DCIT, New Delhi V. Sh. Mahesh Mehta, New Delhi

ITA 2053/DEL/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2674 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 02-05-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 07-04-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Income from undisclosed sources; Search and seizure; Peak credit
• Section: 143(3); 153A; 80IB; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E NEW DELHI BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO. 2050/DEL/2014 AY: 20 04-05 ITA NO. 2053/DEL/2014 AY: 20 08-09 DY.COMMISSIONER OF INCOME TAX, VS SHRI MAHESH MEHTA, CENTRAL CIRCLE-03, NEW DELHI. 2042 , KATRA TOBACCO, KHARI BAOLI, DELHI-110006 (PAN: AGBPM7320C) (APPELLANT) (RESPONDEN T) DEPARTMENT BY : SHRI H.K. CHOUDHARY, CIT DR ASSESSEE BY : SHRI SURESH GUPTA, CA ORDER PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO. 2050/DEL/14 HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF CIT (A)-I, NEW DELHI DATED 15.01.2014 FOR ASSESSMENT YEAR 2004-05. ITA NO. 2053/DEL/14 HAS B EEN FILED BY THE REVENUE AGAINST THE ORDER OF CIT (A)-I, NEW DELHI DATED 23.01.2014 FOR ASSESSMENT YEAR 2008-09. SINCE BOTH THE APPEALS WERE HEARD TOGETHER, THEY ARE BEING DISPOSE D OF THROUGH THIS COMMON ORDER. 2. BRIEF FACTS OF THE CASE ARE THAT A SEARCH AND SE IZURE OPERATION WAS CARRIED OUT AT THE RESIDENCE OF THE A SSESSEE ON ITA NO. 2050/DEL/2014 & 2053/DEL/2014 ASSESSMENT YEAR 2004-05 & 2008-09 2 30.06.2009 ALONG WITH OTHER PREMISES CONNECTED TO H IM AND ALSO THE PREMISES OF THE COMPANIES CONTROLLED BY HIM. A LARGE NUMBER OF DOCUMENTS/HARD DRIVE WERE FOUND AND SEIZE D. IT IS THE ALLEGATION OF THE DEPARTMENT THAT THE ASSESSEE WAS SELLING KATHA/KATHA PRODUCTS IN CASH OUTSIDE THE BOOKS OF A CCOUNTS AND WAS ALSO ENGAGED IN THE BUSINESS OF REAL ESTATE. I T IS THE FURTHER ALLEGATION OF THE DEPARTMENT THAT IN SALE AND PURCH ASE OF PROPERTIES, HUGE AMOUNTS ARE TAKEN IN CASH AND THAT THEY ARE NOT RECORDED IN THE BOOKS OF ACCOUNTS. FOUR BAHIS WERE ALSO SEIZED DURING THE COURSE OF SEIZURE OPERATION AND THE ASSE SSEE, ON THE BASIS OF ENTRIES IN THESE BAHIS , ADMITTED UNDISCLOSED INCOME OF RS. 10 CRORES FOR ASSESSMENT YEAR 2009-10 AND FURTH ER RS. 10 CRORES FOR ASSESSMENT YEAR 2010-11. THE TOTAL SURR ENDER MADE BY THE ASSESSEE WAS RS. 30 CRORES FOR ASSESSMENT YE AR 2009-10 AND RS. 30.80 CRORES FOR ASSESSMENT YEAR 2010-11 FO R HIMSELF AND HIS FAMILY MEMBERS. THE ASSESSEE WAS REQUIRED TO FILE RETURN OF INCOME U/S 153A OF THE INCOME TAX ACT, 1961 (HER EINAFTER REFERRED TO AS THE ACT). IN RESPONSE, THE ASSESS EE STATED THAT HE HAD FILED HIS RETURN FOR ASSESSMENT YEAR 2004-05 ON 31.10.2004 DECLARING AN INCOME OF RS. 6,20,748/- AND THE SAME MAY BE TREATED AS HAVING BEEN