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2016 (11) TMI 289 - ITAT DELHI

2016 (11) TMI 289 - ITAT DELHI - TMI - Reassessment proceeding under section 153C - whether certain documents belonging to the assessee were found and seized during the search action under section 132 of the Act at the premises of “Rajdarbar Group” on 31st July, 2008 - Held that:- Since no addition has been made on the basis of material seized belonging to assessee, on the basis of which, proceedings under section 153C of the Act have been initiated in the case of the assessee, in our opinion, t .....

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eedings in the assessment year under consideration stood completed. The learned Commissioner of Income Tax (Departmental Representative) also could not controvert this position of completion of assessment. - As both the conditions laid down in the decision of Kabul Chawla [2015 (9) TMI 80 - DELHI HIGH COURT ]have been satisfied in the case of the assessee in the year under consideration, respectfully following it, we hold that no addition could have been made in the case of the assessee in t .....

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ders dated 30.04.2011 of learned Commissioner of Incometax (Appeals)-XXXI, New Delhi for assessment year 2005-06 and assessment year 2006-07 respectively. In both the appeals of the Revenue identical grounds have been raised except change of amount involved. Similarly, in the cross objections raised, also identical grounds have been raised except change of amount. In view of identical grounds in appeal and cross objections, both the appeals and cross objections have been heard together and dispo .....

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- made by the Assessing Officer on account of unaccounted purchases from M/s. Supariwala & Co. on the basis of statement given by its proprietor Sh. Mahabir Prasad Gupta recorded on 12.04.2006 u/s 132(4)/131 of Income-tax Act, 1961 (hereinafter referred to as "the Act"), 1961 during the course of search. iii. The appellant craves leave to add, amend any/all the grounds of appeal before or during the course of hearing of the appeal. Cross objections raised in C.O. No. 309/Del/2012 1 .....

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e seized as a result of search on Rajdarbar Group, notice issued u/s 153C of the Act was illegal, invalid and unsustainable. 1.2 That approach adopted by the learned Commissioner of Income Tax (Appeals) to uphold the assumption of jurisdiction without supplying either the satisfaction note or the copies of incriminating material seized from the searched person is highly arbitrary, contrary to law and thus unsustainable. 1.3 That finding of the learned Commissioner of Income Tax (Appeals) that si .....

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ai N. Chandrani vs. ACIT reported in 333 ITR 436 wherein it has been held that, loose papers found as a result of search containing appellant s name cannot be a basis to assume that, such papers belong to the appellant and inabsence thereof, condition precedent for issuance of notice is not fulfilled and as such action taken u/s 153C of the Act stands vitiated. 1.5 That initiation of proceedings u/s 153C of the Act and, framing of assessment u/s 153A/143(3) of the Act is otherwise too bad in law .....

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losed) and in any case, none of it represents incriminating fresh material. 2. That addition made of ₹ 47,51,295/- by the learned Deputy Commissioner of Income Tax is perse without jurisdiction since the same is not based on any material found as a result of search on Rajdarbar Group of cases as has been held by Special Bench of Hon ble Tribunal in the case of M/s All Cargo Global Logistics Ltd. vs. DCIT in ITA No(s) 5018 to 5022 and 5059/M/2010 for Assessment Years 2004-05 to 2009-10. It .....

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eized in the course of search operation, and accordingly notice under section 153C of the Act was issued on 21/07/2010. In response, the assessee filed return of income on 12/08/2010 and notice under section 143(2) of the Act was issued and served within stipulated period and the assessment was completed under section 153C/143(3) of the Act on 28/12/2010. In the assessment order, the Assessing Officer has observed that the proprietary concern of assessee i.e. M/s. P.R. Enterprises was one of the .....

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,598/- to Rajdarbar Group during the year 2005-06. In post-search proceedings in Rajdarbar Group of cases again Sh. Mahabir Prasad Gupta was summoned under section 131 of the Act and his statement was recorded on 17/10/2008, wherein he reiterated his earlier admission of cash sales of Supari to Rajdarbar Group . According to the Assessing Officer, Sh. Mahabir Prasad Gupta admitted unaccounted cash sales on the basis of incriminating documents seized during the course of search at the premises of .....

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to these unaccounted purchases of ₹ 2,09,20,200/-. The Assessing Officer also estimated undisclosed investment of ₹ 18,44,240/-. Thereafter, the Assessing Officer held that the assessee was manufacturing alongwith another person Sh. Manoj Hora, who was having 18 pouch packing machines, whereas the assessee was having only 15 pouch packing machines and, therefore, the total undisclosed income estimated of ₹ 1,04,52,850/- (Rs.86,08,610 + 18,44,240) was divided in the ratio of po .....

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material seized pursuant to the search action under section 132 of the Act at the premises of Rajdarbar Group . The learned Commissioner of Income-tax (Appeals) was of the view that under section 153A both the original and reassessment proceedings are merged together, so the nature of additions to be made cannot be restricted to only undisclosed income detected as a result of such and accordingly, he upheld the validity of the re-assessment proceedings under section 153C of the Act. However, on .....

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nd that grounds taken in cross objection, challenges the legality of assuming jurisdiction by the Assessing Officer, which goes to the root of the matter and, therefore, cross objection are first taken for adjudication. 4. The learned counsel of the assessee in support of ground No.2 of the cross objections submitted that no addition has been made in the case of the assessee on any material seized during the course of search action under section 132 of the Act on Rajdarbar Group and the assessme .....

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al Representative), on the other hand, relied on the finding of the learned Commissioner of Income Tax (Appeals) on the issue in dispute. 5. We have heard the rival submissions and perused the material on record. In the case of Kabul Chawla (supra), Hon ble Delhi High Court has held that if on the date of search, the assessment already stood completed, and no incriminating material was unearthed during the search, no addition could have been made to the income already assessed. The relevant find .....

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Y 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 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 year .....

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e 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." 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. In .....

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of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment. Conclusion 38. The present appeals concern AYs, 2002-03, 2005-06 and 2006-07.On the date of the search the said assessments already stood completed. Since no incriminating material was unearthed during the search, no additions could have been made to the income already assessed. 6. Similarl .....

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008-09. 7. The Hon ble High Court after considering the judgment in the case of Kabul Chawla (supra) and judgment in the case of SSP Aviation Ltd. Vs. Deputy Commissioner of Income tax [2012] 346 ITR 177, held as under: 37. As expressly indicated under Section 153C of the Act the assessment or reassessment of income of a person other than a searched person would proceed in accordance with the provisions of Section 153A of the Act. The concluded assessments cannot be interfered with under Section .....

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ted to; the AO had no jurisdiction to make the reassessment under Section 153C of the Act. 39. In view of the above, the third question framed, whether the proceedings under Section 153C of the Act could be initiated against the Assessee, is answered in favour of the Assessee and against the Revenue. 8. In the light of the ratio laid down in above decisions, we find that no addition could be made u/s 153C/153A, if following two conditions are satisfied: i. No incriminating material belonging to .....

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section 132 of the Act at the premises of Rajdarbar Group on 31st July, 2008. But from the orders of the Assessing Officer, we find that additions have been made on the basis of statement of Sh. Mahabir Prasad Gupta, proprietor of M/s Supariwala & Co. in post search proceedings on 17th October, 2008, in which, he reiterated his earlier statement under section 132(4)/131 of the Act recorded on 12th April, 2006 during the search action under section 132 of the Act dated 22nd March, 2006 conduc .....

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-06, base of A.Y. 06- 07 is taken (Unaccounted Purchase AY 05-06 Profit AY 06- 07/Unaccounted Purchase AY 06-07) 3 Gross Profit as estimated by AO (2,09,20,000*4,63,80,1 31/11,27,10,598) Rs.86,08,610 4 Peak Figure in the Diary of Mahabir prasad Gupta of M/s Supariwala & Co. ₹ 18,44,240 5 Total (Sr.no. 3 + Sr. no. 4) Rs.1,04,52,850 6 Profit appropriated in case of Manoj Hora based on 18 Manufacturing Machines of Gutka 7 Profit appropriated in case of Devender Kr. Arawal based on 15 Manu .....

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on the evidence of third-party entry any statements. The relevant finding of the learned Commissioner of Income-tax (Appeals) are reproduced as under: The chart on basis of which addition has been made on account of serial no. 1 to 7 above is based on evidence of third party entry and statement at serial no.1. From serial No 2 to serial no.7, the AO has created an edifice of addition based on his own imagination that the appellant must have converted unaccounted purchases of Supari into Gutka. H .....

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ing ultimate weapon of search, can result in justified addition. The legal provision relating to presumption u/s 132(4A) is applicable to the person from whose possession or control the incriminating material is found & seized. Based on the incriminating material found from third party search but not belonging to the appellant this presumption will not be applicable unless corroborated by other evidence. Presumption available under section 132(4A) can be drawn against the person in whose cas .....

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ating material found in the case of the assessee, during the course of search, is satisfied. 11. Regarding the second condition, the assessee submitted that assessment for the year under consideration was not abated as the return of income under section 139(1) of the Act was filed on 30/10/2005 and limitation for issue of notice under section 143(2) was also over and no notice under section 143(2) of the Act was received before the date of search, thus the proceedings in the assessment year unde .....

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