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2016 (4) TMI 855 - ITAT DELHI

2016 (4) TMI 855 - ITAT DELHI - TMI - Assessment under Section 153 - addition u/s 50C - Held that:- AO has made addition by invoking deeming provision of section 50C of the Act and addition for A.Y 2005-06 has been made on the basis of facts and evidence which was already available with the AO at the time of original assessment proceedings as well as subsequent assessment proceedings which were completed on 26.12.2007 u/s 143(3) r.w.s. 153A of the Act. It is pertinent to note that the AO has not .....

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we are inclined to held that the addition made for the year under consideration, which is not based on any incriminating material found during the course of search is not sustainable and respectfully following the precedent laid down by the Hon'ble High Court, in the case of Kabul Chawla [supra] addition made by the AO and upheld by the ld. CIT(A) is demolished. - Decided in favour of assessee - ITA No. 5728/Del /2013 - Dated:- 26-2-2016 - SHRI N.K. SAINI, ACCOUNTANT MEMBER, AND SHRI CHANDRA MOH .....

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count of long term capital gain by invoking the provisions of section 50C. (1.2) Because on a due consideration of facts and circumstances of the case, particularly that - (i) property was agreed to be sold in June, 2003 for ₹ 20 lakhs and an advance of ₹ 5 lakhs was received by cheque on 14.6.2003 however th sale deed was registered on 11.5.2004; (ii) in spite of search and seizure action u/s 132 having been carried out twice, no incriminating material requiring adverse inference wa .....

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rest u/s 234B is excessive. 3. Because the order appeal against is contrary to the facts, law and principles of natural justice. 3. Briefly stated, facts relating to this case are that the assessee is an individual lady, who continued to be assessed to tax regularly for more than 20 years. Due to search and seizure action u/s 132 of the Income tax Act, 1961 [for short, 'the Act'] on 1.9.2005 (1st in sequence), assessment for the impugned year was made u/s 153A/143(3) of the Act vide orde .....

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e, returns for the said six assessment years were filed u/s 153A on 1.2.2010 under protest as no incriminating material was found during the course of search. Return for the year of search was filed u/s 139 of the Act, in time. Asstt. Years Particulars of return filed Addition made Particulars of Date of filing Income returned Income assessed Date of order 2003-04 01.02.10 94,17,484 Nil 94,17,484 10.12.10 2004-05 01.02.10 11,99,366 Nil 11,99,366 10.12.10 2005-06 01.02.10 39,89,607 *4,03,000 43,9 .....

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usal of which it will be seen that even the said addition is not based upon any incriminating material found during the course of search. Though no incriminating material was found, an addition of ₹ 4,03,000/- was made on account of long term capital gain by invoking the deeming provisions of section 50C of the Act. Relevant finding of the Assessing Officer appears at page 2 of the assessment order whereby Assessing Officer computed the long term capital gain at ₹ 10,38,160/- as agai .....

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id property was agreed to be sold in June 2003 for ₹ 20 lakhs and advance of ₹ 5 lakhs was received by Cheque on 14.6.2003, though sale deed was registered on 11.5.2004 (after a gap of 11 months approx), copy of sale deed has been placed at page 11-23 of PB. Addition has been made without making reference to the DVO. The ld. AR further submitted that in spite of search and seizure action under section 132 having been carried out twice, no incriminating material requiring adverse infe .....

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yond the seized material while assessing total income of the assessee under section 153A of the Act. As a result, this ground of appeal is allowed (sic disallowed). 6. The ld. CIT(A) has held as under: Regarding the second contention the ld. CIT(A) s finding is givne at para 5.3 as under: I have considered the assessment order, written submission and argument of Ld. AR during the appellate proceedings. It is undisputed fact that the stamp valuation is higher than the sale consideration. Ld. AR h .....

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appellant. As regards the 3rd contention, it is held by the CIT(A) in para 5.3 at page 11 of the order as under: Next argument of Ld. AR is that the assessing officer should have referred the matter for valuation to the district valuation officer as per the provision of subsection (2) and (3) of the section 50C as stamp valuation was more than the market value. I do not agree with this argument of ld. AR. Subsection (2) of section 50C cannot be invoked automatically. Forthe operation of subsecti .....

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rds the 4th contention, it is held by the CIT(A) in para 5.3 at page 11 of the order as under: Next argument of Ld. AR is that the addition was made without seized documents. This issue has been deed (sic-dealt) in details in earlier ground. I have decided that the assessing officer u/s 153A has power to assess total income including undisclosed income as per the decision of jurisdictional High Court in the case of Anil Bhatia. As a result, this ground of appeal is dismissed. So far as the 5th c .....

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he assessment framed U/s 153A for the years which do not gets abated and for which there is no incriminating material, reliance is placed on the decision of Hon ble Jurisdictional High Court of Delhi in the recent decision dated 28..8.2015 in the case of CIT vs. Kabul Chawla [ITA 707, 709 and 713 of 2014] since reported in [2015] 234 Taxman 300 (Del), wherein after analyzing the cases of - (i) CIT v. Anil Kumar Bhatia [2013] 352 ITR 493 (Del) (Para 15- 21); (ii) CIT v. Chetan Das Lachman Das [20 .....

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heva) Ltd. [2015] 374 ITR 645 (Bom) (Para 35-36) It has been reiterated that settled legal proposition is if no incriminating material was unearthed during the search, no addition could be made to the income already assessed and the related legal proposition has been summarized in para 37 of the said order. 1. Further, it is submitted that under the circumstances as the said sale deed was available at the stage of original assessment itself, and all the facts stood already disclosed and provisio .....

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(A) it is submitted that on perusal of sale deed it will be seen that valuation made by the Stamp Valuation authorities is made up as under: Cost of land 20,05,380 Add: 5% due to park facing 1,00,269 Cost of 34 years old construction 2,97,136 Total - 24,02,785 Say 24,03,000 3. Accordingly, on a due consideration of fact that construction is 34 years old which does not have any value as such rather, demolition of the said construction will be extra to the buyer, therefore, there is no major diffe .....

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e Hon'ble Jurisdictional High Court in the case of Kabul Chawla [supra] and vehemently contended that the Hon'ble High Court has summarized the legal position and the proposition in this regard and in legal position No. IV, it is amply clear that the assessment u/s 153A of the Act has to be made only on the basis of seized material. 7. On careful consideration of submission of both the rival representatives, at the very outset, undisputedly and admittedly, the earlier assessment for A.Y .....

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O made addition of ₹ 4,03,000/- for A.Y 2005-06 by invoking deeming provisions of section 50C of the Act which is the year under appeal. On careful perusal of the operating paras at page 2 of the assessment order, it is amply clear that the said addition is not based on any incriminating material found during the course of search. At this juncture, when we consider the dicta laid down by the Hon'ble Jurisdictional High Court in the case of Kabul Chawla, we note that their Lordships, af .....

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t of the law explained in the aforementioned decisions, the legal position that emerges is as under: i. Once a search takes place under Section 132 of the Act, notice under Section 153 A(l) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will ha .....

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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 AO 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. Obviously an assessment has to be made under this Section only on the basis of seized material .....

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one assessment shall be made separately for each AY on the basis of the findings of the search and any other material 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 requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclo .....

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