ACIT, Cemtral Circle-30, New Delhi V. Ramprastha Promoters & Developers Pvt. Ltd, New Delhi

ITA 5793/DEL/2017

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 3989 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-09-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2014-2015
• Appeal Filed On: 10-09-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Search and seizure; Period of limitation; Assessment record
• Section: 132; 143(3); 133A; 153A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH: ‘F’ NEW DELHI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND DR. B.R.R. KUMAR, ACCOUNTANT MEMBER ITA No.5792/Del/2017 Assessment Year: 2013-14 And ITA No.5793/Del/2017 Assessment Year: 2014-15 And ITA No.5794/Del/2017 Assessment Year: 2015-16 ACIT, Central Circle-30, New Delhi Vs. Ramprastha Promoters & Developers Pvt. Ltd., C-10, C-Block, Main Market, Vasant Vihar, New Delhi PAN :AADCR6481J (Appellant) (Respondent) And C.O. No. 44/Del/2022 [Arising out of ITA No.5794/Del/2017] Assessment Year: 2015-16 And C.O. No. 45/Del/2022 [Arising out of ITA No.5792/Del/2017] Assessment Year: 2013-14 And C.O. No. 46/Del/2022 [Arising out of ITA No.5793/Del/2017] Assessment Year: 2014-15 Ramprastha Promoters & Developers Pvt. Ltd., C-10, C-Block, Main Market, Vasant Vihar, New Delhi Vs. ACIT, Central Circle-30, New Delhi PAN :AADCR6481J (Appellant) (Respondent) ITA Nos.5792, 5793 & 5794/Del/2017 C.O. Nos.44, 45 & 46/Del/2022 2 | P a g e ORDER PER SAKTIJIT DEY, JM: Captioned appeals by the Revenue and cross objections by the assessee arise out of three separate orders of learned Commissioner of Income Tax (Appeals)-30, New Delhi, pertaining to assessment years 2013-14, 2014-15 and 2015-16. C.O. No. 44/Del/2022 (AY: 2015-16) C.O. No. 45/Del/2022 (AY: 2013-14) C.O. No. 46/Del/2022 (AY: 2014-15) 2. At the outset, we must observe, though notice of appeals filed by the Revenue were served on the assessee on 22.02.2021, however, the cross-objection were filed on 20.04.2022. 3. Before us, learned counsel for the assessee submitted that due to extension of period of limitation on account Covid-2019 pandemic, there is no delay in filing the cross objections. In this context, he relied upon the order dated 10 th January, 2022 of the Hon’ble Supreme Court in suo motu Writ Petition (C) No. 03/2020. Assessee by Sh. Rajesh Jain, CA Respondent by Sh. T. Kipgen, CIT (DR) Sh. Shankar Gupta, Sr. DR Date of hearing 04.07.2022 Date of pronouncement 23.09.2022 ITA Nos.5792, 5793 & 5794/Del/2017 C.O. Nos.44, 45 & 46/Del/2022 3 | P a g e 4. Having considered the submissions of the parties on the issue, it is observed, the Hon’ble Supreme Court taking cognizance of the hardship faced by litigants in filing cases within the prescribed period of limitation due to Covid-2019 pandemic, suo motu, took cognizance and extended the period of limitation by holding that in cases, where limitation would have expired during the period between 15.03.2020 till 28.02.2022, the limitation will get extended by a period of 90 days from 01.03.2022. In view of the aforesaid order of the Hon’ble Supreme Court, in our considered view, there is no delay in filing the cross objections. Accordingly, they are admitted for adjudication on merits. 5. The common grounds raised in the cross objections are as under: “The Assessment Order passed under section 153A of the Act, is void-ab-initio as learned JCIT, did not give valid approval under section 153D of the Act. The approval dated 22 nd December, 2016 issued by JCIT is not valid as the same has been given without application of mind on the same day, to all Assessment Orders mechanically, when learned Assessing Officer sent draft Assessment Orders to JCIT for approval.” 6. Since, the cross objections filed by the assessee are purely on a legal issue, we proceed to dispose of them at the outset. As could ITA Nos.5792, 5793 & 5794/Del/2017 C.O. Nos.44, 45 & 46/Del/2022 4 | P a g e be seen from the grounds raised, the assessee has challenged the validity of the assessment orders passed under section 153A of the Act on the ground that before completing the assessment, the Assessing Officer has not obtained a valid approval under section 153D of the Act. 7. Briefly the facts, which are relevant for disposal of this issue are, assessee is a resident corporate entity. On 18.02.2015, a search and seizure operation under section 132 of the Act was conducted in case