Amit Arora, New Delhi V. DCIT, New Delhi

ITA 3481/DEL/2015

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 4661 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 5 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-11-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2006-2007
• Appeal Filed On: 01-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S S RANA
• Assessee Lawyers: SAMARTH CHOUDHARI ADV P
• Keywords: Gift; Search and seizure
• Section: 143(3); 153A; 2(22)(e); 234B; 115JB; 143(1); 143(2); 139(1); 145; 132; 144; 2; 139

Judgement Text

ITA NO.- 3481 /DEL/2015. SHRI AMIT ARORA, NEW DELHI. PAGE 1 OF 12 IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH: G: NEW DELHI) BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI ANADEE NATH MISSHRA, ACCOUNTANT MEMBER ITA NO:- 3481 /DEL/2015 ( ASSESSMENT YEAR: 2006-07) SHRI AMIT ARORA, 201, VIPPS CENTRE,-2- COMMUNITY CENTER, MASJID MOTH, G.K. II, NEW DELHI. VS ACIT, CENTRAL CIRCLE-22, NEW DELHI. PAN NO: ACAPA9659D APPELLANT RESPONDENT REVENUE BY : SHRI S.S. RANA, CIT(DR) ASSESSEE BY : SHRI SALIL KAPOOR, ADV. AND SHRI SAMARTH CHOUDHARI, ADV. PER ANADEE NATH MISSHRA, AM (A) THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE IMPUGNED APPELLATE ORDER DATED 01.04.2015 PASSED BY LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-29, NEW DELHI, [LD. CIT(A),FOR SHORT] PERTAINING TO ASSES SMENT YEAR 2006-07, ON THE FOLLOWING GROUNDS: 1. THAT THE NOTICE ISSUED AND ASSESSMENT ORDER PAS SED U/S 153A /143(3) IS ILLEGAL, BAD IN LAW AND WITHOUT JURISDICTION. 2. THAT THE ADDITION MADE BY THE AO ARE NOT BASED ON ANY INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH. HENCE A SSESSMENT ORDER PASSED ITA NO.- 3481 /DEL/2015. SHRI AMIT ARORA, NEW DELHI. PAGE 2 OF 12 U/S 153A/143(3) AND THE ADDITIONS/DISALLOWANCES ARE ILLEGAL, BAD IN LAW AND WITHOUT JURISDICTION. 3. THAT IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE, CIT (A) HAS ERRED IN LAW IN UPHOLDING THE ADDITION U/S 153A MADE BY T HE AO AS NO INCRIMINATING DOCUMENT WAS FOUND AT THE PREMISES OF THE ASSESSEE DURING THE COURSE OF SEARCH. 4. THAT THE ADDITION/DISALLOWANCE MADE IS UNJUST, ARBITRARY AND IS NOT BASED ON ANY MATERIAL ON RECORD. THE CIT(APPEAL) HAS ERRE D IN SUSTAINING THE ADDITION OF RS 5,31,000/- OUT OF ADDITION OF RS. 7, 77,648/-. 5. THAT IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN UPHOLDING THE ADDITION OF RS.5,31,000/- U/S 69 OF THE ACT ON ACCOUNT OF CHEQUE DEPOSITED IN THE ST ANDARD CHARTERED BANK OF THE ASSESSEES MINOR SON. 6. THAT THE CIT (A) HAS FAILED TO APPRECIATE THAT D EPOSIT OF RS. 5,31,000/- IN THE BANK ACCOUNT REPRESENT GIFT FROM GRANDFATHER/ U NCLE OF MOTHER TO THE MINOR SON AND THE SAME HAS BEEN WRONGLY TREATED AS INCOME. 7. THAT THE EXPLANATIONS GIVEN, EVIDENCE PRODUCED AND MATERIAL PLACED AND MADE AVAILABLE ON RECORD HAVE NOT BEEN PROPERLY CON SIDERED AND JUDICIALLY INTERPRETED AND THE SAME DO NOT JUSTIFY THE ADDITIO N MADE. 8. THAT THE ADDITION MADE IS BASED ON MERE SURMISES AND CONJUNCTURES AND THE SAME CANNOT BE JUSTIFIED BY ANY MATERIAL ON RECORD. 9. THAT INTEREST U/S 234A 234B AND 234C OF THE INC OME TAX ACT, 1961 HAS BEEN WRONGLY AND ILLEGALLY CHARGED AND HAS BEEN WRO NGLY WORKED OUT. 10. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTE R AND/OR DELETE ANY OF THE ABOVE GROUNDS OF APPEAL AT OR BEFORE THE TIME OF HE ARING. (B) ORIGINAL RETURN OF INCOME WAS FILED BY THE ASSESSE E UNDER SECTION 139(1) OF THE INCOME TAX ACT, 1961 (I.T. ACT, FOR SHORT) ON 22.07.2006 DECLARING INCOME OF RS. 5,77,411/-. A SEARCH AND SEIZURE ACTION U/S 13 2 OF THE I.T. ACT WAS CARRIED OUT ON 05.12.2007. AT THE TIME OF SEARCH, NO ASSESSMEN T PROCEEDING WAS PENDING IN THE CASE OF THE ASSESSEE. NOTICE U/S 153A OF I.T. A CT WAS ISSUED AND THE ASSESSEE FILED RETURN IN RESPONSE THERETO, ON 10.11.2008 DEC LARING, AGAIN, THE AFORESAID ITA NO.