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Income Tax Appellate Tribunal, DELHI BENCH ‘B’ : NEW DELHI
PER SHAMIM YAHYA, ACCOUNTANT MEMBER :
This appeal by the assessee is directed against the order of the ld.
Commissioner of Income-tax-3, Gurgaon dated 12.03.2018 pertaining to
assessment year 2007-08.
Grounds of appeal taken by the Revenue read as under :- “i) Whether on facts and in the circumstances of the case the Ld. CIT(A) was right in concluding that there was a difference in scope of proceedings under section 153A of the Income Tax Act, 1961 for an abated assessment and for a completed assessment.
2 ITA No.3677/Del./2018 ii) Whether on facts and in the circumstances of the case the Ld. CIT(A) was right in holding that no addition can be made u/s 153A in respect of completed assessment if no incriminating material is found during search. iii) Whether there is any restriction on the power 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 in the circumstances of the case the Ld. CIT(A) was correct in interpreting section 153A which starts 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 any escaped income or under-assessed income undisclosed income has to be assessed for such completed assessment, then it has to be done in the proceedings u/s 153A in search cases as during the pendency of the proceedings u/ s 153A, the proceedings u/s 147 of the Income Tax Act, 1961 cannot be initiated. v) Whether on the facts and in the circumstances of the case the Ld. CIT(A) was right in following Delhi High Court decision in the case of CIT vs. Kabul Chawla, 380 ITR 173 when the Hon'ble HC itself admits in para 37(iv) that "Although Section 153A does not say that additions should strictly be made on the basis of evidence found in course of search ..... " there by interpreting the statue in the manner which were never worded or intended by the legislature. vi) Whether on the facts and in the circumstances of the case the Ld. CIT(A) has erred in ignoring the principles of strict interpretation of statute when the words used in the statute i.e. section 153A(1)(b) of the IT Act, 1961 are assess or reassess the "Total Income". vii) Whether on the facts and in the circumstances of the case the Ld. CIT(A) has erred in not deciding the issue of addition of Rs.1,87,00,000/- as unexplained share application/ share capital money made u/s 68 of the Income Tax Act, 1961 on merits.”
In this case, a search action under section 132(1)(A) of the
Income-tax Act, 1961 (for short 'the Act') was carried out in the case of
the assessee on 09.05.2012. Subsequently, assessment proceedings were
initiated and order under section 153(1)(b) read with section 143 (3) of
3 ITA No.3677/Del./2018 the Act was passed on 30.03.2015 making addition of Rs.1,87,00,000/- on
account of unexplained credit u/s 68 of the Act.
Upon assessee’s appeal, ld. CIT (A), upon a finding that no
incriminating documents/records or any other evidence was found or
seized during the course of search, deleted the addition referring to
Hon’ble Delhi High Court decision in the case of CIT vs. Kabul Chawla.
We may gainfully refer to the order of ld. CIT (A) in this regard as
under:-
“5.3 It is an undisputed fact, apparent from the assessment order that no incriminating documents/records or any other evidence was found or seized during the course of search proceedings which resulted in any addition in the case of the appellant. The only addition made in the assessment order under section 153A read with section 143(3) is on account of share capital received amounting Rs.1,87,00,000/-. This addition is not borne out of search action. 5.4 It is also undisputed fact that the appellant had submitted return of income originally u/s 139 of the Act on 29.10.2007.Assessment order u/s 143(3) was passed by the AO on 10.12.2009, w.r.t return filed u/s 139 of the Act, wherein the returned income of the appellant was assessed at Rs.3,77,76,730/- as against Rs.3,67,58,515/- declared by the appellant. At the time of search action on 26.05.2011, no assessment/reassessment proceedings were pending nor abated. 5.5 It is clear from the above that neither any incriminating material/ evidence were found and seized during the course of search in case of the appellant during the year under consideration nor any addition has been made emanating out of the search proceedings and no proceedings were pending nor abated in terms of the provision of section 153A of the Act. The addition has been made on account of unexplained credit u/s 68 as discussed in the assessment order.”
Thereafter, ld. CIT (A) referred to several case laws and concluded as
under :-
“5.8 The facts of the above referred case are similar to the present case of the appellant. As mentioned earlier, the addition made in present case
4 ITA No.3677/Del./2018 is not emanating out of any incriminating material found during the search proceedings nor any proceedings were pending or abated on the date of search, in this case. 5.9. In view of the ratio laid down by the Hon'ble High Court of Delhi in the case of CIT vs Kabul Chawla and also other judgments as discussed in order of Hon'ble ITAT reproduced above, the decision of the jurisdictional ITAT has been found applicable and accordingly, the addition of Rs. 1,87,00,000/- made on account of share capital received by the company cannot be sustained and hence deleted looking in to the position of law and facts of the case.”
Against this order, assessee is in appeal before us. We have heard
both the parties and perused the records.
Ld. Counsel of the assessee reiterated that there is a clear finding
by the ld. CIT (A) that there is no incriminating material found during the
course of search on the basis of which addition was made. He submitted
that this is an undisputed fact. He further submitted that recent Hon’ble
Apex Court in the case of PCIT vs. Abhisar Buildwell (P.) Ltd. reported
in (2023) 149 taxmann.com 399 (SC) upheld this proposition. Hence, he
submitted that order of ld. CIT (A) is to be upheld.
Per contra, ld. DR for the Revenue relied upon the order of AO but
he could not dispute the proposition that there is no incriminating
material found during search on the basis of which impugned addition has
been made.
Upon careful consideration, we find that it is now judicially settled
that addition u/s 153A in case of unabated assessment can only be made
on the basis of incriminating material found during search. Since, in the
5 ITA No.3677/Del./2018 present case, there is no dispute that addition has not been made on incriminating material found during search. The addition is not legally
sustainable. Hence, respectfully following the precedents as above, we confirm the order of ld. CIT (A) in this regard. 9. Since we have decided the issue on the validity of jurisdiction itself, adjudication of merits of the case is only of academic interest, hence we are not engaging into the same. 10. In the result, the appeal of the Revenue is dismissed. Order pronounced in the open court on this 21st day of September, 2023.
Sd/- sd/- (ANUBHAV SHARMA) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated the 21st day of September, 2023 TS Copy forwarded to: 1.Appellant 2.Respondent 3.CIT 4.CIT (A) 5.CIT(ITAT), New Delhi. AR, ITAT NEW DELHI.