FILED U/S 153A OF THE ACT. ITA NO. 2050/DEL/2014 & 2053/DEL/2014 ASSESSMENT YEAR 2004-05 & 2008-09 3 2.1 DURING THE COURSE OF ASSESSMENT PROCEEDINGS U/S 153A, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD DEC LARED AN OPENING CASH BALANCE OF RS. 1,00,12,666/- AS ON 1 ST APRIL, 2003 IN THE STATEMENT OF AFFAIRS. HOWEVER, THE ASSESSIN G OFFICER DID NOT AGREE TO THE ASSESSEES CLAIM OF OPENING CASH B ALANCE AND ADDED BACK THE SAME TO HIS INCOME. THE ASSESSING O FFICER ALSO DISALLOWED ASSESSEES CLAIM OF DEDUCTION U/S 80IB A MOUNTING TO RS. 5,88,461/- FOR ASSESSEES PROPRIETARY CONCERN M /S MAHESH TEA HOUSE ON THE GROUND THAT THE BLENDING AND PACKA GING OF TEA WAS NOT A MANUFACTURING ACTIVITY. THE ASSESSING OF FICER ALSO MADE SOME OTHER DISALLOWANCES AND THE ASSESSMENT U/ S 153A R/W SECTION 143(3) OF THE ACT WAS COMPLETED AT RS.1 ,13,99,190/-. 2.2 AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEF ORE THE LD. CIT (A). THE ASSESSEE CHALLENGED THE ADDITION ON T HE LEGAL GROUND THAT SINCE THE ASSESSEES RETURN WAS ACCEPTED U/S 1 43(1) OF THE ACT, NO ASSESSMENT PROCEEDINGS WERE PENDING ON THE DATE OF SEARCH AND, THEREFORE, THE ASSESSMENT PROCEEDINGS D ID NOT ABATE AND HAD ATTAINED FINALITY. IT WAS THE PLEA OF THE ASSESSEE BEFORE THE LD. CIT (A) THAT IN THE ASSESSMENT PROCEEDINGS U/S 153A, THE ASSESSING OFFICER WAS EMPOWERED TO MAKE ONLY SUCH A DDITIONS WHICH WERE BASED ON THE EVIDENCES OF INCRIMINATING NATURE FOUND ITA NO. 2050/DEL/2014 & 2053/DEL/2014 ASSESSMENT YEAR 2004-05 & 2008-09 4 DURING THE COURSE OF SEARCH. HOWEVER, THE LD. CIT (A) DID NOT AGREE TO THE LEGAL GROUND RAISED BY THE ASSESSEE AN D DISMISSED THE SAME. HOWEVER, ON MERITS, THE LD. CIT (A) DELE TED THE ADDITION OF RS. 1,00,12,666/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNEXPLAINED OPENING CASH BALANCE. THE L D. CIT (A) ALSO ALLOWED THE ASSESSEES CLAIM OF DEDUCTION U/S 80IB. AGGRIEVED, THE DEPARTMENT HAS NOW APPROACHED THE IT AT AND HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. THAT THE COMMISSIONER OF INCOME TAX(APPEALS) H AS ERRED IN LAW AND ON FACTS OF THE CASE IN DELETING T HE ADDITION OF RS.1,00,12,666/- MADE BY THE AO ON ACCO UNT OF UNDISCLOSED INCOME. 2. THAT THE COMMISSIONER OF INCOME TAX(APPEAL) ERRED IN LAW AND ON FACTS OF THE CASE IN DELETING T HE DISALLOWANCES MADE U/S 80IB OF THE IT ACT, 1961 AMOUNTING TO RS.5,88,461 /-. 3. (A)THEORDER OF THE CIT(A) IS ERRONEOUS AND NOT TENABLE IN LAW AND ON FACTS, (B) THE APPELLANT CRAVES LEAVE S TO ADD, ALTER OR AMEND ANY/ALL OF THE GROUNDS OF APPEA L BEFORE OR DURING THE COURSE OF THE HEARING OF THE A PPEAL. 3. IN ASSESSMENT YEAR 2008-09, THE ORIGINAL RETURN HAD BEEN FILED ON 30.09.2008 DECLARING AN INCOME OF RS. 19,2 8,870/- AND IN RESPONSE TO NOTICE U/S 153A OF THE INCOME TAX AC T, CONSEQUENT TO THE SEARCH AND SEIZURE OPERATION ON 3 0.06.2009, THE RETURN OF INCOME U/S 153A WAS FILED ON 30.11.20 10 DECLARING ITA NO. 2050/DEL/2014 & 2053/DEL/2014 ASSESSMENT YEAR 2004-05 & 2008-09 5 AN INCOME OF RS. 19,76,120/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER RAISED A QUERY R EGARDING SEIZED ANNEXURE A-4 PARTY NO S-2 WHICH HAD BEEN SEIZED DUR ING THE SEARCH OPERATION AMOUNTING TO RS. 23 LAKHS. IT WAS THE ASSESSEES CONTENTION THAT THIS AMOUNT PERTAINED TO BROUGHT FORWARD FROM THE BAHIS PERTAINING TO PREVIOUS YEARS. HOWEVER, THE ASSESSING OFFICER PROCEEDED TO TREAT THE SAME A S INCOME FROM UNDISCLOSED SOURCES AND ADDED THE SAME TO THE INCOM E OF THE ASSESSEE. FURTHER, THE ASSESSING OFFICER ALSO NOTI CED THAT THE COMPANY HAD RAISED FUNDS THROUGH UNSECURED LOANS AM OUNTING TO RS. 3,95,92,219/- AND THE ASSESSEE WAS REQUIRED TO PRODUCE THE PERSONS ALONG WITH EVIDENCES OF THEIR SOURCE OF INVESTMENT MADE WITH THE ASSESSEE. CONFIRMATORY REPLIES WERE RECEIVED BY THE ASSESSING OFFICER FROM THE PERSONS IN QUESTION BUT WHEN THE INSPECTOR OF INCOME TAX WAS DEPUTED TO CONFIRM THE EXISTENCE OF THESE INVESTORS FROM THE ADDRESSES FROM WHERE THESE CONFIRMATIONS WERE RECEIVED, THE INSPECTOR IN HIS R EPORT SUBMITTED THAT NO SUCH INVESTORS EXISTED AT THE ADD RESSES MENTIONED. THE ASSESSING OFFICER PROCEEDED TO ADD BACK RS. 35 LAKHS CLAIMED TO HAVE BEEN RECEIVED AS SHARE APPLIC ATION MONEY. THE ASSESSMENT WAS COMPLETED AT AN INCOME OF RS. 77 ,76,120/-. ITA NO. 2050/DEL/2014 & 2053/DEL/2014 ASSESSMENT YEAR 2004-05 & 2008-09 6 3.1 ON APPEAL, THE LD. CIT (A) ON THE ISSUE OF ADDI TION OF RS. 23 LAKHS HELD THAT THIS AMOUNT WAS TO BE TAXED IN ASSE SSMENT YEAR 2008-09 I.E. THE YEAR UNDER CONSIDERATION ITSELF AN D DIRECTED THAT THE ASSESSEE WOULD BE ENTITLED TO BENEFIT OF THIS A MOUNT FROM UNDISCLOSED INCOME FOR ASSESSMENT YEAR 2009-10 WORK ED OUT ON THE BASIS OF PEAK CASH BALANCE. REGARDING THE OTHE R ADDITION OF RS. 35 LAKHS, THE LD. CIT (A) HELD THAT THE ASSESSE E HAD DISCHARGED THE PRIMARY ONUS TO ESTABLISH THE TRANSA CTION AND HELD THAT ON MERITS, THERE WAS NO CASE FOR ADDITION OF THESE AMOUNTS AS UNEXPLAINED CREDITS. 4. THE LD. CIT DR SUBMITTED THAT AS FAR AS THE DEPA RTMENTS GROUND NO. 1 CHALLENGING THE DELETION OF ADDITION O F RS. 1,00,12,666/- IN ASSESSMENT YEAR 2004-05 WAS CONCER NED, THE ASSESSEE HAD NOT PRODUCED ANY EVIDENCE IN SUPPORT O F THE STATEMENT OF AFFAIRS AND THE SAME WAS PRODUCED AT T HE FAG END OF THE YEAR WHEN THE ASSESSMENT ORDER WAS AT THE STAGE OF FINALIZATION AND AS SUCH, THE ASSESSING OFFICER DID NOT HAVE AN OPPORTUNITY TO VERIFY THE SAME DUE TO CONSTRAINT OF TIME. LD. CIT DR SUBMITTED THAT THE ASSESSEE HAD BEEN TAKING UNSE CURED LOANS AS WAS EVIDENT FROM THE BALANCE SHEET AND, ON THE O THER HAND, HE WAS HAVING A HUGE CASH BALANCE IN HAND WHICH APPEAR S HIGHLY ITA NO. 2050/DEL/2014 & 2053/DEL/2014 ASSESSMENT YEAR 2004-05 & 2008-09 7 IMPROBABLE. LD. CIT DR ALSO SUBMITTED THAT THE LD. CIT (A) HAD DELETED THE ADDITION ON THE GROUND THAT THE OPENING CASH BALANCE CANNOT BE THE INCOME FOR THE YEAR UNDER CONSIDERATI ON AS THE SAME WAS INCOME OF THE EARLIER YEARS. IT WAS SUBMI TTED BY THE LD. CIT DR THAT ALTHOUGH IMMEDIATELY PRECEDING ASSE SSMENT YEAR I.E. ASSESSMENT YEAR 2003-04 WAS OUTSIDE THE P URVIEW OF SIX YEARS PERIOD LAID DOWN U/S 153, IN ABSENCE OF ANY D OCUMENTARY EVIDENCE, THE UNVERIFIED OPENING CASH BALANCE CAN B E TAXED AS INCOME FROM UNDISCLOSED SOURCES. 4.1 ON GROUND NO. 2 IN ASSESSMENT YEAR 2004-05 PERT AINING TO ASSESSEES CLAIM OF DEDUCTION U/S 80IB, THE LD. CIT DR SUBMITTED THAT THERE WAS NO MANUFACTURING ACTIVITY CARRIED OUT BY THE ASSESSEE WHICH WAS THE PRE-REQUISITE FOR CLA IM OF DEDUCTION U/S 80IB. IT WAS SUBMITTED THAT THE ASSE SSEE WAS ONLY ENGAGED IN THE BLENDING AND PACKAGING OF TAX WHICH CANNOT BE CALLED A MANUFACTURING ACTIVITY BECAUSE MANUFACTURE INVOLVES TRANSFORMATION OF A PRODUCT TO THE EXTENT THAT IT B ECOMES A COMMERCIALLY DIFFERENT COMMODITY HAVING A DIFFERENT CHARACTER. LD. CIT DR SUBMITTED THAT THE LD. CIT (A) WAS PATEN TLY INCORRECT IN GRANTING ASSESSEES CLAIM OF DEDUCTION U/S 80IB. ITA NO. 2050/DEL/2014 & 2053/DEL/2014 ASSESSMENT YEAR 2004-05 & 2008-09 8 4.2 ARGUING FOR GROUND NO. 1 FOR ASSESSMENT YEAR 20 08-09 IN DEPARTMENTS APPEAL PERTAINING TO THE DIRECTION OF THE LD. CIT (A) TO REDUCE RS. 23 LAKHS FROM THE UNDISCLOSED INCOME FOR THE ASSESSMENT YEAR 2008-09, THE LD. CIT DR SUBMITTED T HAT THE ASSESSEE HAD FAILED TO SUBSTANTIATE THAT THESE AMOU NTS PERTAINED TO BROUGHT FORWARD BALANCES OF PREVIOUS YEARS AND, THEREFORE, IN ABSENCE OF SUBSTANTIATION BY THE ASSESSEE, THE ADDI TION WAS CORRECTLY MADE. 4.3 ON THE SECOND GROUND FOR ASSESSMENT YEAR 2008-0 9, PERTAINING TO DELETION OF ADDITION OF RS. 35 LAKHS, THE LD. CIT DR PLACED RELIANCE ON THE FINDINGS IN THE ASSESSMENT O RDER AND SUBMITTED THAT INSPECTORS REPORT STATING THAT INVE STOR COMPANIES WERE NOT FOUND TO BE EXISTING AT THE ADDRESS WAS CO NCLUSIVE EVIDENCE THAT THE AMOUNT OF RS. 35 LAKH WAS NOT CON TRIBUTED AS SHARE APPLICATION MONEY BY THE ALLEGED INVESTOR BUT WAS RATHER UNEXPLAINED MONEY OF THE ASSESSEE. 5. IN RESPONSE, THE LD. AUTHORISED REPRESENTATIVE S UBMITTED THAT AS FAR AS ASSESSMENT YEAR 2004-05 WAS CONCERNE D, RULE 27 OF THE INCOME TAX APPELLATE TRIBUNAL RULES 1963 WAS BEING INVOKED BY HIM ON THE GROUND THAT NO INCRIMINATING MATERIAL WAS FOUND DURING THE COURSE OF SEARCH WHICH PERTAINED T O ASSESSMENT ITA NO. 2050/DEL/2014 & 2053/DEL/2014 ASSESSMENT YEAR 2004-05 & 2008-09 9 YEAR 2004-05. IT WAS SUBMITTED THAT ADDITION OF RS . 