of the assessee along with other group entities. Based on search and seizure operation, proceedings under section 153A of the Act were initiated in case of the assessee and the Assessing Officer ultimately completed the assessment for the assessment years under dispute by making certain additions/disallowances. Against the assessment order so passed, the assessee preferred appeals before learned Commissioner (Appeals) contesting the additions made by the Assessing Officer. In other words, the assessee, per se, did not raise any ground challenging the validity of the assessment orders passed in absence of valid approval under section 153D of the Act. Be that as it may, before us, the assessee has filed cross-objections challenging the validity of the assessment orders on the ground ITA Nos.5792, 5793 & 5794/Del/2017 C.O. Nos.44, 45 & 46/Del/2022 5 | P a g e that the approval granted under section 153D of the Act is mechanical and without application of mind. Since, the issue raised by the assessee is a purely legal issue going to the root of the matter and can be decided based on the materials available on record, we admit the ground raised in the cross objections for adjudication. 8. Learned counsel appearing for the assessee submitted before us that Assessing Officer has sent the assessment orders for approval of the Joint Commissioner of Income Tax (JCIT) vide letter dated 22 nd December, 2016. He submitted, on the very same day, i.e., 22 nd December, 2016, the JCIT granted approval under section 153D of the Act in respect of assessment orders passed under 153A of the Act for assessment years 2009-10 to 2014-15 and in respect of assessment order passed under section 143(3) of the Act for assessment year 2015-16. Drawing our attention to the approval dated 22.12.2016 of the JCIT obtained under the Right To Information Act, 2005, the learned counsel for the assessee submitted, on a perusal of the approval, it is discernible that the approving authority has not applied his mind on the materials available on record, including the seized materials before approving the draft assessment orders. He submitted, the very fact ITA Nos.5792, 5793 & 5794/Del/2017 C.O. Nos.44, 45 & 46/Del/2022 6 | P a g e that the JCIT has given his approval on the very same date, he received the draft assessment orders from the Assessing Officer, demonstrates that he did not verify the seized material and appraisal report and other documents and merely accepted the draft assessment orders. Referring to CBDT Circular No. 3/2008, dated 12.03.2008, he submitted, object behind introduction of section 153D is to ensure that assessment of search cases should be made with the prior approval of superior authority so that the superior authority applies his mind on the materials and other attending circumstances on the basis of which the officer is making the assessment and after due application of mind on the seized materials. He submitted, the obligation of granting approval acts as an inbuilt protection to the tax payers against arbitrary or unjust exercise of discretion by the Assessing Officer. He submitted, the approval granted under section 153D of the Act should necessarily reflect due application of mind, if the same is subjected to judicial scrutiny. Referring to the letter of approval, learned counsel submitted, the authority concerned has given his approval in a routine manner without proper application of mind. Thus, the approval granted under section 153D of the Act in case of the present assessee does not meet the conditions of section ITA Nos.5792, 5793 & 5794/Del/2017 C.O. Nos.44, 45 & 46/Del/2022 7 | P a g e 153D of the Act. In support of such contention, he relied upon the following decisions: 1. Pr. CIT Vs. Smt. Shreelekha Damani, ITA No.668 of 2016, dated 27.11.2018 (Bombay High Court) 2. Arch Pharmalabs Ltd. Vs. ACIT, ITA No. 6656/Mum/2017 Along with Ors., dated 07.04.2021 (ITAT, Mumbai) 3. Madan Lal Vs. DCIT, (2021) 214 TTJ 0958 (ITAT, Amritsar) 4. Navin Jain & Ors. Vs. DCIT, (2021) 91 ITR 0682 (ITAT, Lucknow) 5. Rishabh Buildwell P. Ltd. & Ors. Vs. DCIT, ITA No. 2122/Del/2018 Along with Ors., dated 04.07.2019 (ITAT, Delhi) 9. Learned Departmental Representative, on the other hand, submitted that in case of search related assessments, the entire proceeding is monitored by the approving authority. He submitted, the draft assessment order is a culmination of various steps taken preceding the framing of draft assessment order. He submitted, once, the draft assessment order is framed, the entire assessment record along with seized materials and appraisal report are ITA Nos.5792, 5793 & 5794/Del/2017 C.O. Nos.44, 45 & 46/Del/2022 8 | P a g e forwarded to the approving authority. He submitted, after examining the draft assessment order and other materials available in the assessment record, the approving authority grants approval under section 153D of the Act. He submitted, following the procedure laid in section 153D of the Act, the JCIT has granted approval in case of the assessee. He submitted, when the assessee alleges that the grant of approval is mechanical and without application of mind, the burden is entirely on the assessee to prove such fact. He submitted, the assessee cannot make such allegation merely on conjectures and surmises. Thus, he submitted, the cross objections filed by the assessee are devoid of merit. 10. We have considered rival submissions and perused the materials on record. As could be seen from the factual matrix, the Assessing Officer has proceeded to complete assessments under section 153A of the Act in assessment years 2013-14 and 2014- 15, whereas, he has completed assessment under section 143(3) of the Act for assessment year 2015-16, i.e., the year of search. It is the case of the assessee before us that the approval granted by the JCIT under section 153D of the Act is mechanical and without application of mind, since the approval was granted on the very ITA Nos.5792, 5793 & 5794/Del/2017 C.O. Nos.44, 45 & 46/Del/2022 9 | P a g e same day, the JCIT received the draft assessment orders along with assessment records from the Assessing Officer. The basis for the aforesaid allegation of the assessee is, the letter granting approval under section 153D of the Act on 22.12.2016. As discussed earlier, the assessee did not raise this issue before the first appellate authority. However, on the basis of information obtained under the Right to Information Act, 2005, the assessee has taken up this issue before us. As could be seen from the documents furnished before us by learned counsel for the assessee, vide letter dated 22.12.2016, the Assessing Officer forwarded the draft assessment order along with the assessment records to the JCIT for approval under section 153D of the Act. The contents of the letter is as under: “The Joint Commissioner of Income-tax, Central Range-8, New Delhi Sir, Sub: Approval u/s 153D of Income-tax Act, 1961 in M/s. Ramprastha Group of cases (D.O.S. -18/02/2015)- Request regarding. Kindly find herewith draft assessment orders u/s 153D & 143(3) of the Act in the following case for according the approval under section 153D of the I.T. Act. S. No. Name of assessee PAN U/s Asst. Years 1. M/s. Ramprastha Promoters & AADCR6481J 153A 2009-10 to 2014-15 ITA Nos.5792, 5793 & 5794/Del/2017 C.O. Nos.44, 45 & 46/Del/2022 10 | P a g e Developers Pvt. Ltd. 2. M/s. Ramprastha Promoters & Developers Pvt. Ltd. AADCR6481J 143(3) 2015-16 The draft order is being submitted after verifying entire seized material including computer media, panchnamas and its annexure, recorded and inquiries conducted. All the issues mentioned in the Appraisal Report and arising out of seized material have been examined. Encl: as above Yours faithfully, Sd/- (Dr. Dhrubasish K. Deka) Asstt. Commissioner of Income-tax, Central Circle-30, New Delhi” 11. Learned JCIT granted approval under section 153D of the Act on the very same day, i.e., 22.12.2016. The contents of the letter issued by JCIT are as under: “The Assistant Commissioner of Incoem Tax, Central Circle-30, New Delhi Sub: Approval u/s 153D of the Income Tax Act, 1961 in the case of M/s. Ramprastha Group of cases – reg. Please refer to your letter F. No. ACIT/CC-30/Draft approval/2016- 17/1121 dated 22.12.2016 on the above subject. Approval is hereby accorded to the draft assessment orders in the following cases:- S. No. Name of the assessee PAN A.Y. 1. M/s. Ramprastha Promoters & Developers Pvt. Ltd. AADCR6481J 2009-10 2. M/s. Ramprastha Promoters & Developers Pvt. Ltd. AADCR6481J 2010-11 3. M/s. Ramprastha Promoters & Developers Pvt. Ltd. AADCR6481J 2011-12 ITA Nos.5792, 5793 & 5794/Del/2017 C.O. Nos.44, 45 & 46/Del/2022 11 | P a g e 4. M/s. Ramprastha Promoters & Developers Pvt. Ltd. AADCR6481J 2012-13 5. M/s. Ramprastha Promoters & Developers Pvt. Ltd. AADCR6481J 2013-14 6. M/s. Ramprastha Promoters & Developers Pvt. Ltd. AADCR6481J 2014-15 7. M/s. Ramprastha Promoters & Developers Pvt. Ltd. AADCR6481J 2015-16 Assessment records are enclosed Sd/- Encl: As above (Sanjeev Minocha) Joint Commissioner of Income Tax, Central Range-8, New Delhi” 12. From the perusal of the aforesaid two documents, it is very much clear that along with draft assessment orders, the Assessing Officer has forwarded the assessment records, which obviously contained the seized materials and all other documents, based on which, the assessment proceedings were completed. The approval granted by JCIT under section 153D of the Act has been termed as mechanical and without application of mind by the assessee only because the JCIT has granted approval on the very same day he received the draft assessment orders. However, this simply cannot be a valid reason to infer that the JCIT has not applied his mind before granting approval under section 153D of the Act. It is an accepted factual position that the JCIT monitors search assessment proceedings as the approving authority. Therefore, it is ITA Nos.5792, 5793 & 5794/Del/2017 C.O. Nos.44, 45 & 46/Del/2022 12 | P a g e patent and obvious that the JCIT must be involved in different stages of the assessment proceeding. 13. That being the case, it cannot be said that the JCIT was completely ignorant about the materials available in the assessment record, based on which, the assessments were completed, thereby, requiring him to go through the entire materials again before granting approval under section 153D. Whether or not, the JCIT has examined the assessment records and the materials contained therein is a purely factual issue in the personal knowledge of the authority concerned and not within the knowledge of assessee. Unless, the assessee backs his allegation regarding non-application of mind by the authority concerned with conclusive evidence, such bald allegation cannot be accepted. When, the assessee is coming up with an allegation that the JCIT has not applied his mind and granted approval under section 153D of the Act mechanically, it is for him to establish such fact through proper evidence. In the facts of the present appeal, the assessee has failed to do so. 14 Pertinently, in course of hearing, the assessee has strongly relied upon the decision of the Hon’ble Bombay High Court in case of PCIT Vs. Shreelekha Damani (supra) and some other decisions ITA Nos.5792, 5793 & 5794/Del/2017 C.O. Nos.44, 45 & 46/Del/2022 13 | P a g e of the Coordinate Bench. However, on a careful reading of the decision rendered in case of PCIT Vs. Shreelekha Damani (supra), it is noticed that it has been decided based on the peculiar facts involved therein. In the said case, the approving authority, viz., Additional CIT has very clearly mentioned in the order granting approval that since, he did not get much time to analyse the issue of draft order on merit, the draft order was approved, as it is submitted. Basis such fact, the Hon’ble High Court concluded that his action of granting approval, therefore, was a mere mechanical exercise without any independent application of mind on his part. The other decisions of the Coordinate Bench relied upon by learned counsel have simply followed the decision of Hon’ble Bombay High Court in case of Shreelekha Damani (supra). However, in the facts of the present appeal, the approving authority, viz., the JCIT has not made any such observation as was made by the approving authority in case of Shreelekha Damani (supra). 15. In view of the aforesaid, we are not able to accept the contention of learned counsel for the assessee in this regard. Accordingly, grounds raised in the cross objections are dismissed. 16. In the result, cross objections are dismissed. ITA Nos.5792, 5793 & 5794/Del/2017 C.O. Nos.44, 45 & 46/Del/2022 14 | P a g e ITA No.5792/Del/2017 (AY: 2013-14) ITA No.5793/Del/2017 (AY: 2014-15) ITA No.5794/Del/2017 (AY: 2015-16) 17. The first common issue arising in the aforesaid appeals of the Revenue relates to deletion of addition made of different amounts on account of sale of scrap of steel generated during construction activity. Briefly the facts are, in course of a survey conducted under section 133A of the Act at the project site office of the assessee, certain documents, being annexures marked as A-1 and A-3 were impounded. As alleged by the Assessing Officer, these impounded documents contained undisclosed income generated by way of sale of scrap of steel. The details of documents impounded, as enumerated by the Assessing Officer are as under: i. Get-out passes of steel scrap at projects site. ii. Weighing slip of Dharma Kanta iii. Applications along with quotations made by parties to the assessee for purchase of steel scrap. iv. Periodical summary statements of the scrap sales pertaining to the period December, 2011 to February, 2015. 18. As observed by the Assessing Officer, at the time of survey, when the assessee was confronted with the impounded documents ITA Nos.5792, 5793 & 5794/Del/2017 C.O. Nos.44, 45 & 46/Del/2022 15 | P a g e and was called upon to explain, why such sale of scrap was not accounted in the regular books of account, Sh. Nikhil Jain, CEO of the group, in a statement recorded under section 132(4) of the Act, allegedly stated that the scrap sales are made in cash and are not recorded in the regular books of account. The Assessing Officer further observed, in course of post search proceeding, the assessee furnished details of scrap sale, which indicated that scrap of Rs.1527.44 mt. was sold for Rs.3,52,85,140/- during the block period of 01.04.2008 to 15.02.2015. The Assessing Officer further alleged that following up the admission made in the statement recorded under section 132(4) of the Act, one of the directors and authorized representative of the group filed a letter to offer income of Rs.3,52,85,140/- to tax. When confronted with the aforesaid factual position in course of assessment proceedings, the assessee submitted that the concerned persons have retracted there statements made in course of search and post search proceedings. It was submitted by the assessee that whatever income generated from the sale of scrap, belonged to the contractor who was entrusted to do the construction work and not to the assessee. The Assessing Officer, however, did not accept the explanation of the assessee. Based on the impounded documents and the statements ITA Nos.5792, 5793 & 5794/Del/2017 C.O. Nos.44, 45 & 46/Del/2022 16 | P a g e recorded from the CEO and Director of the assessee-company, the Assessing Officer ultimately concluded that the assessee has not disclosed income of Rs.3,52,85,140/- generated from sale of scrap to tax. Accordingly, he added back the amount in four different assessment years i.e. assessment years 2012-13 to 2015-16. 19. The assessee contested the aforesaid additions before learned Commissioner (Appeals). Being convinced with the submissions of the assessee that the income generated from sale of scrap belonged to the contractor and not to the assessee, learned Commissioner (Appeals) deleted the additions in assessment years under dispute. 20. Before us, learned Representatives appearing for the parties reiterated their respective stand. 21. We have considered rival submissions and perused the materials on record. Undisputedly, in course of survey conducted in the project site office of the assessee, certain documents were impounded, which allegedly reveal undisclosed income from sale of steel scrap. It is the case of the Revenue that in a statement recorded under section 132(4) of the Act in course of search conducted in case of the assessee as well as the persons related to the group, the CEO of the assessee group admitted that the income generated from sale of steel scrap was not recorded in the books of ITA Nos.5792, 5793 & 5794/Del/2017 C.O. Nos.44, 45 & 46/Del/2022 17 | P a g e account. However, subsequently the person concerned retracted the statement and completely denied of having any income from sale of steel scrap. Rather, it is the case of the assesse that as per the contract between the assessee and the contractor, who was entrusted with the job of constructing the project, the scrap generated in course of construction would also belong to contractor. It is a fact on record that the assessee has stuck to his aforesaid stand right from the stage of assessment proceeding. In fact, in the body of the assessment order, the Assessing Officer has reproduced in detail the submissions of the assessee to advance its case that the income generated from sale of steel scrap does not belong to the assessee. The assessee had submitted that as per terms of the agreement with the contractor, though, the assessee was to supply cement and steel, however, the scrap generated in course of construction would belong to the Contractor. We have observed, learned Commissioner (Appeals) after verifying the terms of agreement with the contractor has given a factual finding that as per the contract, wastage is permitted up to 3%, which is actually scrap generated from the cutting of the steel etc. and is within the agreed limit. He has also given a factual finding that as per the understanding between the parties, scrap material was taken by ITA Nos.5792, 5793 & 5794/Del/2017 C.O. Nos.44, 45 & 46/Del/2022 18 | P a g e the contractor for disposal, hence, rates with the contractor are decided accordingly. 