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Income Tax Appellate Tribunal, DELHI BENCH: ‘H’ NEW DELHI
Before: SHRI SAKTIJIT DEY & SHRI M. BALAGANESH
per sub-section (2) of Section 153A, if any proceeding initiated or any order of assessment or reassessment made under sub-section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) or section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to subsection (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Commissioner. Therefore, the intention of the legislation seems to be that in case of search only the pending assessment/reassessment proceedings shall abate and the AO would assume the jurisdiction to assess or reassess the 'total income' for the entire six years period/block assessment period. The intention does not seem to be to re-open the completed/unabated assessments, unless any incriminating material is found with respect to concerned assessment year falling within last six years preceding the search. Therefore, on true interpretation of Section 153A of the Act, 1961, in case of a search under Section 132 or requisition under Section 132A and during the search any incriminating material is found, even in case of unabated/completed assessment, the AO would have the jurisdiction to assess or reassess the 'total income' taking into consideration the incriminating material collected during the search and other material which would include income declared in the returns, if any, furnished by the assessee as well as the undisclosed income. However, in case during the search no incriminating material is found, in case of completed/unabated assessment, the only remedy available to the Revenue would be to initiate the reassessment proceedings under sections 147/48 of the Act, subject to fulfilment of the conditions mentioned in sections 147/148, as in such a situation, the Revenue cannot be left with no remedy. Therefore, even in case of block assessment under section 153A and in case of unabated/completed assessment and in case no incriminating material is found during the search, the power of the Revenue to have the reassessment under sections 147/148 of the Act has to be saved, otherwise the Revenue would be left without remedy.
If the submission on behalf of the Revenue that in case of search even where no incriminating material is found during the course of search, even in case of unabated/completed assessment, the AO can assess or reassess the income/total income taking into consideration the other material is accepted, in that case, there will be two assessment orders, which shall not be permissible under the law. At the cost of repetition, it is observed that the assessment under Section 153A of the Act is linked with the search and requisition under Sections 132 and 132A of the Act. The object of Section 153A is to bring under tax the undisclosed income which is found during the course of search or pursuant to search or requisition. Therefore, only in a case where the undisclosed income 11 | P a g e
ITA Nos.4362 to 4366/Del/2019 to 5176/Del/2019 AYs: 2005-06 to 2009-10 is found on the basis of incriminating material, the AO would assume the jurisdiction to assess or reassess the total income for the entire six years block assessment period even in case of completed/unabated assessment. As per the second proviso to Section 153A, only pending assessment/reassessment shall stand abated and the AO would assume the jurisdiction with respect to such abated assessments. It does not provide that all completed/unabated assessments shall abate. If the submission on behalf of the Revenue is accepted, in that case, second proviso to section 153A and subsection (2) of Section 153A would be redundant and/or rewriting the said provisions, which is not permissible under the law.
For the reasons stated hereinabove, we are in complete agreement with the view taken by the Delhi High Court in the case of Kabul Chawla (supra) and the Gujarat High Court in the case of Saumya Construction (supra) and the decisions of the other High Courts taking the view that no addition can be made in respect of the completed assessments in absence of any incriminating material.
14. In view of the above and for the reasons stated above, it is concluded as under:
i) that in case of search under Section 132 or requisition under Section 132A, the AO assumes the jurisdiction for block assessment under section 153A; ii) all pending assessments/reassessments shall stand abated; iii) in case any incriminating material is found/unearthed, even, in case of unabated/completed assessments, the AO would assume the jurisdiction to assess or reassess the 'total income' taking into consideration the incriminating material unearthed during the search and the other material available with the AO including the income declared in the returns; and iv) in case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabated assessments. Meaning thereby, in respect of completed/unabated assessments, no addition can be made by the AO in absence of any incriminating material found during the course of search under Section 132 or requisition under Section 132A of the Act, 1961. However, the completed/unabated assessments can be re-opened by the AO in exercise of powers under Sections 147/148 of the Act, subject to fulfilment of the conditions as envisaged/mentioned under sections 147/148 of the Act and those powers are saved. 12 | P a g e
ITA Nos.4362 to 4366/Del/2019 to 5176/Del/2019 AYs: 2005-06 to 2009-10
The question involved in the present set of appeals and review petition is answered accordingly in terms of the above and the appeals and review petition preferred by the Revenue are hereby dismissed. No costs.” 13. As could be seen from the aforesaid observations of Hon’ble Supreme Court, in case, no incriminating material is unearthed during the search, the Assessing Officer cannot assess or reassess income taking into consideration the other materials in respect of completed unabated assessments. Keeping in perspective the aforesaid ratio laid down by Hon’ble Supreme Court, if we examine the facts involved in the present appeals, it can be seen that the addition made by the Assessing Officer by estimating the GP rate is not with reference to any incriminating material found as a result of search and seizure operation conducted on assessee. At least, there is no reference of such material in the assessment orders. Though, before us, learned Departmental Representative made a valiant attempt to establish a link between the search and seizure operation conducted in case of the assessee and the survey authorization issued in the name of M/s. Dee Kay Trade Centre, however, we are not convinced. Merely because simultaneously with the search and seizure operation conducted in case of the assessee, a survey
ITA Nos.4362 to 4366/Del/2019 to 5176/Del/2019 AYs: 2005-06 to 2009-10 authorization was issued in the name of M/s. Dee Kay Trade Centre, it will not mean that the survey authorization was based on any incriminating material found during the search and seizure operation. At least, the aforesaid fact is not borne out from the assessment orders.
