Income Tax Appellate Tribunal - Delhi
Lata Jain, New Delhi vs Assessee on 29 May, 2015
IN THE INCOME TAX APPELLATE TRIBUNAL
(DELHI BENCH 'D ', NEW DELHI)
BEFORE SHRI G. C. GUPTA, HON'BLE VICE PRESIDENT
AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER
I.T.A. No.2140, 2141 /Del/2008
Assessment year : 1998-99 and 1999-2000
DCIT, CC-21, Vs. Smt. Lata Jain,
New Delhi 22-A, Rajpur Road,
Civil Lines, Delhi
GIR / PAN:AANPJ5648L
C.O. No.159 and 239/Del/2009
(Assessment Year 1998-99 and 1999-2000)
Smt. Lata Jain, Vs. DCIT, CC-21,
22A, Rajpur Road, New Delhi
Civil Lines,
Delhi
(Appellant) (Respondent)
Appellant by : Ms. Sulekha Verma, CIT, DR
Respondent by : Shri Rajesh Jain, CA
Date of hearing : 13.05.2015
Date of pronouncement : 29.05.2015
ORDER
PER T.S. KAPOOR, AM:
These are two appeals filed by revenue against two separate orders of Ld. CIT(A) both dated 07.03.2008. The grounds of appeals taken by revenue in these appeals are reproduced as under:
(i) I.T.A.No. 2140/Del/2013:2 ITA No.2140,2141/Del/2008
C.O.159 and 239/Del/2009 "1. "On the facts and in the circumstances of the case, the Ld CIT (A) has erred in holding Gold/Silver utensil as Capital Assets instead of Personal Effects by observing that "It is immaterial whether the articles made of Gold or Silver, are in the shape of utensils or in the form of furniture"
2. "On the facts and in the circumstances of the case the Ld. CIT(A) has erred in directing the A.O. to recomputed the Capital Gain on Sale of these articles (i.e.) utensils) made of Gold and Silver after allowing the benefit of indexation."
3. "On the facts and in the circumstances of the case the Ld. CIT(A) has erred in directing that the A.O. should follow and recomputed Interest U/s 234B without pointing an error in computation of Interest U/s 234B done."
(ii) I.T.A.No. 2141/Del/2013:
"On the facts and in the circumstances of the case, the Ld CIT (A) has erred in directing to allow the benefit of carry forward of losses for the A.Y. 1998- 99 under capital gain on sale of Gold/Silver utensils against Capital Gain for the A.Y. 1999-
2000."
2. The assessee has also filed cross objections against these appeals and the ground of cross objections taken by assessee are reproduced as under:
(i) C.O. No.159/Del/2009:-
"1. That the learned DCIT erred in assessing the income of the appellant at Rs.4,15,17,250/- against income returned at Rs.34,59,120/- without providing sufficient opportunity to the appellant.
2. 2.1 That the learned DCIT failed to appreciate the original assessment in the instant case was completed u/s- 143(3) vide order dated 9th August 2000, accepting the returned income and claim of carry of capital loss amounting to Rs. 87,64,069/- and again in the proceedings u/s- 147 / 143(3), vide order dated 10th March 2006, the said figure of returned income and capital loss was accepted. That it is not permissible under law to make a different assessment of income 3 ITA No.2140,2141/Del/2008 C.O.159 and 239/Del/2009 on the same facts, without bringing any new material on record, in assessment u/s 153 A of the Act.
2.2 That the law does not permit change of opinion on the same set of facts by the A.O.
3. The learned CTT(A) erred in not following the binding judicial precedents of jurisdictional High Court Jindal Photo Films Limited 256 ITR 1 (Delhi), -Kelvinator India Limited Eicher Limited 213 CTR 57 which were brought to his notice in written submissions and erred in rejected the legal ground that the Assessing Officer is not permitted to assess the income on different income than the income assessed U/s-143(3) vide valid Order dated 9th August, 2000, without bringing any incriminating document found in consequence to Search u/s- 132(1) of the Act on 9th December, 2003.
4. That there was no justification for levying of interest u/s- 234B, 234C of the Act on the facts of the case and as per law.
5. Without prejudice to the ground no. 6, interest charged u/s- 234B is excessive and the same is not calculated as per law.
6. That the assessment has not been made in accordance with law and the addition made by DCIT are also unsustainable on the facts of the case and as per law."
(iii) C.O.No.239/Del/2009:
"1. That the learned CIT(Appeal) erred in not disposing ground no.2, in respect of assessing of income from business at Rs.l,20,5711 - against "NIL" income returned by the appellant under the said head of income, without discussing in the Assessment Order.
2. That the learned CIT(Appeal) erred in holding that interest u/s-234D is leviable in the assessment of income u/s-153A I 143(3) in relation to any assessment framed after 1st June, 2003.
3. That the contention of learned CIT(Appeal) in respect of interest u/s-234D has been decided against the Revenue by the Honorable special Bench in the case of Ekta Promoters Limited."
3. The brief facts of the case are that a search and seizure operation was conducted u/s 132 of the Act on 09.12.2003 at the residential as well as business premises of related persons of Begum Gutka group and assessee is a part of such group and therefore her case was reopened in view of the 4 ITA No.2140,2141/Del/2008 C.O.159 and 239/Del/2009 provisions of Section 153A. The assessee was required to file return u/s 153A to which assessee submitted that the original return filed by her be treated as return filed u/s 153A of the Act. During the assessment proceedings in Assessment Year 1998-99, the A.O. observed that the assessee had claimed a gross capital loss of Rs.90,69,085/- and after setting off against other capital gain an amount of Rs.87,84,069/- has been claimed to have been carried forward. The A.O. observed that the assessee had incurred long term capital loss on the sale of gold and silver utensils after claiming indexation. The A.O. confronted the assessee that these assets were personal effects and does not get covered by the definition of capital asset. However, the assessee submitted that the assets declared under VDIS were never shown as personal effects and were never used as personal assets and the same qualifies for being classified as capital assets. The A.O. did not agree with the contention of assessee and made an addition of Rs.3,77,58,105/- by holding as under:
"The reply of the assessee has been considered carefully. Bulk quantity of silver and gold utensils clearly goes to show that they were clearly 'personal effects'. Now) the law is well settled that the expression "personal effects" includes silver/gold utensils meant for personal use though not for daily use. Likewise, in Smt. Shree Kumari Undra v. CIT 228 ITR 548, 553, 556 & CIT v. Benarshilal Kataruka 185 ITR 493, 496 (Cal) 'silver utensils consisting of thalis, katories and tumblers etc. were held to be 'personal effects'. Further, in Jayantilal A Shah v. CIT 156 ITR 448 (Born) it was held that even though certain articles are not normally in daily use, these can be considered as "personal effects" so long as these are meant for personal use Huge quantity of gold and silver utensils. In the assessee's case also it is seen (Statement of assets acquired out of Income declared under VDIS 1997 most of which were apparently acquired by inheritance way back in the year 1966-67 to 68-69) that the items so!9- were Plate, Thali, Glasses etc. made of gold and silver. These items are quite similar to the items held to be 'personal effects' 5 ITA No.2140,2141/Del/2008 C.O.159 and 239/Del/2009 u/s 2 (14) of the LT. Act, 1961 by the High Courts in their decisions referred to above. Thus, factually and legally no doubt is left that the impugned were 'personal effects'. Simply because the assessee does not show them as personal effect it will take them out of the purview of the "personal effects". Utensils are in almost all the cases are "personal effects'. Even otherwise the assessee has not advanced any evidence to rebut that they were 'personal effects' except advancing the self serving averment that she has not treated it as "personal effects".
In the light of the facts & circumstances discussed above, very clearly the assessee's attempt to treat the same as "capital asset' fails. I hold the utensils made of gold/silver as "personal effects'. After holding so the claim for indexation also would be required to be disallowed. Net result of it would be disallowance of Rs.3,77,58,105/ -crores on account of incorrect indexation claimed. In addition to the above disallowance as a consequential effect even in following years in which loss on account of indexation has been set off against other incomes would also be required to be disallowed. Facts clearly suggest incorrect particulars/ claim and consequently the concealment on assessee's part for which penalty proceedings are also initiated."
4. Aggrieved, the assessee filed appeal before Ld. CIT(A) and Ld. CIT(A) has deleted the addition made by A.O. by holding as under:
"As regards to substantial issue is concerned, I am of the view that the appellant has merit in her submissions. The AO has denied the benefit of indexation in the computation of capital gains on sale of gold and silver items by holding them as 'personal effects'. By excluding the value of indexation, the AO has taken the total sale proceeds on those articles as income and applied normal rate of taxes.
