DCIT, New Delhi V. M/s Madhyam Housing Pvt. Ltd., New Delhi

ITA 5112/DEL/2016

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 9024 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2009-2010
• Appeal Filed On: 28-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Search and seizure
• Section: 153A; 132

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C: NEW DELHI BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO. 5112/DEL/2016 ASSTT. YEAR: 2009-10 O R D E R PER SUDHANSHU SRIVASTAVA, JM: THIS APPEAL IS PREFERRED BY THE DEPARTMENT AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-24, NEW DELHI {CIT (A)} VIDE DATED 29.07.2016 PERTAINING TO THE ASSESSMENT YEAR 2009-10. DCIT, CENTRAL CIRCLE - 8, ROOM NO. 333, ARA CENTRE, JHANDEWALAN EXTN. NEW DELHI VS. M/S. MADHYAM HOUSING PVT. LTD. B-2/6, PLOT NO. 2, ASHOK NAGAR, DB GUPTA ROAD, NEW FAIZ CHOWK, KAROL BAGH, NEW DELHI. (APPELLANT) (RESPONDENT) DEPARTMENT BY: SHRI J.K. MISHRA, CIT DR ASSESSEE BY : DR . SHASHWAT BAJPAI, ADVOCATE SHRI SHARAD AGARWAL, ADVOCATE SWATI RANA, ADVOCATE DATE OF HEARING 04/07 /201 9 DATE OF PRONOUNCEMENT 30 / 09 /2019 2 2.0 THE BRIEF FACTS OF THE CASE ARE THAT A SEARCH AND SEIZURE OPERATION WAS CONDUCTED ON K-WORLD GROUP OF CASES ON 5.4.2012 AND THE ASSESSEE COMPANY WAS ALSO A PART OF THE SEARCH ACTION. PURSUANT TO THAT SEARCH ACTION, THE CASE OF THE ASSESEE WAS CENTRALIZED, AND, SUBSEQUENTLY NOTICE U/S 153A OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED THE ACT) WAS ISSUED TO THE ASSESSEE REQUIRING THE ASSESSEE TO SUBMIT ITS RETURN OF INCOME. IN PURSUANCE TO THE SAID NOTICE, THE ASSESSEE FILED ITS RETURN OF INCOME DECLARING A NET INCOME OF RS. 84,740/- AS AGAINST THE ORIGINAL RETURN OF INCOME WHICH WAS FILED AT A TOTAL INCOME OF RS. 74,831/-. 2.1 DURING THE COURSE OF ASSESSMENT PROCEEDINGS U/S 153A OF THE ACT, THE ASSESSING OFFICER (AO) NOTED THAT THE ASSESSEE HAS RECEIVED SHARE APPLICATION MONEY AND PREMIUM TOTALING TO RS. 1,11,00,000/- WHICH RECEIVED FROM THREE COMPANIES. THE AO OBSERVED THAT THE REQUIRED DOCUMENTS EVIDENCING CREDITWORTHINESS, GENUINENESS AND IDENTITY OF THE INVESTORS WERE NOT FURNISHED AND, THEREFORE, THE ADDITION TO THE TUNE OF RS. 1,11,00,000/- WAS CALLED FOR. THE ASSESSMENT WAS COMPLETED AT AN INCOME OF RS. 1,11,84,740/- AFTER MAKING 3 ADDITION OF RS. 1,11,00,000/- U/S 68 OF THE ACT ON ACCOUNT OF ALLEGED BOGUS SHARE CAPITAL. 2.2 AGGRIEVED, THE ASSESSEE APPROACHED THE LD. CIT (A) AND CHALLENGED THE ADDITION ON THE LEGAL GROUND THAT SINCE NO INCRIMINATING MATERIAL WAS UNEARTHED DURING THE COURSE OF SEARCH, THE ADDITION COULD NOT HAVE BEEN JUSTIFIABLY MADE. THE LD. CIT (A), FOLLOWING THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. KABUL CHAWLA REPORTED IN 280 ITR 573 (DEL), DELETED THE ADDITION MADE BY THE AO. 2.3 NOW THE DEPARTMENT IS BEFORE THE TRIBUNAL AND HAS CHALLENGED THE ACTION OF THE LD. CIT (A) IN DELETING THE ADDITION. 3.0 AT THE OUTSET, THE LD. AUTHORIZED REPRESENTATIVE (AR) SUBMITTED THAT THE ISSUE STOOD COVERED BY THE JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. KABUL CHAWLA IN FAVOUR OF THE ASSESSEE. THE LD. AR ALSO SUBMITTED THAT AN IDENTICAL ADDITION DELETED BY THE LD. CIT (A) AND PERTAINING TO THE SAME SEARCH IN K-GROUP OF COMPANIES IN THE CASE OF ACIT VS. M/S. DINGLE BUILDCONS PVT. LTD. IN CO. NOS. 351 AND 352/DEL/2016 IN ITA NOS. 4666 AND 4667 / DEL/ 2016 HAD BEEN UPHELD BY THE ITA VIDE ORDER DATED 1 ST FEBRUARY, 2018. 4 4.0 THE LD. CIT (DR) RELIED ON THE ORDER OF THE AO AND STATED THAT THE ACTION OF THE LD. CIT (A) IN QUASHING THE ASSESSMENT ORDER WAS NOT TENABLE. IT WAS SUBMITTED THAT THE JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF KABUL CHAWLA DID NOT RESTRICT THE ASSESSMENT TO INCRIMINATING DOCUMENTS ONLY. 5.0 WE HAVE HEARD BOTH THE RIVAL CONTENTIONS AND HAVE ALSO AND PERUSED THE RELEVANT RECORDS AVAILABLE WITH US, ESPECIALLY THE ORDERS OF THE REVENUE AUTHORITIES AND THE CASE LAW REFERRED HEREINABOVE. WE FIND THAT THE ADDITIONS MADE BY THE AO ARE BEYOND THE SCOPE OF SECTION 153C OF THE INCOME TAX ACT, 1961, BECAUSE NO INCRIMINATING MATERIAL OR EVIDENCE HAD BEEN FOUND DURING THE COURSE OF SEARCH SO AS TO DOUBT THE TRANSACTIONS. IT WAS NOTED THAT IN THE ENTIRE ASSESSMENT ORDER, THE AO HAS NOT REFERRED TO ANY SEIZED MATERIAL OR OTHER MATERIAL FOR THE YEAR UNDER CONSIDERATION HAVING BEING FOUND DURING THE COURSE OF SEARCH IN THE CASE OF THE ASSESSEE, LEAVE ALONE THE QUESTION OF ANY INCRIMINATING MATERIAL FOR THE YEAR UNDER APPEAL. THEREFORE, IN OUR CONSIDERED OPINION, THE ACTION OF THE AO IS BASED UPON CONJECTURES AND SURMISES AND HENCE, THE ADDITION MADE IS NOT SUSTAINABLE IN THE EYES OF LAW. THE ISSUE IN DISPUTE IS 5 NOW NO LONGER RES INTEGRA IN VIEW OF THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. KABUL CHAWLA REPORTED (2016) 380 ITR 573 (DEL.) WHEREIN THE HONBLE HIGH COURT HAS HELD 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 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 ISSUED TO THE PERSON SEARCHED REQUIRING HIM TO FILE RETURNS FOR SIX AYS IMMEDIATELY PRECEDING THE P REVIOUS 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 B E 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 6 ARBITRARY OR MADE WITHOU T 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 AS SESSMENT 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 CO NCERNED, 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 FINDINGS 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 UN DISCLOSED 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. 38. THE PRESENT APPEALS CONCERN AYS, 2002-03, 2005-06 AND 2006-07.ON THE DATE OF THE SEARCH THE SAID ASSESSMENTS ALREADY STOOD COMPLETED. SINCE NO INCRIMINATING MATERIAL WAS UNEARTHED DURING THE SEARCH, NO ADDITIONS COULD HAVE BEEN MADE TO THE INCOME ALREADY ASSESSED. 7 5.1 IN THE PRESENT APPEAL BEFORE US, IT IS NOT IN DISPUTE THAT THE NO INCRIMINATING MATERIAL WAS FOUND IN RESPECT OF THE ASSESSE DURING THE COURSE OF SEARCH AS IS EVIDENT FROM THE ASSESSMENT ORDER ITSELF. DURING THE COURSE OF HEARING BEFORE US ALSO, THE DEPARTMENT COULD NOT NEGATE THIS FACTUAL FINDING OF THE LD. CIT (A). THEREFORE, IN VIEW OF THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF KABUL CHAWLA (SUPRA), WE AFFIRM THE ACTION OF THE LD. CIT (A) IN DELETING THE ADDITION IN DISPUTE AND DISMISS THE REVENUES APPEAL 7.0 IN THE FINAL RESULT THE APPEAL OF THE DEPARTMENT STANDS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 30 TH SEPTEMBER, 2019. SD/- SD/- (R.K. PANDA) (SUDHANSHU SRIVASTAVA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 30/09/2019 VEENA COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI