Income Tax Appellate Tribunal - Lucknow
Shri Manoj Kumar Agarwal, Kanpur vs Deputy Commissioner Of Income Tax, ... on 16 December, 2021
I.T.(SS)A. No.427 & 428/Lkw/2019
Assessment year:2010-11 & 11-12 1
IN THE INCOME TAX APPELLATE TRIBUNAL
LUCKNOW BENCH 'A', LUCKNOW
(THROUGH VIRTUAL HEARING)
BEFORE SHRI A. D. JAIN, VICE PRESIDENT
AND SHRI T. S. KAPOOR, ACCOUNTANT MEMBER
I.T.(SS)A. No.427 & 428/Lkw/2019
Assessment Years:2010-11 & 2011-12
Shri Manoj Kumar Agarwal, Vs. Dy.C.I.T.,
X-1/135, G. T. Road, Central Circle-2,
Krishna Puram, Kanpur.
Kanpur.
PAN:AFPPA5170H
(Appellant) (Respondent)
Appellant by Shri P. K. Kapoor, C. A.
Respondent by Smt. Sheela Chopra, CIT, D.R.
Date of hearing 14/12/2021
Date of pronouncement 16/12/2021
ORDER
PER T. S. KAPOOR:A.M. These two appeals have been filed by the assessee against the common order of learned CIT(A)-IV, Kanpur dated 29/03/2019. The grounds of appeal taken by the assessee are similar in both the appeals. Both the appeals were heard together therefore, for the sake of convenience a common and consolidated order is being passed.
2. The Learned counsel for the assessee, at the time of hearing, argued only grounds Nos. 1 and 2 which are common in both the appeals and for the sake of completeness the same are reproduced below:
I.T.(SS)A. No.427 & 428/Lkw/2019 Assessment year:2010-11 & 11-12 2 "1. Because the learned CIT(A) was wrong in law & on facts in confirming the assessment order passed by Assessing Officer u/s 153A of the Act as the same was not in consonance with the settled position of law vis-à-vis search cases.
2. Because the learned CIT(A) has erred in law and on facts in upholding the assessment ignoring the settled position of law that provisions of section 153A, in case where proceedings are not pending, could not be applied in absence of any incriminating material."
3. Learned counsel for the assessee invited our attention to the facts of these cases and submitted that a search & seizure operation was carried out on 27/11/2015 on Chaurasia Group and accordingly assessee was required to file income tax returns u/s 153A of the Act and which the assessees had duly filed. It was submitted that Assessing Officer, in both the years, while making the addition, has not referred to any incriminating documents but has made the additions on the basis of entries in the books of accounts which is not permissible under the law as in these years, the assessments stood completed before the date of search and under these circumstances the Hon'ble Delhi High Court in the case of Pr. CIT vs. Meeta Gutgutia [2017] 395 ITR 526 has held that in the case of completed assessments, the additions can only be made on the basis of incriminating material, if any. It was submitted that the SLP filed by the Revenue against the order of Hon'ble Delhi High Court has also been dismissed by Hon'ble Supreme Court. Learned counsel for the assessee submitted that Hon'ble Delhi High Court has categorically held that in the absence of incriminating documents the additions cannot be made in case of completed assessments. The Learned counsel for the assessee further submitted that the Lucknow Bench of the Tribunal, in various cases, has allowed appeals of the various assessees under similar facts and I.T.(SS)A. No.427 & 428/Lkw/2019 Assessment year:2010-11 & 11-12 3 circumstances and in this respect reference was made to the following case laws decided by Lucknow Bench of the Tribunal:
(i) I.T.(SS)A. No.551/Lkw/2019 in the case of Ashish Kumar Chaurasia HUF vs. Dy. CIT, Central Circle-II, Kanpur
(ii) I.T.(SS)A. No.89/Lkw/2019 in the case of Ashish Kumar Chaurasia HUF vs. Dy. CIT, Central Circle-II, Kanpur
(iii) I.T.(SS)A. Nos.379 & 380/Lkw/2019 in the case of Smt. Sandhya Agarwal vs. Dy. CIT, Central Circle-1, Kanpur
(iv) I.T.(SS)A. No.417/Lkw/2019 in the case of Siddarth Gupta vs. Dy. CIT, Central Circle-II, Kanpur.