It is very relevant to refer to section 2(14) which define what constitutes a 'capital asset'. Capital asset means property of any kind held by an assessee but excludes certain items from its purview. Apart from stock in trade, raw materials, consumable stores, this section specifically excludes 'personal effects'. In turn the 'jewellery' has been taken out of the category of 'personal effects'. Again 'jewellery' has 6 ITA No.2140,2141/Del/2008 C.O.159 and 239/Del/2009 been given inclusive meaning in this provision. In effect the jewellery do fall under capital asset for the purpose of section 2(14) of IT Act. As per clause (ii) of subsection 14 of section 2, ornaments made of gold, silver and other precious metals, and any precious or semi precious stones whether or not set in- any furniture, utensil or articles, are defined as 'jewellery' for the purposes of capital asset. From this, it is very clear that it is intended to subject the sale proceeds of jewellery under capital gains even if they are meant for personal use. Assuming that an assessee sells jewellery which is being used daily as wearing apparel, still the sale proceeds have to be computed under capital gains. Only exception is available if they are part of stock in trade or raw material, _ otherwise there is no option available except to compute capital gains on sale proceeds of these articles.
In the instant case there is no dispute about nature of articles sold during the year. All these items are made of gold and silver which were declared under VDIS 1997. Since these articles are made of precious metals like gold and silver, it is difficult to exclude them from the category of capital asset. It is immaterial whether the articles, made of gold or silver, are in the shape of utensils or in the form of furniture; they do fall in the definition of capital asset. The AO is not correct to deny the benefit of cost inflation indexation to the sale proceeds of these items in the computation of capital gains. Consequently the order of the AO cannot be sustained in view of the above reasons. Accordingly he is directed to delete the addition made and recompute the capital gains on sale of these articles made of gold and silver after allowing the benefit of indexation. While doing so he should work out correct amount of capital gain on sale of diamonds where the assessee has taken the market value as on 01.04.1987 as against 01.04.1981 for the purpose of cost of diamonds for indexation.
For the purpose of VDIS declaration the value as on 1.4.87 is to be adopted, whereas for capital gains the base year should be 1.4.1981. The market value in the year 1981 would be less than what was adopted. Hence it requires reworking based on correct value in the year 1981. Resultantly the ultimate the loss on capital gain arrived on sale of the above referred articles should be allowed to be carried forward to the subsequent years, subject to verification of the due date of filing return of income."7 ITA No.2140,2141/Del/2008
C.O.159 and 239/Del/2009
5. The Revenue is aggrieved with the order of Ld. CIT(A) and has filed appeal before us against the findings of Ld. CIT(A). In the Assessment Year 1999-2000, the revenue is aggrieved as Ld. CIT(A) has directed the A.O. to allow benefit of carry forward of losses from Assessment Year 1998-99. Against both appeals the assessee has filed cross objections and one of the objections taken by assessee in Assessment Year 1998-99 is regarding jurisdiction of A.O. to make assessment u/s 153A in view of the fact that already assessment was completed twice i.e. once u/s 143(3) and again u/s 143(3) read with respect to section 147 and in these two assessments no such claim of capital loss was denied and therefore denial of capital loss in assessment proceedings u/s 153A on the same facts and circumstances will amount to change of opinion which was not permissible. The assessee has further taken the ground that in the absence of incriminating documents no addition can be made u/s 153A of the Act.
6. At the outset, Ld. D.R. submitted that the question to be decided by Hon'ble Bench is as to whether the gold and silver utensils sold by assessee during the year 1998-99 can be classified as personal effects or can be classified as capital assets. Ld. D.R. submitted that there is no dispute about the fact that the declared articles of gold and silver were utensils as admitted by assessee and therefore, cannot be classified as jewellery as the same cannot be worn. Ld. D.R. submitted that Ld. CIT(A) has wrongly held the utensils as items of jewellery. There is a lot of difference between items of jewellery and items of utensils. She referred on order of Hon'ble Calcutta High Court in the case of CIT Vs Banarsilal Katarnuka 185 ITR 493 wherein Hon'ble Calcutta High Court has held that silver utensils / gold utensils cannot be classified as capital assets as the very use of utensils 8 ITA No.2140,2141/Del/2008 C.O.159 and 239/Del/2009 presupposes personal use. Ld. D.R. also placed her reliance on an order of Hon'ble High Court of Calcutta in the case of Shree Kumari Mundra Vs CIT 228 ITR 548 and submitted that in this case, the Hon'ble Tribunal had held that silver utensils sold by assessee were not personal effects against which the Hon'ble High Court held that utensils were personal effects. In view of above, Ld. D.R. strongly argued that the utensils were meant for personal purposes and are quite different from jewellery and therefore no capital gain or loss was allowable on the sale of such personal effects. She argued that Ld. CIT(A) has wrongly held that the items of utensils as jewellery for the purpose of classifying these as capital assets.
