THE ASSTT. COMMISSIONER OF INCOME TAX (CENTRAL)-1, Indore V. SHRI ASHOK KATARIA, Ratlam

ITSSA 11/IND/2016

• Counselvise Citation: [2016] 122 COUNSELVISE.COM (IT) 2221 (ITAT-INDORE)
• Duration Of Justice: 4 month(s) 27 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 15-07-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 12-07-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 18-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJEEV VARSHNEY
• Assessee Lawyers: P D NAGAR
• Keywords: Unexplained cash credit; Search and seizure; Block assessment; Surrender of tenancy right
• Section: 143(3); 142(1); 153A; 32; 147; 132

Judgement Text

ITA NO. 9/IND/2016 & IT(SS) A NO.11/IND/2016 ASHOK KATARIA 1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI D.T. GARASIA, JM & SHRI N.S. SAINI, AM IT(SS)A NO.9/IND/2016 A.Y.2010-11 SHRI ASHOK KATARIA RATLAM PAN ACFPK - 5787 ::: APPELLANT VS DY. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE INDORE ::: RESPONDENT IT(SS)A NO.11/IND/2016 A.Y.2010-11 ASSTT. COMMISSIONER OF INCOME TAX-I INDORE ::: APPELLANT VS SHRI ASHOK KATARIA RATLAM PAN ACFPK 5787 ::: RESPONDENT ITA NO. 9/IND/2016 & IT(SS) A NO.11/IND/2016 ASHOK KATARIA 2 ASSESSEE BY SHRI ANIL SATHE & SHRI P.D. NAGAR REVENUE BY SHRI RAJEEV VARSHNEY DATE OF HEARING 12.7.2016 DATE OF PRONOUNCEMENT 15.7.2016 O R D E R PER SHRI N.S. SAINI, AM IN THE APPEAL OF THE ASSESSEE THE ONLY GRIEVANCE IS TH AT THE LEARNED CIT(A) ERRED IN CONCLUDING THAT THE TRANSAC TION OF ACQUISITION AS WELL AS RELINQUISHMENT OF RIGHT WAS NON EST AND TREATING THE AMOUNT RECEIVED AGAINST RELINQUISHMENT OF TENANCY RIGHT OF RS. 90 LACS AS UNEXPLAINED CREDIT. 2. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABL E ON RECORD. IN THE INSTANT CASE THE ASSESSEE HAS CLAIMED TO HAVE RECEIVED RS. 90 LACS ON SURRENDER OF TENANCY RIGH TS IN RESPECT OF ROOM NO. 10B, IIND FLOOR AT KHAMBATA PATHAN ITA NO. 9/IND/2016 & IT(SS) A NO.11/IND/2016 ASHOK KATARIA 3 CHAWL/RANE BUILDING SITUATED AT C.S. NO. 112 & 113 AT D R. E. MOSES ROAD, WORLI, MUMBAI 400 018 AND ROOM NO. 9B ON IIND FLOOR OF PREMISES CHAWL NO. 3A (1071) SITUAT ED AT E. MOSES ROAD, WORLI, BOMBAY-18. THE ASSESSEE HAS FURTHE R CLAIMED THAT THE SAID TENANCY RIGHTS WERE ACQUIRED BY HIM BY WAY OF PURCHASE FROM DEEPAK YESHWANT POWLE ON 16.7.2002 AND MRS. STELLA DSILVA ON 18.2.2000 ON PAYMENT OF RS.2 LACS. CONSEQUENTLY, THE ASSESSEE CLAI MED TO HAVE DERIVED LONG TERM CAPITAL GAINS OF RS.90 LACS. IN THE ASSESSMENT THE ASSESSING OFFICER HELD THAT THERE WAS NO ACTUAL TENANCY RIGHT OF THE ASSESSEE AND, THEREFORE, ASSESSED RS. 90 LACS AS INCOME FROM OTHER SOURCES. 3. ON APPEAL, THE LEARNED CIT(A) CONFIRMED THE ACTION O F THE ASSESSING OFFICER. 