3.1 Learned counsel for the assessee further submitted that the proposition that in the cases of completed assessments, the additions can only be made on the basis of incriminating material is further strengthened by the order of Hon'ble Supreme Court in the landmark decision of CIT vs. Sinhgad Technical Education Society (2017) 397 ITR 344 (SC) wherein Hon'ble Supreme Court held that there must be incriminating material relating to that year while making additions u/s 153C of the Act. It was submitted that with these findings Hon'ble Supreme Court has further affirmed that for making additions u/s 153A/153C, the existence of incriminating material is sine qua non. Learned counsel for the assessee filed a chart containing therein the I.T.A. Nos., assessment years involved, date of filing of income tax returns along with mentioning of respective paper book pages. The chart further contained time limits for issuing notice u/s 143(2) where assessment was not completed u/s 143(3) of the Act. It was argued that since in all these cases additions have not been made on the basis of incriminating material and the assessments stood completed before the date of search therefore, additions sustained by learned CIT(A) are not in accordance with law and needs to be deleted. It was submitted that learned CIT(A) has dismissed this ground of appeal by holding that for making addition u/s 153A, there is no requirement that the I.T.(SS)A. No.427 & 428/Lkw/2019 Assessment year:2010-11 & 11-12 4 addition can only be made on the basis of incriminating material only. Learned counsel for the assessee submitted that the case laws relied on by learned CIT(A) are not applicable to the facts and circumstances of the assessee as Hon'ble Supreme Court in the case of Pr. CIT vs. Meeta Gutgutia (supra) has confirmed the findings of Hon'ble Delhi High Court wherein it has been held that the addition u/s 153A cannot be made in the absence of incriminating material.
4. Learned CIT, D.R., on the other hand, heavily placed reliance on the orders of the authorities below.
5. We have heard the rival parties and have gone through the material placed on record. We find that in these cases, the assessment years involved are 2010-11 and 2011-12. For assessment year 2010-11, the original return of income was filed on 19/09/2010, a copy of acknowledgment of return of income is placed at page 1 of the paper book. No assessment has been made u/s 143(3) of the Act and time limit for issuing a notice u/s 143(2) expired on 30/09/2011 and therefore, the assessment in this year stood completed before the date of search i.e. 27/11/2015.
5.1 For assessment year 2011-12, the original return of income was filed on 30/09/2011, a copy of acknowledgment of return of income is placed at page 3 of the paper book and the return was processed on 11/11/2011, the evidence of which is placed at page 4 of the paper book. No assessment in this case was completed u/s 143(3) of the Act and time for issuing notice u/s 143(2) expired on 30/09/2012 and therefore, the assessment in this year also stood completed before the date of search i.e. 27/11/2015.
I.T.(SS)A. No.427 & 428/Lkw/2019 Assessment year:2010-11 & 11-12 5
6. The above facts clearly demonstrate that the assessment years involved in these appeals stood completed before the date of search and additions, if any, were to be made on the basis of incriminating material only which has not been done as the orders of Assessing Officer with respect to additions do not indicate or refer to any incriminating material. Before ld. CIT(A) the assessee took a specific ground that in the absence of incriminating material the additions cannot be made in the years where the assessments stood completed. The learned CIT(A) has held that the law does not require the Assessing Officer to make addition in such cases only on the basis of incriminating material and therefore, he dismissed this ground of appeal. While holding so the learned CIT(A) has relied on a number of case laws and has made similar findings in all cases. For the sake of completeness, the findings of learned CIT(A) in I.T.A. No.427 are reproduced below:
"5.1 Ground no. 1, 2 and 3 for A.Y. 2010-11, AY. 2011-12 and for A.Y. 2015-16 pertain to legal challenge to notice u/s 153A of the Act. It is also submitted by the ld. A.R. of the appellant that order u/s 153A of the Act is invalid in absence of incriminating material found as a result of search for these relevant assessment years in appeals. Appellant also placed reliance on the following case laws.