7. Ld. A.R. on the other hand submitted that the utensils were not personal effects of assessee and in this respect, he invited our attention to paper book page 24 where an affidavit signed and sworn by assessee was placed wherein assessee had claimed that assessee had not used the utensils for her personal purposes. Ld. A.R. further relied upon the case law of M K Jajodia Vs ITO decided by Kolkata Bench of ITAT reported at 20 TTJ 167. He argued that the Hon'ble Tribunal in this case has held that in order to constitute items of personal effects, mere possibility that articles are capable of being put to personal or household use was not sufficient to treat those as personal effects. Ld. A.R. submitted that in this case, the Hon'ble Tribunal has held that though the silver utensils were capable of being used for personal household use, yet in the absence of any wear and tear during long period of possession, these cannot be said to have been used for personal use or household use. of assessee. Ld. A.R. submitted that in the case of assessee also whatever was declared in VDIS, the same utensils having some weight, were sold as is apparent from declaration of VDIS and the sale bills 9 ITA No.2140,2141/Del/2008 C.O.159 and 239/Del/2009 of such utensils and therefore, cannot be said that the same were used as there is no difference in weight of utensils and it was submitted that in case these were used for personal purposes, there must have been some wear and tear to them. Ld. A.R. further relied upon the case law of Faiz Murtaza Ali Vs CIT decided by Hon'ble Delhi High Court reported at 360 ITR 200. Ld. A.R. submitted that in that case the claim of assessee that the items inherited by him were items of personal effects was decided in favour of assessee on the basis of an affidavit filed by assessee. Ld. A.R. submitted that in the present case also, the assessee has filed affidavit and has claimed that these were her personal effects and the affidavit has not been rebutted by the Revenue. Ld. D.R. replying in her rejoinder submitted that the case law decided by ITAT is not relevant as the issue has been decided by Hon'ble Calcutta High Court which has been relied upon by her and regarding the case law of Faiz Murtaza Ali Ld. D.R. submitted that it was a case of sale of items like paintings, carpets and furniture etc which invariably are items of personal effect and are similar to utensils.
7. As regards the cross objections filed by assessee, Ld. D.R. objected to the C.O. on the basis that these were not filed within time and no application for condonation of delay was field and therefore, argued that the same need to be dismissed. Ld. A.R. submitted that C.O. NO.159 in respect of Assessment Year 1998-99 was filed on 24.06.2009 and notice containing memorandum of grounds of appeal was received by the assessee on 05.06.2009. Ld. A.R. also produced envelope containing notice along with date of dispatch of such ground of appeal and, therefore, argued that the C.O. 159 was filed well within time, which Ld. D.R. also acceded. However, Ld. D.R. submitted that C.O. 239 for Assessment Year 1999- 10 ITA No.2140,2141/Del/2008 C.O.159 and 239/Del/2009 2000 was not within time as the same was filed on 11.08.2009 whereas notice was received by assessee on 21.06.2009 and therefore, C.O. was filed beyond the mandatory period of 30 days. Ld. A.R. could not explain the delay in C.O. for Assessment Year 1999-2000. Ld. A.R. was however allowed to argue on C.O. 159/del/2009 In C.O. 159, the assessee has submitted that original assessment was completed on 09.08.2000 u/s 143(3) and the claim of carry forward of capital loss was also allowed and again in proceedings u/s 147 vide order dated 10.03.2006, the said claim for capital loss was accepted. Therefore, it was not permissible under law to make a different assessment of income on the same facts and circumstances without finding any new material. Ld. A.R. has strongly placed his reliance on the judgement of Hon'ble Delhi High Court in the case of Jindal Photo Films Vs ITO in I.T.A. No. 256 ITR 01 (Del.), CIT Vs Kelvinator of India Ltd. 320 ITR 561, CIT Vs Eicher Ltd 213 CTR 57. Ld. A.R. submitted that having completed assessment on two occasions one u/s143(3) and another u/s 143(3) read with Section 147, there was no occasion available to A.O. to again make assessment u/s 153A especially in view of the fact that no new fact or material was there. Ld. A.R. argued that change of opinion is not permitted as per case laws relied upon by him. Ld. A.R. vide ground No.3 has also agitated that in the absence of incriminating document found in the course of search, no addition can be made. He submitted that assessment during the year was completed vide order dated 09.08.2000 and, which stood completed on the date of search, i.e. on 09.12.2003 and therefore, addition if any could have been made only on the basis of some incriminating material. In support of this, Ld. A.R. placed his reliance on the following case laws:
i) Jai Steel (India) 259 CTR 281 (Raj.)
