AI Structured Summary
Not yet generated for this judgment
Judgment
PER RAJ KUMAR CHAUHAN , J.M.:
The appeal is directed against the order dated 23.10.2024of Learned Commissioner of Income Tax (Appeals), New Delhi [hereinafter referred to as the “CIT(A)”], passed under section 250 of the Income Tax Act, 1961 [hereinafter referred to as “the Act”] whereby the addition of Rs. 3,50,00,000/- made u/s 69C of the Act in the assessment order dated 19.10.2016 was deleted.
The facts in brief as culled out from the proceedings are that the search and seizure operation u/s 132 of the Act was conducted on Sh. K. S. Dhingra & Sh. G. S. Dhingra group of cases on 16.09.2011. During the course of search & seizure operation, certain documents/papers belonging to the assessee M/s. Advantage Housing Pvt. Ltd. were found and seized. Based on the seized paper, the case of the appellant company was initiated u/s 153C of the Act by issuance of notice u/s 153C on 08.10.2013. The assessment proceedings were completed vide order u/s 153C r.w.s. 143(3) of the Act on 28.03.2014 by making a total addition of Rs. 3,50,00,000/-. In the appeal, filed by the assessee company before the Ld. CIT(A) against the order of the Ld. Assessing officer (‘AO’) u/s 153C r.w.s. 143(3) of the Act dated 28.03.2014, vide order dated 01.12.2014, ld. CIT(A) held the order of the Ld. AO as invalid due to the defect in assumption of jurisdiction. The basis of the addition was that during the course of search, a note pad from the table of Shri Naveen Chaudhary, CFO, M/s. U.K. Paints India Pvt. Ltd. was seized forming part of Annexure A-15. From the perusal of the said note pad page no. 3 and scanned copy thereof mentioned at page no. 2 of the assessment order shows that a property no. 58, Sunder Nagar, New Delhi was purchased by three persons to create a new company M/s. Advantage Housing Pvt. Ltd. in which all the three persons were having equal shares. The sale deed has been executed as per Ld. AO for Rs. 33 crores and in addition to that an amount of Rs. 3.5 crore was paid in cash, as per copy of note Pad found during the search. Against the order of the Ld. CIT(A) wherein the assessment order was set aside, the department preferred appeal before the ITAT bearing ITA No. 145/Del/2015 which was decided by ITAT on 27.02.2020. The ITAT approved the reasoning given by Ld. CIT(A). Against the order of the ITAT dated 27.02.2020, department did not prefer any appeal before the Hon’ble High Court, however, in the meantime, before disposal of the appeal by the ITAT, as aforesaid, the notice u/s 148 of the Act was issued on 16.04.2015 which was duly served after taking necessary approval accorded by the Principal Commissioner of Income Tax, Circle -1, New Delhi on 9th March, 2015 for reopening the case. The case was reopened after considering the reply dated 14.05.2015 filed by the assessee wherein the assessee stated that the returns so filed originally be treated as having been filed in compliance to notice u/s 148 of the Act. The statutory notice u/s 143(2) of the Act was issued on 15.07.2015 followed by notice u/s 142(1) of the Act dated 18.07.2016 and duly served upon the assessee. Vide reply dated 31.08.2016, the assessee raised objection with regard to reasons to believe for issuance of notice u/s 148 of the Act. A final show cause notice was issued to the assessee company on 27.09.2016 requiring it to explain as to why the amount of Rs. 3.5 crore should not be treated as the amount given in cash in excess of that recorded in the deed. The assessee did not make a compliance to the said show cause notice. The Ld. AO observed that since the note pad was found from the table of Sh. Naveen Chaudhary who is responsible/ representative for this purchase/ sale deed, and hence the contents of the note pad cannot be said to be untrue. It is further observed that the said document contained various details of a number of transactions pertaining to property at 58, Sundar Nagar, New Delhi and all these transactions are duly reflected in the books of accounts of the assessee except the transaction relating to cash payments of Rs. 3.5 crore. It is further observed that a transaction con`sisting of a series of a transactions and all the transaction are true except one can’t be accepted that the said one transaction has not taken place because of the fact that it is not duly recorded. It is therefore, observed and concluded that the assessee company intentionally has not recorded the payment of Rs. 3.5 crore made in cash in its book of account as the payment has been made from the undisclosed sources of income of the assessee company. Accordingly, the sum of Rs. 3.5 crore was added by the AO to the income of the assessee as undisclosed income u/s 69C of the Act.
