M/s. Sudhir Engineering Co., New Delhi V. DCIT, New Delhi

ITA 1758/DEL/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 8069 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 1 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 31-03-2016
• Assessment Year: 2004-2005
• Appeal Filed On: 25-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SALIL AGGARWAL SHAILESH GU PTA; SHANKALP SHARMA
• Keywords: Search and seizure
• Section: 143(3); 153A; 80IB; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH G NEW DELHI) BEFORE SHRI I.C. SUDHIR AND SHRI O.P. KANT ITA NO. 1 75 8 /DEL/201 4 ASSESSMENT YEAR: 200 4 - 0 5 SUDHIR ENGINEERING CO. VS. DCIT, 507 - 509, INTERNATIONAL TRADE TOWE R, CENTRAL CIR. 25, NEHRU PLACE, NEW DELHI. NEW DELHI. (PAN: AA BFS6000P ) (APPELLANT) (RESPONDENT) ASSESSEE BY: S/ SHRI SALIL AGGARWAL, SHAILESH GUPTA & SHANKALP SHARMA, ADV. DEPARTM ENT BY: S MT . RISHPAL BEDI, SR. DR DATE OF HEARING : 21 . 0 4 .201 6 DATE OF PRONOUNCEMENT: 27 : 0 4 .201 6 ORDER PER I.C. SUDHIR : JUDICIAL MEMBER THE ASSESSEE HAS QUESTIONED FIRST APPELLATE ORDER ON SEVERAL GROUNDS RAISING THE ISSUE AS TO WHETHER THE LEARNED CIT(APPEALS) WAS JUSTIFIED IN SUSTAINING A DISALLOWANCE OF RS.4,91,404 ON ACCOUNT OF DEDUCTION CLAIMED UNDER SEC. 80IB OF THE INCOME - T AX ACT, 1961 IN AN ASSESSMENT MADE UNDER SEC. 153A/143(3) OF THE INCOME - TAX ACT, 1961. 2. HEARD AND CONSIDERED THE ARGUMENTS ADVANCED BY THE PARTIES IN VIEW OF ORDERS OF THE AUTHORITIES BELOW, MATERIAL AVAILABLE ON RECORD AND THE DECISIONS RELIED UPON. 2 3 . AT THE OUTSET OF HEARING, THE LEARNED AR POINTED OUT THAT DISALLOWANCE OF RS.4,91,404 CLAIMED ON ACCOUNT OF DEDUCTION UNDER SEC. 80IB OF THE ACT HAS BEEN WRONGLY SUSTAINED BY THE LEARNED CIT(APPEALS) WITHOUT APPRECIATING THAT THE PROCEEDINGS INITIATED UN DER SEC. 153A OF THE ACT AND FRAMING ASSESSMENT IN FURTHERANCE THERETO MAKING THE SAID DISALLOWANCE IN ABSENCE OF INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH AND ABATEMENT OF ASSESSMENTS MADE EARLIER ON 15.12.2006 UNDER SEC. 143(3) OF THE ACT AND UNDER SEC. 143(3)/147 ON 20.11.2009 ON THE DATE OF SEARCH. HE SUBMITTED THAT IN SUCH A SITUATION, THE HON'BLE JURISDICTIONAL HIGH COURT OF DELHI IN THE CASE OF PRAVEEN KUMAR JOLLY VS. DG OF INCOME - TAX(INV.) AND ORS. IN WP(C) 8721/2014 AND OTHERS VIDE O RDER DATED 22.3.2016 (COPY FILED) HAS BEEN PLEASED TO HOLD THAT EVEN ISSUANCE OF NOTICE UNDER SEC. 153A IS BAD IN LAW. 3.1 THE LEARNED AR SUBMITTED FURTHER THAT IN THE ASSESSMENT ORIGINALLY FRAMED UNDER SEC. 143(3) ON 15.12.2006, THE CLAIMED DEDUCTION UN DER SEC. 80IB OF THE ACT WAS ALLOWED. AGAIN IN THE ASSESSMENT FRAMED UNDER SEC. 147/143(3) ON 