ii) MGF Automobiles Ltd. in I.T.A.No. 4212 & 4213/Del/2011 11 ITA No.2140,2141/Del/2008 C.O.159 and 239/Del/2009
iii) Kusum Gupta in I.T.A.No. 4873/Del/2009, 2510, 3312, 2833 /Del/ 2011.
iv) PACL India Ltd. in I.T.A.No. 2637/Del/2010
v) Deepaen A. Paraekh, Mumbai I.T.A.No. 467, 469, 460/2011
vi) Jigsnesh P. Shah, Mumbai I.T.A.No. 1553 & 3173/Mum/2010
vii) Parsvnath Developers Ltd., Delhi I.T.A.No. 5188/Del/2013
viii) Kabul Chawla, Delhi I.T.A.No. 779, 780, 781, 782/Del/2013
ix) DCIT Vs Kurele Pape Mills Pvt. Ltd. I.T.A.No. 3761/Dle/2011.
8. Ld. A.R. further submitted that interest charged u/s 234B was excessive and was not as per law. Ld. D.R. while replying to the Cross Objections submitted that the provisions of Section 153A are very clear and in a search case the provisions of Section153A automatically becomes operative and assessments of 6 years has to be reopened and she further argued that it is not a case of change in opinion as in the original assessment order, the issue of capital loss on sale of utensils was not considered. Ld. D.R. further submitted that as decided by Hon'ble Delhi High Court in the case of Anil Kumar Bhatia, the provisions of Section 153 A are mandatory in nature. As regards incriminating documents, the Ld. D.R. submitted that during search, various incriminating documents were found and the statement of assessee was also recorded and, therefore, it cannot be said that no incriminating material was found during the search proceedings. In this respect Ld. D.R. invited our attention to an ITAT order in the case of assessee herself for the Assessment Year 2000-01 placed in paper book pages 24-33 wherein ITAT had upheld the addition on account of gifts received by assessee on the basis of incriminating material only. She argued that since the addition made by lower authorities on account of bogus gifts was upheld by ITAT, it cannot be said that no incriminating material was found. Ld. D.R. further argued that provisions of section 153A are 12 ITA No.2140,2141/Del/2008 C.O.159 and 239/Del/2009 mandatory provisions and the fresh assessments has to be carried out and there is no requirement of incriminating material and in this respect she relied upon the case law of Apoorva Extrusion Pvt. Ltd. in I.T.A. No. 3308/Del/2010 for the Assessment Year 2002-03 decided vide order dated 09.10.2014. Ld. D.R. strongly argued that the case law of Anil Kumar Bhatia 29 taxman 98 decided by Hon'ble Delhi High Court is very much in favour of Revenue wherein the Hon'ble Court has held that once the provisions of Section 153A are triggered, the A.O. is empowered to assessee or reassess the total income of aforesaid years. Ld. D.R. further heavily relied upon the case law of Filatex India Ltd. 269/2014 decided by Hon'ble Delhi High Court wherein she invited our attention to the question of law framed by Hon'ble Delhi High Court and further invited our attention to the answer given by the Hon'ble High Court. Ld. D.R. submitted that the Hon'ble High Court had clearly decided the issue in favour of Revenue by holding that addition u/s 153A need not be restricted or limited to the incriminating material. Ld. D.R. further placed her reliance on the case law of Raj Kumar in I.T.A. No. 56/2011 decided by Hon'ble Allahabad High Court and also case law of Canara Housing Development Company in I.T.A. No. 38/2014 decided by Karnataka High Court.
9. Ld. D.R. also placed her reliance on the case law of CIT Vs Kpil Jain 50 DTR 342 decided by Hon'ble Delhi High Court for the proposition that the question of jurisdiction has to be raised within a month from the date of service of notice u/s 158BD of the Act. Ld. D.R. submitted that since the provisions of Secsiton158 BD are peri materia with the provisions of Section 153A, therefore, question of jurisdiction u/s 153A can be raised only within one month from the date of service of notice, which in the present case has 13 ITA No.2140,2141/Del/2008 C.O.159 and 239/Del/2009 not been done, therefore, legal objections raised by assessee are not tenable in law. As regards the issue of charging of interest u/s 234B, Ld. D.R. submitted that in the case of assessee herself, :Hon'ble Tribunal in Assessment Year 2000-01 has decided the issue in favour of Revenue and in this respect invited our attention to para 8 & 9 of the order placed in paper book pages 31 & 32.