Aggrieved by the said addition, the assessee filed an appeal before the ld. CIT(A),who set aside the assessment order and deleted the addition so made, observing that the action taken by Ld. AO u/s 147 of the Act was not valid in law because the reason to believe were solely based on the material found during the course of search that took placed on 16 September, 2011 on the Dhingra group. It is not the case of the AO that the alleged escapement is detected based on some material not found during the course of search. It was further observed that where the incriminating material was found during the course of search, the assessment has to be framed in accordance with the provisions of section 153A and 153C of the Act. While framing the assessment, the AO can take into account the other materials even not found during the search but in case no incriminating material is found during the course of search, and the information /material other than the search is available with the AO, the action u/s 147/148 may be taken subject to the fulfilment of the conditions laid down therein. It was further observed that in the instance case, from perusal of the reason to believe as recorded by the AO prior to the issuance of notice u/s 148 of the Act, it is clear that the reasons to believe has been framed by the AO only on the basis of material seized during the course of search and there was no other material with him. The Ld. CIT(A) has even deleted the addition made on merit also on the ground that the jottings made on a piece of paper has no evidentiary value in the absence of any corroborative independent evidence and no liability can be fastened on third party. It was further observed that in the present case, except the jottings on the piece of paper, nothing has been brought on record suggesting that the amount of Rs. 3.5 crores, over and above the actual sale consideration, has been paid to M/s. Atma Ram Properties (P.) Ltd., more particularly, when Mr. Chadha, owner of M/s. Atma Ram Properties (P.) Ltd. has specifically denied having received any amount over and above the actual sale consideration.
Aggrieved by the impugned order, the Revenue is in appeal and raised following grounds:
“1.Whether on the facts and circumstances of the case the id. CIT(A) was justified in deleting the addition of Rs. 3.5 Crores made by the AO, citing the reason that, additions were made on the basis of rough jottings mentioned on documents seized during the course of search u/s 132 of the IT Act, 1961 and ignoring the judgement of Hon'ble High Court of Delhi in the case of Principal Commissioner of Income-tax v. Maharaji Education Trust in IT APPEAL NO. 721 OF 2023 dated 03.07.2024?
2.The appellant craves leave to add, alter or amend any/all of the grounds of appeal before or during the course of the hearing of the appeal.
3.Whether on the facts and circumstances of the case the id. CIT(A) was justified in holding that, action taken by the AO under section 147 is not valid in law as the proceedings u/s 147 of the IT Act, 1961 was initiated on the basis of material seized during search u/s 132 of the IT Act, 1961?
4.Whether on the facts and circumstances of the case the Id. CIT(A) was justified in ignoring the judgement passed by the jurisdictional High Court i.c. High Court of Delhi in the case of Principal Commissioner of Income Tax -7, Delhi Vs Naveen Kumar Gupta in ITA No. 401/2022?”
On summarizing the ground, we have noticed that the Revenue has challenged the impugned order primarily on the ground that the deletion of the addition of Rs. 3.5 crore was done contrary to the judgment of Jurisdictional High Court in the Case of PCIT vs. Maharaja Education Trust ITA No. 721/2023, dated 03.07.2024. Secondly, the reopening has been declared invalid while ignoring the case of Hon’ble Jurisdictional High Court in case of PCIT vs. Navin Kumar Gupta, ITA No. 401/2025 order dated 20.11.2024.