4. BEFORE US, THE ASSESSEE EXPLAINED THAT THE TENANCY RIGHT IN RESPECT OF ROOM NO. 10B, IIND FLOOR AT KHAMB ATA PATHAN CHAWL/RANE BUILDING SITUATED AT C.S. NO. 112 & ITA NO. 9/IND/2016 & IT(SS) A NO.11/IND/2016 ASHOK KATARIA 4 113 AT DR. E. MOSES ROAD, WORLI, MUMBAI 400 018 WAS ORIGINALLY HELD BY MR. DEEPAK YESHWANT POWLE AND THE ASSESSEE ACQUIRED THE TENANCY RIGHT BY MAKING PAYMENT OF RS.2 LACS BY DEMAND DRAFT. SIMILARLY IN RESPECT OF PRE MISES ROOM NO. 9B ON IIND FLOOR OF PREMISES CHAWL NO. 3A (1071) SITUATED AT E. MOSES ROAD, WORLI, BOMBAY-18 THE ORIGIN AL TENANT WAS MRS. STELLA DSILVA FROM WHOM THE ASSESSEE ACQUIRED THE TENANCY RIGHT ON 18.2.2000 BY MAKING PAYMENT OF RS. 2 LACS BY DEMAND DRAFT. COPIES OF DD AR E PLACED AT PAGE 26 OF THE PAPER BOOK FILED BY THE ASSESSE E. 5. THE ASSESSEE CONTENDED THAT THE AFORESAID TENANCY RIGHTS WERE TRANSFERRED TO MRS. JAMNA A. LOKHANDWALA & MR. ALIASGAR M. LOKHANDWALA DURING THE YEAR UNDER CONSIDERATION AND THE ASSESSEE DIRECTLY RECEIVED RS.4 5 LACS FROM MRS. JAMNA A. LOKHANDWALA & MR. ALIASGAR M. LOKHANDWALA IN RESPECT OF THE PREMISES ROOM NO. 10B, I IND FLOOR AT KHAMBATA PATHAN CHAWL/RANE BUILDING SITUATED AT ITA NO. 9/IND/2016 & IT(SS) A NO.11/IND/2016 ASHOK KATARIA 5 C.S. NO. 112 & 113 AT DR. E. MOSES ROAD, WORLI, MUMBAI 400 018 AND RS.45 LACS IN RESPECT OF THE PREMISES ROO M NO. 9B ON IIND FLOOR OF PREMISES CHAWL NO. 3A (1071 ) SITUATED AT E. MOSES ROAD, WORLI, BOMBAY-18. THE AMOUNTS WERE CREDITED IN THE BANK ACCOUNT OF THE ASSESS EE ON 27.5.2009. THE AFORESAID TRANSACTIONS WERE SUPPORTED BY TRIPARTITE AGREEMENT ENTERED INTO BETWEEN MRS. JAMN A A. LOKHANDWALA & MR. ALIASGAR M. LOKHANDWALA, ON THE ONE HAND, ORIGINAL TENANT, ON THE OTHER HAND THE ASSESSE E AS A CONFIRMING PARTY THERETO. THE REVENUE HAS NOT ACCEPTED THE ABOVE TRANSACTION ON THE GROUND THAT IN TH E OPINION OF THE ASSESSING OFFICER THE VALUE OF TENANCY RIGHT IN MARCH AND APRIL, 2000 SHOULD HAVE BEEN MUCH MORE THAN THE AMOUNT CLAIMED TO HAVE BEEN PAID BY THE ASSESSEE FOR ACQUIRING THE SAME. 6. FURTHER, THE ASSESSING OFFICER OBSERVED THAT THER E WERE TWO AGREEMENTS FOR TRANSFER OF TENANCY RIGHT IN FAVOUR OF ITA NO. 9/IND/2016 & IT(SS) A NO.11/IND/2016 ASHOK KATARIA 6 MRS. JAMNA A. LOKHANDWALA & MR. ALIASGAR M. LOKHANDWALA IN RESPECT OF THE PROPERTIES UNDER CONSIDERATION. ONE AGREEMENT WAS ENTERED INTO ON 25.6.2009 WHICH WAS BETWEEN THE ORIGINAL TENANT AND THE TRANSFEREE DEVELOPER. IN THIS AGREEMENT NOWHERE THE N AME OF THE ASSESSEE WAS MENTIONED. 7. HOWEVER, IN THE LATTER AGREEMENT WHICH WAS ENTERED INTO ON 18 TH NOVEMBER, 2009, BESIDES SHOWING ORIGINAL TENANT AS TRANSFEROR, MRS. JAMNA A. LOKHANDWALA & MR. ALIASGAR M. LOKHANDWALA, AS TRANSFEREE AS ALSO NAME OF THE ASSESSEE WAS APPEARING AS CONFIRMING PARTY. ON THE BASIS OF THIS AGREEMENT, THE ASSESSING OFFICER CONCLUDED T HAT THE TRANSACTION OF SURRENDER OF TENANCY RIGHT BY THE ASSESS EE TO THE DEVELOPER WAS NOT GENUINE. 8. WE FIND THAT NO MATERIAL HAS BEEN BROUGHT ON RECORD BY THE REVENUE TO SHOW THAT THE VALUE OF TENANCY RIGHT IN MARCH/APRIL, 2000 WAS MORE THAN THE AMOUNT CLAIMED TO ITA NO. 9/IND/2016 & IT(SS) A NO.11/IND/2016 ASHOK KATARIA 7 HAVE BEEN PAID BY THE ASSESSEE FOR ACQUIRING THE TENANCY RIGHT. THEREFORE, ADVERSE INFERENCE DRAWN BY THE ASS ESSING OFFICER IS FOUND TO BE BASED MERELY ON ASSUMPTION AND SURMISES. 