10. We have heard rival parties and have gone through the material placed on record. As the assessee has raised legal issue in cross objections therefore, we first take up cross objections. In cross objection No.159/Del/2008, the assessee has taken a ground that assessment was already completed u/s 143(3) and then again u/s 143(3) read with Section 147 and during these assessments, no addition whatsoever regarding denial of capital loss was made and therefore, without any new material, addition u/s 153A was against law as it amounts to change in opinion and, therefore, was not permissible. However, we find that the provisions of Section 153A start with a non obstante clause relating to normal assessment procedure which is covered by sections 139, 147, 148, 149, 151, 152 and 153. These sections relate to assessment and reassessment provisions. Prior to introduction of Section 153A, there was chapter XIV-B of the Act which took care of the assessments to be made in cases of search and seizure and such assessments were known as block assessments because the chapter provides for a single assessment to be made in respect of period of block of 10 years. The block assessment so made was independent and in addition to normal assessment proceedings as clarified by Explanation below section 158BA(2). After introduction of group of sections 153A-153C, the single block assessment was given a go by. Under new section 153A in a case 14 ITA No.2140,2141/Del/2008 C.O.159 and 239/Del/2009 where search is initiated u/s 132, the A.O. is obliged to call upon searched persons to furnish return for 6 assessment years immediately preceding the Assessment Year relevant to previous year in which search was conducted. Another feature of this section is that the A.O. is empowered to initiate the reassessment of total income of aforesaid years. This is a departure from earlier block assessment scheme in which block assessment roped in only the undisclosed income and the regular assessment proceedings were preserved resulting into multiple assessments. The argument of Ld. A.R. that addition made u/s 153A on same set of facts and circumstances amount to change of opinion does not hold any force as the Hon'ble Court in the cases relied upon by Ld. A.R. has held the concept of change of opinion in context to provisions of Section 147 of the Act and these decisions are not applicable to assessments made u/s 153A of the Act. The object of section153A is to assess total income including the declared income as well as undeclared income unearthed during search. Therefore from the above, it follows that if during search proceedings, the search team finds some undisclosed income, then A.O. is bound to include this income in the assessment u/s 153A irrespective of the fact that earlier in proceedings u/s 143(3), the same was not considered. The Hon'ble High Delhi Court in the case of Anil Kumar Bhatia 24 Taxman.com 98 vide order dated 07.08.2012 has held as under:
"A question may arise as to how this is sought to be achieved where an assessment order had already been passed in respect of all or any of those six assessment years, either under Section 143(1)(a) or Section 143(3) of the Act. If such an order is already in existence, having obviously been passed prior to the initiation of the search/requisition, the Assessing Officer is empowered to reopen those proceedings and reassess the total income, taking note of the undisclosed income, if any, unearthed during the search. For this 15 ITA No.2140,2141/Del/2008 C.O.159 and 239/Del/2009 purpose, the fetters imposed upon the Assessing Officer by the strict procedure to assume jurisdiction to reopen the assessment under Sections 147 and 148, have been removed by the non obstante clause with which sub section (1) of Section 153A opens. The time-limit within which the notice under Section 148 can be issued, as provided in Section 149 has also been made inapplicable by the non obstante clause. Section 151 which requires sanction to be obtained by the Assessing Officer by issue of notice to reopen the assessment under Section 148 has also been excluded in a case covered by Section 153A. The time-limit prescribed for completion of an assessment or reassessment by Section 153 has also been done away with in a case covered by Section 153A. With all the stops having been pulled out, the Assessing Officer under Section 153A has been entrusted with the duty of bringing to tax the total income of an assessee whose case is covered by Section 153A, by even making reassessments without any fetters, if need be."
11. In view of above, the ground No.2 taken by assessee is dismissed.
12. However in ground No.3, the assessee has further raised an objection that no incriminating material was found during search and, therefore, no addition can be made in the absence of such incriminating material. Hon'ble Delhi High Court in the case of Anil Kumar Bhatia has though held that provisions of Section 153A are mandatory and in the course of non pending assessments, the addition can be made even without finding any incriminating material. However, in the case of pending assessments, the Hon'ble Court has left open the answer to the question as to whether in case of completed assessments, the addition can be made in the absence of incriminating material. This can be seen from the following observations of Hon'ble High Court:
"We are not concerned with a case where no incriminating material was found during the search conducted under section 132 of the Act. We, therefore, express no opinion as to whether section 153A can be 16 ITA No.2140,2141/Del/2008 C.O.159 and 239/Del/2009 invoked even in such a situation. That question is, therefore, left open."