(i) CTV v. Kabul Chawla [2016] 380 ITR 573(Delhi),
(ii) CIT v. Deepak Kumar Agarwal (2017) 251 Taxman 22 (Bom.)/86 tQxmann.com.
(iii) CIT v. Vikas Gutgutia (2017) 396 ITR 691 (Del.),
(iv) CIT v. Devangi (2017) 394 ITR 184 (6uj.), etc. 5.2 Undersigned has carefully considered the submission and the case laws cited by the appellant. However, considering the express provisions of section 153A of the Act, undersigned would like to differ with the submission of the appellant, because section 153A of the Act clearly provides I.T.(SS)A. No.427 & 428/Lkw/2019 Assessment year:2010-11 & 11-12 6 the power to AO to assess/reassess the cases of person searched u/s 132(1) of the Act for immediately six preceding years. Section 153A of the Act does not provide existence of incriminating material as essential requirement. In the opinion of the undersigned, the action u/s 132/132A of the Act would automatically trigger the provisions of section 153A of the Act for computation of total income of the appellant. This provision does not restrict the Assessing Officer to take action in those cases where assessment has already been completed.
Since, the AO has rightly exercised his powers to assess/reassess the case u/s 153A of the Act. The undersigned find no force in the submission of the appellant and therefore, this ground is dismissed.
5.3 The contention of the Id. A.R. is also not acceptable after placing reliance on following judicial pronouncement.
In the case of E.N. Gopakumar Vs CIT (2Q16) 75 taxmann.com 215 (Kerala))]- Hon'ble Kerala High Court held that assessment proceedings generated by issuance of a notice under section 153A(l)(a) can be concluded against interest of assessee including making additions even without any incriminating material being available against assessee in search under section 132 on basis of which notice was issued under section 153A(1)(a).
The above order has been passed after considering cases of;
(i) CIT v. Kabul Chawla [2016] 380 ITR 573/(20151 234 Taxman 300/61 taxmann.com 412 (Delhi),
(ii) CIT v. Continental Warehousing Corpn.
(NhavaSheva) Ltd. [2015] 374 ITR 645/232Taxman 270/58 taxmann.com 78 (Bom.).
(iii) Principal CIT v. Kurele Paper Mills (P.) Ltd. [2016] 380 ITR 571 (Delhi),
(iv) CIT v. Lancy Constructions [2016] 383 ITR 168/237 Taxman 728/66 taxman.com 264 (Kar.),
(v) CIT v. ST. Francies Clay Decor Tiles [2016] 240 Taxman 168/70 taxmann.com I.T.(SS)A. No.427 & 428/Lkw/2019 Assessment year:2010-11 & 11-12 7 234 (Ker.) and (vi) CIT v. Promy Kuriakose [2016] 386 ITR 597 (Ker.).
Further, in the case of CIT Vs Raj Kumar Arora [2014] 52 taxmann.com 172 (Allahabad) [20141 367 ITR 517 (Allahabad)- Hon'ble Allahabad High Court held that Assessing Officer has power to reassess returns of assessee not only for undisclosed income found during search operation but also with regard to material available at time of original assessment.
Similarly, in the case of CIT Vs Kesarwani Zarda Bhandar Sahson Alld. ITA No. 270 of 2014 (Allahabad)- Hon'ble Allahabad High Court held that Assessing Officer has power to reassess returns of assessee not only for undisclosed income found during search operation but also with regard to material available at time of original assessment.
Also, in the case of CIT Vs St. Francis Clay Decor Tiles (385 ITR 624)-Hon'ble Delhi Kerala Court held that notice issued under section 153A- return must be filed even if no incriminating documents discovered during search.