9. FURTHER THE EXPLANATION OF THE ASSESSEE WAS THAT THE RELEVANT DEVELOPMENT CONTROL REGULATIONS SPECIFYING T HAT PERMISSIBLE FSI IS DEPENDENT UPON THE NUMBER OF OCC UPIERS AND ACTUAL AREA OCCUPIED BY THEM AND NO NEW TENANCY CREATED AFTER 13.06.1996 SHALL BE CONSIDERED. THEREFO RE, THE NAME OF THE ORIGINAL TENANT CONTINUED IN THE RECOR D OF THE LANDLORD AND THE NAME OF THE ASSESSEE WAS NOT SUBSTITUTED THEREIN. HOWEVER, IN 2007 THE NAME OF T HE ASSESSEE WAS GIVEN AS THE TENANT IN RESPECT OF THE PROPERTIES IN QUESTION AND THIS FACT IS SUPPORTED BY C LAUSE (B) OF THE AGREEMENT DATED 18.11.2009, WHICH READS AS UNDER :- (B) THE CONFIRMING PARTY IS THE NOMINEE/ASSIGNEE ITA NO. 9/IND/2016 & IT(SS) A NO.11/IND/2016 ASHOK KATARIA 8 OF THE TRANSFEROR AND AS SUCH HIS NAME WAS GIVEN IN THE LIST OF TENANTS TO THE DEVELOPERS. HE FURTHER EXPLAINED THAT IN THE ABOVE CIRCUMSTANCES, AGREEMENT FOR SURRENDER OF TENANCY RIGHT WAS ENTERED I NTO BY THE DEVELOPER WITH THE ORIGINAL TENANT ONLY BUT TH E PAYMENT OF CONSIDERATION WAS MADE DIRECTLY TO THE ASSES SEE BY THE DEVELOPER. THE DEVELOPER FOR THE SAKE OF ABUN DANT PRECAUTION ALSO LATER ON ENTERED INTO ANOTHER TRANSFER AGREEMENT BY INCLUDING THE NAME OF THE ASSESSEE AS CONFIRMING PARTY. 10 IN THE ABOVE CIRCUMSTANCE, MERELY BECAUSE THERE WER E TWO AGREEMENTS EXECUTED IN RESPECT OF SURRENDER OF T ENANCY RIGHTS IN RESPECT OF THE PROPERTIES IN QUESTION, THE GENUINENESS OF SURRENDER OF TENANCY RIGHTS BY THE ASS ESSEE CANNOT BE INFERRED. 11. WE FIND THAT THE REVENUE COULD NOT BRING ANY POSI TIVE MATERIAL ON RECORD BY MAKING VERIFICATION WITH THE ITA NO. 9/IND/2016 & IT(SS) A NO.11/IND/2016 ASHOK KATARIA 9 DEVELOPER OR THE ORIGINAL TENANT THAT NO TENANCY RIGHT WAS ACTUALLY ACQUIRED BY THE ASSESSEE OR NO TENANCY RIGHT WAS ACTUALLY SURRENDERED BY THE ASSESSEE IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. 12. IT IS OBSERVED THAT THE ADDITION WAS MADE ONLY ON THE BASIS OF SURMISES AND CONJECTURES. NO POSITIVE MATERI AL COULD BE BROUGHT ON RECORD BY THE REVENUE TO SHOW T HAT TRIPARTITE AGREEMENT DATED 18.11.2009, WHEREIN THE ASSESSEE WAS SHOWN AS CONFIRMING PARTY IN RESPECT OF TH E TRANSACTION OF SURRENDER OF TENANCY RIGHT IN RESPECT O F THE PROPERTIES IN QUESTION, WAS NOT GENUINE. 13. IN OUR CONSIDERED VIEW, WITHOUT BRINGING ANY CO GENT MATERIAL ON RECORD TO SHOW THAT THE AGREEMENTS DATED 18.11.2009 WERE NOT GENUINE, IT WAS NOT OPEN TO THE REVENUE TO REJECT THE TRANSACTION EVIDENCED BY THOSE AGREEMENTS. IN THE CIRCUMSTANCES, IN OUR CONSIDERED VIEW, THE REJECTION OF EXPLANATION OF THE ASSESSEE BY THE RE VENUE ITA NO. 9/IND/2016 & IT(SS) A NO.11/IND/2016 ASHOK KATARIA 10 IS UNSUSTAINABLE. WE, THEREFORE, SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES ON THIS ISSUE AND DIRECT THE ASSESS ING OFFICER TO ACCEPT RS.90 LACS AS CONSIDERATION RECEIVED BY THE ASSESSEE IN RESPECT OF SURRENDER OF TENANCY RIGHT AND CONSEQUENTLY COMPUTE THE LONG TERM CAPITAL GAIN DERIVE D FROM THE SAME AS PER LAW. THUS, THE GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D. 15. IN THE APPEAL OF THE REVENUE, FOLLOWING GROUNDS O F APPEAL HAVE BEEN TAKEN :- (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE WHETHER THE LD. CIT(A) WAS CORRECT IN LAW TO HOLD TH AT ADDITIONS BASED ON INCRIMINATING MATERIAL ONLY CAN BE MADE IN ABATED/COMPLETED ASSESSMENT. (II) WHETHER RETURNS PROCESSED U/S 143(1) CAN BE TRE ATED AS COMPLETED ASSESSMENT DESPITE THE FACT THAT HON'BLE ITA NO. 9/IND/2016 & IT(SS) A NO.11/IND/2016 ASHOK KATARIA 11 APEX COURT HAS CATEGORICALLY HELD THAT PROCESSING OF RETURN U/S 143(1) DOES NOT AMOUNT TO ASSESSMENT IN THE CASE OF ACIT VS. RAJESH JHAVERI STOCK BROKERS PVT . LTD. CASE NO. 2830 OF 2007 16. THE BRIEF FACTS OF THE CASE ARE THAT A SEARCH AND SEIZURE OPERATION WAS CARRIED OUT U/S 132 OF THE ACT O N 7 TH SEPTEMBER, 2011 ON KATARIA GROUP OF WHICH THE ASSESSEE WAS ONE OF THE MEMBERS. FURTHER, THE ASSESSEE HAD FIL ED RETURN OF INCOME U/S 139(1) FOR THE IMPUGNED ASSESSM ENT YEAR ON 27.11.2010. FURTHER THE RETURNS OF INCOME F ILED BY THE ASSESSEES WERE ACCEPTED BY THE DEPARTMENT AND NO NOTICE U/S 143(2) OR 142(1) WAS ISSUED AND ACCORDING LY THE ASSESSMENTS ATTAINED FINALITY DUE TO EXPIRY OF LIMITATIO N PERIOD OF 12 MONTHS FROM THE END OF THE MONTH IN WH ICH THE RETURNS WERE FILED. HENCE, THE ASSESSMENTS WERE DEEMED TO BE COMPLETED AND NOT PENDING ON THE DATE OF SEARCH ON 7.9.2011. ACCORDINGLY, THE ASSESSEE CONTEN DED ITA NO. 9/IND/2016 & IT(SS) A NO.11/IND/2016 ASHOK KATARIA 12 THAT AS NO INCRIMINATING MATERIAL WAS FOUND FROM THE PREMISES OF THE ASSESSEE DURING THE COURSE OF SEARCH U/S 132 OF THE ACT ON 7.9.2011, NO ADDITION COULD BE MADE IN AN ASSESSMENT MADE U/S 153A OF THE ACT. 17. THE LEARNED CIT(A) ON THE ABOVE CONTENTION OF TH E ASSESSEE AND THE FACTS OF THE CASE HELD THAT THERE WERE NO VALID PROCEEDINGS U/S 153A OF THE ACT AND ALLOWED THE APPEALS OF THE ASSESSEE BY CANCELLING THE ASSESSMENT ORDERS IN THE CASES OF ALL THESE ASSESSEES. WHILE DOIN G SO, THE LEARNED CIT(A) HELD AS UNDER :- 4.1 I HAVE GONE THROUGH THE ASSESSEES CONTENSIONS. THE HON'BLE ITAT, INDORE BENCH, INDORE , IN IT(SS) ANOS. 71/IND/2014 IN THE CASE OF M/S KALANI BROS. HAS HELD AS UNDER :- 8. IN RESPECT OF 153A BAD IN LAW ON THE GROUND THAT ORIGINAL ASSESSMENT PROCEEDINGS U/S 143(3) WAS ITA NO. 9/IND/2016 & IT(SS) A NO.11/IND/2016 ASHOK KATARIA 13 COMPLETED ON 29.12.2006 (HEREINAFTER REFERRED AS ORIGINAL ASSESSMENT ORDER FOR EACE OF REFERENCE), THE A.O. TREATED THE SAID LEASE TRANSACTION AS SALE TRANSACTION AND TAXED THE TOTAL SECURITY DEPOSIT RECEIVABLE AS SALE CONSIDERATION OF SALE OF LAND. T HE ADDITION MADE IN THE SEARCH ASSESSMENT ORDER PERTAI NED TO THE ISSUE ALREADY DEALT IN THE ORIGINAL ASSESSME NT ORDER I.E. LEASE TRANSACTION CATEGORISED AS SALE TRANSACTION. THE FACT THAT THE AFORESAID ISSUE BEA RS NO RELATION TO ANY OF THE MATERIAL/DOCUMENTS/RECORDS F OUND AND SEIZERD DURING THE SEARCH ACTION ON 16.04.2009. LD. CIT(A) HAS RELIED UPON THE CIRCULAR NO. 7 OF 2003 W HICH CLARIFIES THE POSITION OF THE PENDING APPEALS AS ON THE DATE OF THE SEARCH. THE RELEVANT PORTION IS REPRODU CED HEREWITH THE ASSESSING OFFICER SHALL ASSESS OR REASSESS T HE TOTAL INCOME OF EACH OF THESE SIX ASSESSMENT YEARS. ITA NO. 9/IND/2016 & IT(SS) A NO.11/IND/2016 ASHOK KATARIA 14 ASSESSMENT OR REASSESSMENT, IF ANY, RELATING TO ANY ASSESSMENT YEAR FALLING WITHIN THE PERIOD OF SIX ASSESSMENT YEARS PENDING ON THE DATE OF INITIATION OF THE SEARCH UNDER SECTION 132 OR REQUISITION UNDER SECTI ON 132A AS THE CASE MAY BE SHALL ABATE. IT IS CLARFIED THAT THE APPEAL REVISION OR RECTIFICATION PROCEEDINGS PE NDING ON THE DATE OF INITIATION OF SEARCH UNDER SECTION 1 32 OR REQUISITION SHALL NOT ABATE. ACCORDINGLY, AS FAR AS COMPLETED ASSESSMENTS ARE CONCERNED, THEY DO NOT ABATE. THE A.O. CANNOT PROCE ED TO MAKE THE SAME ADDITION IN THE BLOCK ASSESSMENT WITHOUT ANY INCRIMINATING MATERIAL FOUND IN THE COU RSE OF SEARCH. THE SAID VIEW PREVENTS THE A.OI. TO UNDO WH SAT HAS ALREADY BEEN COMPLETED AND HAS BECOME FINAL IN THE ORIGINAL ASSESSMENT PROCEEDINGS. 9. WE HAVE HEARD BOTH THE SIDES. WE HAVE ALSO GONE THROUGH THE CASE LAWS RELIED UPON BY BOTH THE SIDES . WE ITA NO. 9/IND/2016 & IT(SS) A NO.11/IND/2016 ASHOK KATARIA 15 HAVE ALSO CONSIDERED VARIOUS RELEVANT FACTS OF THE CASE. IT IS A SETTLED LEGAL POSITION THAT ONCE A SEARCH A ND SEIZURE ACTION HAS TAKEN PLACE U/S 132 OF THE ACT O R A REQUISITION HAS BEEN MADE U/S 132A THE PROVISIONS O F SECTION 153A TRIGGED AND ASSESSING OFFICER IS BOUND TO ISSUE NOTICE U/S 153A OF THE ACT. ONCE NOTICES ARE ISSUED U/S 153A OF THE ACT THEN ASSESSEE IS LEGALLY OBLIGED TO FILE RETURN OF INCOME FOR SIX YEARS. THE ASSESSMENT AND REASSESSMENT FOR SIX YEARS SHALL BEFINALISED BY THE ASSESSING OFFICER. IT IS ALSO HE LD BY VARIOUS COURTS THAT ONCE NOTICE U/S 153A OF THE ACT ISSUED, THEN ASSESSMENT FOR SIX YEARS SHALL BE AT L ARGE BOTH FOR ASSESSING OFFICER AND ASSESSEE HAVE NO WARRANT OF LAW. IT HAS BEEN ALSO HELD THAT IN THE ASSESSMENT YEARS WHERE ASSESSMENTS HAVE BEEN ABATED IN TERMS OF SECOND PROVISO TO SECTION 153A T HEN ASSESSING OFFICER ACTS UNDER ORIGINAL JURISDICTION AND ITA NO. 9/IND/2016 & IT(SS) A NO.11/IND/2016 ASHOK KATARIA 16 ONE ASSESSMENT IS MADE FOR TOTAL INCOME INCLUDING T HE ADDITION MADE ON THE BASIS OF SEIZED MATERIAL. BUT WHERE THERE IS NO ABATEMENT OF ASSESSMENT AND ASSESSMENTS WERE COMPLETED ON THE DATE OF SEARCH TH EN ADDITION CAN BE MADE ONLY ON THE BASIS OF INCRIMINA TING DOCUMENTS OR UNDISCLOSED ASSETS ETC. IN THESE CASES THERE WAS NO INCRIMINATING DOCUMENT FOUND AND SEIZE D. NO ASSESSMENT PROCEEDINGS WERE ABATED IN THESE ASSESSEE. THUS ASSESSMENT FOR THESE ASSESSMENT YEAR S WERE COMPLETED ON THE DATE OF SEARCH. THE ASSESSMEN TS WERE COMPLETED U/S 143(3) OF THE ACT READ WITH SECT ION 153A/153C OF THE ACT AFTER THE SEARCH. THERE WAS NO ABATEMENT OF ANY PROCEEDINGS IN THESE CASES FOR THE SE ASSESSMENT YEARS IN TERMS OF SECOND PROVISO TO SECT ION 153A OF THE ACT. THERE IS NO SEIZED MATERIAL BELONG ING TO THE ASSESSEE WHICH WAS FOUND AND SEIZED IN RELATION TO ADDITIONS MADE. IN A RECENT A DECISION, HON'BLE DEL HI ITA NO. 9/IND/2016 & IT(SS) A NO.11/IND/2016 ASHOK KATARIA 17 HIGH COURT IN THE CASE OF CIT VS. KABUL CHAWLA (SUP RA0 HAS HELD THAT COMPLETED ASSESSMENTS CAN BE INTERFER ED WITH BY THE ASSESSING OFFICER WHILE MAKING ASSESSME NT U/S 153A OF THE ACT 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 SEAR CH WHICH WAS NOT PRODUCED OR NOT ALREADY DISCLOSED OR MADE KNOWN IN THE COURSE OF ORIGINAL ASSESSMENT. IN ALL THESE CASES NO ASSESSMENTS WERE PENDING ON THE DATE OF SEARCH FOR THESE ASSESSMENT YEARS. NO ASSESSMENT S WERE ABATED IN TERMS OF SECOND PROVISO TO SECION 15 3A OF THE ACT. HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. KABUL CHAWLA (SUPRA) HAS CONSIDERED VARIOUS HIGH COURT DECISIONS RELIED UPON BY THE LEARNED DR. THE HON'BLE DELHI HIGH COURT HAS CONSIDERED THE CASES O F CANARA HOUSING DEV. CO. VS. DCIT; MNADUGULA VS. ITA NO. 9/IND/2016 & IT(SS) A NO.11/IND/2016 ASHOK KATARIA 18 DCIT; CIT VS. CHETANDAS LAXMANDAS AND CIT VS. ANIL KUMAR BHATIA (SUPRA). THE ONLY DECISION OF THE HON' BLE ALLAHABAD HIGH COURT IN THE ASE OF CIT VS. RAJ KUMA R ARORA; 367 ITR 517 RELIED UPON BYTHE LEARNED DR WAS NOT CONSIDEERED BY HON'BLE DELHI HIGH COURT WHILE DECIDING THE ISSUE IN THE CASE OF KABUL CHAWLA. THE HON'BLE ALLAHABAD HIGH COURT HAS REVERSED THE ORDER OF THE TRIBUNAL AND REMANDED THE ISSUE TO THE TRIBUNAL TO CONSIDER THE APPEAL OF THE DEPARTMENT ON MERITS. IT IS A SETTLED LEGAL POSITION THAT WHEN TWO VIEWS ARE POSS IBLE ON A PARTICULAR ISSUE THEN THE VIEW FAVOURABLE TO T HE ASSESSEE SHOULD BE FOLLOWED AS HELD BY THE HON'BLE APEX COURT IN THE CASE OF CIT VS. VEGETABLE PRODUCT S; 88 ITR 192. RESPECTFULLY FOLLOWING THE DECISION OF TH E HON'BLE APEX COURT, WE DISMISS THE GROUND OF APPEAL OF THE REVENUE. DEPARTMENTAL APPEALS ARE DISPOSED ACCORDINGLY. ITA NO. 9/IND/2016 & IT(SS) A NO.11/IND/2016 ASHOK KATARIA 19 4.2 HON'BLE ITAT INDORE BENCH INDORE HAS HELD THAT IN THE ABSENCE INCRIMINATING DOCUMENTS FOUND AND SEIZE D DURING THE COURSE OF SEARCH, THE ASSESSING OFFICER IS NOT JUSTIFIED IN MAKING THE ADDITION IN NON-ABATED ASSE SSMENT ORDER WHILE PASSING THE ORDER U/S 153A R.W.S. 143(3 ) OF THE ACT. THE DECISION IN THE CASE OF KALANI BROS. HAS A GAIN BEEN FOLLOWED BY THE HON'BLE INDORE BENCH INDORE IN THE CASE OF M/S ANANT STEEL PVT. LTD. INDORE IN IT(SS) A NO. 31, 28, 29 & 30/IND/2010 VIDE ORDER DATED 18.11.2015. 4.3 THE HON'BLE ITAT INDORE BENCH INDORE WHILE ARRIVING AT THE ABOVE DECISION HAS DISCUSSED ALL TH E RECENT DECISIONS ON THE ISSUE OF VALIDITY OF SEC. 153A IN THE ABSENCE OF ANY INCRIMINATING DOCUMENTS FOUND AND SE IZED DURING THE COURSE OF SEARCH AND HELD THAT IT IS A S ETTLED LEGAL POSITION THAT WHEN TWO VIEWS ARE POSSIBLE ON A PARTICULAR ISSUE THEN THE ABOVE FAVOURABLE TO THE A SSESSEE ITA NO. 9/IND/2016 & IT(SS) A NO.11/IND/2016 ASHOK KATARIA 20 SHOULD BE FOLLOWED AS HELD BY THE HON'BLE APEX COUR T IN THE CASE OF CIT VS. VEGETABLE PRODUCTS, 88 ITR 192. 4.4 DURING THE COURSE OF APPELLATE PROCEEDINGS THE APPELLANT HAS FILED AN AFFIDAVIT STATING THAT NO DO CUMENT, PAPER, BOOKS OF ACCOUNTS, ARTICLE OR ANY MATERIAL WHATSOEVER PERTAINING TO ANY INCOME CHARGEABLE TO T AX IN HIS HANDS WAS FOUND DURING THE COURSE OF SEARCH. TH E APPELLANT HASA FURTHER DECLARED THAT EVEN AFTER THE SEARCH AND PRIOR TO THE COMMENCEMENTS OF THE ASSESSMENT/REASSESSMENENT PROCEEDINGS IN HIS CASE N O DOCUMENT, PAPER OR INFORMATION PERTAINING TO HIS IN COME WAS REQUISITIONED BY THE DEPARTMENT AT ANY POINT OF TIME. THE APPELLANT HAS ALSO AFFIRMED THAT NO DOCUMENT PERTAINING TO HIS OCCUPATION, TENANCY RIGHTS, ACQUI SITION OF TENANCY RIGHTS, SALE OF ALLOTMENT RIGHTS OR SALE OF PERMANENT ALTERNATE ACCOMMODATION WAS FOUND DURING SEARCH. ITA NO. 9/IND/2016 & IT(SS) A NO.11/IND/2016 ASHOK KATARIA 21 4.5 IN VIEW OF THE FACT THAT NO INCRIMINATING DOCUM ENT WAS FOUND DURING THE SEARCH AND FOLLOWING THE DECIS IONS OF THE JURISDICTIONAL ITAT CITED ABOVE, I ALLOW THE AP PEAL ON THE GROUND OF VALIDITY OF PROCEEDINGS U/S 153A OF T HE IT ACT. GROUND NO. 1 IS THEREFORE ALLOWED. 18. THE ONLY CONTENTION OF THE REVENUE IS THAT AS THE RETURN WAS ONLY PROCESSED U/S 143(1), THE SAME CANNOT BE TREATED AS AN ASSESSMENT AND RELIED UPON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF RAJESH JHAVE RI STOCK BROKERS PVT. LTD. CASE NO. 2830 OF 2007. THER EFORE, ASSESSMENT WAS VALIDLY MADE U/S 153A OF THE ACT. 19. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSESSEE SUPPORTED THE ORDERS OF THE LEARNED CIT(A). 20. WE FIND THAT IN THE ORDER PASSED BY THE LEARNE D CIT(A) IN THE CASES OF ALL THESE ASSESSEES HE HAS PLACED RELIANCE ON THE DECISION OF THIS BENCH OF THE TRIBUN AL IN ITA NO. 9/IND/2016 & IT(SS) A NO.11/IND/2016 ASHOK KATARIA 22 IT(SS) A NO. 71/IND/2014 IN THE CASE OF KALANI BROTHE RS AS ALSO THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. KABUL CHAWLA (2015) 61 TAXMAN. 412 (DE L) WHICH IS IN FAVOUR OF THE ASSESSEE ON THE ABOVE PROPOS ITION. THE LEARNED DR COULD NOT CITE ANY CONTRARY DECISION BE FORE US. WE FIND THAT THE HON'BLE DELHI HIGH COURT IN TH E CASE OF KABUL CHAWLA (SUPRA) TAKING NOTE OF QUESTION POSED IN TH E CASE OF ANIL KUMAR BHATIA WHICH READS AS UNDER :- '21. A QUESTION MAY ARISE AS TO HOW THIS IS SOUGHT TO BE ACHIEVED WHERE AN ASSESSMENT ORDER HAD ALREADY BEEN PASSED IN RESPECT OF ALL OR ANY OF THOSE SIX ASSESSMENT YEARS, EITHER UNDER SECTION 143(1)(A) OR SECTION 143(3) OF THE ACT. IF SUCH AN ORDER IS ALREADY IN EXISTENCE, HAVING OB