Income Tax Appellate Tribunal - Indore
Shri Satish Nema, Indore vs The Dcit 2(1), Indore on 7 February, 2020
आयकर अपील य अ धकरण, इंदौर यायपीठ, इंदौर
IN THE INCOME TAX APPELLATE TRIBUNAL,
INDORE BENCH, INDORE
BEFORE HON'BLE KUL BHARAT, JUDICIAL MEMBER
AND HON'BLE MANISH BORAD, ACCOUNTANT MEMBER
IT(SS) No 149, 150 & 152/Ind/2016
Assessment Years 2005-06, 2006-07,& 2009-10
PAN : ABOPM2352F
DCIT-2(1), V/s Shri Satish Nema,
Indore 61/1, Puja Villa,
Lal Bag, Keshar Bag Road,
Indore
(Revenue) (Respondent)
C.O. No.34,35 & 37/Ind/2016
Assessment Years 2005-06, 2006-07 & 2009-10
Shri Satish Nema, V/s DCIT-2(1)
61/1, Puja Villa, Indore
Lal Bag, Keshar Bag Road,
Indore
(Respondent) (Revenue)
Revenue by Shri S.B. Prasad, DR
Assessee by Shri Anil Kumar Garg, CA
Date of Hearing 27.01.2020
Date of Pronouncement 07.02.2020
Satish Nema
IT(SS) No.149, 150, 152/Ind/2016 & C.O.No.34, 35 & 37/Ind/2016
ORDER
PER BENCH.
The above captioned appeals filed at the instance of revenue & Cross Objection by assessee pertaining to Assessment Years 2005- 06, 2006-07 & 2009-10 are directed against the orders of Ld. Commissioner of Income Tax (Appeals)-I (in short 'Ld.CIT(A)'], Indore dated 10.3.2016 which is arising out of the order u/s 153A r.w.s.143(3) of the Act dated 28.03.2013 framed by DCIT-2(1), Indore.
2. As the issues raised in these appeals are common they were heard together and are being disposed off by this common order for the sake of brevity and convenience.
3. As Revenue has raised common grounds of appeal for all three Assessment Years 2005-06, 2006-07 and 2009-10. Grounds raised for Assessment Year 2005-06 are only mentioned below:-
(1) Whether in the facts and in the circumstances of the case, the Ld. CIT CA) erred in law by deleting the additions holding that these additions have not been made on the basis of incriminating materials or documents found during Search & seizure action u/s 132 of the IT Act.2
Satish Nema IT(SS) No.149, 150, 152/Ind/2016 & C.O.No.34, 35 & 37/Ind/2016 (2) Whether on the facts and in the circumstances of the case the Ld. CIT CA) erred in law in interpreting section 153A of the IT Act. (3) Whether in the facts and in the circumstances of the case the Ld. CIT CA) erred in law by allowing the appeal of the assessee in not appreciating the Circular No. 7 of2003 dated: 05/09/2003 issued by the CBDT, New Delhi. (4) Whether in the facts and in the circumstances of the case the Ld. err CA) erred in law by not appreciating the fact that there is no precondition for initiation as well as assessment/reassessment u/s 153A of the I'I' Act that documents pertaining to each of the assessment year falling under provisions of section 153A/l53C should be found.
4. Against the appeals filed by the Revenue assessee has also filed Cross Objections for all the three Assessment Years raising following grounds of appeal;
C.O. No.34/Ind/2016 (Assessment Year 2005-06)
1.That, on the facts and in the circumstances of the case, the learned CIT(A) grossly erred in law in not admitting the additional ground of appeal raised by the respondent before the Id. CIT(A) inasmuch that the impugned Assessment Order passed by the learned AO was barred by the time limit prescribed under s.153B(1)(a) of the Income-Tax Act, 1961 inasmuch in the instant case, last of the authorisations for search under s.132 of the Act was executed during the financial year ended on 31-03-2011 and consequently, the Assessment Order was statutorily required to be passed uptill 31-03-:2013 whereas such Assessment Order was actually passed after 31-03-2013 and served upon the respondent on 02-04-20'13, therefore, the impugned Assessment Order deserves to be quashed on this legal 3 Satish Nema IT(SS) No.149, 150, 152/Ind/2016 & C.O.No.34, 35 & 37/Ind/2016 ground alone.
