TMI Blog2018 (5) TMI 1922X X X X Extracts X X X X X X X X Extracts X X X X ..... oes not require detailed discussion because legal issue has already been decided in favour of the assessee that entire addition would stand deleted, therefore, this ground is left for academic discussion only. These grounds are accordingly allowed in terms above. Addition made in assessment u/s 153A - HELD THAT:- Original assessment stands completed on the date of the search and no incriminating material was found during the course of search, therefore, no addition could have been made to the income of the assessee which is already assessed. It is well-settled law that completed assessment can be interfered with by the AO by making assessment u/s 153A only on the basis of some incriminating material unearthed during the course of search which was not produced or not already disclosed or made known in the course of original assessment. Therefore, no addition could be made against the assessee. In view of the above decisions, we set aside the orders of the authorities below and delete all the additions. Levy of penalty u/s 271(1)(c) - HELD THAT:- After considering the rival contentions, we are of the view that penalty is not leviable in the matter. On quantum appeal, we hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... application for condonation of delay and submitted that the assessee in the present appeal, has challenged the charging of interests u/s 234A 234B of the Income Tax Act, 1961 (in short Act ) and that the additions have been made without recovery of incriminating material. Therefore, the assessee has a prima facie case for inference in the orders of the authorities below. The assessee prayed for condonation of delay. Ld. CIT DR, however, objected to the same and submitted that the delay may not be condoned. 3.1. After considering rival submissions, we are satisfied that the assessee could not file the appeal due to inadvertent mistake within the period of limitation. The assessee would not gain anything in delaying the filing of appeal when he has prima facie case. Therefore, the delay in filing the appeal is condoned. 4. The assessee in the present appeal has challenged the orders of the authorities below in charging interests u/s 234A 234B of the Act. It is also stated that no addition could have been made in assessment u/s 153A of the Act since the assessment had already become final and had not abated. As a matter of fact, no incriminating material was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t abated, at the time of search, the AO has no jurisdiction to make the addition u/s 153A of the Act. He has relied upon the judgement of the Hon ble Delhi High Court in the case of CIT (Central)-III vs Kabul Chawla [2015] 380 ITR 573 (Delhi) in which it was held that: On a conspectus of section 153A(l), read with the provisos thereto, and in the light of the law explained in various decisions, the legal position that emerges is as under: (i) Once a search takes place under section 132, notice under section 153A(1) will have to be mandatorily issued to the person searched requiring him to file returns for six assessment years immediately preceding the previous year relevant to the assessment year in which the search takes place. (ii) Assessments and reassessments pending on the date of the search shall abate. The total income for such assessment years will have to be computed by the Assessing Officers as a fresh exercise. (iii) The Assessing Officer will exercise normal assessment powers in respect of the six years previous to the relevant assessment year in which the search takes place. The Assessing Officer has the power to assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in the case of Pr. CIT, Central-2, New Delhi vs Meeta Gutgutia Prop. M/s Ferns N Petals 395 ITR 526 in which it was held that :- 69. What weighed with the Court in the above decision was the habitual' concealing of income and indulging in clandestine operations and that a person indulging in such activities can hardly be accepted to maintain meticulous books or records for long. These factors are absent in the present case. There was no justification at all for the AO to proceed on surmises and estimates without there being any incriminating material qua the AY for which he sought to make additions of franchisee commission. 70. The above distinguishing factors in Dayawanti Gupta (supra), therefore, do not detract from the settled legal position in Kabul Chawla (supra) which has been followed not only by this Court in its subsequent decisions but also by several other High Courts. 71. For all of the aforementioned reasons, the Court is of the view that the ITAT was justified in holding that the invocation of Section 153A by the Revenue for the AYs 2000-01 to 2003-04,was without any legal basis as there was no incriminating material qua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow, therefore, same may be adjudicated. 12. We have considered rival submissions and material on record. Hon ble Punjab Haryana High Court in the case of VMT Spinning Co. Ltd. vs CIT Another [2016] 389 ITR 326 (P H) held as under:- The Tribunal could decide the appeal on a ground neither taken in the memorandum of appeal nor by seeking its leave. The only requirement was that the Tribunal could not rest its decision on any other ground unless the party who might be affected had sufficient opportunity of being heard on that ground. Therefore, the Tribunal ought to have exercised its discretion in view of the fact that the assessee intended raising only a legal argument without reference to any disputed questions of fact. Since there were no additional evidence required for the decision on the new ground raised by the assessee and such question arose from the facts which were already on the record of the assessment proceedings and since a decision upon the new ground raised by the assessee would only help in determining the assessee s correct tax liability, the matter could be remanded to the Tribunal for adjudicating upon the additional ground on its merits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utgutia Prop. M/s Ferns N Petals (supra), therefore, the contention of the Ld. CIT DR is rejected that this ground may not be adjudicated. Ld. Counsel for the assessee filed the transfer order in the case of the assessee to show that the case of the assessee has been transferred to DCIT, Circle-2, Faridabad on 30.06.2015. The assessee is situated at Faridabad, therefore, the Jurisdictional High Court in the case of the assessee would be Hon ble Punjab Haryana High Court. The assessee, therefore, rightly relied upon the decision of the ITAT, Chandigarh Bench in the case of Mala Builders P.Ltd. (supra) in which the point in issue has been decided in favour of the assessee. No other contrary decision of Hon ble Punjab Haryana High Court have been cited by the Ld.CIT DR. Therefore, the decision of the Hon ble Allahabad High Court in the case of Raj Kumar Arora (supra) cannot be given preference. The other decisions cited by Ld.CIT DR, therefore, would not support the case of the Revenue. Considering the totality of the facts and circumstances of the case and the fact that original assessment stands completed on the date of the search and no incriminating material was found during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not rebutted by Department. Ld. DR relied upon the judgement of the Hon ble Delhi High Court in the case of Prannoy Roy Anr. vs Commissioner Of Income Tax [2002] 254 ITR 755 in which it was held that interests u/s 234A would be payable only in a case where tax had not been deposited prior to the date of filing of the return. In this judgement, the amended provision inserted in section 234A(3) w.e.f. 01.06.2003 have not been considered. Therefore, this decision would not support the case of the Revenue. The charging of interest u/s 254A is to be restricted to 07 months only and cash seized to be adjusted against demand u/s 234B as discussed above. However, the same issue does not require detailed discussion because legal issue has already been decided in favour of the assessee that entire addition would stand deleted, therefore, this ground is left for academic discussion only. These grounds are accordingly allowed in terms above. 18. In the result, the appeal of the assessee is allowed. ITA No.5740/Del/2014 [Assessment Year: 2003-04] 19. This appeal by the assessee has been directed against the order of Ld.CIT(A), Meerut dated 14.05.2013 for AY ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as well as cross objection by the assessee are directed against the order of Ld.CIT(A), Meerut dated 29.11.2013 for AY 2005- 06. The AO passed the assessment order u/s 153A/143(3) of the Act on 29.12.2009. The assessee filed return of income declaring income of ₹ 3,90,800/-. The AO made an addition on account of income from undisclosed sources which were based on the record produced by the assessee. The AO made addition of ₹ 1,09,38,880/- on account of unexplained credit u/s 68 of the Act which was based upon the material produced by the assessee at the assessment stage. The AO made an addition of ₹ 1,50,000/- u/s 69 of the Act on account of unexplained investment for purchase of FDs. An addition of ₹ 27,000/- was made on account of unexplained expenditure for purchase of Samsung Air Conditioner. An addition of ₹ 3,00,000/- was made on premium earned on cancellation of land deal. The assessee produced additional evidences before Ld.CIT(A). The assessee explained before Ld.CIT(A) that during the assessment proceedings due to inadequacy of time, the evidences could not be produced, therefore, additional evidences were filed. The submissions and additiona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not honoured on account of insufficient fund, therefore, equivalent amount was debited. Ld.CIT(A), accordingly deleted the addition. 24. On Ground No.5, Revenue challenged the deletion of addition of ₹ 1,50,000/- for short term deposit/cumulative deposit favouring wife and daughter of the assessee. It was found that such deposit was not in the name of the assessee. It was in the name of the daughter of the assessee in which wife of the assessee was nominee, therefore, the addition was deleted. Revenue raised Ground No.6 for deletion of ₹ 27,000/- for investment in Air Conditioner which were deleted by Ld.CIT(A) where investment was made by the wife and only general query was made by the AO in this regard. It would, therefore, show that on these additions, no incriminating material was found during the course of search. 24.1. Ld. CIT DR relied upon the order of the AO. On the other hand, Ld. Counsel for the assessee relied upon the order of Ld.CIT(A). After considering rival contentions, we do not find error in order of Ld.CIT(A) in deleting all additions on which Department filed appeal. The assessee explained AO issued notice on 23.11.1999 for 30.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6,00,000/- was received on 28.02.2005 from Sh. Narender and in AY 2007- 08, Ld.CIT(A) deleted the addition in respect of same person and Department is not in appeal. Ld. CIT DR, however, submitted that no confirmations have been filed by these parties. It was also explained by Ld. Counsel for the assessee that these additions were made without bringing incriminating material during the course of search against the assessee. Ground No.2 of the cross-objection is general in nature and Ground No.3 is with regard to telescoping which were not pressed. Ground No.4 of the Cross Objection is for charging of interest u/s 234A 234B of the Act which is similar as decided in ITA No.5739/Del/2014. Ground No.5 of the Cross Objection is that no addition could be made in the assessment u/s 153A of the Act because the assessment had become final and had not abated. No incriminating material was found and seized during the course of search qua these additions. Ld. Counsel for the assessee pointed out that P.B 1 is original return of income filed on 31.03.2006 and the assessment stood completed on the date of search. Since no incriminating material was found during the course of search to make ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 36(1)(iii) of the Act. The assessee challenged these additions in the cross-objection, charging of interests u/s 234A 234B are also challenged. The assessee raised legal ground on Ground No.7 of cross- objection that no addition can be made u/s 153A of the Act because assessment stood completed and no incriminating material was found during the course of search to make these additions. Admittedly, the original return of income was filed on 30.09.2006 and assessment was completed on the date of search. The AO made the addition on merit based on record and details and documents produced by the assessee at the assessment stage. Admittedly, no incriminating material was found so as to make the above additions under challenge. Therefore, the issue is covered in favour of the assessee in the case of the same assessee in ITA No.5739/Del/2014 (supra). We, accordingly, set aside the orders of the authorities below and delete all the additions. Ground No.7 of C.O. is allowed. 32. Briefly grounds on merits are also considered. On Ground No.1 of the Cross-Objection, the assessee challenged the addition of ₹ 07 Lakhs u/s 68 of the Act in the name of Sh. M.C.Gupta. The AO men ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unts to other persons as loans/advances but has not charged any interests thereon. Interest has been paid by the assessee on loans of ₹ 83 Lakhs. But the assessee has given loan/advances/debts totaling to ₹ 89,19,030/- on which no interest has been declared. The AO, therefore, computed notional interests of ₹ 2,22,637/- on interest free advances and made the addition. It was explained before Ld.CIT(A) that in the nature of business carried on by the assessee there were no practice of charging interest on loan/advances. Further, the explanation has been given in respect of certain parties as to why interest was not charged from them and moreover, it could not be disputed that the assessee had not actually charged any interest. The assessee, therefore, claimed that no notional interest should be charged and no addition should be made on hypothetical income. The assessee relied upon the decision of Hon ble Supreme Court in the case of Shoorji Vallabhdas 36 ITR 144. In the second limb of the arguments, it was contended that interest bearing funds used for making investment which have yielded income, therefore, interest should be allowed deduction. Ld.CIT(A) accepted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of penalty and cancellation of penalty u/s 271(1)(c) of the Act. The AO vide separate order levied the penalty u/s 271(1)(c) of the Act on the addition made in the assessment order. Ld.CIT(A) partly confirmed the additions/sustained in appeal. Ld.CIT(A), therefore, partly allowed the appeal of the assessee and cancelled the part penalty. The assessee is in appeal challenging the penalty order. The Revenue is in appeal challenging the deletion of penalty because the Departmental appeal on merits is pending before the Tribunal. Ld. Counsel for the assessee submitted that quantum order of the Tribunal may be followed in deciding the penalty appeals and also filed copy of the show cause notice dated 29.12.2009 issued for assessment year under appeal before levy of penalty u/s 274 r.w.s 271(1)(c) in which the AO has mentioned (c) Have concealed the particulars of your income or furnished inaccurate particulars of such income. Ld. Counsel for the assessee, therefore, submitted notice is bad in law and that penalty is not leviable in the matter. 38. On the other hand, Ld. Sr. DR relied upon the orders of the authorities below and relied upon the order of ITAT, Mumbai ..... X X X X Extracts X X X X X X X X Extracts X X X X
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