- 3481 /DEL/2015. SHRI AMIT ARORA, NEW DELHI. PAGE 3 OF 12 INCOME OF RS. 5,77,411/- . ASSESSMENT ORDER DATED 30.12.2009 WAS PASSED BY THE ASSESSING OFFICER (AO, FOR SHORT) UNDER SECTION 1 53A / 143(3) OF I.T. ACT, WHEREIN, INTER ALIA, ADDITION OF RS. 7,77,649/- WAS MADE ON ACCOUNT OF UNEXPLAINED DEPOSITS IN STANDARD CHARTERED BANK IN THE NAME OF THE ASSES SEES MINOR SON. THE ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A). VIDE IMPUGNED APPELLATE ORDER DATED 01.04.2015, THE LD. CIT(A) SUSTAINED AN AMOUNT OF R S. 5,31,000/- OUT OF THE AFORESAID ADDITION OF RS. 7,77,649/- AND DELETED TH E REMAINING AMOUNT. THIS PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE AGAIN ST THE AFORESAID IMPUGNED APPELLATE ORDER DATED 01.04.2015 OF LD. CIT(A). (C) AT THE TIME OF HEARING BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE CONTENDED THAT NO INCRIMINATING MATERIALS WERE FOUND / SEIZED AT THE TIME OF AFORESAID SEARCH AND SEIZURE ACTION UNDER SECTION 132 OF I.T. ACT AND TH EREFORE THE AO HAD NO JURISDICTION UNDER SECTION 153A OF I.T. ACT TO MAKE THE ASSESSME NT, WHEREBY THE AFORESAID ADDITIONS WERE MADE. HE FURTHER SUBMITTED THAT THE ISSUE ON THIS POINT IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY ORDER OF JURIS DICTION HIGH COURT IN THE CASE OF KABUL CHAWLA VS. CIT (2016) 380 ITR 573 (DELHI) . (D) WE HAVE HEARD BOTH SIDES. WE HAVE ALSO PERUSED THE MATERIALS AVAILABLE ON RECORD. THERE IS NO DISPUTE BETWEEN TWO SIDES ABOU T THE FACT THAT NO ASSESSMENT PROCEEDINGS WERE PENDING IN THE CASE OF THE ASSESSE E ON 05.12.2007, THE DATE OF SEARCH AND SEIZURE ACTION U/S 132 OF I.T. ACT. IT IS ALSO A FACT THAT TIME LIMIT FOR ITA NO.- 3481 /DEL/2015. SHRI AMIT ARORA, NEW DELHI. PAGE 4 OF 12 SERVICE OF NOTICE UNDER SECTION 143(2) OF I.T. ACT IN RESPECT OF RETURN FILED ON 22.07.2006. THUS, THE ASSESSMENT ORDER DATED 30.12. 2009 UNDER SECTION 153A OF I.T. ACT HAS NOT BEEN PASSED AFTER ABATEMENT OF ANY PEND ING ASSESSMENT PROCEEDINGS UNDER SECOND PROVISO TO SECTION 153A(1) OF I.T. ACT . THERE IS ALSO NO DISPUTE BETWEEN THE TWO SIDES THAT NO INCRIMINATING MATERIALS WERE FOUND / SEIZED UNDER AFORESAID SEARCH AND SEIZURE ACTION UNDER SECTION 132 OF I.T. ACT. IN THESE FACTS AND CIRCUMSTANCES, THE ISSUE, WHETHER, THE AO HAD THE J URISDICTION TO MAKE THE AFORESAID ADDITION IS SQUARELY COVERED IN FAVOUR OF THE ASSES SEE BY KABUL CHAWLA VS. CIT (SUPRA), AND BY ORDER DATED 25.04.2018 OF ITAT, DELHI, IN TH E CASE OF H.B. N. DAIRIES & ALLIED VS. ACIT IN ITA NOS.1393 TO 1395/DEL/2013, IN WHICH THE AFORESAID ORDER OF HONBLE DELHI HIGH COURT IN THE CASE OF KABUL CHAWLA VS. CI T (SUPRA) WAS CONSIDERED IN DETAIL. THE RELEVANT PORTION OF THE ORDER OF H.B. N. DAIRIE S & ALLIED (SUPRA) VS. ACIT IS REPRODUCED AS UNDER: 6. I HAVE HEARD BOTH THE SIDES AND PERUSED THE REL EVANT MATERIAL ON RECORD. THE SHORT CONTROVERSY IS WHETHER THE LOSS DECLARED BY T HE ASSESSEE IN ITS RETURNS U/S 153A OF THE ACT FOR THE ASSESSMENT YEARS 2004-05 AN D 2005-06 AT RS.23,05,880/- AND RS.23,59,200/- RESPECTIVELY BE CARRIED FORWARD AND SET OFF AGAINST THE POSITIVE INCOME FOR THE ASSESSMENT YEAR 2006-07. THE LD. AM HAS SPE CIFICALLY RECORDED ON PAGE 15 OF HIS PROPOSED ORDER THAT: THOUGH NO INCRIMINATING M ATERIAL RELEVANT FOR ASSESSMENT YEARS 2004-05, 2005-06 AND 2006-07 AGAINST THE ASSE SSEE, WERE UNEARTHED DURING THE COURSE OF SEARCH U/S 132 OF THE IT ACT; BUT INC RIMINATING MATERIAL RELEVANT FOR OTHER YEARS REFERRED TO IN CLAUSE (B) OF