2.That, without prejudice to the above, the learned CIT(A) grossly erred, both on facts and in law, in not deciding the issue on merits with respect to the addition of Rs.l,07,00,000/- made by the AO in the respondent's income on account of unsecured loan claimed to have been received by the respondent from M/s. Aryworth Impex, by invoking provisions of section 68 of the Income-Tax Act, 1961.
3.That, the learned CIT(A) grossly erred, both on facts and in law, in not deciding the issue on merits with respect to the addition of Rs.74,00,000/- made by the AO in the respondent's income on account of amount received from M/s. Shreenath Traders, by invoking provisions of section 68 of the Income-Tax Act, 1961.
4.That, the learned CIT(A) grossly erred, both on facts and in law, in not deciding the issue on merits with respect to the addition of Rs.8,30,000/- made by the AO in the respondent's income by invoking provisions of section 68 of the Income-Tax Act, 1961, merely on guess work, conjectures and surmises.
5(a)That the learned CIT(A) grossly erred, both on facts and in law, in not deciding the issue on merits with respect to the addition of Rs.6,00,000/- made by the AO in the respondents income by disallowing the entire expenditure on account of 'Brokerage' claimed by the respondent for deriving income from MCX sections merely on guess work, surmises and conjectures.
(b) That the learned CIT(A) grossly erred, both on facts and in law, in not deciding :.....e- issue on merits with respect to the addition of Rs.53,425/- and Rs.l,03,500/- made by the AO in the respondent's income by disallowing 50 of the expenditure actually incurred and claimed by the respondent on account of 'Legal Expenses and Salary Expenses' respectively for deriving 4 Satish Nema IT(SS) No.149, 150, 152/Ind/2016 & C.O.No.34, 35 & 37/Ind/2016 income from MCX transactions merely on guess work, surmises and conjectures.
That, the cross objector further craves leave to add, alter and/or amend Ground of Cross-objections, as and when considered necessary. C.O. No.36/Ind/2016 (Assessment Year 2006-07)
1.That, on the facts and in the circumstances of the case, the learned CIT(A) grossly erred in law in not admitting the additional ground of appeal raised by the respondent before the ld. CIT(A) inasmuch that the impugned Assessment Order passed by the learned AO was barred by the time limit prescribed under . 153 B(1 )( a) of the Income Tax Act, 1961 inasmuch in the instant case, last of the authorisations for search under s.132 of the Act was executed during the financial year ended on 31-03-2011 and consequently, the Assessment Order Was statutorily required to be passed uptill 31-03-2013 whereas such Assessment Order Was actually passed after 31-03-2013 and served upon the respondent on 02-04-2013, therefore, the impugned Assessment Order deserves to be quashed on this legal ground alone.
2.That, without prejudice to the above, the learned CIT(A) grossly erred, both on facts and in law, in not deciding the issue on merits with respect to the addition of Rs.30,00,000/_ made by the AO in the respondent's income on account, of unsecured loan claimed to have been received by the respondent from Shri Abhinandan Agrawal, Hyderabad, by invoking provisions of section 68 of the Income- Tax Act, 1961.
3. That, the learned CIT(A) grossly erred, both on facts and in law, in not deciding the issue on merits with respect to the addition of Rs.40,00,000/_ made by the AO in the respondent's income on account of unsecured loan claimed to have been received by the respondent from M/s. CSM Developers, In dare, by invoking provisions of section 68 of the Income-Tax 5 Satish Nema IT(SS) No.149, 150, 152/Ind/2016 & C.O.No.34, 35 & 37/Ind/2016 Act, 1961.
4. That, the learned CIT(A) grossly erred, both on facts and in law, in not deciding the issue on merits with respect to the addition of Rs.20,00,000/_ made by the AO in the respondent's income on account of unsecured loan claimed to have been received by the respondent from M/s. Patel Timbers Ltd., by invoking provisions of section 68 of the Income-Tax Act, 1961.