13. As is apparent, in this year, no incriminating material was found during search, though in respect of earlier year, incriminating material was found and on the basis of such incriminating material, ITAT in the case of assessee, had confirmed the addition but from the assessment order, we do not find that any incriminating material was found during search relating to this year. Nor Ld. D.R. brought to our notice any incriminating material for this year. She argued that in earlier year, there was incriminating material and the necessity of having found incriminating material in each year was not required and in this respect, she had placed her reliance on the case law of Apoorva Extrusion Ltd. in I.T. A.No. 3308/Del/2001. However, we find that in that case, the Hon'ble Tribunal had held that under the provisions of Section 153A, the initiation of assessment or reassessment for all the 6 Assessment Years in the case of person searched is not dependent on findings of any incriminating material. We do not have any contrary view in this regard as we have already held that provisions of Section153A are mandatory and since a person is searched, the proceedings u/s 153A has to be completed by passing a fresh assessment order. The question is as to whether any addition can be made if there is no incriminating material found during search, which in our opinion, is not as the only purpose of search is to unearth the undisclosed income and if during search, no incriminating material leading to existence of undisclosed income is found, then completed assessments cannot be disturbed and this view has been taken in various case laws as relied upon by Ld. A.R. Ld. D.R. has also relied upon the case law of Filatex India Ltd. in I.T.A. No. 269/2014 for the proposition that addition 17 ITA No.2140,2141/Del/2008 C.O.159 and 239/Del/2009 u/s 153A can be made even in the absence of material found during search. However, if we read the complete order in the case of Filatex, it is apparent that there was incriminating material found during search in that case. In the case of Canara Housing Development Co. in I.T.A.No. 38/.... decided by Hon'ble High Court of Karnataka, the Hon'ble Court has dealt the issue vide para 11 as under:
"The Tribunal has proceeded on the assumption by virtue of the judgement of the special bench of the Mumbai, the scope of enquiry under Section i53A is to be confirmed only to the undisclosed income unearthed during search and if there is any other income which is not the subject matter of search, the same cannot be taken into consideration. Therefore, the revisional authority can exercise the power under Section 263. In the entire scheme of 153A of the Act, there is no prohibition for the assessing authority to take note of such income. On the contrary, it is expressly provided under section 153A of the Act the Assessing Officer shall assessee or reassess the "total Income" of six assessment years which means the said total income includes income which was returned in the earlier return, the income which was unearthed during search and income which is not the subject matter of aforesaid two income. "
14. From the above orders of Hon'ble Karnataka High Court, we find that Hon'ble High Court has held that during assessment proceedings u/s 153A, addition can also be made in respect of such income not forming part of declared income or undeclared income. Therefore, this decision is in favour of revenue.
15. Hon'ble Rajasthan High Court in the case of Jai Steels (supra) has been pleased to hold that assessee was not eligible to claim deduction for an expenditure during assessment proceedings u/s 153A if the claim was not made in original assessment proceedings and which stood completed. Therefore, Hon'ble Rajasthan High Court has held that in the case of 18 ITA No.2140,2141/Del/2008 C.O.159 and 239/Del/2009 completed assessment, the same can be tinkered only based upon incriminating material found during search.
16. Similarly, Hon'ble Bombay High Court in a recent case decided on 21.04.2015 has confirmed the special bench decision in the case of All Cargo Global Logistics Ltd. wherein it was held that in the absence of incriminating documents, no addition can be made.
17. The Hon'ble Court on an appeal filed by Revenue had framed the following questions of law in respect of additions to be made u/s 153A:
"(i) Whether on the facts and in the circumstances of the case, the Hon'ble ITAT is correct in narrowing down the scope of assessment u/s 153A in respect of completed assessments by holding that only undisclosed income and undisclosed assets detected during search could be brought to tax ?
(ii) Whether on the facts and in the circumstances of the case, the Hon'ble ITAT is correct in law in holding that the scope of Section 153A is limited to assessing only search related income, thereby denying Revenue the opportunity of taxing other escaped income, that comes to the notice of the AO?
(iii) Whether on the facts and in the circumstances of the case, the Hon'ble !TAT was right in limiting the scope of Section 153A only to undisclosed income when as per the section the A.O. has to assess the total income of the six assessment years."
18. The findings on these questions of law are contained in para 18 which are reproduced below:
"18. Mr. Dastur would submit that the Revenue is protected completely in this case. The power is of drastic nature and has to be exercised within constitutional parameters. However, though the second proviso to sub-section (1) of section 153A would not apply in the first three years of this case, yet, as far as the second three year period is concerned, the assessments were pending. The proceedings in relation thereto abate. Now the entire assessment in relation to the second phase of three years can be made but the foundation for all this and the action under section 153A is a search under section 132 19 ITA No.2140,2141/Del/2008 C.O.159 and 239/Del/2009 or requisition of books of account and other assets under section 132A. In the present case, the notice under section 153A is founded on search. If there is no incriminating material found during the search, then, the Special Bench was right in holding that the power under section 153A being not expected to be exercised routinely, should be exercised if the search reveals any incriminating material. If that is not found, then, in relation to the second phase of three years, there is no warrant for making an order within the meaning of this provision.
In any event, the issue stands concluded by a Division Bench judgment of this Court rendered in the case of Commissioner of Income Tax Appeal no.36 of 2009 decided on 29th October, 2010. It is, therefore, apparent that the law laid down by this Court is binding on the Revenue. If that is 'binding then the questions of law and with regard to applicability of section 153A need to be answered against the Revenue and in favour of the assessee."
19. Therefore, there are different views of different high courts in this respect and in such a situation; the view favourable to the assessee is to be followed.
20. As regards argument of Ld. D.R. that existence of incriminating material in all years is not necessary and it is sufficient if incriminating material is found for any of the years, we do not find force in this argument as every year is a separate year and existence of incriminating material in one year cannot be applied to another year.
21. Similarly, we do not find any force in the argument of Ld. D.R. that question of jurisdiction can only be raised within one month from the date of service of notice u/s 153A as Ld. D.R. had relied on the case law of CIT Vs Kapil Jain 50 DTR 342 as we find that in that case the question was decided with reference to section 124 of the Act and not with reference to Section 153A of the Act.
20 ITA No.2140,2141/Del/2008C.O.159 and 239/Del/2009
22. In view of the above, C.O. 159/Del/2009 is allowed. Since we have decided the legal issue in favour of assessee, the Revenue's appeal in I.T.A. No. 2140 has become academic and is dismissed as infructuous.
23. C.O. No.239/Del/2009 being delayed and in the absence of no application for condonation of delay, the same is dismissed.
24. I.T.A. No. 2141/Del/2008 filed by Revenue has also become infructuous in view of the fact that the Revenue in this year was aggrieved only with the directions of Ld. CIT(A) whereby he had allowed carry forward of loss on account of capital loss from Assessment Year 1998-99 but since we have allowed C.O. in that year whereby we have held the addition illegal, therefore, question of carry forward of loss will not arrive. Therefore, I.T.A. No. 2141/Del/2008 is dismissed as infructuous.
25. In nutshell, appeals of revenue are dismissed as infructuous whereas C.O. 159/Del/2009 is allowed and C.O. 239/Del/2009 is dismissed.
26. Order pronounced in the open court on 29th May, 2015.
Sd./- Sd./-
( G. C. GUPTA) (T.S. KAPOOR)
VICE PRESIDENT ACCOUNTANT MEMBER
th
Date: 29 May, 2015
Sp
Copy forwarded to:-
1. The appellant
2. The respondent
3. The CIT
4. The CIT (A)-, New Delhi.
5. The DR, ITAT, Loknayak Bhawan, Khan Market, New Delhi. True copy.
By Order (ITAT, New Delhi).
21 ITA No.2140,2141/Del/2008 C.O.159 and 239/Del/2009 S.No. Details Date Initials Designation 1 Draft dictated on 26/5 Sr. PS/PS 2 Draft placed before author 26,27,28 Sr. PS/PS Draft proposed & placed before the 3 JM/AM Second Member Draft discussed/approved by Second 4 AM/AM Member 5 Approved Draft comes to the Sr. PS/PS 29/5/15 Sr. PS/PS 6 Kept for pronouncement 29/5 Sr. PS/PS 7 File sent to Bench Clerk 29/05 Sr. PS/PS Date on which the file goes to Head 8 Clerk 9 Date on which file goes to A.R. 10 Date of Dispatch of order