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2016 (9) TMI 198 - ITAT DELHI

2016 (9) TMI 198 - ITAT DELHI - TMI - Assessment u/s 153A - addition on account of sale of scrap and on account of disallowance u/s 14A - Held that:- No incriminating material has been found during the course of search relating to the assessee for A.Y. 2008-09 to justify additions made by the AO on account of sale of scrap and on account of disallowance u/s 14A r.w.r 8D and that too, that the assessment order based on the original return filed u/s 139 of the Act has not been pending and the same .....

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undertaking and scrap was general from carrying out the said activities has been sold. Thus, in view of the above noted factum, the issue is squarely covered in favour of the assessee by the said decision of the Hon’ble Jurisdictional High Court in the case of CIT Vs. Sadhu Forging Ltd [2011 (6) TMI 9 - DELHI HIGH COURT ] - ITA Nos. 6791 to 6793/Del/2013 - Dated:- 29-7-2016 - SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER, AND SHRI L.P. SAHU, ACCOUNTANT MEMBER For The Assessee : Shri Ved Jain, Adv, Sh .....

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ty. 2. The assessee has raised the following grounds of appeal in all the three appeals: A.Y. 2008-09 1. On the facts and circumstances of the case, the order passed by the learned Commissioner of Income Tax (Appeals) [CIT(A)] under section 153A/143(3) is bad both in the eye of law and on facts. 2. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the proceedings initiated under Section 153A are bad .....

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ts and in law'in not following the judgment of the jurisdictional Delhi High Court in the case of Sadhu Forgings Ltd. (2011) 336 ITR 444 (Del) which is squarely applicable to the facts of this case. 5. On the facts and circumstances of the case! the learned CIT(A) has erred both on facts and in law in confirming the disallowance of ₹ 1.25,000/- under Section 14A of the Act read with Rule 8D. 6. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and i .....

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53A are bad in law in the absence of any incriminating material belonging to the assessee being found during the course of the search. 3. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the action of the AO in making an addition of ₹ 5,69,742/- being income from sale of scrap treating the same as not eligible for deduction under Section 80-IB of the Act. 4. On the facts and circumstances of the case, the learned CIT(A) has err .....

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onfirming the action of the AO in making an addition of ₹ 2,64,039/- being income from sale of scrap treating the same as not eligible for deduction under Section 80-IB of the Act. 3. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in not following the judgment of the jurisdictional Delhi High Court in the case of Sadhu Forgings Ltd. (2011) 336 ITR 444 (Del) which is squarely applicable to the facts of this case. Ground Nos. 1 & 2 A.Y. .....

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.w.s 143(3) of the Act are legal and valid. However, he could not controvert the fact that in the similar set of facts and circumstances, the Tribunal order dated 27.5.2015 [supra] the proceedings u/s 153A/143(3) of the Act has been declared as null and void. The relevant operative paras of the Tribunal order [supra] read as follows: 3. Since the issue raised in ground 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 co .....

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t. During the course of assessment proceedings the assessee questioned the validity of initiation of proceedings u/s 153A of the Act on the basis that no incriminating material was found during the course of search and the assessment u/s 143(3) was already framed before the date of search. The AO did not agree with the assessee and rejected the objection with this finding that there was no requirement that an assessment made u/s 153A of the Act should based on any material seized in the course o .....

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made, but could not succeed. 7. In support of legal issue raised in ground nos. 2 to 6, the ld. AR submitted that in the present case assessment was completed u/s 143(3) of the Act, where the issue of deduction u/s 80IB was elaborately investigated and discussed. He contended that the proceedings initiated u/s 153A are bad in law as no incriminating material belonging to the assessee being found during the course of search. In support he placed reliance on the following decisions: i) Al-Cargo Gl .....

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. Anil Kumar Bhatia - 352 ITR 493 (Del.). ix) Jakson Engineering Ltd. Vs. ACIT & Ors. ITA Nos. 349/Del/2013 (2005-06) to 2007-08) & ors. Order dated 11.04.2014. x) Raj Kumar Chawla Vs. ACIT ITA Nos. 1682/Del/2013 and ors. (A.Ys. 2004-05 & ors) order dated 17.02.2015. 8. Learned CIT DR on the other hand submitted that there is no need of finding of incriminating material during the course of search to justify the validity of assessment framed under sec. 153A read with sec. 143(3) of t .....

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vi) Dr. A.K. Bansal, 355 ITR 513 (All). vii) ITO vs. Varia Pratik Engineering 120 TTJ 1 (Ahd) viii) CIT vs. Raj Kumar Arora, ITA No. 56/2011 (All. H.C.) ix) DCIT vs. Apoorva Extrusion Pvt. Ltd. & ors. ITA Nos. 3308/Del/2010 (A.Y. 2002-03) & ors. Order dated 09.10.2014. 9. Having gone through the orders of the authorities below, we find that the Learned CIT(Appeals) has rejected the contentions of the assessee on the issue of validity of assessment framed under sec. 153A read with sec. 14 .....

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Logestic Ltd. vs. CIT (supra), we find that the ratio laid down therein, supports the contentions of the assessee on the issue. It reads as under: "58. Thus, question No. 1 before us is answered as under :- (a) In assessments that are abated, the AO retains the original jurisdiction as well as jurisdiction conferred on him u/s 153A for which assessments shall be made for each of the six assessment year separately : (b) In other cases, in addition to the income that has already been assessed .....

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ring the course of search? 12. In the case of Kusum Gupta (supra) also the return was processed u/s 143(1) of the Act and time limit for issuance of notice u/s 143(2) had expired on the date of search and it was held that no assessment was pending in that case and thus there was no question of abatement of assessment. Therefore, the addition in the assessment u/s 153A would be made only on the basis of incriminating material found during the search. The Delhi Bench of the Tribunal in its recent .....

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h the pending and completed assessment were to be taken on same pedestal, then there was no need to enshrine second proviso to sec. 153A( 1) providing that the pending assessments within the period of six assessment years shall abate. The Hon'ble Delhi High Court in the case of Anil Kumar Bhatia (supra) dealt with a situation in which some incriminating material was found in respect of a non-pending assessment. It was in that background that the Hon'ble High Court held that sec. 153A app .....

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riminating material is found during the course of search. This can be seen from the following observations of the Hon'ble High Court :- "20. 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 obviously been passed prior to the initiation of the search/requisition, .....

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by 'taking note of the undisclosed income if any, unearthed during the search'. The expression 'unearthed during the search' is quite significant to denote that in respect of completed or non-pending assessments, the Assessing Officer is albeit duty bound to assess or reassess the total income but there is a cap on the scope of additions in such assessment, being the items of income 'unearthed during the search'. In other words, the determination of 'total income' .....

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t in respect of the years for which the assessments are pending vis-a-vis the years for which assessments are non-pending. In respect to the assessment years for which the original assessments have already been completed on the date of search, the total income shall be determined by restricting additions only to those which flow from incriminating material found during the course of search. If no incriminating material is found in respect of such completed assessment, then the total income in th .....

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second proviso to sec. 153A( 1), the total income shall be computed afresh uninfluenced by the fact whether or not there is any incriminating material. In fact, this is the position which follows when we read the judgment of the Hon'ble Delhi High Court in Anil Kumar Bhatia (supra) in juxtaposition to the special bench order in the case of All Cargo Global Logistics Ltd. (supra). The other judgment relied by the Ld. DR in the case of Madugulu Venu (supra) also talks about the need for making .....

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sment framed thereunder. The decisions relied upon by the ld. CIT, DR in the cases ofCanara Housing Development Company vs. DCIT (supra) of Hon'ble Karnataka High Court andFilatex India P. Ltd. vs. CIT (supra) of Hon'ble Delhi High Court having distinguishable facts are not applicable in the present case. In the case of Filatex India Pvt. 12 Ltd. (supra), the question raised on the applicability of provisions u/s 153A was that "whether the Tribunal erred on facts and in law in not h .....

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ion 1 to section 115JB of the Act?" The relevant facts of that case noted in para no. 2 of the decision are that the AO in the proceedings u/s 153A of the Act, had made several additions, relying upon the incriminating material found in the course of search, which was conducted on 18.1.2006 and subsequent dates. In this paragraph of the decision it has been perused from the impugned order of the Tribunal that incriminating material including statement of Sanjay Agarwal, GM (Marketing) have .....

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inating material was found concerning the addition u/s 115JB of the Act." The Hon'ble High Court has rejected this contention of the assessee with this finding that u/s 153A of the Act, the additions need not to be restricted or limited to the incriminating material, which was found during the course of search. Thus, it is clear from the facts of this case before the Hon'ble High Court that several additions relying upon the incriminating material found in the course of search were .....

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ents, once sec. 153A of the Act is applicable. Section 153A(1) postulates one assessment; putting the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which search was conducted or requisition was made. 14. In para no. 3 of the judgment the Hon'ble Delhi High Court while discussing the cited decisions in the cases CIT vs. Chetan Das (2012), 254 CTR (Del) 292 and CIT vs. Anil Kr. Bhatia(2012), 2010-11 Taxman 453 (Del) cited by the .....

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uot;. 15. When we peruse the facts of the case in the case of Filatax India Ltd. and the question raised therein it comes out that in that case admittedly during the course of search incriminating material including statements were found and resulted in additions and the addition made u/s 115JB of the Act was not based upon any incriminating material. Thus, the question raised before the Hon'ble High Court was as to whether the Tribunal has erred in law in not upholding that recomputation of .....

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nue. 16. So far as, the decision of Hon'ble Karnataka High Court in the case of Canara Housing Development Company (supra) relied upon by the ld. CIT DR is concerned, the issue raised before the Hon'ble High Court was regarding validity of revisional order passed u/s 263 of the Act by the ld. CIT partly upheld by the Tribunal and during that course the Hon'ble High Court has also been pleased to discuss the decision in the cases of Anil Kumar Bhatia (supra) and the decision of Specia .....

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t to the assessment had not been produced in the course of original assessment and found in the course of search, such books of accounts or other documents have to be taken into consideration while assessing or re-assessing the total income under the provisions of sec. 153A of the Act. Even any undisclosed income or undisclosed property has been found after the conclusions of the search, same would also be taken into consideration. The requirement of assessment or re-assessment under the said se .....

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allenged it was held that if the AO is satisfied that any money, bullion, Jewellery or other valuable article or thing or books of account or documents seized in the course of the search belongs to a person other than the person who was searched, then such assets or books of accounts or documents shall be handed over by him to the AO having jurisdiction over such other person. Once, that is done, the AO having jurisdiction over such other person shall proceed against him for making an assessment .....

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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. The Hon'ble Karnataka High Court in the case of Canara Housing Development Company (supra) has, however, been pleased to express different view, however, as per the established proposition of law, we are bound to follow the decision of Hon'ble Jurisdictional Delhi High Court and since, the Hon'ble Karnataka High Court and the Hon'bl .....

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ating to the assessee for the assessment year under consideration to justify the additions made in the year by the Assessing Officer and assessment based on the original return of income filed under sec. 139 of the Act was not pending as on the date of search, we following the above cited decisions by the learned AR, discussed above, hold that the assessment framed under sec. 153A read with sec. 143(3) of the Income-tax Act, 1961 for the assessment year under consideration is not valid and the s .....

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r 8D of the Income-tax Rules, 1962 [hereinafter referred to as 'the Rules'] and that too, that the assessment order based on the original return filed u/s 139 of the Act has not been pending and the same has been completed on the date of the search. Therefore, assessment framed u/s 153A r.w.s 143(3) of the Act for ay 2008-09 is not valid and we hold the same as null and void. Accordingly, the issue covered by the Tribunal order dated 27.5.2015 is decided in favour of the assessee and thu .....

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0. Accordingly, the appeals for AYs. 2009-10 is allowed only on legal grounds as indicated above. ITA No. 6793/Del/2013 for AY 2010-11 Ground Nos. 1 to 3 of the assessee 7. We have heard the rival submissions and have carefully perused the relevant materials placed on record of the Tribunal. The ld. Counsel placing reliance on the decision of the Hon ble Jurisdictional High Court of Delhi in the case of Sadhu Forging Ltd 336 ITR 444 [Del] contended that the issue is squarely covered in favour of .....

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ying as a deduction u/s 80IB of the Act. He also drew our attention to para 4.2 to 4.4 at pages 8 and 9 of the order of the CIT(A). 9. On careful consideration of the above, from the relevant operative part of the decision of the Hon ble Jurisdictional High Court of Delhi in the case of CIT Vs. Sadhu Forging Ltd [supra], their Lordships have held as under: 13. Keeping in view the activities of the assessee in giving heat treatment for which it had earned labour charges and job-work charges, it c .....

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