5. That the learned CIT(A) grossly erred, both on facts and in law, in not deciding the issue on merits with respect to the addition ofRs.73,25,601l- made by the AO in the respondent's income by making ad-hoc disallowance out of the expenditure claimed by the respondent for deriving income from MCX transactions merely on guess work, surmises and conjectures.
6. That the learned CIT(A) grossly erred, both on facts and in law, in not deciding e issue on merits with respect to the addition of Rs.3,80,200/- made by the AO in e respondent's income on account of alleged unexplained investment in Plot No. I10 & 1-11, Shreeji Velly, Gram Bicholi Mardana, Indore, by invoking provisions 0- section 69B of the Income-Tax Act, 1961, on extraneous considerations, without giving proper opportunity of being heard and without considering the material fact that the entire investment was made by the respondent out of his explained sources only.
7. That, the learned CIT(A) grossly erred, both on facts and in law, in not deciding the issue on merits with respect to the addition ofRs.3,55,995/- made by the AO in e respondent's income on account of alleged unexplained investment in Plot No. R-8, Shreeji Velly, Gram Bicholi Mardana, Indore, by invoking provisions, of Section 69B of the Income-Tax Act, 1961, on extraneous considerations, without giving proper opportunity of being heard and without considering the material fact that the entire investment was made by the respondent out of his explained sources only. 6 Satish Nema IT(SS) No.149, 150, 152/Ind/2016 & C.O.No.34, 35 & 37/Ind/2016
8. That, the cross objector further craves leave to add, alter and/or amend Ground of Cross-objections, as and when considered necessary. C.O. No.37/Ind/2016 (Assessment Year 2009-10)
1.That, on the facts and in the circumstances of the case, the learned CIT(A) grossly erred in law in not admitting the additional ground of appeal- raised by the respondent before the Id. CIT(A) inasmuch that the impugned Assessment Order passed by the learned AO was barred by the time limit prescribed under s.l53B(l)(a) of the Income-Tax Act, 1961 inasmuch in the instant case, last of the authorisations for search under s.132 of the Act was executed during the financial year ended on 31-03-2011 and consequently, the Assessment Order was statutorily required to be passed uptill 31-03- 2013 whereas such Assessment Order was actually passed after 31-03- 2013 and served upon the respondent on 02-04-2013, therefore, the impugned Assessment Order deserves to be quashed on this legal ground alone.
2.That, without prejudice to the above, the learned CIT(A) grossly erred, both on facts and in law, in not deciding the issue on merits with respect to the addition of Rs.95,00,000/- made by the AO in the respondent's income on account of amount received from M/s. M.P. Real Estate & Developers, a partnership firm in which the respondent was one of the partners, by invoking provisions of section 68 of the Income-Tax Act, 1961. 3(a) That, the learned CIT(A) grossly erred, both on facts and in law, in not deciding the issue on merits with respect to the addition of Rs.45,00,000/- made by the AO in the respondent's income on account of unsecured loan claimed to have been received by the respondent from M/s. SCS Builders & Developers Pvt. Ltd., by invoking provisions of section 68 of the Income-Tax Act, 1961.
(b) That, without prejudice to the above, the learned CIT(A) grossly erred, 7 Satish Nema IT(SS) No.149, 150, 152/Ind/2016 & C.O.No.34, 35 & 37/Ind/2016 both-on facts and in law, in not deciding the issue on merits with respect to the impugned addition, without considering the material fact that the date i.e. 12-12-2007 on which the respondent received the loan from M/s. SCS Builders & Developers Pvt. Ltd. fall in the previous year relevant to A.Y. 2008-09 only and therefore, even on this count no addition could have been made during the assessment year under consideration.
4.That, the learned CIT(A) grossly erred, both on facts and in law, in not deciding the issue on merits with respect to the addition of Rs.5,OO,OOO/- made by the AO in the respondent's income on account of unsecured loan claimed to have been received by the respondent from M/s. Shreenath Traders, Indore, by invoking provisions of section 68 of the Income-Tax Act, 1961.
5.That, the learned CIT(A) grossly erred, both on facts and in law, in not deciding the issue on merits with respect to the addition of Rs.25,OO,OOO/- made by the AO in the respondent's income on account of undisclosed capital gain, merely on guess work, conjectures and surmises without properly considering and appreciating the explanation of the respondent made before the AO.
6.That, the cross objector further craves leave to add, alter and/or amend Ground of Cross-objections, as and when considered necessary.
5. Brief facts of the case as culled out from the records are that the assessee is an individual engaged in the business of MCX trading. A search u/s 132 of the I.T. Act was conducted on 25.11.2010 at the residence of the assessee. Consequently notice u/s 153A was issued on 29.11.2011 and in response to the notice assessed has filed return of income on 20.01.2012. Thereafter 8 Satish Nema IT(SS) No.149, 150, 152/Ind/2016 & C.O.No.34, 35 & 37/Ind/2016 notices u/s 143(2) and 142(1) along with questionnaire were duly served upon the assessee. Income of the assessee was assessed u/s 153A r.w.s. 143(3) of the I.T. Act after making various additions.
6. Aggrieved assessee preferred appeal before Ld. CIT(A) onobserving that since there is no incriminating material found during the course of search for all the Assessment Years 2005-06, 2006-07 & 2009-10, Ld. CIT(A) following the decision of the Co- ordinate Bench in the case of Kalani Bros. & others IT(SS) No.71/Ind/2015 dated 6.11.15 did not uphold the validity of the assessment u/s 153A of the Act and deleted the addition. As regards the ground raised on merits they were rendered academic in view of the facts that Ground No.1 to 3 of the appellant challenging the validity of the order u/s 153A of the Act was allowed.
7. Aggrieved revenue is now in appeal before the Tribunal against the finding of Ld. CIT(A) quashing the assessment proceedings u/s 153A of the Act whereas the assessee has filed Cross Objections challenging the finding of Ld. CIT(A) of not adjudicating the issues raised on merits.
9 Satish Nema IT(SS) No.149, 150, 152/Ind/2016 & C.O.No.34, 35 & 37/Ind/2016
8. We will first take up the revenue's appeal for all the three Assessment Years wherein finding of Ld. CIT(A) is in challenge holding the proceedings u/s 153A as invalid on the ground that no incriminating material was found during the course of search in the instant case.
9. Ld. Departmental Representative vehemently argued supporting order of Ld. A.O and also referred to various submissions referring to the alleged incriminating material, extract of questions asked during the course of search, details of inventory of accounts book found and seized. Ld. Departmental Representative was fair enough to accept that as regards to Assessment Year 2005-06 and Assessment Year 2009-10 there was no incriminating material found during the course of search and the addition made by the Ld. A.O were not based on any such seized material and it only on the basis of information gathered during the course of assessment proceedings.
10. Per contra Ld. Counsel for the assessee submitted that since the revenue authorities have accepted that no incriminating material was found during the course of search for Assessment Year 2005-06 10 Satish Nema IT(SS) No.149, 150, 152/Ind/2016 & C.O.No.34, 35 & 37/Ind/2016 and Assessment Year 2009-10 the finding of Ld. CIT(A) may be confirmed and Cross Objections raised by the assessee may be dismissed as infructuous. However with regard to Assessment Year 2006-07 for which the Ld. Departmental Representative referred to the incriminating material, it was submitted that no such material was found. Certain questions were asked during the search proceedings on the basis of which Ld. A.O seeked information during the course of assessment about the alleged unexplained investment. The assessee has submitted that the alleged purchase of properties were duly accounted for in the regular books and have been disclosed by the assessee. Since the alleged investments are duly explained they do not fall in the category of incriminating material and thus no addition could have been made. Ld. Counsel for the assessee apart from relying various judgments and decisions relied by the Ld. CIT(A) also relied on the decision of Hon'ble High Court of Delhi in the case of Principal CIT & Ors V/s Meeta Gutgutia (2017) 395 ITR 0526. Against this judgment of Hon'ble High Court of Delhi the appeal filed by the Revenue in Special Leave Petition before the Hon'ble Supreme Court was dismissed vide order dated 2.7.2018. 11 Satish Nema IT(SS) No.149, 150, 152/Ind/2016 & C.O.No.34, 35 & 37/Ind/2016
11. We have heard rival contentions and perused the records placed before us and carefully gone through the various judgments and decisions relied by the Ld. Counsel for the assessee. Common grievance of the revenue for Assessment Year 2005-06, Assessment Year 2006-07 and Assessment Year 2009-10 is that the Ld. CIT(A) erred in law by deleting the addition holding that these addition have not been made on the basis of incriminating material found during the course of search and seizure action u/s 132 of the Act.
12. During the course of hearing when after giving sufficient opportunity to the revenue authorities to produce the incriminating material if any which are the sole basis of addition made by the Ld. A.O, revenue authorities were fair enough to accept that for Assessment Year 2005-06 and Assessment Year 2009-10 no such incriminating material was found during the course of search and the additions made in the assessment order are based on the information gathered during assessment proceedings. However with regard to Assessment Year 2006-07 revenue authorities have claimed that there was some incriminating material.
12 Satish Nema IT(SS) No.149, 150, 152/Ind/2016 & C.O.No.34, 35 & 37/Ind/2016
13. However from the perusal of the paper book filed by the Departmental Representative and the assessment order it is revealed that the basis of addition were Question No.14 and 15 asked to the assessee on 25.11.10. Question No.14 was with regard to purchase of land at Gram Bicholi Mardana Tehsil & Dist. Indore Plot No.I-10 and I-11 of 2400 square feet each valuing at Rs.1,48,800/- for each plot. Question No.15 assessee was asked to show the source of investment in purchase of 4500 square feet of land at Gram Bicholi Mardana Tehsil & Dist. Indore at Rs.2,79,000/-. Apart from asking these two questions there is no reference of any incriminating material evidencing that the assessee had not disclosed any particular transaction or has made any unaccounted investment over and above the stated price in the registered documents.
14. Thereafter during the course of assessment proceedings referring to Question No. 14 & 15 Ld. A.O asked to produce the details. The assessee submitted the necessary documents and contended that the alleged transactions of purchase are from the regular source of income and funds available with the assessee. Fund flow statement for the period 1.4.2004 to 31.3.2011 was filed 13 Satish Nema IT(SS) No.149, 150, 152/Ind/2016 & C.O.No.34, 35 & 37/Ind/2016 before the Ld. A.O vide letter dated 26.10.2012. For better understanding we reproduce below the finding of Ld. A.O in the assessment order for Assessment Year 2006-07 relating to addition of Rs.3,80,200/- and Rs. 3,55,995/- for unexplained investment;
3.UNEXPLAIINED INVESTMENT:-
Vide question No.14 of the statement of the assessee dated 25/11/2010 recorded during the course of search on 25/11/2010 the assessee was required to explain the source of purchase of the plot at no. 1-10 and 1-1 leach 2400 Sq. Ft. At Shreeji Velly, Gram Bicholi Mardana, Indore purchased for Rs. 148800/- each dated 02112/2005. During the course of assessment proceedings the assessee was required to furnish evidence for such source of investment.
Vide submission dated 26/10/2012 the assessee submitted that he has incurred total investment of Rs.3,80,200/-(Rs.1 ,90,100/- *2) including registry expenses and the source of investment can be verified from the fund flow statement.
On examination of bank statement and the explanation for credit entries for bank entries tiled by the assessee it was noted that no amount has been withdrawn from the bank during F.Y. 2005-06 for the payment towards investment in subject property. The assessee also failed to furnish the copy of registry for the said property even asking repeatedly. In absence of verifiable details the amount of Rs. 3,80,200- invested remain unexplained therefore added to the income of the assessee u/s 69B of the LT. Act. Penalty proceedings u/s 271(l)(c) is initiated separately.
Addition: Rs. 380,200/-14
Satish Nema IT(SS) No.149, 150, 152/Ind/2016 & C.O.No.34, 35 & 37/Ind/2016
3.UNEXPLAINED INVESTMENT:-
Vide question No.15 of the-statement of the assessee dated 25/11/2010 recorded during the course of search on 25/11/2010 the assessee was required to explain the Source of investment in the plot at H-8 4500 Sq. Ft. At Shreeji Velly, Gram Bicholi Mardana, Indore - purchased for Rs.2,79,000/- each dated 02/12/2005. During the course of assessment proceedings the assessee was required to furnish evidence for such source of investment.