22. A perusal of material placed on record, we find that apart from the materials impounded at the time of survey and the statements recorded from some of the persons, there are no other materials in the possession of the Assessing Officer to conclusively prove that the income generated from sale of steel scrap belonged to the assessee. The impounded documents, though, to some extent indicate generation of steel scrap and their sale, however, they are not in the nature of conclusive evidence to fasten the liability on the assesse. Though, it may be a fact that at the time of recording of statement under section 132(4) and post search proceedings, some persons related to group might have stated that the income generated from sale of steel scrap belonged to the assessee, however, subsequently, such statements have been retracted and the assessee had explained that such statement/admission was given without properly knowing agreement/arrangement with the contractor. When the assessee has furnished an explanation before the Assessing Officer to the effect that the rate with the contractor was negotiated after taking into consideration the fact that the income generated from sale of scrap within the permissible limit ITA Nos.5792, 5793 & 5794/Del/2017 C.O. Nos.44, 45 & 46/Del/2022 19 | P a g e would belong to the contractor, the Assessing Officer was required to conduct further inquiry to come to a definite conclusion that the income generated from sale of steel scrap actually belonged to the assessee. By simply relying upon the statement recorded under section 132(4) of the Act and post search proceeding as well as impounded documents, the Assessing Officer has made the addition. Once, the assessee furnished an explanation, the Assessing Officer was required to take forward the inquiry in course of assessment proceeding to its logical end by ascertaining the real facts through inquiry with the persons involved, including, the concerned contractor. It is relevant to observe, in course of assessment proceeding, the assessee had also furnished sample copies of some contracts. However, as it appears, by simply saying that the agreements do not contain any clause regarding ownership of scrap, the Assessing Officer has not conducted any further inquiry. 23. Thus, in our considered opinion, the Revenue has failed to controvert the factual finding of learned Commissioner (Appeals) through cogent evidence. That being the factual position emerging on record, we do not find any infirmity in the decision of learned Commissioner (Appeals) in deleting the additions in the years ITA Nos.5792, 5793 & 5794/Del/2017 C.O. Nos.44, 45 & 46/Del/2022 20 | P a g e under disputed. Thus, we uphold the decision of learned Commissioner (Appeals) on this issue. Grounds are dismissed. 24. The next common issue arising for consideration relates to deletion of addition made on account of inflated purchase expenses. In course of assessment proceeding, the Assessing Officer noticed that in course of search operation certain documentary evidences were found, which indicted that one M/s. MK Woods India Pvt. Ltd., one of major timber suppliers to the assessee group had indulged in manipulation of accounts so as to help the group in inflating the purchases. Basis such information, a survey under section 133A of the Ac was conducted at the premises of M/s. M.K. Woods India Pvt. Ltd on 19.02.2015, which was subsequently converted into a full-fledged search and seizure operation under section 132(1) of the Act. As alleged by the Assessing Officer, in the statement recorded under section 132(4) of the Act in course of search and seizure operation, one of the Directors of M/s. M.K. Woods India Pvt. Ltd. admitted of having inflated the actual sales made by 20% to 30%. When this fact was confronted to the assessee, the assessee completely denied of having inflated the purchases. The Assessing Officer, however, was not convinced with the submissions of the assessee and added ITA Nos.5792, 5793 & 5794/Del/2017 C.O. Nos.44, 45 & 46/Del/2022 21 | P a g e back different amount in the years under dispute. The total addition in three different assessment years aggregated to Rs.2,63,32,990/-. The assessee contested the aforesaid additions before learned Commissioner (Appeals). Being convinced with the submissions of the assessee, learned Commissioner (Appeals) deleted the addition. 