SECTION 15 3A(1) OF THE IT ACT WERE INDEED UNEARTHED. HE CONSIDERED THE JUDGMENTS OF THEHON'B LE DELHI HIGH COURT IN THE CASE OF KABUL CHAWLA VS. CIT (2016) 380 ITR 573 (DELHI) AND SMT. DAYAWANTI THROUGH SMT. SUNITA GUPTA & ANR. VS. CIT & ANR. (2017) 390 ITR 0496 (DELHI) AND THUS OBSERVED ON PAGES 19 AND 20 OF HIS PROPOSED ORDER T HAT WHEN TWO PRECEDENTS OF EQUAL STRENGTH FROM HIGHER COURTS ARE AVAILABLE, T HE PRECEDENT WHICH IS CLOSER TO THE FACTS OF THE CASE SHOULD BE PREFERRED. EX CONSEQUE NTI, HE APPLIED THE JUDGMENT IN THE CASE OF SMT. DAYAWANTI (SUPRA) TO HOLD THAT : EVEN IN RESPECT OF THOSE ASSESSMENT YEARS IN RESPECT OF WHICH NO INCRIMINATI NG MATERIALS WAS UNEARTHED DURING SEARCH U/S 132 OF THE IT ACT; AND EVEN IF NO ASSESSMENTS OR RE-ASSESSMENTS ARE PENDING FOR THOSE ASSESSMENT YEAR (S) ON THE DA TE OF SEARCH U/S 132 OF THE IT ITA NO.- 3481 /DEL/2015. SHRI AMIT ARORA, NEW DELHI. PAGE 5 OF 12 ACT; THERE IS NO OBSTACLE IN MAKING ADDITION U/S 15 3A OF THE IT ACT PROVIDED SOME INCRIMINATING MATERIAL IN THE CASE OF THE ASSESSEE FOR ANY ASSESSMENT YEAR (S) (REFERRED TO IN CLAUSE (B) OF SECTION 153A(1) OF TH E INCOME-TAX ACT) IS UNEARTHED AS A RESULT OF SEARCH U/S 132 OF THE IT ACT WHETHER BY S TATEMENT U/S 132(4) OF THE IT ACT OR BY WAY OF UNDISCLOSED INVESTMENT OR BY WAY OF IN CRIMINATING DOCUMENTS OR IN ANY OTHER MANNER. THIS IS HOW, HE HELD THAT THE DISALL OWANCE OF LOSS CLAIMED BY THE ASSESSEE FOR THE ASSESSMENT YEARS 2004-05 AND 2005- 06 ON THE GROUND OF CLAIM OF VARIOUS EXPENSES MADE BY THE ASSESSEE, NOT BEING FU LLY VERIFIABLE, WAS IN ORDER. THE LD. JM REITERATED THE FACT THAT NO INCRIMINATING MA TERIAL OR DOCUMENT OR EVIDENCE WAS FOUND DURING THE COURSE OF SEARCH IN RELATION TO SU CH TWO ASSESSMENT YEARS AND, HENCE, THE LOSS SO CLAIMED FOR CARRY FORWARD AND SE T OFF SHOULD BE ALLOWED AGAINST THE INCOME FOR THE A.Y. 2006-07. 7. IT HAS BEEN NOTICED ABOVE THAT SEARCH IN THIS CA SE WAS CONDUCTED ON 20.11.2009. THE ASSESSMENT YEARS UNDER CONSIDERATION ARE 2004-0 5, 2005- 06 AND 2006-07. THE ASSESSEE FILED RETURNS FOR THESE YEARS ORIGINALLY U /S 139 AT THE MATERIAL TIME. WHEREAS THE RETURN FOR THE ASSESSMENT YEAR 2004- 05 WAS PRO CESSED U/S 143(1) OF THE ACT, ASSESSMENTS WERE COMPLETED U/S 143(3) IN RESPECT OF THE ASSESSMENT YEARS 2005-06 AND 2006-07. THE ASSESSEES PROFIT & LOSS ACCOUNT F OR THE ASSESSMENT YEAR 2004-05 SHOWS INCURRING OF EXPENSES AT RS.95.21 LAC AGAINST WHICH LOSS OF RS.24.30 LAC WAS COMPUTED AND CLAIMED IN THE RETURN OF INCOME. THE R ETURN OF THE ASSESSEE WAS PROCESSED U/S 143(1) DETERMINING LOSS AT THE DECLAR ED FIGURE. PROFIT & LOSS ACCOUNT OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2005-06 SHOWS INCURRING OF EXPENSES AT RS.1.31 CRORE AND THE ASSESSEE FILED RETURN AT A LO SS OF RS.23,59,200/-. AFTER MAKING SOME DISALLOWANCE, THE ASSESSING OFFICER COMPLETED ASSESSMENT U/S 143(3) ON 30.11.2007 AT A LOSS OF RS.18.17 LAC. IN SO FAR AS THE ASSESSMENT YEAR 2006-07 IS CONCERNED, THE ASSESSEE FILED RETURN AND THE ASSESS MENT WAS COMPLETED U/S 143(3) ON 02.12.2008 DETERMINING NIL INCOME, BUT CHARGING TAX U/S 115JB ON BOOK PROFIT OF RS.10,90,440/-. THUS, IT IS EVIDENT THAT THE ASSESS MENTS FOR THE ASSESSMENT YEARS 2004-05 TO 2006-07 STOOD COMPLETED ON THE DATE OF S EARCH ON 20.11.2009. 8. AT THIS JUNCTURE, IT IS SIGNIFICANT TO NOTE THAT WHEN A SEARCH IS CONDUCTED, THERE CAN BE TWO TYPES OF ASSESSMENT YEARS, NAMELY, COMPLETED ASSESSMENTS AND NON- COMPLETED OR PENDING ASSESSMENTS. ASSESSMENT YEARS HAVING COMPLETED ASSESSMENTS MEAN THE YEARS FOR WHICH EITHER THE ASSESSMENTS STO OD COMPLETED BY THE AO U/S 143(3) OR SECTION 144 BEFORE THE DATE OF SEARCH OR THE YEARS FOR WHICH THE REGULAR ASSESSMENTS WERE NOT TAKEN UP AFTER THE FILING OF T HE RETURNS BY THE ASSESSEE AND FURTHER THAT THE TIME LIMIT FOR ISSUING NOTICE U/S 143(2) STOOD EXPIRED ON THE DATE OF SEARCH. 