1,00,12,666/- WAS MADE ON THE BASIS OF STATEMENT O F AFFAIRS AS ON 31.03.2003 WHICH WAS FILED BY THE ASSESSEE DURIN G THE COURSE OF ASSESSMENT PROCEEDINGS AND THE SAME WAS NOT BASE D ON ANY INCRIMINATING MATERIAL FOUND DURING THE COURSE OF S EARCH. THE LD. AUTHORISED REPRESENTATIVE ALSO SUBMITTED THAT E VEN IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS NOT REF ERRED TO ANY INCRIMINATING MATERIAL HAVING BEEN FOUND DURING THE YEAR UNDER CONSIDERATION. LD. AUTHORISED REPRESENTATIVE ALSO SUBMITTED THAT IN THIS YEAR, THE ASSESSMENT PROCEEDINGS HAD NOT AB ATED AND, THEREFORE, NO ADDITION COULD BE MADE IF THE SAME WA S NOT BASED ON ANY INCRIMINATING MATERIAL FOUND DURING THE COUR SE OF SEARCH. THE LD. AUTHORISED REPRESENTATIVE RELIED ON THE JUD GMENT OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF KABUL CHAWL A AND SUBMITTED THAT THE JUDGMENT OF THE HON'BLE HIGH COU RT SQUARELY COVERED THE ASSESSEES CASE IN ASSESSEES FAVOR. O N MERITS, THE LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT THE AS SESSING OFFICER HAD NOT EXAMINED THE RETURN OF THE ASSESSME NT YEARS AND THE STATEMENT OF AFFAIRS WAS BEING FILED EVERY YEAR AND, THEREFORE, THE ASSESSEE CANNOT BE HELD AT FAULT FOR THE INACTI ON OF THE ASSESSING OFFICER IN NOT EXAMINING AND VERIFYING TH E ITA NO. 2050/DEL/2014 & 2053/DEL/2014 ASSESSMENT YEAR 2004-05 & 2008-09 10 RETURN/STATEMENT OF AFFAIRS OF EARLIER YEARS. IT W AS SUBMITTED THAT THERE WAS AN APPARENT ACCEPTANCE BY THE DEPARTMENT OF THE RETURN AND THE STATEMENT OF AFFAIRS AS THERE WAS NO T RECORDING OF FACT TO THE CONTRARY. ON THE ISSUE OF DEDUCTION U/ S 80IB OF THE ACT, IT WAS SUBMITTED THAT BLENDING TEA ONLY MAKES IT FIT FOR CONSUMPTION AND, THEREFORE, THE PROCESS OF BLENDING WAS ESSENTIALLY MANUFACTURING AS A NEW PRODUCT FOR HUMA N CONSUMPTION CAME INTO EXISTENCE AS A CONSEQUENCE OF BLENDING AND MIXING. 5.1 ON GROUND NO.1 PERTAINING TO DEPARTMENTS APPEA L FOR ASSESSMENT YEAR 2008-09, THE LD. AUTHORISED REPRESE NTATIVE SUBMITTED THAT THE LD. CIT(A) HAS ADJUDICATED THIS ISSUE AGAINST THE ASSESSEE AND HAS DIRECTED THAT THE AMOUNT OF RS .23 LAKHS HAS TO BE TAXED FOR ASSESSMENT YEAR 2008-09 ITSELF AND HAS GIVEN A DIRECTION THAT THIS AMOUNT SHOULD BE REDUCED AT T HE TIME OF CALCULATING PEAK CREDIT FOR ASSESSMENT YEAR 2008-09 AND, THEREFORE, IF THE DEPARTMENT HAD ANY CAUSE FOR GRIE VANCE, THE SAME CAN ONLY BE IN ASSESSMENT YEAR 2009-10 AND NOT IN ASSESSMENT YEAR 2008-09. 5.2 ON GROUND NO.2 IN ASSESSMENT YEAR 2008-09, THE LD. AUTHORISED REPRESENTATIVE PLACED RELIANCE ON THE OR DERS OF THE ITA NO. 2050/DEL/2014 & 2053/DEL/2014 ASSESSMENT YEAR 2004-05 & 2008-09 11 LEARNED CIT (A) AND ALSO SUBMITTED THAT THE REPORT WAS OBTAINED AT THE BACK OF THE ASSESSEE AND THE ASSESSEE WAS NO T CONFRONTED WITH THE INCOME TAX REPORT. IT WAS FURTHER SUBMITT ED THAT THE INITIAL ONUS HAD BEEN DISCHARGED BY THE ASSESSEE AN D THE SAME WAS NOT REFLECTED IN THE BOOKS OF ACCOUNTS. IT WAS ALSO SUBMITTED THAT THE ASSESSEE WAS WILLING TO PRODUCE THE PARTIE S AT EVEN THIS STAGE. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y PERUSED THE RELEVANT MATERIAL PLACED ON RECORD. AS FAR AS DEPARTMENTS APPEAL FOR ASSESSMENT YEAR 2004-05 IS CONCERNED, A PERUSAL OF THE ASSESSMENT ORDER SHOWS THAT THE ADDITIONS IN TH IS YEAR HAVE BEEN MADE WITHOUT ANY REFERENCE TO ANY INCRIMINATIN G MATERIAL FOUND AND SEIZED AND PERTAINED TO THIS YEAR DURING THE SEARCH OPERATION. IT IS UNDISPUTED THAT THE ASSESSEE HAD FILED THE ORIGINAL RETURN ON 1.11.2004. THUS, IT IS NOT THE CASE OF THE DEPARTMENT THAT NO RETURN OF INCOME HAD BEEN FILED. IT IS ALSO UNDISPUTED THAT NOTICE U/S 143(2) OF THE ACT COULD HAVE BEEN ISSUED UP TO 31.10.2005 WHICH WAS NOT ISSUED. A SE ARCH TOOK PLACE ON 30.6.2009 AND, THEREFORE, THE ASSESSMENT F OR ASSESSMENT YEAR 2004-05 CANNOT BE SAID TO HAVE ABAT ED ON THE DATE OF SEARCH. IT WILL ALSO BE WORTHWHILE TO REPR ODUCE PARA 37 OF ITA NO. 2050/DEL/2014 & 2053/DEL/2014 ASSESSMENT YEAR 2004-05 & 2008-09 12 THE JUDGMENT OF THE HONBLE HIGH COURT OF DELHI IN THE CASE OF CIT CENTRAL III VS. KABUL CHAWLA (SUPRA) WHICH LA YS DOWN THE ENTIRE LAW WITH REGARD TO SECTION 153A AS UNDER :- 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 LEGA L POSITION THAT EMERGES IS UNDER: I. ONCE A SEARCH TAKES PLACE UNDER SECTION 132 OF THE ACT, NOTICE UNDER SECTION 153 A (1) WILL HAV E 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 OF 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 BE 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 OTHE R POST-SEARCH MATERIAL OR INFORMATION AVAILABLE WITH ITA NO. 2050/DEL/2014 & 2053/DEL/2014 ASSESSMENT YEAR 2004-05 & 2008-09 13 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 'ASSESS' 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 ASSESSMENT AND THE ASSESSMENT UNDER SECTION 153A MERGES INTO ONE. ONLY ONE ASSESSMENT SHALL BE MADE SEPARATELY FOR EACH AY ON THE BASIS OF THE FINDING OF THE SEARCH AND ANY OTHER MATERIAL EXISTING OR BROUGHT ON THE RECORD OF THE AO. 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 UNDISCLOSED 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. 6.1 PERUSAL OF THE ASSESSMENT ORDER REVEALS THAT THE AO HAS NOT REFERRED TO ANY INCRIMINATING MATERIAL WHILE MAKING THE ADDITIONS ITA NO. 2050/DEL/2014 & 2053/DEL/2014 ASSESSMENT YEAR 2004-05 & 2008-09 14 AND THEREFORE THE CASE OF THE ASSESSEE IS SQUARELY COVERED BY THE RATIO OF THE JUDGMENT OF THE HONBLE DELHI HIGH COU RT IN THE CASE OF KABUL CHAWLA (SUPRA). ACCORDINGLY, THE ASSESSMEN T ITSELF IS VOID AB INITIO . THUS, ON THE FACTS OF THE CASE AND RESPECTFULLY FOLLOWING THE HONBLE HIGH COURT OF DELHI IN CIT CE NTRAL III VS. KABUL CHAWLA (SUPRA) WHILE ACCEPTING THE ASSESEEES GROUND UNDER RULE 27 OF THE ITAT RULES, 1963, WE QUASH THE ENTIRE ASSESSMENT. THE DEPARTMENTS APPEAL STANDS DISMISSE D. 6.2 AS FAR AS THE DEPARTMENTS APPEAL FOR ASSESSMEN T YEAR 2008-09 IS CONCERNED, WITH RESPECT TO GROUND NO.1, WE AGREE WITH THE CONTENTIONS OF THE LD. AUTHORISED REPRESENTATIV E THAT LD. CIT (A) HAS DIRECTED THAT THE AMOUNT OF RS. 23 LAKHS IS TO BE BROUGHT TO TAX IN ASSESSMENT YEAR 2008-09 I.E. THE YEAR UND ER APPEAL. THE LD. CIT (A) HAS DIRECTED THAT A SET OFF OF THIS AMOUNT COULD BE GIVEN IN ASSESSMENT YEAR 2009-10, THEREFORE, THE DE PARTMENT CAN HAVE GRIEVANCE WITH RESPECT TO APPELLATE PROCEEDING S IN ASSESSMENT YEAR 2009-10 ONLY. ACCORDINGLY, WE DISM ISS GROUND NO. 1 AS INFRUCTUOUS. 6.3 AS FAR AS GROUND NO. 2 REGARDING SHARE APPLICAT ION MONEY OF RS. 35 LAKHS IS CONCERNED, IT IS UNDISPUTED THAT TH E ASSESSEE HAD ITA NO. 2050/DEL/2014 & 2053/DEL/2014 ASSESSMENT YEAR 2004-05 & 2008-09 15 FILED RELEVANT DOCUMENTARY EVIDENCES BEFORE THE ASS ESSING OFFICER AND THE ASSESSING OFFICER HAS ALSO ACKNOWLEDGED THE SAME IN HIS ASSESSMENT ORDER. THE AMOUNT HAS BEEN ADDED BACK O N THE GROUND THAT WHEN AN INSPECTOR WAS DEPUTED TO VISIT THE ADDRESSES FROM WHICH THE CONFIRMATORY LETTERS OF TH E SHARE APPLICANTS WERE RECEIVED, THE INSPECTOR IN HIS REPO RT STATED THAT NO SUCH SHARE APPLICANTS WERE FOUND AT THESE ADDRES SES. HOWEVER, IT IS UNDISPUTED THAT THE ASSESSEE WAS NOT CONFRONTED WITH THE INSPECTORS REPORT AND THE ADDITION WAS MA DE ON THE BASIS OF A REPORT OBTAINED BEHIND HIS BACK. HOWEVE R, THE LD. AUTHORISED REPRESENTATIVE HAS STATED THAT THE ASSES SEE WAS WILLING TO PRODUCE THE PARTIES EVEN AT THIS STAGE A ND, THEREFORE, WE DEEM IT PROPER TO RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR VERIFYING THESE AMOUNTS AFTER GIVING DU E OPPORTUNITY TO THE ASSESSEE TO SUBSTANTIATE HIS CLAIM AND ALSO EXA MINING THE PARTIES, IF SO DEEMED NECESSARY BY HIM. ACCORDINGL Y, THIS GROUND STANDS ALLOWED FOR STATISTICAL PURPOSES. 7. IN THE FINAL RESULT, I.T.A. NO. 2050/DEL/2014 ST ANDS DISMISSED WHEREAS I.T.A. 2053/DEL/2014 STANDS PARTL Y ALLOWED FOR STATISTICAL PURPOSES. ITA NO. 2050/DEL/2014 & 2053/DEL/2014 ASSESSMENT YEAR 2004-05 & 2008-09 16 ORDER PRONOUNCED IN THE OPEN COURT ON 31ST JULY, 2017. SD/- SD/- (R.K. PANDA) (SUDHANSHU SRIVASTAVA) ACCOUNTANT MEMBER JUDICI AL MEMBER DATED: 31ST JULY, 2017 GS COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT BY ORDER ASSTT. REGISTRAR