25. We have considered rival submissions and perused the materials on record. A reading of the assessment orders would reveal that the additions on account of inflated purchase expenses were made solely relying upon statement recorded from a third party, viz., one of the Directors of M/s. MK Woods India Pvt. Ltd., which is stated to be a major timber supplier to the assessee. As could be seen from the facts on record, though, search and seizure operation was conducted on the assessee as well, however, no incriminating material was found therein to indicate that the assessee had inflated its purchase expenses. Whatever incriminating material, if at all they can be termed as incriminating materials, as per the Assessing Officer own observations were found in course of search and seizure operation conducted in respect of a third party, i.e., M/s. M.K. Woods India Pvt. Ltd. Further, except relying upon the statement of one of the Directors ITA Nos.5792, 5793 & 5794/Del/2017 C.O. Nos.44, 45 & 46/Del/2022 22 | P a g e of M/s. M.K. Woods India Pvt. Ltd., the Assessing Officer has not dismissed in detail regarding the nature of incriminating material found in case of M/s. M.K. Woods India Pvt. Ltd. and how they implicate the assessee. It is a further fact on record that, though, the Assessing Officer has made the disputed addition solely relying upon the statement of a third party, however, no opportunity of cross-examination was afforded to the assessee in spite of a request in that behalf being made by the assessee. There is nothing on record, even to suggest that so called incriminating material found in case of M/s. MK Woods India Pvt. Ltd. was confronted to the assesse. In the aforesaid factual back-drop, we do not find any infirmity in the decision of learned Commissioner (Appeals) in deleting the additions as such additions have been made purely on conjecture and surmises. Accordingly, we uphold the decision of learned Commissioner (Appeals) on the issue by deleting the disallowance made. 26. The third and final common issue raised by the Revenue relates to deletion of disallowance of foreign travel expenses. Briefly the facts are, in course of assessment proceeding, the Assessing Officer found that the assesse had claimed huge foreign travel expenses. After perusing necessary details and examining them, ITA Nos.5792, 5793 & 5794/Del/2017 C.O. Nos.44, 45 & 46/Del/2022 23 | P a g e the Assessing Officer ultimately concluded that a part of the foreign travel expenses cannot be allowed as such foreign travel expenses have been incurred by the family members of the Directors including their wives, children and other relatives. Thus, the Assessing Officer held that such expenses cannot be considered to be for the purpose of business. Having held so, he disallowed 20% out of the expenses incurred for foreign travel of Directors and employees. Whereas, he disallowed the foreign travel expenses relating to others. The assessee contested the disallowances before learned Commissioner (Appeals). Having found merit in the submissions of the assesse that such disallowance made is not based on any incriminating material, learned Commissioner (Appeals) deleted the disallowance. Of course, on merits also he decided the issue in favour of the assessee. 