9. AS PER THE SCHEME UNDER THE ACT, A RETURN FILED BY THE ASSESSEE IS FIRST PROCESSED BY THE A.O. U/S 143(1)(A) OF THE ACT IN WHICH TOTAL INCOME IS COMPUTED AFTER MAKING THE SPECIFIED ADJUSTMENTS. AS PER CLAUSE (B), TAX A ND INTEREST, IF ANY, IS COMPUTED ON THE BASIS OF THE TOTAL INCOME COMPUTED UNDER CLAUSE (A). CLAUSES (D) AND (E) OF SECTION 143(1) PROVIDE THAT AN INTIMATION SHALL BE SENT TO THE ASSESSEE SPECIFYING THE SUM DETERMINED TO BE PAYABLE BY, OR THE AMOUNT OF R EFUND DUE TO, THE ASSESSEE AND THE AMOUNT OF REFUND DUE TO THE ASSESSEE IN PURSUAN CE OF THE DETERMINATION UNDER CLAUSE (C) SHALL BE GRANTED TO THE ASSESSEE. PROCES SING OF THE RETURN U/S 143(1) AND ITA NO.- 3481 /DEL/2015. SHRI AMIT ARORA, NEW DELHI. PAGE 6 OF 12 THE CONSEQUENTIAL ISSUING OF INTIMATION IS CONSTRUE D AS PASSING OF THE ASSESSMENT ORDER EXCEPT WHERE A NOTICE U/S 143(2) IS ISSUED FO R A SCRUTINY ASSESSMENT U/S 143(3) OF THE ACT. IN A CASE, WHERE NOTICE U/S 143(2) IS I SSUED, THE PROCESSING OF RETURN U/S 143(1) AND THE CONSEQUENTIAL ISSUANCE OF INTIMATION DOES NOT AMOUNT TO PASSING OF THE ASSESSMENT ORDER BECAUSE THE ASSESSMENT ORDER, IN SUCH CIRCUMSTANCES, IS PASSED AFTER DUE SCRUTINY U/S 143(3) OF THE ACT. TH ERE CAN BE ONLY ONE ASSESSMENT ORDER FOR ONE YEAR. THE CRUX OF THE MATTER IS THAT WHERE NO NOTICE U/S 143(2) IS ISSUED WITHIN THE PERMISSIBLE MAXIMUM TIME, THE ISS UANCE OF INTIMATION ON PROCESSING THE RETURN U/S 143(1) OF THE ACT, IS CON STRUED AS COMPLETION OF ASSESSMENT. HOWEVER, WHERE SUCH NOTICE IS ISSUED, T HE INTIMATION ISSUED U/S 143(1)(A) LOSES THE CHARACTER OF AN ASSESSMENT ORDE R, WHICH IN THAT CASE, IS PASSED U/S 143(3) AFTER THOROUGH SCRUTINY. TO SUM UP, AN A SSESSMENT IS TERMED AS COMPLETED ON THE PASSING OF AN ORDER U/S 143(3) OF THE ACT, BUT, IN A CASE, WHERE A RETURN HAS BEEN FILED BY THE ASSESSEE, WHICH IS PRO CESSED U/S 143(1), BUT NO FURTHER NOTICE U/S 143(2) IS ISSUED AND THE SAME CANNOT BE ISSUED BECAUSE OF THE TIME LIMIT SETTING IN, THE INTIMATION SENT TO THE ASSESSEE U/S 143(1) IS ALSO TREATED AS A COMPLETED ASSESSMENT FOR THIS PURPOSE. 10. AU CONTRAIRE, THE ASSESSMENT YEARS HAVING NON-C OMPLETED OR PENDING ASSESSMENTS MEAN THE YEARS FOR WHICH THE ASSESSMENT S WERE PENDING ON THE DATE OF SEARCH WHICH ARE ABATED IN TERMS OF THE EXPRESS PRO VISIONS OF THE SECOND PROVISO TO SECTION 153A. THIS WILL ALSO EMBRACE THE YEARS IN R ESPECT OF WHICH THE TIME LIMIT FOR ISSUING NOTICE U/S 143(2) IS STILL AVAILABLE WITH T HE AO AS ON THE DATE OF SEARCH. 11. ADVERTING TO THE EXTANT FACTUAL MATRIX, IT IS S EEN THAT THE ASSESSMENT YEARS UNDER CONSIDERATION FALL IN THE CATEGORY OF `COMPLETED AS SESSMENTS AND NOT THE `PENDING ASSESSMENTS ABATING ON THE DATE OF SEARCH. BOTH TH E LD. MEMBERS HAVE CONSIDERED THE JUDGMENT OF THE HON'BLE JURISDICTIONAL HIGH COU RT IN THE CASE OF KABUL CHAWLA (SUPRA). THE FACTS OF THAT CASE ARE THAT A SEARCH W AS CARRIED OUT U/S 132 ON 15.11.2007 ON BPTP LTD., A LEADING REAL ESTATE DEVE LOPER OPERATING ALL OVER INDIA AND SOME OF ITS GROUP COMPANIES INCLUDING THE PREMISES OF THE ASSESSEE, WHO OWNED AND CONTROLLED THE GROUP. NO ASSESSMENT PROCEEDINGS WER E PENDING FOR THE ASSESSMENT YEARS 2002-03, 2005-06 AND 2006-07 AS ON THE DATE O F THE SEARCH. THE ASSESSMENTS FOR SUCH ASSESSMENTS YEARS HAD ALREADY BEEN MADE U/ S 143(1) OF THE ACT. THE ASSESSEE FILED RETURNS FOR THE THREE ASSESSMENT YEA RS DECLARING CERTAIN INCOME. THE ASSESSMENTS WERE COMPLETED U/S 153A FOR THE CONCERN ED ASSESSMENT