TMI Blog2020 (12) TMI 393X X X X Extracts X X X X X X X X Extracts X X X X ..... MI 1046 - ITAT CHANDIGARH] we find no infirmity in the view taken by the CIT(A) who had rightly quashed the addition made by the A.O u/s 2(22)(e) of the Act. - Decided against revenue. - ITA NO. 1498/Chd/2019 - - - Dated:- 3-12-2020 - Shri. N.K. Saini, VP And Shri Ravish Sood, JM For the Assessee : Shri Sudhir Sehgal, Advocate For the Revenue : Shri Sandip Dahiya, CIT ORDER PER RAVISH SOOD, JUDICIAL MEMBER: The present appeal filed by the revenue is directed against the order passed by the CIT(A)-3, Gurgaon, dated 30/07/2019, which in turn arises from the assessment order passed under Sec. 153A r.w.s 143(3) of the Income Tax Act, 1961 (for short Act ), dated. 27.03.2015 for A.Y. 2010-11. The revenue has assailed the impugned order on the following grounds of appeal before us: 1. Whether on the facts and in circumstances of the case, the CIT(A) is right in law in deleting the addition made by the AO u/s 2(22)(e) of the Income Tax Act, 1961 on account of deemed dividend received by the assessee by diverting the funds of the company M/s Hansa Metallic Pvt. Ltd. in which assessee is director substantial share holder of the company. 2. It is p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 2(22)(e) of the Act. In so far the claim of the assessee that as the amount under consideration was received from the company by way of a book entry involving no actual flow of funds, therefore, the provisions of Sec. 2(22)(e) would stand excluded, the A.O did not favor with the same. Accordingly, in the backdrop of his observations recorded in the assessment order the A.O added an amount of ₹ 2,80,00,000/- [₹ 50,00,000/- (+) ₹ 2,30,00,000/-] as deemed dividend under section 2(22)(e) of the Act in the hands of the assessee. 4. Aggrieved the assessee assailed the assessment order in appeal before the Ld. CIT(A). It was the claim of the assessee before the first appellate authority that as no assessment proceedings were pending in his case on the date of the search and seizure proceedings, the assessment under section 153A could thus have been made only on the basis of seized material. It was submitted by the assessee before the CIT(A) that as no incriminating material was unearthed during the course of search proceedings and the assessment proceedings in his case had remained unabated as on the said date, therefore, no additions could have been validly mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had rightly vacated the addition made by the A.O under section 2(22)(e). 8. Per contra, the ld. Departmental Representative (for short D.R ) though supported the order of the A.O, however, he fairly admitted that the issue was squarely covered by the order of the Tribunal in the case of M/s Mala Builders Pvt. Ltd. (supra). It was submitted by the Ld. DR that the Ld. CIT(A) had vacated the addition on the jurisdictional issue itself and had not dwelled on the merits of the case. 9. We have heard the authorized representatives of both the parties, perused the orders of the lower authorities and the material available on record, as well as the judicial pronouncements pressed into service by them. As is discernible from the records, the addition made by the A.O while framing the assessment vide his order passed u/s 153A r.w.s 143(3), dated 27.03.2015 does neither emanate out of any incriminating material found during the course of search proceedings nor any assessment proceedings for the year under consideration were pending or stood abated on the date of the search conducted in the case of the assessee. It is in the backdrop of the aforesaid factual position that we shall deal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oduced or not already disclosed or made known in the course of original assessment. 17. We find that the issue first came up for consideration before the High Court of Bombay in the case of CIT Vs. M/s Murli Agro Products ltd. (supra), wherein on the issue of exercise of revisionary powers by the Commissioner of Income Tax u/s 263 of the Act, on the order passed by the Assessing Officer under section 153A, it was contended by the Revenue that the impugned order was erroneous and prejudicial to the interest of the Revenue since the Assessing Officer had only determined the undisclosed income and not the total income which is the mandate of section 153A .The Hon'ble High Court, while adjudicating the issue, dealt at length with the purpose of introduction of the new search assessment procedures, as against the earlier block assessment procedures and then went on to interpret the proviso to section 153A(1), and held that it is only pending proceedings which are abated on initiation of proceedings under section 153A of the Act. while the assessments which have attained finality cannot be disturbed unless materials gathered in the course of proceedings under section 153A of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39;requisition' are the crucial words appearing in the substantive provision and proviso and they would throw light on the issue of applicability of the provision. The Court upheld the understanding of the legal provision of section 153A by the Special Bench in the I. T.A. T. in this case and further held that the Delhi High Court had in the case of Anil Kumar Bhatia also reached to the same conclusion. It also referred to the judgment of the Karnataka High Court in the case of Canara Housing Development Co. Vs. DCIT (2014) 49 Taxmann.98 and stated that even as per that judgment, the scope of enquiry in search carried under section 153A had to essentially revolve around search or requisition under section 132A of the Act. 20. In the case of Kabul Chawla (supra), the Delhi High Court after considering various decisions of High Courts, summarized the legal position in paragraph 37, which is reproduced below: 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: Assessments and reassessments pending on the date of the sea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pholding the proposition that addition u/s 153A, in case of earlier completed assessments, can be made only on the basis of incriminating material found during search or requisition is that: 1. Assessment u/s 153A can be framed only in cases where a search is initiated u/s 132 or Books of Accounts, other documents or any assets are requisitioned u/s 132A of the Act. Moreover notices u/s 153A(l)(a) can be issued and income assessed or reassessed of six years preceding the assessment year relevant to the previous year in which search is conducted or requisition is made. Thus the crucial words search and requisition appear in the substantive provision and the proviso, which throws light on the issue of applicability of the provision .Such assessments have a vital link with the initiation and conduct of search .Since search can be authorized only on the fulfillment of conditions enumerated in section 132,those conditions will have to be taken into account while interpreting section 153A and the interpretation arrived at is that in respect of unabated proceedings assessment has to be made on the basis of books of accounts or other documents not produced in the course of origina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicable to assessments made u/s 143(3) shall apply and in case it is a reassessment being made all principles of reassessment which are applicable in case of proceedings u/s 147/148 shall become applicable. Thus in cases where assessment have already been made addition to be made in proceedings u/s 153A is to be restricted to incriminating material found if any. 24. It is amply evident from the above that the issue is settled, with a number of decisions of the High Courts holding that in the case of completed assessments, no addition can be made in the absence of any incriminating material. Though we do agree that there are decisions of High courts which hold otherwise and state that u/s 153A , addition in case of completed assessments need not be restricted to incriminating material, but in view of the Apex court decision in CIT vs Vegetable Products Ltd.(i973) 88ITR 192 which states that where there are two reasonable constructions of a statute, the construction favouring the assessee should be adopted, we hold that in case of completed assessments under section 143(3)/143(1) of the Act, in the absence of any incriminating material found during the course of search, the ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