We have heard the ld. AR for the Respondent/ assessee and Ld. DR for the Appellant/ Revenue and examined the record.
Ground No. 2 is general ground, hence needs no adjudication and accordingly, dismissed. The ground no. 1 has been raised on the basis of ignoring judgment of Hon’ble High Court of Delhi in the case of Principal Commissioner of Income Tax vs. Maharaji Education Trust, ITA No. 721/2023 dated 03.07.2024. We have noticed that against the said judgment, the assessee has preferred SLP which was disposed off by the Hon’ble Supreme Court observing as under:
“1.This Petition arises from the judgment and order passed by the High Court of Delhi dated 03.07.2024 in the Principal Commissioner of Income-tax v. Maharaji Education Trust [2024] 166 taxmann.com 197/468 ITR 634 (Delhi)/Income Tax Appeal No. 721/2023 by which the appeal filed by the revenue came to be allowed, thereby setting aside the order passed by the ITAT in favour of the petitioner assessee.
2.We heard Mr Balbir Singh, the learned counsel appearing for the petitioner-assessee and Mr Chandrashekhar, the learned counsel appearing for the revenue.
3.In para 12 the High Court has observed thus:-
"12.However, despite service being effected on the assessee, nobody had entered appearance on behalf of the assessee when the matter was taken up for final hearing and thus, this Court was constrained to proceed ex-parte in the matter."
4.It appears that the High Court proceeded ex-parte. As according to the High Court despite service being effected on the petitioner assessee, the assessee failed to appear before the High Court.
5.As regards the aforesaid, Mr. Balbir Singh has manifold contentions to raise.
6.We take notice of the fact that after the impugned order came to be passed by the High Court, the petitioner preferred a review petition trying to make good his case that in fact, there was no service effected of the notice issued by the High Court.
7.We are of the view that as the review petition is pending before the High Court, we should not say anything further in the matter.
8.Let the High Court look into the review petition and take an appropriate decision in accordance with law.
9.In the event, if the order is adverse to the petitioner, it shall be open for him to avail appropriate legal remedy before the appropriate forum in accordance with law.
10.Since demand has already been raised and there is some urgency, we request the High Court to take up the review petition and see to it that the same is disposed of on its own merits within a period of four weeks from today.
11.The petition stands disposed of accordingly.
12.Pending application(s), if any, stand disposed of.”
In view of the judgment of the Hon’ble Supreme Court Maharaji Education Trust vs. PCIT, dated 8th April, 2025,referred to above, it is not made clear by the Revenue whether the judgment of the Hon’ble High Court dated 03.07.2024 has been reviewed or has attained finality. In case the judgment has been reviewed, in that situation, the same cannot be made basis or ground for challenging the order of the ld. CIT(A). In these facts and circumstances, we are of the considered opinion that the Ground No. 1 raised by the assessee is misconceived and is accordingly dismissed.
Ground No. 3 and 4: Both the grounds are taken up together as they are inter-connected. During the course of arguments as well as in the written submissions, Ld. AR has argued that the assumption of Jurisdiction u/s 147 and 148 of the Act by the Ld. AO after the initiating of the proceeding u/s 153C of the Act which were set aside by the Ld. CIT(A) and the order of the ld. CIT(A) was confirmed by the Jurisdictional ITAT in ITA No. 1451/Del/2015, vide order dated 27.02.2020 holding that the reopening of the assessment u/s 148 of the Act by issuing u/s 147 of the Act is bad in law as it would amount to parallel proceedings. Ld. DR for Revenue has relied upon the judgment of the Hon’ble Delhi High Court in PCIT vs. Navin Kumar Gupta as the basis of Ground No. 4 for assailing the finding of the Ld. CIT(A) which also pertains to Ground No. 3 also.
On perusal of the ratio of judgment in Naveen Kumar Gupta case (supra) as contained in para No. 58 and 59 extracted below, would show that the Ld. AO could have taken recourse to Section 147/148 of the Act in the case of the assessee only if the Ld. AO did not assume its Jurisdiction for making assessment/ reassessment u/s 153C of the Act. Admittedly, in the case in hand, the Ld. AO has assumed the jurisdiction u/s 153C of the Act and proceeded to make the addition , thereby he has exercised the jurisdiction u/s 153C of the Act which in appeal was found to be bad in law by the Ld. CIT(A) on the ground that there was no satisfaction by the Ld. AO of the searched person. Therefore, taking recourse to u/s 147/148 in this case is contrary to the observation of the Hon’ble High Court in para Nos. 58 and 59 in Naveen Kumar Gupta case (supra) referred case wherein it was held that the Act does not contemplate parallel assessment proceedings and the proceeding carried out by Ld. AO in this case, as noted above while assuming jurisdiction u/s 147/148 are nothing but parallel assessment proceedings which are not permissible in law. The relevant para No. 58 & 59 are extracted as under:
“58.In a case where pursuant to search conducted under Section 132 of the Act or requisition made under Section 132A of the Act in respect of another person (searched person), assets, documents or books of account, which either belong to the assessee or contain information pertaining to the said assessee, are found. And, the same are handed over to the AO of the assessee; he would subject to satisfaction of the other jurisdictional conditions stipulated under Section 153C of the Act, having the jurisdiction to make a reassessment/assessment of the income of the assessee under Section 153C of the Act. However, the same does not mean that he is bound to exercise the said jurisdiction. In the event, the AO does not assume it’s jurisdiction to proceed with making an assessment/ reassessment under Section 153C of the Act, recourse to Section 147/148 is not ousted. The non obstante provision kicks-in only on the AO assuming the jurisdiction under Section 153C of the Act, that is, if the AO exercises its jurisdiction to initiate the machinery provisions of Section 153C of the Act to make an assessment/reassessment of the assessee’s income for the stipulated period. The non obstante provisions do no come into play, if the AO does not take recourse to provision of Section 153C of the Act.
59.The non obstante clause as used in Section 153C of the Act cannot be read to completely exclude the provisions of Sections 143 or 147 of the Act in cases where the assessee’s income is sought to be assessed inter alia on the basis of the information found during search proceedings. However, it will not be open for the AO to take recourse to Section 147 of the Act, where the AO has taken steps under Section 153C of the Act. Thus, if the conditions for exercise of jurisdiction under Section 153C of the Act are satisfied and the AO issues a notice as required under Section 153C of the Act, any reassessment under Section 147 of the Act would obviously, be impermissible. This is because the Act does not contemplate parallel assessment proceedings. Where the AO is satisfied that the assets, material and documents forwarded by the AO of the searched person under Section 153C of the Act has a bearing on determination of the income of the assessee for any of the years, the AO shall proceed to issue a notice under Section 153C of the Act. By virtue of non obstante clause, the AO is not required to follow the procedural rigours of Section 148 of the Act. Subject to obtaining the approval under Section 153D of the Act, if necessary, the AO is not required to seek any approval from the specified authority, as required under Section 148/151 of the Act for issuing a notice under Section 153C of the Act and can proceed to assess / reassess income for the concerned assessment years.”
For these reasons, we are of the considered opinion that assuming of the Jurisdiction u/s 147/148 of the Act, in this case is not permissible in law and is accordingly, held bad in law. For these reasons, we do not find any infirmity and perversity in the order of the Ld. CIT(A) wherein he has held that the action taken by the Ld. AO u/s 147 of the Act was not valid in law for the reasons mentioned above. We confirm the said finding of the Ld. CIT(A). Since, the assuming of the jurisdiction u/s 147/148 of the Act is not permissible in law in the present case in hand, the question of deletion of the addition on merit has rendered academic and we have not adjudicated the same. The ground No. 3 and 4 are dismissed.
In the result, the appeal of the revenue is dismissed.