In the case of CIT Vs Anil Kumar Bhatia (24 taxmann.com 98. 211 Taxmcm 453. 352 ITR493)-Hon'ble Delhi High Court held that jurisdiction of AO under 153A is to assess total income for/the year and not restricted to seized material. Post search reassessment in respect of all 6 years can be made even if original returns are already processed u/s 143(1)(a) - Assessing Officer has power u/s 153A to make assessment for all six years and compute total income of assessee, including undisclosed income, notwithstanding that returns for these years have already been processed u/s 143(1)(a). Even if assessment order had already been passed in respect of all or any of those six assessment years, either under section 143(l)(a) or section 143(3) prior to initiation of search/requisition, still Assessing Officer is empowered to reopen those proceedings under section 153A without any fetters and reassess total income taking note of undisclosed income, if any, unearthed during search.
I.T.(SS)A. No.427 & 428/Lkw/2019 Assessment year:2010-11 & 11-12 8 In the case of Filatex India Ltd Vs CIT (49 taxmann.com
465) Hon'ble Delhi High Court held that during assessment under section 153A, additions need not be restricted or limited to incriminating material, found during course of search.
5.4 In view of the detailed discussion mentioned here-in- above and considering the jurisdictional pronouncements cited here-in-above, legal grounds of appeal of the appellant are hereby dismissed for each assessment year i.e. A.Y. 2010-11, A.Y. 2011-12 & A.Y. 2015-16."
7. The above findings of learned CIT(A) along with the findings of Assessing Officer clearly demonstrate that there was no incriminating material on the basis of which the Assessing Officer had made the additions. The Assessing Officer while making additions has not relied on any incriminating material but has made additions on the basis of entries in the books of accounts. When this grievance was taken to learned CIT(A) he held that law does not require that additions u/s 153A can only be made on the basis of incriminating material. While holding so, the ld. CIT(A) has also relied on certain case laws which has been decided against the assessee. First case law of E. N. Gopakumar vs. CIT was pronounced in 2016. Second case law of CIT vs. Raj Kumar Arora was pronounced in 2014. Third case law of CIT vs. Kesarwani Zarda Bhandar Sahson Allahabad was pronounced in 2014. Similarly case law of CIT vs. St. Francis Clay Décor tiles was pronounced in the year 2016 whereas the Hon'ble Delhi High Court has pronounced the case law in the case of Pr. CIT vs. Meeta Gutgutia in 2017 after considering the other case laws referred by learned CIT(A) and which has been confirmed by Hon'ble Supreme Court wherein the Hon'ble Supreme Court has dismissed the SLP filed by Revenue. Therefore, the case laws relied on by learned CIT(A) are of no help to Revenue. The Lucknow Bench of the Tribunal in a number of I.T.(SS)A. No.427 & 428/Lkw/2019 Assessment year:2010-11 & 11-12 9 cases, after relying on the judgment of Hon'ble Supreme Court in the case of Pr. CIT vs. Meeta Gutgutia (supra) has allowed the appeals of various assessees in the following cases:
(i) I.T.(SS)A. No.551/Lkw/2019 in the case of Ashish Kumar Chaurasia HUF vs. Dy. CIT, Central Circle-II, Kanpur
(ii) I.T.(SS)A. No.89/Lkw/2019 in the case of Ashish Kumar Chaurasia HUF vs. Dy. CIT, Central Circle-II, Kanpur
(iii) I.T.(SS)A. Nos.379 & 380/Lkw/2019 in the case of Smt. Sandhya Agarwal vs. Dy. CIT, Central Circle-1, Kanpur
(iv) I.T.(SS)A. No.417/Lkw/2019 in the case of Siddarth Gupta vs. Dy. CIT, Central Circle-II, Kanpur.
