TMI Blog2020 (8) TMI 817X X X X Extracts X X X X X X X X Extracts X X X X ..... not pending or had attained finality before the date of search, the additions can be made only on the basis of incriminating material found during the course of search qua that assessment year, i.e., the material should pertained to that Assessment Year - see MEETA GUTGUTIA PROP. M/S. FERNS N PETALS [ 2017 (5) TMI 1224 - DELHI HIGH COURT] As none of the additions made by the Assessing Officer in the impugned Assessment Years 2006-07 and 2007-08 are based on any incriminating material found during the course of search pertaining to these assessment years, and therefore, we hold that these additions are beyond the scope of assessment framed u/s.153A/143(3). On this legal ground alone, the additions made by the Assessing Officer are deleted. - Decided in favour of assessee. - I.T.A. No.5565/DEL/2012, I.T.A. No.5566/DEL/2012 - - - Dated:- 27-8-2020 - Shri Amit Shukla, Judicial Member And Shri Prashant Maharishi, Accountant Member For the Appellant : Shri R.S. Ahuja, CA For the Respondent : Ms. Sunita Singh, CIT-DR ORDER PER AMIT SHUKLA, JUDICIAL MEMBER: The aforesaid appeals have been filed by the assessee against separate impugned orders of even dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at, during the course of search proceedings u/s.132, statement of Lt. Colonel, H.S. Bedi who was the CMD of the Tulip Group was recorded, in which he has admitted that the group companies were involved in making bogus purchases from various entities and has also made a declaration of ₹ 75 crores on account of bogus purchases made by different group companies made in the Assessment Year 2009-10 and this amount was surrendered in names of various companies. Assessing Officer has also noted the relevant extract of the statement and mentioned about the inquiries conduced for the purchases during Financial Years 2007-08 and 2008-09 relevant to Assessment Years 2009-10 and 2010-11. However, there is no iota of any reference or material that anything incriminating was found regarding purchases qua the Assessment Years 2006-07 and 2007-08 nor there is any such thing in the statement recorded u/s.132(4) and in the subsequent inquiry conducted that anything incriminating was found relating to these assessment years. Based on inquiries and statements which were relevant for the Assessment Years 2009-10 onwards, Assessing Officer has made adverse inference in the Assessment Year 2006-07 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l or evidence found during the course of search relevant for the Assessment Years 2006-07 and 2007-08. Neither there is any incriminating material found during the course of search for preliminary expenses or for payment of profession services or alleged bogus purchases. The Assessing Officer himself observed that all these issues were raised during the course of assessment proceedings and there is no specific material pertaining to Assessment Years 2006-07 and 2007-08. In the entire assessment order especially in the assessment order for the Assessment Year 2007-08, Assessing Officer has referred to the statement of CMD, wherein he has admitted that bogus purchases were debited during the Financial Year 2009-10 and 2010-11 in various companies and he has also made surrender of ₹ 75 crores in various group companies on account of bogus purchases. He has also referred to certain inquiry conducted subsequently upon the entities from where the group companies have made purchases in the subsequent years were found to be non genuine. Only an inference has been drawn based on subsequent inquiries relevant for the Assessment Years 2009-10 and 2010-11 in the impugned Assessment Year, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3A for AYs 2000-01 to 2003-04 55. On the legal aspect of invocation of Section 153A in relation to AYs 2000-01 to 2003-04, the central plank of the Revenues submission is the decision of this Court in Dayawanti Gupta (supra). Before beginning to examine the said decision, it is necessary to revisit the legal landscape in light of the elaborate arguments advanced by the Revenue. 56. Section 153A of the Act is titled Assessment in case of search or requisition . It is connected to Section 132 which deals with 'search and seizure'. Both these provisions, therefore, have to be read together. Section 153A is indeed an extremely potent power which enables the Revenue to re- open at least six years of assessments earlier to the year of search. It is not to be exercised lightly. It is only if during the course of search under Section 132 incriminating material justifying the re-opening of the assessments for six previous years is found that the invocation of Section 153A qua each of the AYs would be justified. 57. The question whether unearthing of incriminating material relating to any one of the AYs could justify the re-opening of the assessment for all the earlier AYs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aw in a case where, in the absence of any incriminating material being found during the search under Section 132 of the Act, the Revenue sought to justify initiation of proceedings under Section 153A of the Act and make an addition under Section 68 of the Act on bogus share capital gain. The order of the CIT(A), affirmed by the ITAT, deleting the addition, was not interfered with. 59. In Kabul Chawla (supra), the Court referred to the decision of the Rajasthan High Court in Jai Steel (India), Jodhpur v. ACIT (2013) 36 Taxman 523 (Raj). The said part of the decision in Kabul Chawla (supra) in paras 33 and 34 reads as under: 33. The decision of the Rajasthan High Court in Jai Steel (India), Jodhpur v. ACIT (supra) involved a case where certain books of accounts and other documents that had not been produced in the course of original assessment were found in the course of search. It was held where undisclosed income or undisclosed property has been found as a consequence of the search, the same would also be taken into consideration while computing the total income under Section 153A of the Act. The Court then explained as under: 22. In the firm opinion of this Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 015] 58 taxmann.com 78 (Bom) which accepted the plea that if no incriminating material was found during the course of search in respect of an issue, then no additions in respect of any issue can be made to the assessment under Section 153A and 153C of the Act. The legal position was thereafter summarized in Kabul Chawla (supra) as under: 37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: i. Once a search takes place under Section 132 of the Act, notice under Section 153 A (1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not based on any incriminating material found during the course of the search in respect of AYs under consideration i.e., AY 2006-07. The Gujarat High Court referred to the decision in Kabul Chawla (supra), of the Rajasthan High Court in Jai Steel (India), Jodhpur v. ACIT (supra) and one earlier decision of the Gujarat High Court itself. It explained in para 15 and 16 as under: 15. On a plain reading of section 153A of the Act, it is evident that the trigger point for exercise of powers thereunder is a search under section 132 or a requisition under section 132A of the Act. Once a search or requisition is made, a mandate is cast upon the Assessing Officer to issue notice under section 153A of the Act to the person, requiring him to furnish the return of income in respect of each assessment year falling within six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made and assess or reassess the same. Since the assessment under section 153A of the Act is linked with search and requisition under sections 132 and 132A of the Act, it is evident that the object of the section is to bring ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment In case of search or requisition, it goes without saying that the assessment has to have relation to the search or requisition, in other words, the assessment should connected With something round during the search or requisition viz., incriminating material which reveals undisclosed income. Thus, while in view of the mandate of sub-section (1) of section 153A of the Act, in every case where there is a search or requisition, the Assessing Officer is obliged to issue notice to such person to furnish returns of income for the six years preceding the assessment year relevant to the previous year in which the search is conducted or requisition is made, any addition' or disallowance can be made only on the basis of material collected during the search or requisition, in case no incriminating material is found, as held by the Rajasthan High Court in the case of Jai Steel (India) v. Asst. CIT (supra), the earlier assessment would have to be reiterated, in case where pending assessments have abated, the Assessing Officer can pass assessment orders for each of the six years determining the total income of the assessee which would include income declared in the returns, if any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... As far as Karnataka High Court is concerned, it has in CIT v. IBC Knowledge Park P. Ltd. (supra) followed the decision of this Court in Kabul Chawla (supra) and held that there had to be incriminating material qua each of the AYs in which additions were sought to be made pursuant to search and seizure operation. The Calcutta High Court in CIT-2 v. Salasar Stock Broking Ltd. (supra), too, followed the decision of this Court in Kabul Chawla (supra). In CIT v. Gurinder Singh Bawa (supra), the Bombay High Court held that: 6...once an assessment has attained finality for a particular year, i.e., it is not pending then the same cannot be subject to tax in proceedings under section 153A of the Act. This of course would not apply if incriminating materials are gathered in the course of search or during proceedings under section 153A of the Act which are contrary to and/or not disclosed during the regular assessment proceedings. 63. Even this Court has in CIT v Mahesh Kumar Gupta (supra) and The Pr. Commissioner of Income Tax-9 v. Ram Avtar Verma (supra) followed the decision in Kabul Chawla (supra). The decision of this Court in Pr. Commissioner of Income Tax v. Kurele Paper M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure to record any transaction in the accounts of the Assessee for the AYs in question. On the contrary, the Assessee herein stated that, he is regularly maintaining the books of accounts. The disclosure made in the sum of ₹ 1.10 crores was only for the year of search and not for the earlier years. As already noticed, the books of accounts maintained by the Assessee in the present case have been accepted by the AO. In response to question No. 16 posed to Mr. Pawan Gadia, he stated that there was no possibility of manipulation of the accounts. In Dayawanti Gupta (supra), by contrast, there was a chart prepared confirming that there had been a year-wise non-recording of transactions. In Dayawanti Gupta (supra), on the basis of material recovered during search, the additions which were made for all the years whereas additions in the present case were made by the AO only for AY 2004-05 and not any of the other years. Even the additions made for AYs 2004-05 were subsequently deleted by the CIT(A), which order was affirmed by the ITAT. Even the Revenue has challenged only two of such deletions in ITA No. 306/2017. 68. In para 23 of the decision in Dayawanti Gupta (supra), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evenue. It is held that in the facts and circumstances, the Revenue was not justified in invoking Section 153A of the Act against the Assessee in relation to AYs 2000-01 to AYs 2003-04. (ii) Question (ii) is answered in the affirmative i.e., in favour of the Assessee and against the Revenue. It is held that with reference to AY 2004-05, the ITAT was correct in confirming the orders of the CIT (A) to the extent it deleted the additions made by the AO to the taxable income of the Assessee of franchise commission in the sum of ₹ 88 lakhs and rent payment for the sum of ₹ 13.79 lakhs. 9. Thus, respectfully the ratio and the principle laid down by the Hon ble Jurisdictional High Court, we hold that none of the additions made by the Assessing Officer in the impugned Assessment Years 2006-07 and 2007-08 are based on any incriminating material found during the course of search pertaining to these assessment years, and therefore, we hold that these additions are beyond the scope of assessment framed u/s.153A/143(3). On this legal ground alone, the additions made by the Assessing Officer are deleted. 8. In the result, the appeals of the assessee are allowed. Orde ..... X X X X Extracts X X X X X X X X Extracts X X X X
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