In any case of the matter, out of the entire sales turnover of the assessee in the relevant assessment years, the doubt/suspicion of the Assessing Officer is only with regard to sales effected to two parties, viz., M/s. Dee Kay Trade Centre and M/s. J.S. Enterprises. As regards the other purchasing parties, no adverse material or information has been collected by the Assessing Officer. Even, with regard to these two parties also, there is no incriminating material found as a result of search.
Because of this fact only, the Assessing Officer instead of disallowing the entire sales effected to the parties, has proceeded to make additions enhancing the GP rate. In any case of the matter, the additions made by the Assessing Officer by enhancing the GP rate is purely based on estimation and guess work and not as a result of any incriminating material found during search and seizure operation. That being the factual position emerging on record, applying the ratio laid down by the Hon’ble Supreme 14 | P a g e
ITA Nos.4362 to 4366/Del/2019 to 5176/Del/2019 AYs: 2005-06 to 2009-10 Court in case of PCIT Vs. Abhisar Buildwell Pvt. Ltd. (supra), no addition can be made in the assessment under section 153A of the Act. Thus, on the aforesaid reasoning alone, the additions made by the Assessing Officer would not be sustainable.
Even otherwise also, in our view, the assessee has a strong case on merits as well. As discussed earlier, the additions made by estimating the GP rate is based on the reasoning that two parties to whom the assessee had effected sales are not traceable and appear to be non-genuine. It is evident, though, the Assessing Officer has stated that the parties were not found at the given address, however, it is a fact on record that the proprietor of both the concerned parties is having PAN issued by the department. Thus, it is a fact that the concerned part is on the rolls of the department. It is further evident, in course of assessment proceeding, the Assessing Officer has issued notices under section 133(6) of the Act to various banks, wherein, the concerned purchasing parties were having their accounts. In response to the notices issued under section 133(6) of the Act, the concerned banks have provided details of bank accounts of the concerned parties/entities. On verifying these bank accounts statements, the Assessing Officer has noticed that just prior to 15 | P a g e
ITA Nos.4362 to 4366/Del/2019 to 5176/Del/2019 AYs: 2005-06 to 2009-10 issuance of cheques to the assessee, cash deposits have been made in bank accounts. The Assessing Officer has further stated that from the photograph of the proprietor in the bank account, it does not appear that party will be having a turnover of more than Rs.70 crores. The aforesaid reasonings of the Assessing Officer are totally irrelevant. When the concerned parties are having so many bank accounts, it has to be believed that the parties were in existence at the relevant point of time, as the bank accounts reveal regular transaction. In any case of the matter, though, the Assessing Officer has disbelieved the sales effected by the assessee to the aforesaid two parties, however, consciously, he has not disallowed the entire sales made to the parties but has estimated the GP rate. This presupposes that, to some extent, the Assessing Officer believed that sales were, indeed, effected by the assessee, though, the parties to whom the assessee sold goods remained unverified.
Be that as it may, ultimately, the Assessing Officer has applied GP rate of 6.7% to entire sales turnover of the assessee.
This, in our view, is unacceptable, as, except two parties, the Assessing Officer has not found anything adverse in respect of sales made to others. Therefore, he should not have applied the 16 | P a g e
ITA Nos.4362 to 4366/Del/2019 to 5176/Del/2019 AYs: 2005-06 to 2009-10 GP rate of 6.75% to entire sales turnover. To that extent, learned Commissioner (Appeals) was justified in reversing the decision of the Assessing Officer. However, insofar as the applicability of the GP rate of 6.75% to sales effected to M/s. Dee Kay Trade Centre and M/s. J.S. Enterprises are concerned, there is no difference in the products sold by the assessee to all the parties. Therefore, if the GP shown by the assessee in respect of sales effected to other parties is acceptable, there is no reason why the same GP rate will not apply to the sales effected to M/s. Dee Kay Trade Centre and M/s. J.S. Enterprises. This is so because, when there is similarity in the products sold, there cannot be much difference in the GP rate. For the aforesaid reasons, we hold that the additions sustained by learned Commissioner (Appeals) in different assessment years under dispute deserves to be deleted.
Accordingly, we do so.
In the result, assessee’s appeals are allowed, whereas, Revenue’s appeals are dismissed.
Order pronounced in the open court on 16th May, 2023