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2015 (6) TMI 173 - ITAT DELHI

2015 (6) TMI 173 - ITAT DELHI - TMI - Disallowance on account of scrap sale for the purpose of deduction u/s 80IB - initiation of proceedings u/s 153A - Held that:- In absence of incriminating material found during the course of search no addition can be made u/s 153A of the Act where the original assessment was already framed on the date of search.

In the present case before us that no incriminating material was found during the course of search relating to the assessee for the asses .....

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void. See CIT vs. Anil Kr. Bhatia (2012 (8) TMI 368 - DELHI HIGH COURT)- Decided in favour of assesse. - ITA No. 383/Del/2013 - Dated:- 27-5-2015 - N K Saini, AM And I C Sudhir, JM,JJ. For the Appellants : Shri Ved Jain, & Rano Jain, CA For the Respondent : Ms Sulekha Verma, CIT-DR ORDER Per: I C Sudhir: The assessee has impugned first appellate order on several grounds. The ground no. 1 is general in nature. In ground nos. 2 to 6 the assessee has questioned validity of initiation of procee .....

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nos. 2 to 6 is legal in nature and going to the root of the matter, we preferred to adjudicate it first. 4. We have heard and considered the arguments advanced by the parties on the issue, material available on record and the decisions relied upon in this regard. 5. The facts in brief are that the assessee belongs to Jakson Group of Companies headed by Shri S. K. Gupta and is in the area of assembly of DG Sets. The search operation was conducted on 10.02.2010 in the group. Notice u/s 153A was is .....

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ng that there was no requirement that an assessment made u/s 153A of the Act should based on any material seized in the course of search. The AO also made disallowance of ₹ 12,32,226/- on account of scrap sale for the purposes of deduction u/s 80IB of the Act and disallowance of ₹ 61,412/- u/s 14A of the Act in the assessment framed. 6. The assessee questioned the validity of above assessment both on initiaon of proceedings u/s 153A of the Act in absence of incriminating material fou .....

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the assessee being found during the course of search. In support he placed reliance on the following decisions: i) Al-Cargo Global Logistic Ltd. vs. ACIT - 137 ITD 287 (Mum.)- (S.B) ii) DCIT vs. Devi Dayal Petro-Chemical Pvt. Ltd. - ITA Nos. 5430 to 5436/Del/2013, C.O. Nos. 83 to 88/Del/14 dated 10.9.2014; 6 iii) SSP Aviation Ltd. vs. DCIT - 346 ITR 177 iv) Kusum Gupta vs. DCIT - ITA No. 4873/Del/2009 dt. 28.3.2013; v) ACIT vs. Asha Kataria - ITA No. 3105/Del/2011 dated 20.5.2013 vi) Sanjay Agg .....

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terial during the course of search to justify the validity of assessment framed under sec. 153A read with sec. 143(3) of the Income-tax Act, 1961 and the only requirement is that search has been conducted at the premises of the assessee under sec. 132 of the Act. In support, he placed reliance on the following decisions: i) CIT vs. Fila Tex India Ltd. - ITA No. 269/2014 dated 14.7.2014 (Del.); ii) Canara Housing Development Co. vs. DCIT - ITA No. 38/2014 dated 25.7.2014 (Karnataka) iii) CIT vs. .....

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jected the contentions of the assessee on the issue of validity of assessment framed under sec. 153A read with sec. 143(3) of the Income-tax Act, 1961 in absence of incriminating material found during the course of search and in the absence of the pendency of the assessment as on the date of search on the basis that for framing assessment under sec. 153A, no such requirement is there and the only requirement is that search has been conducted under sec. 132 of the Act. 10. Having gone through the .....

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h of the six assessment year separately : (b) In other cases, in addition to the income that has already been assessed, the assessment u/s 153A will be made on the basis of incriminating material, which in the context of relevant provisions means (i) books of account, other documents, found in the course of search but not produced in the course of original 8 assessment, and (ii) undisclosed income or property discovered in the course of search." 11. The issue raised before the Special Bench .....

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de only on the basis of incriminating material found during the search. The Delhi Bench of the Tribunal in its recent decision on the issue in the case of Shri Kabul Chawla (supra) and others vide order dated 23.5.2014 has expressed the similar view. It has also discussed the decision of Hon'ble Jurisdictional Delhi High Court in the case of CIT vs. Anil Kumar Bhatia (2012) 211 Taxmann 453 (Del.), while deciding the issue. The relevant para No. 8 & 9 in this regard is being reproduced as .....

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espect of a non-pending assessment. It was in that background that the Hon'ble High Court held that sec. 153A applies if incriminating material is found even if assessments are completed. The question as to whether any addition can be made in respect of completed assessments when no incriminating material was found, was apparently left open. However, we find that there are sufficient indirect hints given by the Hon'ble Delhi High Court in the case of Anil Kumar Bhatia (supra) about not m .....

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h an order is already in existence, having obviously been passed prior to the initiation of the search/requisition, the Assessing Officer is empowered to reopen those proceedings and reassess the total income, taking note of the undisclosed income, if any, unearthed during the search." 9. The above extracted observations of the Hon'ble High Court, which are though obiter dicta, make the point clear that where an assessment order has already been passed for a year(s) within the relevant .....

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e items of income 'unearthed during the search'. In other words, the determination of 'total income' in respect of the assessment years for which the assessments are already completed on the date of search, shall not be influenced by the items of income other than those based on the material unearthed during the course of search. There is not and cannot be any quarrel over the proposition that the Assessing Officer has no option but to determine the total income of the assessee i .....

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f search. If no incriminating material is found in respect of such completed assessment, then the total income in the proceedings u/s 153A shall be computed by considering the originally determined income. If some incriminating material is found in respect of 11 such assessment years for which the assessment is not pending, then the 'total income' would be determined by considering the originally determined income plus income emanating from the incriminating material found during the cou .....

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. The other judgment relied by the Ld. DR in the case of Madugulu Venu (supra) also talks about the need for making fresh assessment in respect of the assessment years for which the assessments are not pending on the date of search but does not set out the scope of such assessment, which is the issue before us." 13. We, thus, find that the decision of the Hon'ble Jurisdictional Delhi High Court in the case of Anil Kr. Bhatia (supra) supports the case of the assessee that in absence of i .....

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ed on the applicability of provisions u/s 153A was that "whether the Tribunal erred on facts and in law in not holding that re-computation of book profit, de-hors any material found during the course of search in the order passed u/s 153A of the Act was without jurisdiction, being outside the scope of proceedings under that section?" The other question was, "whether on the facts and circumstances of the case, the Tribunal erred in law in upholding the action of the AO in denying s .....

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impugned order of the Tribunal that incriminating material including statement of Sanjay Agarwal, GM (Marketing) have resulted in additions, which have been upheld. The Hon'ble High Court has been pleased to note in this paragraph as "it is not the case of the appellant - assessee that initiation of proceedings u/s 153A was bad or unwarranted in law as no incriminating material was found during the search. The contention raised by the appellant - assessee is that the addition, which is .....

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'ble High Court that several additions relying upon the incriminating material found in the course of search were made by the AO in the assessment proceedings u/s 153A of the Act and addition u/s 115JB was made by the AO in absence of incriminating material concerning this addition. This addition was questioned by the assessee on the basis that there was no incriminating material found concerning the addition made in the assessment u/s 153A of the Act, which has been rejected by the Hon' .....

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CIT vs. Chetan Das (2012), 254 CTR (Del) 292 and CIT vs. Anil Kr. Bhatia (2012), 211 Taxman 453 (Del) cited by the ld. AR of the assessee appellant, has noted certain observations made and findings given by the Hon'ble Court therein. Thereafter in para no. 4 of the judgment, the Hon'ble High Court has held as under: "The first question, we notice was not raised by the appellant before the AO, CIT(A) and before the Tribunal. The appellant claims that the contention being legal can b .....

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e the Hon'ble High Court was as to whether the Tribunal has erred in law in not upholding that recomputation of book profit, de-hors any material found during the course of search in the order based u/s 153A of the Act was without jurisdiction, being outside the scope of proceedings under that section. The Hon'ble High Court after discussing the issue in detail has been pleased to decide the question against the assessee and has upheld the addition made u/s 115JB of the Act. Thus, having .....

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has also been pleased to discuss the decision in the cases of Anil Kumar Bhatia (supra) and the decision of Special Bench of the Tribunal in the case of All Cargo Global Logistic Ltd. (supra). It has been observed by the Hon'ble High Court that the condition precedent for application of sec. 153A is that there should be a search u/s 132 and initiation of proceedings u/s 153A is not dependent on any undisclosed income being unearth during the such search. The Hon'ble Rajasthan High Court .....

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arch, same would also be taken into consideration. The requirement of assessment or re-assessment under the said section has to be read in the context of sections 132 or 132A of the Act, in much as, in case nothing incriminating is found on account of such search or requisition, then the question of re-assessment of the concluded assessment does not arise, which would require more reiteration and it is only in the context of the abated assessment under second proviso which is required to be asse .....

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that is done, the AO having jurisdiction over such other person shall proceed against him for making an assessment or reassessment of his income in accordance with the provisions of sec. 153A. The petitioner therein was not searched u/s 132 of the Act, however, some documents belonging to it were found during the search carried out in the premises of Puri Group of Companies. 18. We, thus, find that the ratio laid down by the Hon'ble Delhi High Court and Hon'ble Rajasthan High Court in t .....

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