For the sake of completeness the findings of Lucknow Tribunal in I.T.A.551/Lkw/2019 in the case of Ashish Kumar Chaurasia HUF vs. Dy CIT, Central Circle-II, Kanpur are reproduced below:
"7. We have heard the rival submissions and have gone through the material placed on record. We find that a search took place on 27.11.2015 and the cases belonging to various assessees of the group were reopened u/s. 153A/153C of the Act and various additions were made. The additions made by the Assessing Officer does not relate to any incriminating material found during search and rather the Assessing Officer has made the additions on the basis of examination of books of account. For the sake of completeness the findings of Assessing Officer in IT(SS) No. 551/Lkw/2019 are reproduced below:
"During the year under consideration, the assessee has raised unsecured loans of Rs. 30,00,000/- from M/s Neil industries Ltd.. The assessee was required to furnish the identity genuineness and creditworthiness of the lender. However the fact is that M/s Neil Industries Ltd. is engaged in providing accommodation entry in the form of unsecured loans/share I.T.(SS)A. No.427 & 428/Lkw/2019 Assessment year:2010-11 & 11-12 10 capital/share premium etc. which is evident from the copy of assessment order of M/s Neil Industries Ltd. all the facts have already been confronted with the assessee and no proper and satisfactory explanation has been furnished by the assessee. In view of above documentary and circumstantial evidence the so called unsecured loan of Rs. 30,00,000/- is nothing but the unexplained income of the assessee which has been received in the form of unsecured loans, therefore the so called unsecured loan of Rs. 30,00,000/- is being added to the total income of the assessee u/s 68 of the I T Act, 1961. Further commission paid for obtaining entry @5% on 30,00,000/- which conies to Rs. 1,50,000/- is also bang added to the total income of the assessee u/s 69 of the I.T. Act, 1961. Penalty proceedings u/s 271(1)(c) of the I.T. Act, 1961 are being initiated separately for concealment of income by furnishing in accurate particulars of income.
(Addition of Rs. 31.50.000/-)"
8. Before ld. CIT(A) a specific ground was taken regarding completed assessment wherein the additions could have been made only on the basis of incriminating material if any found during search. The ld. CIT(A), however, dismissed this ground of appeal by holding that once the cases are reopened u/s. 153A of the Act the Assessing Officer can make the addition even in the absence of any incriminating material. The ld. CIT(A) has made similar findings in all the cases. For the sake of completeness the findings of ld. CIT(A) in ITA No. 551/Lkw/2019 is reproduced below:
"5.2 Undersigned has carefully considered the submission and the case laws cited by the appellant. However, considering the express provisions of section153A of the Act, undersigned would like to differ with the submission of the appellant, because section 153A of the Act clearly provides the power to AO to assess/reassess the cases of person searched u/s 132(1) of the Act for immediately six preceding years. Section 153A of the Act does I.T.(SS)A. No.427 & 428/Lkw/2019 Assessment year:2010-11 & 11-12 11 not provide existence of incriminating material as essential requirement. In the opinion of the undersigned, the action u/s 132/132A of the Act would automatically trigger the provisions of section 153A of the Act for computation of total income of the appellant. This provision does not restrict the Assessing Officer to take action in those cases where assessment has already been completed. Since, the AO has rightly exercised his powers to assess/reassess the case u/s 153A of the Act. The undersigned find no force in the submission of the appellant and therefore, this ground is dismissed.
9. The above findings of both authorities clearly demonstrate that Assessing Officer had not made the addition on the basis of any incriminating material and rather he has made the addition on the basis of entries in the books of account which is not in accordance with the settled law as in a number of cases it has been held by various High Courts that in case of concluded assessments the addition can be made only on the basis of incriminating material found during search. Even Hon'ble Supreme Court in the case of Kabul Chawla (Supra) and Meeta Gutgutia (Supra) has dismissed the SLP filed by the Department against the order of Hon'ble High Courts. The Lucknow Bench vide order dated 16.12.2020 in a consolidated order after considering the written submissions of Revenue has decided the issue in favour of the assessee by holding as under:
