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2015 (5) TMI 1051 - ITAT DELHI

2015 (5) TMI 1051 - ITAT DELHI - TMI - Addition u/s 153A - Held that:- Under new section 153A in a case where search is initiated u/s 132, the A.O. is obliged to call upon searched persons to furnish return for 6 assessment years immediately preceding the Assessment Year relevant to previous year in which search was conducted. Another feature of this section is that the A.O. is empowered to initiate the reassessment of total income of aforesaid years. This is a departure from earlier block asses .....

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t if during search proceedings, the search team finds some undisclosed income, then A.O. is bound to include this income in the assessment u/s 153A irrespective of the fact that earlier in proceedings u/s 143(3), the same was not considered. - Decided against assessee.

Addition made in the absence of such incriminating material - Held that:- There are different views of different high courts in this respect and in such a situation; the view favourable to the assessee is to be followed .....

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grounds of appeals taken by revenue in these appeals are reproduced as under: (i) I.T.A. No. 2140/Del/2013: 1. "On the facts and in the circumstances of the case, the Ld CIT (A) has erred in holding Gold/Silver utensil as Capital Assets instead of Personal Effects by observing that "It is immaterial whether the articles made of Gold or Silver, are in the shape of utensils or in the form of furniture" 2. "On the facts and in the circumstances of the case the Ld. CIT(A) has er .....

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T (A) has erred in directing to allow the benefit of carry forward of losses for the A.Y. 1998- 99 under capital gain on sale of Gold/Silver utensils against Capital Gain for the A.Y. 1999- 2000." 2. The assessee has also filed cross objections against these appeals and the ground of cross objections taken by assessee are reproduced as under: (i) C.O. No.159/Del/2009:- 1. That the learned DCIT erred in assessing the income of the appellant at ₹ 4,15,17,250/- against income returned at .....

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ssible under law to make a different assessment of income on the same facts, without bringing any new material on record, in assessment u/s 153 A of the Act. 2.2 That the law does not permit change of opinion on the same set of facts by the A.O. 3. The learned CTT(A) erred in not following the binding judicial precedents of jurisdictional High Court Jindal Photo Films Limited 256 ITR 1 (Delhi), -Kelvinator India Limited Eicher Limited 213 CTR 57 which were brought to his notice in written submis .....

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erest charged u/s- 234B is excessive and the same is not calculated as per law. 6. That the assessment has not been made in accordance with law and the addition made by DCIT are also unsustainable on the facts of the case and as per law. (iii) C.O.No.239/Del/2009: 1. That the learned CIT(Appeal) erred in not disposing ground no.2, in respect of assessing of income from business at Rs.l,20,5711 - against "NIL" income returned by the appellant under the said head of income, without discu .....

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the Act on 09.12.2003 at the residential as well as business premises of related persons of Begum Gutka group and assessee is a part of such group and therefore her case was reopened in view of the provisions of Section 153A. The assessee was required to file return u/s 153A to which assessee submitted that the original return filed by her be treated as return filed u/s 153A of the Act. During the assessment proceedings in Assessment Year 1998-99, the A.O. observed that the assessee had claimed .....

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red under VDIS were never shown as personal effects and were never used as personal assets and the same qualifies for being classified as capital assets. The A.O. did not agree with the contention of assessee and made an addition of ₹ 3,77,58,105/- by holding as under: The reply of the assessee has been considered carefully. Bulk quantity of silver and gold utensils clearly goes to show that they were clearly 'personal effects'. Now) the law is well settled that the expression &quo .....

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"personal effects" so long as these are meant for personal use Huge quantity of gold and silver utensils. In the assessee's case also it is seen (Statement of assets acquired out of Income declared under VDIS 1997 most of which were apparently acquired by inheritance way back in the year 1966-67 to 68-69) that the items so!9- were Plate, Thali, Glasses etc. made of gold and silver. These items are quite similar to the items held to be 'personal effects' u/s 2 (14) of the L .....

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g the self serving averment that she has not treated it as "personal effects". In the light of the facts & circumstances discussed above, very clearly the assessee's attempt to treat the same as "capital asset' fails. I hold the utensils made of gold/silver as "personal effects'. After holding so the claim for indexation also would be required to be disallowed. Net result of it would be disallowance of ₹ 3,77,58,105/ -crores on account of incorrect index .....

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as under: As regards to substantial issue is concerned, I am of the view that the appellant has merit in her submissions. The AO has denied the benefit of indexation in the computation of capital gains on sale of gold and silver items by holding them as 'personal effects'. By excluding the value of indexation, the AO has taken the total sale proceeds on those articles as income and applied normal rate of taxes. It is very relevant to refer to section 2(14) which define what constitutes .....

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of section 2(14) of IT Act. As per clause (ii) of subsection 14 of section 2, ornaments made of gold, silver and other precious metals, and any precious or semi precious stones whether or not set in- any furniture, utensil or articles, are defined as 'jewellery' for the purposes of capital asset. From this, it is very clear that it is intended to subject the sale proceeds of jewellery under capital gains even if they are meant for personal use. Assuming that an assessee sells jewellery .....

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precious metals like gold and silver, it is difficult to exclude them from the category of capital asset. It is immaterial whether the articles, made of gold or silver, are in the shape of utensils or in the form of furniture; they do fall in the definition of capital asset. The AO is not correct to deny the benefit of cost inflation indexation to the sale proceeds of these items in the computation of capital gains. Consequently the order of the AO cannot be sustained in view of the above reaso .....

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l gains the base year should be 1.4.1981. The market value in the year 1981 would be less than what was adopted. Hence it requires reworking based on correct value in the year 1981. Resultantly the ultimate the loss on capital gain arrived on sale of the above referred articles should be allowed to be carried forward to the subsequent years, subject to verification of the due date of filing return of income. 5. The Revenue is aggrieved with the order of Ld. CIT(A) and has filed appeal before us .....

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3(3) read with respect to section 147 and in these two assessments no such claim of capital loss was denied and therefore denial of capital loss in assessment proceedings u/s 153A on the same facts and circumstances will amount to change of opinion which was not permissible. The assessee has further taken the ground that in the absence of incriminating documents no addition can be made u/s 153A of the Act. 6. At the outset, Ld. D.R. submitted that the question to be decided by Hon ble Bench is a .....

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tween items of jewellery and items of utensils. She referred on order of Hon'ble Calcutta High Court in the case of CIT Vs Banarsilal Katarnuka 185 ITR 493 wherein Hon'ble Calcutta High Court has held that silver utensils / gold utensils cannot be classified as capital assets as the very use of utensils presupposes personal use. Ld. D.R. also placed her reliance on an order of Hon'ble High Court of Calcutta in the case of Shree Kumari Mundra Vs CIT 228 ITR 548 and submitted that in t .....

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e purpose of classifying these as capital assets. 7. Ld. A.R. on the other hand submitted that the utensils were not personal effects of assessee and in this respect, he invited our attention to paper book page 24 where an affidavit signed and sworn by assessee was placed wherein assessee had claimed that assessee had not used the utensils for her personal purposes. Ld. A.R. further relied upon the case law of M K Jajodia Vs ITO decided by Kolkata Bench of ITAT reported at 20 TTJ 167. He argued .....

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been used for personal use or household use. of assessee. Ld. A.R. submitted that in the case of assessee also whatever was declared in VDIS, the same utensils having some weight, were sold as is apparent from declaration of VDIS and the sale bills of such utensils and therefore, cannot be said that the same were used as there is no difference in weight of utensils and it was submitted that in case these were used for personal purposes, there must have been some wear and tear to them. Ld. A.R. .....

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tted by the Revenue. Ld. D.R. replying in her rejoinder submitted that the case law decided by ITAT is not relevant as the issue has been decided by Hon'ble Calcutta High Court which has been relied upon by her and regarding the case law of Faiz Murtaza Ali Ld. D.R. submitted that it was a case of sale of items like paintings, carpets and furniture etc which invariably are items of personal effect and are similar to utensils. 7. As regards the cross objections filed by assessee, Ld. D.R. obj .....

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ed that the C.O. 159 was filed well within time, which Ld. D.R. also acceded. However, Ld. D.R. submitted that C.O. 239 for Assessment Year 1999- 2000 was not within time as the same was filed on 11.08.2009 whereas notice was received by assessee on 21.06.2009 and therefore, C.O. was filed beyond the mandatory period of 30 days. Ld. A.R. could not explain the delay in C.O. for Assessment Year 1999-2000. Ld. A.R. was however allowed to argue on C.O. 159/del/2009 In C.O. 159, the assessee has subm .....

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of Jindal Photo Films Vs ITO in I.T.A. No. 256 ITR 01 (Del.), CIT Vs Kelvinator of India Ltd. 320 ITR 561, CIT Vs Eicher Ltd 213 CTR 57. Ld. A.R. submitted that having completed assessment on two occasions one u/s143(3) and another u/s 143(3) read with Section 147, there was no occasion available to A.O. to again make assessment u/s 153A especially in view of the fact that no new fact or material was there. Ld. A.R. argued that change of opinion is not permitted as per case laws relied upon by h .....

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ndia) 259 CTR 281 (Raj.) ii) MGF Automobiles Ltd. in I.T.A.No. 4212 & 4213/Del/2011 iii) Kusum Gupta in I.T.A.No. 4873/Del/2009, 2510, 3312, 2833 /Del/ 2011. iv) PACL India Ltd. in I.T.A.No. 2637/Del/2010 v) Deepaen A. Paraekh, Mumbai I.T.A.No. 467, 469, 460/2011 vi) Jigsnesh P. Shah, Mumbai I.T.A.No. 1553 & 3173/Mum/2010 vii) Parsvnath Developers Ltd., Delhi I.T.A.No. 5188/Del/2013 viii) Kabul Chawla, Delhi I.T.A.No. 779, 780, 781, 782/Del/2013 ix) DCIT Vs Kurele Pape Mills Pvt. Ltd. I. .....

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utensils was not considered. Ld. D.R. further submitted that as decided by Hon'ble Delhi High Court in the case of Anil Kumar Bhatia, the provisions of Section 153 A are mandatory in nature. As regards incriminating documents, the Ld. D.R. submitted that during search, various incriminating documents were found and the statement of assessee was also recorded and, therefore, it cannot be said that no incriminating material was found during the search proceedings. In this respect Ld. D.R. invi .....

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ns and the fresh assessments has to be carried out and there is no requirement of incriminating material and in this respect she relied upon the case law of Apoorva Extrusion Pvt. Ltd. in I.T.A. No. 3308/Del/2010 for the Assessment Year 2002-03 decided vide order dated 09.10.2014. Ld. D.R. strongly argued that the case law of Anil Kumar Bhatia 29 taxman 98 decided by Hon'ble Delhi High Court is very much in favour of Revenue wherein the Hon ble Court has held that once the provisions of Sect .....

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of Revenue by holding that addition u/s 153A need not be restricted or limited to the incriminating material. Ld. D.R. further placed her reliance on the case law of Raj Kumar in I.T.A. No. 56/2011 decided by Hon'ble Allahabad High Court and also case law of Canara Housing Development Company in I.T.A. No. 38/2014 decided by Karnataka High Court. 9. Ld. D.R. also placed her reliance on the case law of CIT Vs Kpil Jain 50 DTR 342 decided by Hon'ble Delhi High Court for the proposition tha .....

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ng of interest u/s 234B, Ld. D.R. submitted that in the case of assessee herself, :Hon ble Tribunal in Assessment Year 2000-01 has decided the issue in favour of Revenue and in this respect invited our attention to para 8 & 9 of the order placed in paper book pages 31 & 32. 10. We have heard rival parties and have gone through the material placed on record. As the assessee has raised legal issue in cross objections therefore, we first take up cross objections. In cross objection No.159/D .....

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edure which is covered by sections 139, 147, 148, 149, 151, 152 and 153. These sections relate to assessment and reassessment provisions. Prior to introduction of Section 153A, there was chapter XIV-B of the Act which took care of the assessments to be made in cases of search and seizure and such assessments were known as block assessments because the chapter provides for a single assessment to be made in respect of period of block of 10 years. The block assessment so made was independent and in .....

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is empowered to initiate the reassessment of total income of aforesaid years. This is a departure from earlier block assessment scheme in which block assessment roped in only the undisclosed income and the regular assessment proceedings were preserved resulting into multiple assessments. The argument of Ld. A.R. that addition made u/s 153A on same set of facts and circumstances amount to change of opinion does not hold any force as the Hon'ble Court in the cases relied upon by Ld. A.R. has h .....

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tive of the fact that earlier in proceedings u/s 143(3), the same was not considered. The Hon'ble High Delhi Court in the case of Anil Kumar Bhatia 24 Taxman.com 98 vide order dated 07.08.2012 has held as under: 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 obvious .....

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time-limit within which the notice under Section 148 can be issued, as provided in Section 149 has also been made inapplicable by the non obstante clause. Section 151 which requires sanction to be obtained by the Assessing Officer by issue of notice to reopen the assessment under Section 148 has also been excluded in a case covered by Section 153A. The time-limit prescribed for completion of an assessment or reassessment by Section 153 has also been done away with in a case covered by Section 15 .....

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tion can be made in the absence of such incriminating material. Hon ble Delhi High Court in the case of Anil Kumar Bhatia has though held that provisions of Section 153A are mandatory and in the course of non pending assessments, the addition can be made even without finding any incriminating material. However, in the case of pending assessments, the Hon ble Court has left open the answer to the question as to whether in case of completed assessments, the addition can be made in the absence of i .....

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inating material was found and on the basis of such incriminating material, ITAT in the case of assessee, had confirmed the addition but from the assessment order, we do not find that any incriminating material was found during search relating to this year. Nor Ld. D.R. brought to our notice any incriminating material for this year. She argued that in earlier year, there was incriminating material and the necessity of having found incriminating material in each year was not required and in this .....

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and since a person is searched, the proceedings u/s 153A has to be completed by passing a fresh assessment order. The question is as to whether any addition can be made if there is no incriminating material found during search, which in our opinion, is not as the only purpose of search is to unearth the undisclosed income and if during search, no incriminating material leading to existence of undisclosed income is found, then completed assessments cannot be disturbed and this view has been take .....

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t of Karnataka, the Hon ble Court has dealt the issue vide para 11 as under: The Tribunal has proceeded on the assumption by virtue of the judgement of the special bench of the Mumbai, the scope of enquiry under Section i53A is to be confirmed only to the undisclosed income unearthed during search and if there is any other income which is not the subject matter of search, the same cannot be taken into consideration. Therefore, the revisional authority can exercise the power under Section 263. In .....

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quot; 14. From the above orders of Hon ble Karnataka High Court, we find that Hon'ble High Court has held that during assessment proceedings u/s 153A, addition can also be made in respect of such income not forming part of declared income or undeclared income. Therefore, this decision is in favour of revenue. 15. Hon ble Rajasthan High Court in the case of Jai Steels (supra) has been pleased to hold that assessee was not eligible to claim deduction for an expenditure during assessment procee .....

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ing documents, no addition can be made. 17. The Hon ble Court on an appeal filed by Revenue had framed the following questions of law in respect of additions to be made u/s 153A: "(i) Whether on the facts and in the circumstances of the case, the Hon'ble ITAT is correct in narrowing down the scope of assessment u/s 153A in respect of completed assessments by holding that only undisclosed income and undisclosed assets detected during search could be brought to tax ? (ii) Whether on the f .....

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l income of the six assessment years. 18. The findings on these questions of law are contained in para 18 which are reproduced below: 18. Mr. Dastur would submit that the Revenue is protected completely in this case. The power is of drastic nature and has to be exercised within constitutional parameters. However, though the second proviso to sub-section (1) of section 153A would not apply in the first three years of this case, yet, as far as the second three year period is concerned, the assessm .....

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the power under section 153A being not expected to be exercised routinely, should be exercised if the search reveals any incriminating material. If that is not found, then, in relation to the second phase of three years, there is no warrant for making an order within the meaning of this provision. In any event, the issue stands concluded by a Division Bench judgment of this Court rendered in the case of Commissioner of Income Tax Appeal no.36 of 2009 decided on 29th October, 2010. It is, theref .....

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