VIOUSLY BEEN PASSED PRIOR TO THE INITIATION OF THE SEARCH/REQUISITION, THE ASSES SING OFFICER IS EMPOWERED TO REOPEN THOSE PROCEEDINGS AND REASSESS THE TOTAL INC OME, TAKING NOTE OF THE UNDISCLOSED INCOME, IF ANY, UNEARTHED DURING THE SE ARCH. FOR THIS PURPOSE, THE FETTERS IMPOSED UPON THE ASSESSING OFFICER BY THE S TRICT PROCEDURE TO ASSUME JURISDICTION TO REOPEN THE ASSESSMENT UNDER SECTIONS 147 AND 148, HAVE BEEN REMOVED BY THE NON OBSTANTE CLAUSE WITH WHICH SUB S ECTION (1) OF SECTION 153A OPENS.' THE HON'BLE HIGH COURT OF DELHI HELD AS UNDER :- 37. 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 THE AFOREMENTI ONED DECISIONS, THE LEGAL POSITION THAT EMERGES IS AS UNDER: ITA NO. 9/IND/2016 & IT(SS) A NO.11/IND/2016 ASHOK KATARIA 23 I . ONCE A SEARCH TAKES PLACE UNDER SECTION 132 OF TH E 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 IMMEDIATE LY PRECEDING THE PREVIOUS YEAR RELEVANT TO THE AY IN WHICH THE SEARCH TAKES P LACE. II . ASSESSMENTS AND REASSESSMENTS PENDING ON THE DATE OF THE SEARCH SHA LL ABATE. THE TOTAL INCOME FOR SUCH AYS WILL HAVE TO B E 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 A Y 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 OTHER POST- SEARCH MATERIAL OR INFORMATION AVAILABLE WITH THE A O WHICH CAN BE RELATED TO THE EVIDENCE FOUND, IT DOES NOT MEAN THAT THE ASSES SMENT 'CAN BE ARBITRARY OR MADE WITHOUT ANY RELEVANCE OR NEXUS WITH THE SEI ZED MATERIAL. OBVIOUSLY AN ASSESSMENT HAS TO BE MAD E UNDER THIS SECTION ONLY ON THE BASIS OF SEIZED MATERIAL.' V . IN ABSENCE OF ANY INCRIMINATING MATERIAL, THE COMPL ETED ASSESSMENT CAN BE REITERATED AND THE ABATED ASSESSMENT OR REASSESSMEN T 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 'REASSE SS' TO COMPLETED ASSESSMENT PROCEEDINGS CEEDINGS. VI . INSOFAR AS PENDING ASSESSMENTS ARE CONCERNED, THE J URISDICTION TO MAKE THE ORIGINAL ASSESSMENT AND THE ASSESSMENT UNDER SECTION 153A MERGES INTO ONE. ONLY ONE ASSESSMENT SHALL BE MADE SEPARATELY F OR EACH AY ON THE BASIS OF THE FINDINGS OF THE SEARCH AND ANY OTHER M ATERIAL 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 R EQUISITION OF DOCUMENTS OR UNDISCLOSED INCOME OR PROPERTY DISCOVERED IN THE CO URSE OF SEARCH WHICH ITA NO. 9/IND/2016 & IT(SS) A NO.11/IND/2016 ASHOK KATARIA 24 WERE NO T PRODUCED OR NOT ALREADY DISCLOSED OR MADE KNOWN I N THE COURSE OF ORIGINAL ASSESSMENT. 21. HENCE, WE FIND NO INFIRMITY IN THE ORDER OF THE LEARNED CIT(A) WHICH IS IN CONFORMITY WITH THE ORDER OF THE HON'BLE DELHI HIGH COURT. THEREFORE, THE GROUNDS OF APPEAL O F THE REVENUE ARE DISMISSED. 22. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMI SSED. 23. FINALLY, THE APPEAL OF THE ASSESSEE IS ALLOWED AND TH AT OF THE REVENUE IS DISMISSED. PRONOUNCED IN OPEN COURT ON 15 TH JULY, 2016 SD/- SD/- (D.T. GARASIA) (N.S. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER 15 TH JULY, 2016 DN/- ITA NO. 9/IND/2016 & IT(SS) A NO.11/IND/2016 ASHOK KATARIA 25