"5. We have heard the rival parties and have gone through the material placed on record. We find that the first argument of Learned counsel for the assessee was that in case of completed assessments, the addition cannot be made if there is no incriminating material. In this regard Learned counsel for the assessee had submitted that in the year 2013-14 and 2015-16 the assessments stood completed and there was no incriminating material found during the search. In this respect the Bench had asked both the parties to furnish the material which was impounded during the search and which both the parties had filed with the Bench which we have examined and I.T.(SS)A. No.427 & 428/Lkw/2019 Assessment year:2010-11 & 11-12 12 have compared with the material used by Assessing Officer in assessment order. We found that none of the material seized during the search was used by the Assessing Officer for making addition and instead had relied on a document marked as BK-2, which was seized during a search operation on a different group of company and that too on 28/04/2015 that is more than one year before the date of search on assessees. This fact is further strengthened from the assessment order wherein the Assessing Officer, at page 8, has observed as under:
"In this context, it Is noteworthy that a search & seizure operation u/s 132 of the I. T. Act, 1961 conducted upon the companies of Shashwat Agarwal on 28.04.2015 by the Investigation Wing, Kanpur. The incriminating documents which were found and seized are the premises also include a diary identified as BK-2, containing ledgers of different parties. On going through pages of these ledgers, it was found that the companies of Sri Shashwat Agarwal are paper companies and are engaged in providing the accommodation entries of bogus LTCG, unsecured loan etc, to various parties by accepting undisclosed cash from beneficiaries. Name of such beneficiaries, date-wise receipt of cash and issuance of cheques from and to them, is recorded in this diary very vividly. The name of Sri Navin Jain and his family members such as his father Sri Naresh Kiunar Jain, Naresh Kumar Jain HUF, his mother Smt Shrimati Jain and his wife Neetu Jain also figure in this diary. Shri Navin Jain and his aforementioned family members have taken accommodation entries of tax exempt Long Term Capital Gain by the way of pre-arranged and manipulative trading in the shares Cityon Systems (India) Limited. This sale was stage managed by Sh.
Shashwat Agarwal and his brothers as all the shares were purchased by the companies controlled by Sh. Shashwat Agarwal."
5.1 The above observations, noted by the Assessing Officer, clearly demonstrate that a diary identified as BK-2 was impounded during search & seizure operation on 28/04/2015 in the case of search on the companies belonging to Shri Shashwat Agarwal wherein the name of Shri Navin Jain and I.T.(SS)A. No.427 & 428/Lkw/2019 Assessment year:2010-11 & 11-12 13 his family members were mentioned. The Assessing Officer nowhere noted that the names of the assessees was also mentioned in such diary. Moreover, from the findings of the Assessing Officer, we find that the companies of Shri Shashwat Agarwal were engaged in providing accommodation entries of bogus Long Term Capital Gain, unsecured loans etc. to various parties and there is no mention of bogus transactions of cloth. Moreover, the above findings clearly indicate that the accommodation entries of Long Term Capital Gain and unsecured loans were obtained by the individuals mentioned in the assessment order and there is no mention that the assessees had taken any entry of Long Term Capital Gain or unsecured loans from the companies of Shri Shashwat Agarwal. This fact is further corroborated from the fact that the Assessing Officer in the case of the assessees did not make any addition on account of Long Term Capital Gain or unsecured loans but he made the additions by holding the sale and purchase of cloth which was purchased from Rich Group of Companies to be bogus. All these facts demonstrate that the Assessing Officer had not made the addition on the basis of any incriminating document but had made the addition on account of bogus sale and purchase of cloth for which no document was found during the course of search. Even otherwise, the documents relied on by the Assessing Officer were found at the premises of the companies of Shri Shashwat Agarwal wherein the search was carried out on 28/04/2015 and there too the incriminating material, as mentioned in the assessment order, was a diary identified as BK-2 wherein the names of some promoters/directors of the assessees were mentioned. Nowhere therein the names of the assessees have been