Vide submission dated 26/10/2012 the assessee submitted that he has incurred total investment of Rs. 3,55,995/- including registry expenses and the source of investment can be verified from the fund flow statement.
On examination of bank statement and the explanation for credit entries for bank entries by the assessee it was noted that no amount has been withdrawn from the bank during F.Y. 2005-06 for the payment towards investment in subject property. The assessee also failed to furnish the copy of registry for the said property even asking repeatedly. In absence of verifiable details the amount of Rs. 355995/- invested remain unexplained therefore added to the income of the assessee u/s 69B of the LT. Act. Penalty proceeding u/s 271(1)(c) is initiated separately.
Addition: Rs, 3,55,995/-
15. From going through the finding of Ld. A.O first and foremost it is appearing that nexus of the additions are only the questions asked during the course of search proceedings and not any incriminating material. Secondly the assessee had submitted that the investments were made out of the fund available with it and duly accounted for 15 Satish Nema IT(SS) No.149, 150, 152/Ind/2016 & C.O.No.34, 35 & 37/Ind/2016 and shown in the regular return of income for Assessment Year 2006-07 which was originally filed on 19.10.2006 showing the income of Rs. 4,26,605/-. The date by which the return could have been selected for scrutiny by the issuance of notice u/s 143(2) of the Act expires on 31.10.2007.
16. Thus in the proceedings u/s 153A of the Act the additions seems to have been made only on the basis of assessment enquiry.
Assessee had duly replied during the proceedings about the information asked in Question No. 14 & 15 that the transactions have been shown in the regular return of income. This facts remains un rebutted by the revenue authorities that apart from the questions asked there was no other incriminating material found during search relating to Assessment Year 2006-07. Thus the undisputed fact remains is that in assessment completed for Assessment Year 2005- 06, Assessment Year 2006-07 and Assessment Year 2009-10, additions were made by the Ld. A.O merely on the basis of enquiry during assessment proceedings having no direct or indirect nexus with any incriminating material found/seized during the course of search. In the given case where the return of income were originally 16 Satish Nema IT(SS) No.149, 150, 152/Ind/2016 & C.O.No.34, 35 & 37/Ind/2016 filed u/s 139(1) of the Act and assessee's case was not selected for scrutiny u/s 143(2) of the Act, validity of such assessment u/s 153A of the Act needs to be examined in the light of judicial pronouncements.
17. We observe that Ld. CIT(A) allowed the assessee's legal ground quashing the assessment proceedings u/s 153A of the Act by commonly observing as follows:-
"5. Ground No.1 & 3: By these grounds the appellant has challenged the validity of the assessment made u/ s 153A of The Act by contending that no incriminating material j details of undisclosed income were found and hence the assessment was bad in law. Detailed submissions of the appellant on the issue are reproduced at P8rFl No.3 above.
5.1 The thrust of the appellant's contention is that for the assessment year 2005-06 the return of income was originally filed on 19.10.2005. Income was assessed at Rs. 345510/- by order u/s 143(3) of The Act dated 23-10-2007. In view of the above the assessment stood concluded as on 23-10-2007. The additions made in the order u/ s 153A r.w.s.143(3) dated 28-03-2013 are not based on any incriminating material/ documents/ evidences found as a result of action u/s 132. The additions which have been made are on the basis of accounts and details already reflected in the original return of income filed and no incriminating material was found related to the above transactions warranting addition to the total income u / s 153A of the Income Tax Act, 1961.17
Satish Nema IT(SS) No.149, 150, 152/Ind/2016 & C.O.No.34, 35 & 37/Ind/2016 5.2 The transactions were properly recorded in the accounts/return maintained/filed prior to the date of search. Appellant placed reliance on various judicial pronouncements in support of the above legal contention including the decision of the jurisdictional ITAT in the case of Anant Steels Ltd. vs. ACIT (ITA No.133/Ind./2013 dated 30/11/2015) and in the case of Kalani Bros. & Ors. ITA (SS) No. 71/Ind./2014 dated 06/11/2015 and the decision of the special bench of the ITAT, Mumbai in the case of All Cargo Global Logistics Ltd. vs. DCIT (20 ITJ 45) (Trib. Mumbai)(SB).
5.3 The material placed on record has been considered. In the case of Kalani Bros. the jurisdictional ITAT has observed as under:-
"We have heard both the sides. We have also gone through the case laws relied upon by both the sides. We have also considered various relevant facts of the case. It is a settled legal position that once a search and seizure action has taken place u/ s 132 of the Act or a requisition has been made u/ s 132A, the provisions of section 153A trigged and Assessing Officer is bound to issue notice u/ s 153A of the Act. Once notices are issued u/ s 153A of, the Act then assessee is legally obliged to file return of income for six years. The assessment and reassessment for six years shall be finalised by the Assessing Officer. It is also held by various Courts that once notice u/ s 153A of the Act issued, then assessment for six years shall be at large both for Assessing Officer and assessee have no warrant of law. It has been also held that in the assessment years where assessments have been abated in terms of second proviso to section 153A then Assessing Officer acts under original jurisdiction and one assessment is made for total income including the addition made on the basis of seized material. But where there is no abatement of assessments and assessments were completed on the date of search then addition can be made only on the basis of incriminating documents or 18 Satish Nema IT(SS) No.149, 150, 152/Ind/2016 & C.O.No.34, 35 & 37/Ind/2016 undisclosed assets, etc. In these cases there was no incriminating document found and seized. No assessment proceedings were abated in these assessees. Thus assessments for these assessment years were completed on the date of search. The assessments were completed u/ s 143(3} of the Act read with section 153A/ 153C of the Act after the search. There was no abatement of any proceedings in these cases for these assessment years in terms of second proviso to section 153A of the Act. There is no seized material belonging to the assessee which was found and seized in relation to additions made. In. a recent decision, Hon'ble Delhi High Court in the case of CIT vs. Kabul Chawla (supra) has held that completed assessments can be interfered with by the Assessing Officer while making assessment u/ s 153A of the Act, only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which was not produced or not already disclosed or made known in the course of original assessment. In. all these cases no assessments were pending on the date of search for these assessment years. No assessments were abated in terms of second proviso to section 153A of the Act. Hon'ble Delhi High / Court in the case of CIT vs. Kabul Chawla (supra) has considered various High Court decisions relied upon by the learned DR. The Hon'ble Delhi High Court has considered the cases of Canara Housing Development Co. vs. DCfT;
Madugula vs. DCIT; CIT vs. Chetandas Laxmandas and CIT vs. Anil Kumar Bhatia (supra). The only decision of the Hon'ble Allahabad High Court in the case of CIT vs. Raj Kumar Arora; 367 ITR 517 relied on by the learned DR was not considered by Hon'ble Delhi High Court while deciding the issue in the case of Kabul Chawla. The Hon'ble Allahabad High Court has reversed the order of the Tribunal and remanded the issue to the Tribunal to consider the appeal of the department on merits. It is a settled legal position that 19 Satish Nema IT(SS) No.149, 150, 152/Ind/2016 & C.O.No.34, 35 & 37/Ind/2016 when two views are possible on a particulars issue then the view favourable to the assessee should be followed as held by the Hon'ble Apex Court in the case of CIT vs. Vegetable Products; 88 ITR
192. Respectively following the decision of the Hon'ble Apex Court, we dismiss the ground of appeals of the Revenue. Departmental appeals are disposed accordingly."
The decision in the case of Kalani Bros. has again been followed by the Hon'ble ITAT Indore Bench, Indore in the case of M/s Anant Steel Pvt. Ltd., Indore in IT(SS)A No. 31, 28, 29&30/Ind/2010 vide order dated 18.1l.2015.
The Hon'ble ITAT Indore Bench, Indore while arriving at the above decision has taken note of all the recent decisions on the issue of validity of assessment proceedings u/s 153A of the Income Tax Act, 1961 wherein assessments were made without reference to any incriminating documents/material/evidences found during the course of search and held that it is a settled legal position that when two views are possible on a particular issue then the view favourable to the assessee should be followed as held by the Hon'ble Apex Court in the case of CIT vs. Vegetable Products, 88 ITR 192. On perusal of the assessment order in the case it is seen that the additions made by the AO have been made without any reference to any evidences/ documents/material found as a result of search action. The appellant has also stated that no incriminating material was found during the course of search to justify any enquiry on the above issues. In view of the fact that no incriminating documents/material/evidences were found related to the issues considered in the assessment order during the search and keeping in view the decisions of the Jurisdictional IT AT cited above the validity of the assessment ii] s 153A of the Income Tax Act, 1961 cannot be upheld. These grounds of the appellant are therefore allowed. 20 Satish Nema IT(SS) No.149, 150, 152/Ind/2016 & C.O.No.34, 35 & 37/Ind/2016
18. We also observe that similar view came for adjudication before us in the case of Om Prakash Gupta & Ors IT(SS)A No.277 to 281 & 283 to 287/Ind/2017 order dated 28.2.19 and after considering the settled judicial precedence, it was decided in favour of assessee. Relevant portion is extracted below:-
"27. These appeals for assessment years 2009-10 to 2012-13 are concluded and non abate assessments. The A.O. has no time to issue notice u/s 143(2) of the Act and until and unless there is an incriminating material found during the course of search no addition can be made. Nowhere in the assessment order shows that additions are based on the incriminating material even in the order of the Ld. CIT(A). Additions are only made during the course of assessment proceedings by calling the assessee for various details such as books of accounts various documents and assessment was completed. Therefore once the assessments are concluded/non-abated, addition cannot be made unless there is an incriminating material found during the course of search. This legal aspect has already been considered by us in the above appeals in IT(SS)A No.277 to 281/Ind/2017. In view of our decision above the same is to apply in to in all the other present appeals also. We therefore, in view of our decision in those appeals, the orders of the Ld. CIT(A) are reversed and the appeals filed by the assessee are allowed."
19. We therefore respectfully following the decision referred above and also considering the latest judgment of Hon'ble High Court of Delhi in the case of Principal CIT & Ors V/s Meeta Gutgutia (supra) come to the conclusion that since the assessment orders in question 21 Satish Nema IT(SS) No.149, 150, 152/Ind/2016 & C.O.No.34, 35 & 37/Ind/2016 were concluded and non abated assessments no addition can be made in the assessment proceedings u/s 153A of the Act unless there is any incriminating material found during the course of search. We find no inconsistency in the finding of Ld. CIT(A) quashing the assessment proceedings u/s 153A of the Act since the additions were not made on the basis of any incriminating material found during the course of search. Thus revenue's appeal for Assessment Years 2005-06, 2006-07 and 2009-10 stands dismissed.
20. Now we take up the Cross Objections raised by the assessee for Assessment Years 2005-06, 2006-07 and 2009-10. Since we have already dismissed revenue's appeal thereby confirming the findings of Ld. CIT(A) holding the assessment proceedings u/s 153A as invalid resulting into deletion of the additions made by the Ld. A.O dealing with the merits of the case raised in the Cross Objections by the assessee will be merely academic in nature and are thus rendered to be infructuous. Thus the Cross Objections filed by the assessee for Assessment Years 2005-06, 2006-07 and 2009-10 are dismissed as infructuous.
22 Satish Nema IT(SS) No.149, 150, 152/Ind/2016 & C.O.No.34, 35 & 37/Ind/2016
21. In the result Revenue's appeal for Assessment Year 2005-06, Assessment Year 2006-07 and Assessment Year 2009-10 stands dismissed and assessee's Cross Objections are dismissed as infructuous.
The order pronounced in the open Court on 07. 02.2020.
Sd/- Sd/-
( KUL BHARAT) (MANISH BORAD)
JUDICIAL MEMBER ACCOUNTANT MEMBER
दनांक /Dated : 07 February, 2020
/Dev
Copy to: The Appellant/Respondent/CIT concerned/CIT(A)
concerned/ DR, ITAT, Indore/Guard file.
By Order,
Asstt.Registrar, I.T.A.T., Indore
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