30.11.2009, THE SIMILAR INCOME HAS BEEN ASSESSED ACCEPTING THE CLAIMED DEDUCTION UNDER SEC. 80IB OF THE ACT. COPIES OF THESE ASSESSMENT ORDERS HAVE BEEN MADE AVAI LABLE AT PAGE NOS. 1 TO 4 OF THE PAPER 3 BOOK. HE SUBMITTED THAT SEARCH AND SEIZURE OPERATION IN SUDHIR GROUP OF CASES WAS THEREAFTER CONDUCTED ON 10.2.2010 AND NOTICE UNDER SEC. 153A OF THE ACT WAS ISSUED TO THE ASSESSEE. IN RESPONSE THE ASSESSEE FILED ITS RETURN OF INCOME AT RS.3,02,83,247 ON WHICH THE EARLIER ASSESSMENTS WERE FRAMED. IN THE ASSESSMENT FRAMED UNDER SEC. 153A/143(3), THE ASSESSING OFFICER HAS DISALLOWED THE CLAIMED DEDUCTION UNDER SEC. 80IB AT RS.4,91,404 WHICH HAS BEEN UPHELD BY THE LEARNED CIT(APPEALS). 4. THE LEARNED SENIOR DR ON THE OTHER HAND OPPOSED THE APPEAL WITH THIS CONTENTION THAT THE AUTHORITIES BELOW HAVE RIGHTLY DISALLOWED THE CLAIMED DE DUC TION ON SCRAP SALES SINCE IT WAS NOT DERIVED FROM THE MANUFACTURING OF DG SETS. SHE, HOW EVER, CONTENDED THAT NO SUCH LEGAL ISSUE QUESTIONING THE VALIDITY OF INITIATION OF PROCEEDINGS UNDER SEC. 153A OF THE ACT AND ASSESSMENT MADE IN FURTHERANCE THERETO WAS RAISED BEFORE THE AUTHORITIES BELOW. 5. IN REJOINDER, THE LEARNED AR SUBMITTED THAT IT IS AN ESTABLISHED PROPOSITION OF LAW THAT A GROUND INVOLVING THE LEGAL ISSUE GOING TO THE ROOT OF THE MATTER AND ADJUDICATION OF WHICH DOES NOT REQUIRE CONSIDERATION OF FRESH MATERIAL OUTSIDE THE RECORD CAN BE RAISED EVEN FOR THE FIRST TIME BEFORE THE 4 A PPELLATE AUTHORITY. AS AN ABUNDANT PRECAUTION AND TO AVOID TECHNICAL DEFECT IF ANY THE GROUND RAISED ON THE ISSUE CAN BE TREATED AS AN ADDITIONAL GROUND AND THE SAME MAY BE ALLOWED FOR ADJUDICATION BY THE ITAT, PRAYED THE LEARNED AR. 6. CONSIDERING THE AB OVE SUBMISSIONS, WE FIND SUBSTANCE IN THE CONTENTIONS OF THE LEARNED SENIOR DR THAT VALIDITY OF INITIATION OF PROCEEDINGS UNDER SEC. 153A OF THE ACT AND THE ASSESSMENT FRAMED IN FURTHERANCE THERETO WAS NOT QUESTIONED BEFORE THE AUTHORITIES BELOW. WE, HOWEV ER, CONCUR WITH THE SUBMISSION OF THE LEARNED AR THAT AN ADDITIONAL GROUND RAISING A LEGAL ISSUE WHICH GOES TO THE ROOT OF THE MATTER AND FOR ADJUDICATION OF THE SAME, NO FRESH MATERIAL OUTSIDE THE RECORD IS REQUIRED TO BE CONSIDERED, THE SAME EVEN IF IT I S RAISED FOR THE FIRST TIME BEFORE THE ITAT CAN BE ALLOWED. WE THUS ALLOW THE PRAYER OF THE LEARNED AR IN THIS REGARD. PARTIES WERE DIRECTED TO ADVANCE THEIR RESPECTIVE ARGUMENTS ON THE ISSUE. IN RESPONSE THEY ADOPTED THE ABOVE ARGUMENTS ADVANCED BY THEM. 7. WE FIND THAT THERE IS NO DISPUTE ON THE FACT THAT IN THE ASSESSMENT FRAMED UNDER SEC. 143(3) OF THE ACT ON 15.12.2006 AND IN THE REASSESSMENT FRAMED UNDER SEC. 147/143(3) OF THE ACT FRAMED