mentioned. Learned counsel for the assessee had relied on a number of case laws for the proposition that in case no incriminating material is found, the additions cannot be made in the case of completed assessments. Particular reliance was placed on the judgment of Hon'ble Delhi High Court in the case of Kabul Chawla (supra) wherein the SLP filed by the Department was dismissed by Hon'ble Supreme Court. Learned counsel for the assessee had also relied on case law of Pr. CIT vs. Meeta Gutgutia (supra), the SLP of which has also been dismissed by Hon'ble Supreme Court. Though the SLP in the case of Kabul Chawla was dismissed due to low tax effect but the SLP in the case of Meeta Gutgutia was not dismissed due to low tax effect but was dismissed on merits. For the sake of completeness, the judgment of Hon'ble Delhi I.T.(SS)A. No.427 & 428/Lkw/2019 Assessment year:2010-11 & 11-12 14 High Court in the case of Meeta Gutgutia is reproduced below:
"A search and seizure under section 132 urns conducted in the premises of the FNP group which comprised of various companies, partnerships and proprietorship concerns. The statement of an employee PG was recorded on oath under section 133A. The assessee was a director/partner/ shareholder in the group of companies/concerns. She was the proprietor of the concern FNP. On the basis of documents recovered during the search operation, a notice under section 153A was issued to the assessee. Thereafter, a notice and questionnaire under sections 143(2) and 142(1) were also issued. The Assessing Officer passed separate orders in respect of the assessment years 2000-01 to 2003-04. For the assessment year 2004-05, as in the preceding years, the assessee had claimed deduction on account of franchisee commissions paid to various parties. The Assessing Officer held that the addresses of the franchisees were not revealed and that there were discrepancies in the details of the accounts of the franchisees filed by the assessee. Consequently, the franchisee commission payments claimed by the assessee were added back to her income. For the assessment year 2004-05, the Assessing Officer also made an addition on account of stock. The Assessing Officer estimated the undisclosed income, on account of franchisee fee, at a certain percentage for the assessment years 2001 -02 to 2006-07. No addition was made for the assessment year 2006-07, although a disclosure was made. Before the Commissioner (Appeals), the assessee produced additional evidence under rule 46A of the Income-tax Rules,1962, which included copies of franchisee agreements. A rejoinder was filed by the assessee. On analysis of the additional evidence, the Commissioner (Appeals) held that the accounts of the assessee had been tax audited and that no adverse remarks had been made by the tax auditors. He further held that the Assessing Officer had not rejected the books of account of the assessee. Accordingly, he held that the disallowance of the franchisee commissions paid were unsustainable and deleted the additions made. He I.T.(SS)A. No.427 & 428/Lkw/2019 Assessment year:2010-11 & 11-12 15 deleted the additions made on account of payment of rent, non-refundable security, income from self- controlled outlets and reduced the addition made on account of closing stock. He also deleted the additions of undisclosed income, made on account of franchisee fee, accepting the contention of the assessee that there was no disclosure made for earlier years, or any evidence unearthed during the search by the Department that such franchisee fee income was not disclosed by her. Both the Department and the assessee filed appeals before the Appellate Tribunal. Accepting the contention of the assessee that for the assessment years 2000-01 to 2003-04, there was no incriminating material seized during the course of search, and therefore, the assessment orders in respect of those years ought to be quashed, the Appellate Tribunal held that the assumption of jurisdiction under section 153 A for those assessment years was illegal. In respect of the assessment year 2004-05, the Appellate Tribunal held that the additions made were based on seized documents and, therefore, the assessment under section 153A was valid. It dismissed the appeals filed by the Department in respect of the deletions made by the Commissioner (Appeals) and dismissed the assessee's appeal for non-prosecution. On appeals:
Held, dismissing the appeals, (I) that It was only if during the course of search under section 132 incriminating material justifying the reopening of the assessments for six previous years was found that the invocation of section 153 A qua each of the assessment year would be justified."
5.2 The above judgment of Hon'ble Delhi High Court has been upheld by Hon'ble Supreme Court as the SLP filed by Revenue has been dismissed which is reported at 96 Taxmann.com 468. Hon'ble Delhi High Court in above case has distinguished the case law of Dayawanti Gupta vs. CIT 390 ITR 496 (Del) which Learned D. R. had heavily relied. The case law of Hon'ble Allahabad High Court in the case of Raj Kumar Arora 367 ITR 517, though supports the contentions of the Revenue but since Hon'ble Supreme Court has decided the issue in favour of the assessee in the case of Meeta Gutgutia therefore, the judgment of jurisdictional High Court will not help the Revenue. The contention of the I.T.(SS)A. No.427 & 428/Lkw/2019 Assessment year:2010-11 & 11-12 16 Revenue that since the Department has not accepted the decision of Hon'ble Supreme Court in the case of Kabul Chawla and Meeta Gutgutia as SLP in the case of CIT vs. Continental Warehousing Corporation 235 Taxman 568 (SC) has been admitted is also of no help to Revenue. Therefore, in view of the above case laws, we hold that in case of completed assessments, the addition can be made only on the basis of incriminating material found during search. We have already held that no incriminating material was found from the premises of the assessee therefore, the additions cannot be made in the case of completed assessments which in this case is appeal for assessment year 2013-14 wherein in I.T.A. No.510 the assessment order was already passed u/s 143(3) on 22/03/2016 which is before the search date of 23/08/2016, copy of assessment order is placed at pages 51 to 54 of the paper book. Similarly in I.T.A. No. 515, the assessment was completed u/s 143(3) vide order dated 23/03/2016, the copy of which is placed at pages 54 to 57 of the paper book. Similarly in I.T.A. No.517 relating to assessment year 2013-14, the assessment order u/s 143(3) dated 30/03/2016, a copy of which is placed in paper book at pages 52 to 56. Therefore, the assessments in these cases stood completed. Learned counsel for the assessee had though argued that the assessment for assessment year 2015-16 also stood completed but in our opinion the appeals for assessment year 2015-16 cannot be said to be completed as time for issue of notice u/s 143(2) was still available to the Department which was upto 30/09/2016 whereas the search took place on 23/08/2016 which means that there was time available to the Department to issue notice u/s 143(2) therefore, the appeals filed for assessment year 2015-16 cannot be said to have completed. In view of the above discussion, ground No. 2 & 7 of the appeals in I.T.A. No.510, 515 & 517 are allowed."
10. Now to determine as to whether the assessment years under question in these appeals stood completed or not it has to be seen as to whether the assessments in these years were completed u/s. 143(3) of the Act and if not whether the time for issuing notices u/s. 143(2) of the Act had expired or not. The ld. AR in this respect has filed a chart indicating therein the date of filing of original return as well as time limit for the issue of notice u/s. 143(2) of the Act and also the cases where assessment has been completed u/s. 143(3) of the Act. The data in the I.T.(SS)A. No.427 & 428/Lkw/2019 Assessment year:2010-11 & 11-12 17 chart has been verified from the copy of acknowledgement of filing of return as placed in respective paper book as indicated in the chart as reproduced below:
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11. It is seen that assessment in these years stood concluded and Assessing Officer has not made additions on the basis of any incriminating material and therefore the additions sustained by the ld. CIT(A) are not sustainable and therefore, Ground No.2 in all these appeals is allowed.
12. We have allowed the appeals of the assessees on Ground No.2 only. The other grounds of appeal taken by the assessee were neither argued nor adjudicated and hence they are dismissed as infructuous."
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8. The existence of incriminating material for making additions u/s 153A is further strengthened from the decision of Hon'ble Supreme Court in the case of CIT vs. Sinhgad Technical Education Society [2017] 397 ITR 344 (SC) where Hon'ble Supreme Court in a case u/s 153C has again highlighted the importance of existence of incriminating material for making the additions. The Hon'ble Supreme Court went on to hold that the Assessing Officer, while relying on the incriminating material, has to make reference in the satisfaction note regarding year-wise existence of incriminating material. Since there is an interplay between section 153A and section 153C, the findings of Hon'ble Supreme Court in a case u/s 153C are applicable for making additions u/s 153A also.
9. In view of these facts and circumstances and in view of the judicial precedents, grounds No. 1 & 2 in both the appeals are allowed. Since we have allowed the appeals of the assessee on legal issue, other grounds of appeal do not require any adjudication.
10. In the result, both the appeals of the assessee stand partly allowed.
(Order pronounced in the open court on 16/12/2021) Sd/. Sd/.
( A. D. JAIN ) ( T. S. KAPOOR ) Vice President Accountant Member Dated:16/12/2021 *Singh Copy of the order forwarded to : 1. The Appellant 2. The Respondent. 3. Concerned CIT 4. The CIT(A) 5. D.R., I.T.A.T., Lucknow