YEARS MAKING ADDITIONS, INTER ALIA, ON ACCOUNT OF LOW HOUSEHOLD WITHDRAWALS AND DEEMED DEDUCTION U/S 2(22)(E) OF THE ACT. IT WAS SUBMITTED BEFORE TH E LD. CIT(A) THAT NO EVIDENCE WAS FOUND DURING THE COURSE OF SEARCH SO AS TO WARRANT AN ADDITION U/S 2(22)(E) OF THE ACT. THE LD. CIT(A) HELD THAT THE ADDITIONS NEED NO T BE RESTRICTED ONLY TO THE SEIZED MATERIAL. THE TRIBUNAL CONCLUDED THAT: IF SOME INC RIMINATING MATERIAL IS FOUND IN RESPECT OF SUCH ASSESSMENT YEARS FOR WHICH THE ASSE SSMENT IS NOT PENDING, THEN, THE TOTAL INCOME WOULD BE DETERMINED BY CONSIDERING THE ORIGINALLY DETERMINED INCOME PLUS INCOME EMANATING FROM THE INCRIMINATING MATERI AL FOUND DURING THE COURSE OF SEARCH. THAT IS HOW, THE ADDITIONS MADE U/S 2(22)( E), WHICH WERE NOT BASED ON ANY INCRIMINATING MATERIAL FOUND DURING THE COURSE OF S EARCH, WERE HELD TO BE UNSUSTAINABLE IN LAW AND, HENCE, DELETED. THE HON'B LE HIGH COURT APPROVED THE VIEW ITA NO.- 3481 /DEL/2015. SHRI AMIT ARORA, NEW DELHI. PAGE 7 OF 12 TAKEN BY THE TRIBUNAL. IT SUMMARIZED THE LEGAL POSI TION IN PARA 37 OF ITS JUDGMENT AS UNDER :- `ON A CONSPECTUS OF SECTION 153A(1) OF THE ACT, REA D WITH THE PROVISOS THERETO, AND IN THE LIGHT OF THE LAW EXPLAINED IN T HE AFOREMENTIONED DECISIONS, THE LEGAL POSITION THAT EMERGES IS AS UNDER: I. ONCE A SEARCH TAKES PLACE UNDER SECTION 132 OF THE ACT, NOTICE UNDER SECTION 153 A (1) WILL HAVE TO BE MANDATORILY ISSUE D TO THE PERSON SEARCHED REQUIRING HIM TO FILE RETURNS FOR SIX AYS IMMEDIATELY PRECEDING THE PREVIOUS YEAR RELEVANT TO THE AY IN W HICH THE SEARCH TAKES PLACE. II. ASSESSMENTS AND REASSESSMENTS PENDING ON THE DATE O F THE SEARCH SHALL ABATE. THE TOTAL INCOME FOR SUCH AYS WILL HAV E TO BE COMPUTED BY THE AOS AS A FRESH EXERCISE. III. THE AO WILL EXERCISE NORMAL ASSESSMENT POWERS IN RE SPECT OF THE SIX YEARS PREVIOUS TO THE RELEVANT AY IN WHICH THE SEAR CH TAKES PLACE. THE AO HAS THE POWER TO ASSESS AND REASSESS THE 'TOTAL INCOME' OF THE AFOREMENTIONED SIX YEARS IN SEPARATE ASSESSMENT ORD ERS FOR EACH OF THE SIX YEARS. IN OTHER WORDS THERE WILL BE ONLY ON E ASSESSMENT ORDER IN RESPECT OF EACH OF THE SIX AYS IN WHICH BOTH TH E 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 O F THE SEARCH, OR OTHER POST-SEARCH MATERIAL OR INFORMATION AVAILABLE WITH THE AO WHICH CAN BE RELATED TO THE EVIDENCE FOUND, IT DOES NOT M EAN THAT THE ASSESSMENT CAN BE ARBITRARY OR MADE WITHOUT ANY RE LEVANCE OR NEXUS WITH THE SEIZED MATERIAL. OBVIOUSLY AN ASSESSMENT H AS TO BE MADE UNDER THIS SECTION ONLY ON THE BASIS OF SEIZED MATE RIAL. V. IN ABSENCE OF ANY INCRIMINATING MATERIAL, THE COMP LETED ASSESSMENT CAN BE REITERATED AND THE ABATED ASSESSMENT OR REAS SESSMENT CAN BE MADE. THE WORD 'ASSESS' IN SECTION 153 A IS RELATAB LE TO ABATED PROCEEDINGS (I.E. THOSE PENDING ON THE DATE OF SEAR CH) 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 UND ER 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 A O. VII. COMPLETED ASSESSMENTS CAN BE INTERFERED WITH BY THE AO WHILE MAKING THE ASSESSMENT UNDER SECTION 153 A ONLY ON THE BASI S OF SOME INCRIMINATING MATERIAL UNEARTHED DURING THE COURSE OF SEARCH OR REQUISITION OF DOCUMENTS OR UNDISCLOSED INCOME OR P ROPERTY DISCOVERED IN THE COURSE OF SEARCH WHICH WERE NOT PRODUCED OR NOT ALREADY DISCLOSED OR MADE KNOWN IN THE COURSE OF ORIGINAL A SSESSMENT. 12. IT IS EVIDENT FROM THE ABOVE JUDGMENT THAT ONCE A SEARCH TAKES PLACE U/S 132 OF THE ACT, THE ASSESSEE IS OBLIGED TO FILE RETURNS FO R THE SIX ASSESSMENT YEARS IMMEDIATELY PRECEDING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR IN WHICH ITA NO.- 3481 /DEL/2015. SHRI AMIT ARORA, NEW DELHI. PAGE 8 OF 12 THE SEARCH TOOK PLACE. IN SO FAR AS THE COMPLETED A SSESSMENTS AS ON THE DATE OF THE SEARCH ARE CONCERNED, THE SAME ARE TO BE REPEATED A S INCREASED BY CERTAIN ADDITIONS BASED ON INCRIMINATING MATERIAL FOUND DURING THE CO URSE OF SEARCH. IN OTHER WORDS, IF NO INCRIMINATING MATERIAL IS FOUND DURING THE COURS E OF SEARCH, THEN, THE AMOUNT OF TOTAL INCOME DETERMINED UNDER THE EARLIER COMPLETED ASSESSMENTS, IS TO BE ADOPTED IN SUCH FRESH ASSESSMENTS U/S 153A WITHOUT MAKING ANY FURTHER ADDITION. 13. THE LD. AM HAS PREFERRED THE JUDGMENT IN DAYAWA NTI (SUPRA) OVER KABUL CHAWLA (SUPRA) BY FINDING IT MORE CLOSER TO THE FACTS OF T HE PRESENT CASE. IN THE CASE OF DAYAWANTI (SUPRA), A SEARCH AND SEIZURE OPERATION W AS CARRIED OUT ON 22.03.2006. THE ASSESSEE, ALONG WITH OTHER FAMILY MEMBERS, SURR ENDERED RS.3.5 CRORE AT THE TIME OF SEARCH AS ADDITIONAL INCOME IN RESPECT OF `BUSIN ESS CARRIED ON OUTSIDE THE BOOKS OF ACCOUNT IN CONNECTION WITH PRODUCTION AND SALE OF GUTKA. SHE FURTHER ADMITTED IN HER STATEMENT NOT TO HAVE ANY SOURCE OF INCOME OR ANY B ANK ACCOUNT. SHE STILL FURTHER ADMITTED TO BEING PROPRIETOR ONLY ON RECORD AND, IN FACT, SHRI ANUP GUPTA LOOKED AFTER ALL THE OPERATIONS ALONG WITH THE HELP OF OTHER FAM ILY MEMBERS. NOTICE U/S 153A WAS ISSUED REQUIRING THE ASSESSEE TO FURNISH RETURNS. I N RESPONSE, SHE FILED A PHOTO COPY OF THE RETURN EARLIER FILED U/S 139(1) DECLARING GR OSS PROFIT OF RS.7.30 LAC ON SALES OF RS.69.28 LAC, YIELDING GROSS PROFIT RATE OF 10.55%. SINCE NO PROPER BOOKS OF ACCOUNT WERE PRESENTED, THE ASSESSING OFFICER REJECTED THE BOOK VERSION U/S 145 AND ESTIMATED THE SALES AT RS.1 CRORE. HE APPLIED GP RA TE OF 20% AND DETERMINED TOTAL INCOME AT RS.45.90 LAC AS AGAINST THE DECLARED INCO ME OF RS.2.42 LAC. THE CIT (A) REDUCED THE GROSS PROFIT RATE TO BE APPLIED AT 12%. SOME ADDITIONS WERE SUSTAINED AND OTHERS WERE DELETED. THE TRIBUNAL REJECTED THE PLEA OF THE ASSESSEE THAT SINCE NO MATERIAL WAS RECOVERED DURING THE COURSE OF SEARCH, FINALIZED ASSESSMENTS FOR THE PERIODS COVERED BY THE BLOCK YEARS COULD NOT BE REO PENED. THE ASSESSEE RELIED ON THE JUDGMENT IN THE CASE OF KABUL CHAWLA (SUPRA) AND AR GUED THAT SINCE NO INCRIMINATING MATERIAL WAS FOUND, NO ADDITIONS COULD BE MADE IN R ESPECT OF THE COMPLETED ASSESSMENTS. THE HON'BLE HIGH COURT DISMISSED THE A PPEALS ON THE GROUND THAT THE ADDITIONS WERE NOT BASELESS AS THESE WERE BASED ON THE INFERENCES DRAWN BY THE ASSESSING OFFICER. IT FURTHER HELD THAT IF THE ELEM ENT OF GUESS WORK HAS SOME REASONABLE NEXUS WITH THE STATEMENT RECORDED AND DO CUMENTS SEIZED, THEN, THE ADDITIONS CAN BE SUSTAINED. 14. IT IS, THUS, SEEN THAT WHEREAS THE JUDGMENT IN KABUL CHAWLA (SUPRA) CLEARLY LAYS DOWN THAT IN THE ABSENCE OF ANY INCRIMINATING MATER IAL FOUND DURING THE COURSE OF SEARCH, NO FRESH ADDITION CAN BE MADE IN RESPECT OF COMPLETED ASSESSMENTS, THE JUDGMENT IN THE CASE OF SMT. DAYAWANTI (SUPRA) IS P ECULIAR TO ITS FACTS INASMUCH AS THE ADDITION IN THAT CASE WAS BASED ON THE ASSESSEE S STATEMENT MADE AT THE TIME OF SEARCH ADMITTING : `ADDITIONAL INCOME IN RESPECT OF BUSINESS CARRIED ON OUTSIDE THE BOOKS OF ACCOUNT IN CONNECTION WITH PRODUCTION AND SALE OF GUTKA. IT WAS NOT A CASE IN WHICH NO INCRIMINATING MATERIAL WAS FOUND. RATHE R THE ASSESSEES STATEMENT GIVEN AT THE TIME OF SEARCH CONFIRMING THE CARRYING ON OF BUSINESS OUTSIDE THE BOOKS OF ACCOUNT WAS EXTRAPOLATED TO THE EARLIER YEARS AS WE LL. 15. TURNING TO THE FACTS OF THE INSTANT CASE, IT IS SEEN THAT THE ASSESSING OFFICER HAS NOT DISALLOWED ANY SPECIFIC AMOUNT OF EXPENSES ON A CCOUNT OF ANY INCRIMINATING MATERIAL FOUND AT THE TIME OF SEARCH. IT IS PERTINE NT TO NOTE THAT THE ASSESSEE INCURRED ITA NO.