ON 30.11.2009, THE ASSESSING OFFICER HAD ALLOWED THE CLAIMED DE DUCTION UNDER SEC. 80IB OF THE 5 ACT. THESE ASSESSMENTS WERE FRAMED WELL BEFORE THE DATE OF SEARCH I.E. CONDUCTED ON 10.2.2010 IN SUDHIR GROUP OF CASES. IN OTHER WORDS, ON THE DATE OF SEARCH, NO ASSESSMENT WAS PENDING. IT IS ALSO AN UNDISPUTED FACT THAT NO I NCRIMINATING MATERIAL LEADING TO THE DISALLOWANCE OF THE CLAIMED DEDUCTION WAS UNEARTHED DURING THE COURSE OF SEARCH TO SAY THAT INCRIMINATING MATERIAL WAS FOUND DURING THE COURSE OF SEARCH ON THE BASIS OF WHICH THE CLAIMED DEDUCTION UNDER SEC. 80IB OF THE ACT WAS DISALLOWED. WE THUS CONCUR WITH THE CONTENTION OF THE LEARNED AR THAT IN ABSENCE OF INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH AND ABATEMENT OF ASSESSMENT ON THE DATE OF SEARCH, THE ASSESSMENT IN QUESTION FRAMED UNDER SEC. 153A/143(3 ) OF THE ACT CAN BE HELD AS VALID. THIS VIEW IS SUPPORTED BY THE RATIOS LAID DOWN BY THE HON'BLE JURISDICTIONAL HIGH COURT OF DELHI IN ITS RECENT DECISION IN THE CASE OF CIT VS. KABUL CHAWLA [2016] 380 ITR 573 (DELHI). THE HON'BLE HIGH COURT HAS BEEN P LEASED TO SUMMARIZED THE LEGAL POSITION ON THE APPLICATION OF THE PROVISIONS LAID DOWN UNDER SEC. 153A OF THE ACT IN PARA NO. 37 OF THE DECISION, WHICH IS BEING REPRODUCED HEREUNDER FOR A READY REFERENCE: 37. ON A CONSPECTUS OF SECTION 153A(1) OF THE ACT, READ WITH THE PROVISOS THERETO, AND IN THE LIGHT OF THE LAW EXPLAINED IN THE AFOREMENTIONED DECISIONS, THE LEGAL POSITION THAT EMERGES IS AS UNDER: 6 I. ONCE A SEARCH TAKES PLACE UNDER SECTION 132 OF THE ACT, NOTICE UNDER SECTION 153 A (1) WILL HAVE TO BE MANDATORILY ISSUED TO THE PERSON SEARCHED REQUIRING HIM TO FILE RETURNS FOR SIX AYS IMMEDIATELY PRECEDING THE PREVIOUS YEAR RELEVANT TO THE AY IN WHICH THE SEARCH TAKES PLACE. II. ASSESSMENTS AND REASSESSMENTS PENDING ON THE DATE OF THE SEARCH SHALL ABATE. THE TOTAL INCOME FOR SUCH AYS WILL HAVE TO BE COMPUTED BY THE AOS AS A FRESH EXERCISE. III. THE AO WILL EXERCISE NORMAL ASSESSMENT POWERS IN RESPECT O F THE SIX YEARS PREVIOUS TO THE RELEVANT AY IN WHICH THE SEARCH TAKES PLACE. THE AO HAS THE POWER TO ASSESS AND REASSESS THE 'TOTAL INCOME' OF THE AFOREMENTIONED SIX YEARS IN SEPARATE ASSESSMENT ORDERS FOR EACH OF THE SIX YEARS. IN OTHER WORDS THERE WILL B E ONLY ONE ASSESSMENT ORDER IN RESPECT OF EACH OF THE SIX AYS 'IN WHICH BOTH THE DISCLOSED AND THE UNDISCLOSED INCOME WOULD BE BROUGHT TO TAX'. IV. ALTHOUGH SECTION 153 A DOES NOT SAY THAT ADDITIONS SHOULD BE STRICTLY MADE ON THE BASIS OF EVIDENCE FOUND IN THE COURSE OF THE SEARCH, OR OTHER POST - SEARCH MATERIAL OR INFORMATION AVAILABLE WITH THE AO WHICH CAN BE RELATED TO THE EVIDENCE FOUND, IT DOES NOT MEAN THAT THE ASSESSMENT 'CAN BE ARBITRARY OR MADE WITHOUT ANY RELEVANCE OR NEXUS WITH THE SEIZED MATERIAL . OBVIOUSLY AN ASSESSMENT HAS TO BE MADE UNDER THIS SECTION ONLY ON THE BASIS OF SEIZED MATERIAL.' V. IN ABSENCE OF ANY INCRIMINATING MATERIAL, THE COMPLETED ASSESSMENT CAN BE REITERATED AND THE ABATED ASSESSMENT OR REASSESSMENT CAN BE MADE. THE WORD 'ASSE SS' IN SECTION 153 A IS RELATABLE TO ABATED PROCEEDINGS (I.E. THOSE PENDING ON THE DATE OF SEARCH) AND THE WORD 'REASSESS' TO COMPLETED ASSESSMENT PROCEEDINGS. VI. INSOFAR AS PENDING ASSESSMENTS ARE CONCERNED, THE JURISDICTION TO MAKE THE ORIGINAL ASSESSME NT AND THE ASSESSMENT UNDER SECTION 153A MERGES INTO ONE. ONLY ONE ASSESSMENT SHALL BE MADE SEPARATELY FOR EACH AY ON THE BASIS OF THE FINDINGS OF THE SEARCH AND ANY OTHER MATERIAL EXISTING OR BROUGHT ON THE RECORD OF THE AO. 7 VII. COMPLETED ASSESSMENTS CAN BE INTERFERED WITH BY THE AO WHILE MAKING THE ASSESSMENT UNDER SECTION 153 A ONLY ON THE BASIS OF SOME INCRIMINATING MATERIAL UNEARTHED DURING THE COURSE OF SEARCH OR REQUISITION OF DOCUMENTS OR UNDISCL OSED INCOME OR PROPERTY DISCOVERED IN THE COURSE OF SEARCH WHICH WERE NOT PRODUCED OR NOT ALREADY DISCLOSED OR MADE KNOWN IN THE COURSE OF ORIGINAL ASSESSMENT. 8. WE THUS RESPECTFULLY FOLLOWING THE RATIOS LAID DOWN IN THE ABOVE DECISION IN THE CASE OF KA BUL CHAWLA (SUPRA) HOLD THAT THE ASSESSMENT FRAMED UNDER SEC. 153A/143(3) OF THE ACT QUESTIONED IN THE PRESENT CASE IS NOT VALID IN ABSENCE OF INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH AND ABATEMENT OF ASSESSMENT AND REASSESSMENT ALREADY FRA MED ON THE DATE OF SEARCH. THE ASSESSMENT IS ACCORDINGLY QUASHED AS VOID - AB - INITIO. THE ISSUE IS THUS DECIDED IN FAVOUR OF THE ASSESSEE AND THE GROUNDS INVOLVING THE SAME ARE ALLOWED. THE MERIT OF THE DISALLOWANCE OF THE CLAIMED DEDUCTION UNDER SEC. 80IB O F THE ACT QUESTIONED IN THE REMAINING GROUND HAS THUS BECOME INFRUCTUOUS. 9. IN RESULT, THE APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 . 0 4 . 201 6 S D/ - SD/ - ( O.P . K A NT ) ( I.C. S UDHIR ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 27 / 0 4 /201 6 MOHAN LAL 8 COPY FORWARDED TO: 1) APPELLANT 2) RESPONDENT 3) CIT 4) CIT(APPEALS) 5) DR:ITAT ASSISTANT REGISTRAR DATE DRAFT DICTATED DIRECTLY ON COMPUTER 27 . 0 4 .201 6 DRAFT PLACED BEFORE AUTHOR 27 . 0 4 .2016 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. 27 .04 .2016 APPROVED DRAFT COMES TO THE SR.PS/PS 27 . 0 4 .2016 KEPT FOR PRONOUNCEM ENT ON 27 .04 .2016 FILE SENT TO THE BENCH CLERK 28 . 0 4 .2016 DATE ON WHICH FILE GOES TO THE AR DATE ON WHICH FILE GOES TO THE HEAD CLERK. DATE OF DISPATCH OF ORDER.