AI Structured Summary
Not yet generated for this judgment
Judgment
PER AMITABH SHUKLA, AM
This appeal filed by the Revenue is directed against the order of Ld. Commissioner of Income Tax (Appeals)-26, New Delhi, dated 18.09.2020 arising out of assessment order dated 31.12.2019 passed under section u/s 153A/143(3) of the Act for the Assessment Year 2013-14. The word ‘Act’ herein this order would mean Income Tax Act, 1961.
The Revenue has raised following grounds of appeal:-
1.“The Ld. CIT(A) erred in law in holding that, given the facts and circumstances of the case, the assessment u/s 153A had to be made strictly on the basis of the material found during the search and that the other material, even though incriminating, could not be considered in the assessment.
2.The Ld. CIT(A) erred in law in not giving a guidance as to how the income based on material other than that found during the search should be assessed to tax if, according to it, the same could not be taxed in the assessment u/s 153A of the Act.
3.(a) The Ld. Commissioner of Income Tax (Appeals) is erroneous and not tenable in law and on facts.
(b)The appellant craves leave to add, amend any/all the grounds of appeal before or during the course of hearing of the appeal.”
The Registry has identified a delay of 107 days in the case, in filing of this appeal before the tribunal. The ld. DR submitted that the delay in filing the appeal has occurred due to administrative reasons and preoccupation with pressing time barring activities. All these activities contributed to the delay which was neither intentional nor due to negligence or inaction on the part of the Department. We have considered the justification put forth by the ld. DR and we are satisfied with their adequacy. The ld. Counsel for the assessee does not pose any serious objection to the revenue’s request for condonation of delay. We are also conscious of the fact that no litigant gains by intentionally delaying its own matters. Accordingly, we hereby condone the delay and proceed to adjudicate this appeal.
Brief facts of the case as culled out from the order of the lower authorities is that Returned declaring income of Rs.33,35,930/- was filed on 28.03.2015. A search and seizure operation u/s 132 was carried on 26.07.2017 on business and residential premises of G.D. Goenka Group of cases. The ld. Assessing Officer issued notice u/s 153A on 17.09.2019 to the assessee. The assessee had reported receipt of salary and other income from G.D. Goenka Group. The ld. Assessing Officer noted from perusal of documents found and seized, that the assessee has shown bogus Long Term Capital Gains (LTCG) of Rs.8,35,100/- on sale of shares. It was noted that the impugned LTCG has been earned from sale purchase of shares of one Balton Properties Ltd. The ld. Assessing Officer further noted that the said company was a penny stock company. Consequently, after analyzing modus operandi of penny stock company. The ld. Assessing Officer proceeded to, inter alia, add the said amount of Rs.8,35,100/- as unexplained u/s 68 of the Act. The appellant contested the impugned addition before the ld. CIT(A). The appellant had contested the order both on its merits of addition as well as jurisdiction in sufficiency of the Assessing Officer to have made the impugned additions. The ld. CIT(A) quashed the assessment order on legal grounds observing as under:-
‘…..5.2. The issue is first adjudicated on the legal technical ground.
5.2.1In such situation, the issue, when no incriminating material/evidence is found and assessments in those years are completed assessments, can any addition/disallowance be made, has been dealt with and answered by Hon'ble Jurisdictional High Court in the case CIT vS. Kabul Chawla, as mentioned by appellant in its submission. Hon'ble Court has taken a view in such cases that although section 153A 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 Assessing Officer which can be related to the evidence found, it does not mean that the assessment can be arbitrary or made without any relevance or nexus with the seized material. As per Hon'ble Court, such assessment has to be made under the section 153A/153C only on the basis of the seized material. It is further opined by Hon ble Court that completed assessment can be interfered with by the Assessing Officer while making the assessment in the section 153A only on the basis of some incriminating material found during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment. In the subsequent decisions also, Hon'ble court has reiterated their aforesaid views. In the case Pr. CIT vs Ram Avtar Verma 395 ITR 252, Hon'ble Court has supported the aforesaid view that if the assessments are completed on the date of search and no incriminating material is found during the search, assessment u/s 153A of the Act is invalid. Similar view has been taken by Hon'ble Court in the case of Pr. CIT vs Meeta Gutgutia 395 ITR 526 also wherein assessments were completed on the date of search but no incriminating material pertaining to those completed assessment years were found during search, Hon'ble Court held that invocation of section 153A for those years was invalid.
5.2.2Now the facts of the appellant are to be examined in view of this legal position. The search was conducted in the case of the appellant on 26.07.2017. As per the submissions of the appellant, the original return of income was filed on 28.03.2015 and the time to issue notice u/s 143(2) expired on 30.09.2015. This was also not an abated assessment as there is no such indication in the assessment order and as confirmed by the appellant. It is clear from the assessment order as well as submissions of the appellant that search and seizure action 132(1) of the Act was undertaken by the Department in the case of appellant on 26.07.2017 and on that date, assessment for the A.Y. 2013-14 was completed assessment as the time period to issue notices u/s 143(2) for aforesaid years had already expired. In this assessment year, the additions could have been made by the AO only on the basis of incriminating material/evidence found during the search proceedings. However, as can he seen from the present assessment order, the additions have not been made on the basis of any incriminating material found during the search proceedings, but only on the basis of scrutiny of return of income filed in regular course by the appellant. This fact is evident from the assessment order where there is neither any reference to any seized material nor any statement recorded during search on this issue. Further the statements of the brokers reproduced in the assessment order and the list of entities operated as reproduced at pages 13-16 of assessment order, do not contain the name of the script M/s Balton properties Limited transacted by the appellant. Further the statement had been recorded much before the date of search on the appellant and the appellant had not even been questioned during the search on these LTCG transactions.
5.2.3.In view of above, it can be seen that the additions have been made by AO not on the basis of any incriminating material/evidence found during the search proceedings or any incriminating statement recorded during the search. Since the assessment year under consideration is completed assessment year, any addition/disallowance ought to have been made by AO on the basis of such incriminating material/evidence as found during the search proceedings in view of various decisions, including CIT Vs. Kabul Chawla(supra), of Hon'ble Jurisdiction High Court.In view of this, the aforesaid additions made by AO are not sustainable & deserve to be deleted as made during the regular course of assessment proceedings, and not on the basis of incriminating material/evidence found during the search proceedings. I, therefore, delete the aforesaid additions made by AO and allow the respective grounds taken by appellant.
5.3In view of the decision given in the para above, the ground of appeal taken by the appellant on merit are not being adjudicated as this will have academic value only….”
The ld. DR has vehemently argued against the order of the ld. CIT(A). It was contested that the ld. CIT(A) has passed an erroneous order. The ld. DR submitted that the addition has been made in respect of penny stock company and that the assessee has indulged in sham transaction.
The ld. Counsel for the assessee reiterated the arguments taken before the ld. CIT(A) and place full reliance upon the order. The ld. Counsel submitted that once the ld. CIT(A) has deleted the additions made in the assessment order qua the merits of addition do not have any effect. The ld. Counsel alternatively argued that it had held the impugned scrips for seven year. The ld. Counsel submitted that the decision of the ld. CIT(A) is fully covered by decision of Hon’ble Delhi High Court in the case of Kabul Chawla as well as Hon’ble Apex Court in the case of Abhisar Buildwell.
We have heard rival submissions in the light of material placed on records. We have noted from the order of the ld. CIT(A) that the search was undertaken by the Department on 26.07.2017 and on that date the assessment for AY 2013-14 (in terms of Return of Income filed on 28.03.2015) was a completed assessment as the time period to issue notice u/s 143(2) had expired. Consequently, any assessment could only have been made in the light of any incriminating material/evidence found qua assessee during search proceedings. We have also noted that the additions made by the ld. Assessing Officer do not have any reference to any incriminating material found during the search of the assessee. Accordingly, we do not find any infirmity in the conclusions drawn by the ld. CIT(A) of deleting the additions made in the assessment order particularly in the light of cited decision of Hon’ble jurisdictional High Court. Accordingly, we are of the considered view that no case is made out of any interference to the order of the ld. CIT(A) at this stage. We, therefore, confirm the order of the ld. CIT(A) and dismiss the appeal of the Revenue.
In the result, the appeal of the Revenue is dismissed.