27. We have considered rival submissions and perused the materials on record. Insofar as assessment years 2013-14 and 2014-15 are concerned, undisputedly, these are search related years and assessments have been completed under section 153A of the Act. That being the fact on record, as per the settled legal principle, additions/disallowances, if any, have to be made strictly on the basis of incriminating material found as a result of search ITA Nos.5792, 5793 & 5794/Del/2017 C.O. Nos.44, 45 & 46/Del/2022 24 | P a g e and seizure operation. However, a perusal of the assessment order would reveal that the Assessing Officer himself has stated that the issue relating to foreign travel expenses was examined in course of post search proceeding. Thus, it is patent and obvious, the disallowance of a part of travelling expenses in the aforesaid two assessment years is not based on any incriminating material found as a result of search and seizure operation. That being the case, the disallowance made cannot be sustained. Therefore, we uphold the decision of learned Commissioner (Appeals) in deleting the entire disallowances made in assessment years 2013-14 and 2014- 15. However, factual position in assessment year 2015-16 is different. Undisputedly, assessment year 2015-16 is the year of search, hence, the Assessing Officer has to proceed for assessment under section 143(3) of the Act. Therefore, assessment for assessment year 2015-16 is not confined to seized material alone. The Assessing Officer retains his power to examine all issues arising in course of assessment proceeding. Therefore, the issue of disallowance of travelling expenses has to be examined on merits. On a perusal of material on record, including the order passed by the departmental authorities, it is seen that in addition to the disallowance made by the assessee, the Assessing Officer has ITA Nos.5792, 5793 & 5794/Del/2017 C.O. Nos.44, 45 & 46/Del/2022 25 | P a g e proceeded to make further disallowance on ad-hoc basis in respect of travelling expenses incurred by directors and employees. Whereas, he has disallowed 100% of expenses incurred by the relatives of the directors and the employees. Learned Commissioner (Appeals) has recorded a factual finding that as a result of foreign visits by the directors and employees substantial benefit to the business of the assessee has accrued, as, the assessee has received booking of more than 160 flats across the world and Foreign Direct Investment (FDI) from various investors, such as, Deutsche Bank, SARE Group, India Property Fund, Clear Water Capital India Pvt. Ltd. 28. From the aforesaid factual finding of learned Commissioner (Appeals), it can be concluded that the expenses incurred for foreign visits of directors and employees have nexus with the business of the assessee. However, same cannot be said about the expenses incurred for wives and relatives of the directors and the employees. Before learned Commissioner (Appeals), the assessee has submitted that taking female members during foreign travel is to make the environment cordial and to make a rapport with the ladies of other side making easier to finalize the deal. This, in our view, is a too spacious argument to allow assessee’s claim. Firstly, ITA Nos.5792, 5793 & 5794/Del/2017 C.O. Nos.44, 45 & 46/Del/2022 26 | P a g e when the directors and the employees of the assessee are negotiating with the investors or prospective buyers, there is no need for wives and other relatives to travel for such work or company to incur their expenses. The wives and relatives of the directors and the employees are accompanying them completely in their personal capacity and not in connection with the business of the company. No cogent evidence has been brought on record by the assessee to demonstrate in what manner and capacity, the wives and relatives of the directors and the employees have helped in brokering any deal or business for the assessee-company. In aforesaid view of the matter, we hold that an amount of Rs.6,57,861/-, being the travel expenses incurred for the wives and relatives of the directors and the employees, being for non-business purpose, deserves to be disallowed. Therefore, we uphold the disallowance to the extent of Rs.6,57,861/- in assessment year 2015-16. Thus, the appeal for assessment year 2015-16 is partly allowed. 29. In the result, the Revenue’s appeals for assessment years 2013-14 and 2014-15 are dismissed, whereas appeal for assessment year 2015-16 is partly allowed. ITA Nos.5792, 5793 & 5794/Del/2017 C.O. Nos.44, 45 & 46/Del/2022 27 | P a g e 30. To sum up, all the Cross Objections as well as appeals for assessment years 2013-14 and 2014-15 are dismissed, whereas appeal for assessment year 2015-16 is partly allowed. Order pronounced in the open court on 23 rd September, 2022 Sd/- Sd/- (DR. B.R.R. KUMAR) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 23 rd September, 2022. RK/- Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi