. Kabul Chawla (2015) 61 taxmann.com 412 (Delhi) and Pr. CIT vs. Ram Avtar Verma 395 ITR 252 (Delhi). The CIT(A) also categorically observed that the assessment stood concluded at the time of search and thus the addition under s. 153A depended upon the incriminating material found during the search to corroborate the impugned addition, which was found to be absent. In the absence of any incriminating material unearthed at the time of search relevant to assessment year 2011-12 in question, the CIT(A) deleted the additions in the light of judicial precedents.
The relevant operative para of the order of CIT(A) as reproduced hereunder: “I have gone through the submissions, records and order of the AO. It is observed that addition has been made on account of unexplained investment in the property.
All the grounds of appeal are mainly directed on one issue that the proceedings were initiated and order was passed when there was no incriminating material found during the search operation in respect of residential property bearing No. 151, Deepali Enclave, Pitampura, Delhi. Therefore, Ground Number 6 is adjudicated first.
Ground Number 6:
7.1 This ground of the appeal is as under
I.T.A. Nos. 833, 831 & 828/Del/2022 6 CO Nos.9 & 10/Del/2023 (in ITA Nos. 833 & 831/Del/2022)
“That the Ld. AO grossly erred in law and in facts of the case in making additions of Rs. 2,60,71,350/- to the income of the assessee under Section 69A of the Act despite the fact that no evidence of any unexplained investment existed with the Ld. AO."
7.2 After taking into consideration the submissions of the appellant and from the order of the AO, it is observed that this property was purchased by the assessee during F.Y. 2010-11 along with Smt. Kailash Mittal and Smt. Anshika Mittal for a consideration of Rs. 90,33,000/- The valuation as per the Stamp Valuation Authority was Rs. 82,51,818/ Thus, it is observed that the assessee and co-owners had purchased the immovable property at a price higher than the value as per Stamp Valuation Authority.
7.3 Further, whether any addition/disallowance be made without reference to any incriminating material/evidence found during the search operation when the assessment in that year is a completed assessment, has been dealt with and answered by Hon'ble Jurisdictional High Court in the case CIT vs. Kabul Chawla. Hon'ble Court has taken a view in such cases that although section 153A 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 Assessing Officer 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. As per Hon'ble Court, such assessment has to be made under the section 153A/153C only on the basis of the seized material. It is further opined by Hon'ble Court that completed assessment can be interfered with by the Assessing Officer while making the assessment in the section 153A only on the basis of some incriminating material found 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. In the subsequent decisions also, Hon'ble Court has reiterated their aforesaid views. In the case of Pr. CIT vs. Ram Avtar Verma 395 ITR 252, Hon'ble Court has supported the aforesaid view that if the assessments are completed on the date of search and no incriminating material is found during the search, assessment/s153A of the Act is invalid.
7.4 Now the facts of the appellant are to be examined in view of this legal position. It is clear from the assessment order as well as submissions of the appellant that search and seizure action u/s 132(1) of the Act was undertaken by the Department in the case of appellant group on 19.12.2017. The status of original returns filed is as under:
I.T.A. Nos. 833, 831 & 828/Del/2022 7 CO Nos.9 & 10/Del/2023 (in ITA Nos. 833 & 831/Del/2022)
A.Y Date of filing of Last Date for Remarks original return issue of notice u/s 143(2) 2011-12 31.07.2011 30.09.2012 Not an abated assessment
On the date of search on 19.12.2017, assessment for A.Y. 2011-12 was a completed assessment as the time period to issue notices u/s 143(2) had already expired. This was also not an abated assessment as appears from the assessment order and confirmed in the submission of the appellant. Therefore, in this AY, additions on account of unexplained investment in the property could have been made by AO only on the basis of incriminating material/evidence found during the search proceedings. However, as can be seen from the present assessment order, the additions have been made on the basis of valuation report which was obtained by the Investigation Wing. Delhi from Government approved DVO without referring to any incriminating material for doing so.
7.5 In view of above, since the assessment year under consideration is a completed assessment year, any addition/disallowance ought to have been made by AO on the basis of such incriminating material/evidence as found during the search proceedings in view of various decisions, including CIT Vs. Kabul Chawla(supra), of Hon'ble Jurisdictional High Court. In view of this, the aforesaid additions made by AO on account of unexplained investment/money u/s 69A of the IT Act, 1961 is not sustainable and deserve to be deleted as the addition had been made during the regular course of assessment proceedings and not on the basis of incriminating material/evidence found during the search proceedings. L therefore, delete the aforesaid additions made by AO on account of unexplained investment/money u/s 69A of the IT Act, 1961 for AY 2011-12. However, if in future the ratio-decidendi of the decision of Hon'ble High Court in the case of CIT vs. Kabul Chawla gets reversed, the appeal will revive on these issues.”
Aggrieved by the relief granted by CIT(A), the Revenue has filed an appeal before the Tribunal.
We have heard the rival submissions and perused the First Appellate order and the assessment order, material referred and relied upon in the course of hearing was also perused.
I.T.A. Nos. 833, 831 & 828/Del/2022 8 CO Nos.9 & 10/Del/2023 (in ITA Nos. 833 & 831/Del/2022)
11.1 The Hon’ble Supreme Court in the case of Pr. CIT vs. Abhisar Builwell (Pvt.) Ltd. (2023) 454 ITR 212(SC), on first principles, has endorsed the interpretation of s. 153A in the lead Judgment rendered by the Hon’ble Delhi High Court in the case of CIT vs. Kabul Chawla (2016) 380 ITR 573(Del) and plethora of other judicial precedents thereafter by different Courts that in case where the assessment of an assessment year stood concluded at the time of search and remains unabated, the additions and disallowances are permissible in s. 153A proceedings only qua incriminating material found in the course of search. In the instant case, no incriminating material was found during the search and referred in the assessment order and hence the AO is not entitled to make additions in such completed/unabated assessments.
11.2 In view of the judgment delivered by Hon’ble Supreme Court, the law is well settled. In search assessment under s. 153A, the Assessing Officer cannot assess or reassess the total income filed under s. 153A of the Act unless some incriminating material was found during the search. The Revenue has not demonstrated the nature of material found in the course of search which led to impugned additions in the absence of any incriminating material. The cost of land incurred and recorded in the books has been duly accepted and reduced from the fair value derived by the valuer. The additions appear to have been made towards cost of construction of premises thereon. The construction however has been commenced in the subsequent year and has no relation to the AY 2011-12 in question. Secondly, the cost incurred in the respective subsequent year were made by the AO but deleted by the CIT(A). Thirdly, the addition on cost of construction is based on valuation report which is in the realm of estimations without any nexus to any incriminating documents per se. Hence, in the absence of any incriminating material found, We see no perceptible reason to interfere with the finding returned by the CIT(A). We thus decline to interfere.
I.T.A. Nos. 833, 831 & 828/Del/2022 9 CO Nos.9 & 10/Del/2023 (in ITA Nos. 833 & 831/Del/2022)
Identical additions on the same footing has been carried in the case of other co-owners in ITA No.831/Del/2022 – Kailash Mittal and ITA No.828/Del/2022 – Aanshika Mittal are filed by the Revenue. In consonance with the view taken in the case of Sumit Mittal, the appeals in these cases are also liable to be dismissed.
Hence, all the three captioned appeals of the Revenue are dismissed.
Cross Objections filed by respective captioned above are rendered infructuous and thus also liable to be dismissed summarily.
In the ultimate result, all the three captioned appeals filed by Revenue are dismissed and the cross objections filed by assessee captioned above are also dismissed summarily.
Order pronounced in the open Court on 09/11/2023.
Sd/- Sd/- [CHALLA NAGENDRA PRASAD] [PRADIP KUMAR KEDIA] JUDICIAL MEMBER ACCOUNTANT MEMBER
DATED: 09/11/2023 Priti Yadav, Sr. PS* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT(A) 4. CIT 5. DR Assistant Registrar ITAT, New Delhi