- 3481 /DEL/2015. SHRI AMIT ARORA, NEW DELHI. PAGE 9 OF 12 EXPENSES OF RS.95.21 LAC FOR THE ASSESSMENT YEAR 20 04-05. WHAT THE ASSESSING OFFICER HAS DONE IS TO DISALLOW LOSS OF RS.23.05 LA C SIMPLY ON THE GROUND THAT THE EXPENSES INCURRED BY THE ASSESSEE WERE NOT FULLY VE RIFIABLE. IT IS NOT EVEN A CASE OF DISALLOWING ANY PARTICULAR AMOUNT OF EXPENSE FOR WH ATEVER REASON. THUS, IT IS MANIFEST THAT ONLY A PART OF THE EXPENSES, REPRESEN TING LOSS OF RS.23.05 LAC, WERE DISALLOWED AND THAT TOO, ON THE GROUND THAT COMPLET E DETAILS IN RESPECT OF THE EXPENSES INCURRED WERE NOT FURNISHED BY THE ASSESSE E DURING THE COURSE OF PROCEEDINGS U/S 153A OF THE ACT. SIMILAR IS THE POS ITION FOR THE ASSESSMENT YEAR 2005- 06 IN WHICH THE ASSESSEE INCURRED EXPENSES OF RS.1. 31 CRORE AND CLAIMED LOSS OF RS.23.59 LAC. THE ASSESSING OFFICER, IN THE PROCEED INGS U/S 153A, REDUCED SUCH LOSS TO RS. NIL, THEREBY IMPLYING THAT ONLY A PART OF TH E EXPENSES TO THE EXTENT OF THE AMOUNT OF LOSS, WAS DISALLOWED FOR NON-FURNISHING O F NECESSARY DETAILS IN SUPPORT OF EXPENSES. THE CRUX OF THE MATTER IS THAT ONLY A PAR T OF THE EXPENSES REPRESENTING LOSS FOR THE ASSESSMENT YEARS 2004-05 AND 2005-06 WAS DI SALLOWED AND NOT ALLOWED TO BE CARRIED FORWARD FOR SET OFF AGAINST THE INCOME FOR ASSESSMENT YEAR 2006-07 SIMPLY ON THE GROUND THAT EXPENSES WERE NOT FULLY VERIFIABLE SINCE COMPLETE DETAILS WERE NOT FURNISHED DURING THE COURSE OF ASSESSMENT PROCEEDIN GS. 16. ADMITTEDLY, ASSESSMENTS FOR THE A.YS. 2004-05 A ND 2005-06 STOOD COMPLETED ON THE DATE OF SEARCH. THE AMOUNT OF LOSS FINALLY DETE RMINED FOR THE A.Y. 2004-05 IN THE ORIGINAL ASSESSMENT WAS RS.23,05,880/-. SIMILARLY, THE AMOUNT OF LOSS FINALLY DETERMINED BY THE AO IN THE ORIGINAL ASSESSMENT ORD ER PASSED U/S 143(3) ON 30.11.2007 FOR THE ASSESSMENT YEAR 2005-06 WAS RS.1 8,17,685/-. IN THE FRESH ASSESSMENTS U/S 153A, THE ASSESSING OFFICER WAS AUT HORIZED TO REPEAT THE ORIGINALLY ASSESSED INCOME (LOSS) PLUS FRESH ADDITIONS, IF ANY , BASED ON THE INCRIMINATING MATERIAL FOUND AT THE TIME OF SEARCH. ADMITTEDLY, N O INCRIMINATING MATERIAL WAS FOUND IN RESPECT OF THE ASSESSMENT YEARS UNDER CONSIDERAT ION. THERE IS NO REFERENCE WHATSOEVER TO ANY INCRIMINATING MATERIAL FOUND DURI NG THE COURSE OF SEARCH CASTING SHADOW OF DOUBT ON THE GENUINENESS OF SUCH EXPENSES . SINCE THESE EXPENSES WERE CLAIMED AS DEDUCTION IN THE ORIGINAL RETURNS AND TH E ASSESSING OFFICER ACCEPTED THE LOSS SO DECLARED EXCEPT FOR MAKING SOME MODIFICATIO N FOR THE ASSESSMENT YEAR 2005- 06, THE AO WAS SUPPOSED TO RESTRICT HIS EXERCISE OF COMPLETING ASSESSMENTS U/S 153A ONLY TO THE AMOUNT OF INCOME/LOSS DETERMINED ORIGIN ALLY. IT WAS NOT OPEN TO HIM TO VENTURE TO RE-EXAMINE THE DETAILS IN RESPECT OF EXP ENSES IN ASSESSMENT PROCEEDINGS U/S 153A READ WITH SECTION 143(3) OF THE ACT FOR TH E PATENT REASON THAT, ADMITTEDLY, NO INCRIMINATING MATERIAL IN RESPECT OF SUCH EXPENS ES WAS FOUND DURING THE COURSE OF SEARCH. 17. THE CONTENTION OF THE LD. DR THAT THERE WAS SOM E INCRIMINATING MATERIAL FOR SUBSEQUENT YEARS AND THE SAME SHOULD BE CONSIDERED TO HAVE BEARING ON THE DISALLOWANCE OF LOSS FOR THE TWO YEARS UNDER CONSID ERATION, IS INCAPABLE OF ACCEPTANCE FOR MORE THAN ONE REASON. FIRSTLY, THE EXISTENCE OF AN INCRIMINATING MATERIAL FOR THE RELEVANT YEAR IS SINE QUA NON FOR MAKING ANY DISALL OWANCE OF EXPENSES IN RESPECT OF THE COMPLETED ASSESSMENTS. THE HONBLE SUPREME COUR T IN CIT VS. SINHGAD TECHNICAL EDUCATION SOCIETY (2017) 397 ITR 344 (SC) HAS ACCEN TUATED THE RELEVANCE OF THE INCRIMINATING MATERIAL PERTAINING TO THE RELEVANT Y EAR ALONE, THOUGH IN THE CONTEXT OF SECTION 153C OF THE ACT. IN THAT CASE, IT HAS BEEN HELD THAT WHERE THE INCRIMINATING MATERIAL WAS FOUND TO BE PERTAINING TO A PARTICULAR YEAR, THERE WAS NO VALID ITA NO.- 3481 /DEL/2015. SHRI AMIT ARORA, NEW DELHI. PAGE 10 OF 12 SATISFACTION FOR THE OTHER YEARS. SECONDLY, IT IS N OT EVEN A CASE IN WHICH SOME INCRIMINATING MATERIAL INDICATING RECORDING OF BOGU S EXPENSES IN THE SUBSEQUENT YEARS WAS FOUND, WHICH COULD HAVE REFLECTION ON THE YEARS IN QUESTION. THE LD. DR HAS NOT DRAWN MY ATTENTION TOWARDS ANY PART OF THE STATEMEN T U/S 132(4) OF THE ASSESSEE, WHICH SUGGESTS, EVEN REMOTELY, THAT THE ASSESSEE WA S BOOKING BOGUS EXPENSES IN ITS BOOKS OF ACCOUNT FOR THE SUCCEEDING YEARS, SO AS TO EXTRAPOLATE THE SAME TO THE YEARS UNDER CONSIDERATION. THE TRUMP CARD OF THE DEPARTME NTS CASE IS THE RATIO OF DAYAWANTI (SUPRA), WHICH COULD HAVE BEEN APPLIED ON LY IF THE REVENUE HAD ESTABLISHED THE RECORDING OF SOME BOGUS EXPENSES BY THE ASSESSEE IN LATER YEARS, SO AS TO ENABLE IT TO DRAW AN ADVERSE INFERENCE FOR TH E CURRENT YEARS. THIS IS ABSENT IN THE FACTS AND CIRCUMSTANCES OF THE CASE. THUS, IT I S VIVID THAT THE RATIO DECIDENDI IN THE CASE OF DAYAWANTI (SUPRA) DOES NOT APPLY TO THE FACTS OF THE CASE. IN THE ABSENCE OF ANY MATERIAL, THE GENUINENESS OF EXPENSES INCURR ED BY THE ASSESSEE, AND THAT TOO PARTLY TO THE EXTENT OF LOSSES CLAIMED, COULD NOT H AVE BEEN DISTURBED BY THE ASSESSING OFFICER IN THE ASSESSMENT U/S 153A OF THE ACT. BE T HAT AS IT MAY, IT IS FURTHER RELEVANT TO NOTE THAT THE OPERATION OF THE JUDGMENT IN THE C ASE OF DAYAWANTI (SUPRA) HAS BEEN STAYED BY THE HON'BLE SUPREME COURT VIDE ITS JUDGME NT DATED 03.10.2018, A COPY OF WHICH HAS BEEN PLACED ON RECORD. 18. THUS, IT IS APPARENT THAT BETWEEN THE TWO JUDGM ENTS OF KABUL CHAWLA (SUPRA) AND DAYAWANTI (SUPRA), THE FACTS AND CIRCUMSTANCES OF T HE INSTANT CASE ARE FULLY COVERED BY THE RATIO IN THE CASE OF KABUL CHAWLA (SUPRA), W HICH VIEW HAS BEEN REITERATED BY THE HON'BLE DELHI HIGH COURT IN A MORE RECENT DECIS ION IN PRINCIPAL CIT VS. MEETA GUTGUTIA (2017) 395 ITR 526 (DEL). IN VIEW OF THE F OREGOING DISCUSSION, I AGREE WITH THE VIEW CANVASSED BY THE LD. JM IN HOLDING THAT TH E AMOUNT OF DETERMINED LOSS FOR THE ASSESSMENT YEARS 2004-05 AND 2005-06 BE ALLOWED TO BE CARRIED FORWARD FOR SET OFF AGAINST THE INCOME FOR THE ASSESSMENT YEAR 2006 -07. THE QUESTION PROPOSED IS, THEREFORE, ANSWERED IN NEGATIVE BY HOLDING THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN UPHOLDING THE ADDITIONS MADE BY THE AO FOR THE YEAR S OF COMPLETED ASSESSMENTS, WHICH WERE NOT BASED ON ANY INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH RELATING TO SUCH YEARS AND CONSEQUENTLY DENY ING THE BENEFIT OF CARRY FORWARD AND SET OFF OF THE RESULTANT LOSS IN SUBSEQUENT YEA R. 19. THE REGISTRY OF THE TRIBUNAL IS DIRECTED TO LIS T THIS MATTER BEFORE THE DIVISION BENCH FOR PASSING AN ORDER IN ACCORDANCE WITH THE M AJORITY VIEW. (E) RESPECTFULLY FOLLOWING THE DECISION OF HONBLE DEL HI HIGH COURT IN THE CASE OF KABUL CHAWLA VS. CIT (SUPRA) AND ORDER OF ITAT, DEL HI IN THE CASE OF H.B.N. DAIRIES & ALLIED (SUPRA); WE ALSO DECIDE THE ISSUE IN FAVOU R OF THE ASSESSEE, IN THE PRESENT APPEAL BEFORE US. ACCORDINGLY, THE AFORESAID ADDIT IONS STAND DELETED. ITA NO.- 3481 /DEL/2015. SHRI AMIT ARORA, NEW DELHI. PAGE 11 OF 12 (F) IN THE RESULT, FOR STATISTICAL PURPOSES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 26/11/19. SD/- SD/- (AMIT SHUKLA) (ANADEE NATH MISSHRA ) JUDICIAL MEMBER ACCOUNTANT MEMBE R DATED: 26/11/19 POOJA/- COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI ITA NO.- 3481 /DEL/2015. SHRI AMIT ARORA, NEW DELHI. PAGE 12 OF 12 DATE OF DICTATION DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER