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DCIT, New Delhi Versus M/s Basant Projects Ltd. Vice-Versa

2016 (7) TMI 448 - ITAT DELHI

Assessment u/s 153A - unexplained credit u/s 68 addition - Held that:- It is undisputed in the present case that the original assessment proceedings had already been completed u/s 143(3) prior to the date of the search. It is equally undisputed that the impugned additions were made by the Assessing Officer without there being any finding that the additions related to any seized material. The Ld. CIT(A) has given a categorical finding in para 10.1 of his order that in respect of the entities who .....

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dit u/s 68 of the Act. In the subsequent assessment order u/s 153A/143(3), the additions have been made without any reference to any incriminating material and therefore following the ratio laid down by the Hon'ble Delhi High Court in CIT Central-III vs Kabul Chawla (2015 (9) TMI 80 - DELHI HIGH COURT ) - Decided in favour of assessee. - ITA No. 3125/Del/2013, C.O. No. 202/Del/2013 - Dated:- 29-6-2016 - Shri G. D. Agrawal, Vice President And Shri Sudhanshu Srivastava, Judicial Member For the App .....

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other companies/concerns which were also searched along with the assessee are as under:- 3. During the course of the proceeding under section 153A in the assessee s case, the AO found that the assessee had increased the share capital/share application money by ₹ 1052.24 lacs from 84 different entities. The AO has made enquiries from 33 entities by sending the notices under section 133(6)/131 of the Act for the Assessment Years 2004-05, 2005-06, 2006-07 and 2007-08. S. No. Name of the appe .....

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ed their written confirmations and other related documents etc. However, remaining 2 entities namely Vikas Parafins Pvt. Ltd. and Raf Steel Pvt. Ltd., who had invested ₹ 10,00,000/- and 20,00,000/- respectively, did not comply with the notices issued under section 131. Accordingly ₹ 30,00,000 invested by them were treated as unexplained credit and addition was made to assessee's income by the AO. 6. In the appeal before the Ld. First Appellate Authority, the assessee challenged t .....

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e, the CIT(A) has erred in deleting the addition of ₹ 30,00,000/- made by the Assessing Officer on account of unexplained cash credits U/s 68 of the Income tax Act 1961, under the head share application money received by the assessee from different entities. 2. On the facts and in the circumstance of the case, the C1T(A) has erred, in not appreciating in observation of the Assessing Officer on facts of the case that the assessee failed to prove the creditworthiness of the shares applicants .....

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ts in confirming the proceedings initiated under Section 153A of I.T. Act, which is bad in law in the absence my incriminating material belonging to the assessee being found during the course of search. 2. That on the facts and circumstances of the case, the Commissioner of Income Tax (Appeals) has erred both in law and on facts in confirming the validate of impugned assessment order dated 30.12.2011 u/s 153A of I.T. Act as framed by the Assessing officer in respect of closed assessment for whic .....

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incriminating material unearthed during search operations. 9. Before proceeding with the grounds of appeal of the Department, we deem it appropriate to first address and adjudicate on the CO of the assessee as the legal issue raised by the assessee is germane to the entire assessment proceedings. 10. Before us the Ld. AR for the assessee submitted that it is not the case of the Department that the addition of ₹ 30 lacs has been made on account of any incriminating material found during the .....

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the decision of the Hon ble High Court of Delhi in CIT Central-III vs. Kabul Chawla in ITA Nos. 707/2014, 709/2014 and 713/2014. 11. Ld. DR on the other hand supported the order of the AO. 12. We have carefully considered the material placed before us and the issue involved. Section 153A of the Act provides that where a search is initiated u/s 132 of the Act, the AO shall assess or reassess the total income of the six assessment years immediately preceding the assessment year relevant to the pre .....

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r six assessment years making various additions. It is assessee s claim that the addition of ₹ 30 lacs was not tenable as the regular return had been filed and the original assessment had already been completed u/s 143(3) of the Act. It is also the assessee s contention that no material has been found during the search to justify the addition. In our considered opinion section 153A does not authorise the making of a de novo assessment in this particular assessment year. While under the fir .....

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e power given by the first proviso to assess income for six assessment years has to be confined to the undisclosed income unearthed during search and cannot include items which were already before the AO during the course of the original assessment proceedings . 13. It will be relevant at this stage to reproduce Para 37 of the judgment of the Hon ble High Court of Delhi in the case of CIT Central - III vs. Kabul Chawla (supra) which lays down the entire law with regard to section 153A as under : .....

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reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' 'of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessmen .....

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aterial. Obviously an assessment has to be made under this Section only on the basis of seized material. v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings '(i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the jur .....

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