Central)-2 v. M/S Jay Ambey Aromatics

Signature Not Verified $~70 to 72 & 74 IN THE HIGH COURT OF DELHI AT NEW DELHI +ITA 436/2022 & CM APPLs. 47462-63/2022 PR. COMMISSIONER OF INCOME TAX (CENTRAL)-2 ..... Appellant Through:Mr. Sanjay Kumar, Senior StandingCounsel for Revenue. versus M/S JAY AMBEY AROMATICS ..... Respondent Through:None. 71 +ITA 437/2022 & CM APPL. 47464-65/2022 PR. COMMISSIONER OF INCOME TAX (CENTRAL)-2 ..... Appellant Through:Mr. Sanjay Kumar, Senior StandingCounsel for Revenue. versus M/S JAY AMBEY AROMATICS ..... Respondent ThroughNone. 72 +ITA 438/2022 & CM APPL. 47466/2022 PR. COMMISSIONER OF INCOME TAX (CENTRAL)-2 ..... Appellant Through:Mr. Sanjay Kumar, Senior StandingCounsel for Revenue. versus M/S JAY AMBEY AROMATICS ..... Respondent Through:None. ITA 436/2022 & connected matters Page 1 of 5 Signature Not Verified 74 +ITA 440/2022 & CM APPL. 47477/2022 PR. COMMISSIONER OF INCOME TAX(CENTRAL)-2 ..... Appellant Through:Mr. Sanjay Kumar, Senior StandingCounsel for Revenue. versus M/S JAY AMBEY AROMATICS..... Respondent Through:None. %Date of Decision: 09[th]November, 2022CORAM:HON'BLE MR. JUSTICE MANMOHANHON'BLE MS. JUSTICE MANMEET PRITAM SINGH ARORA J U D G M E N T MANMOHAN, J (Oral): 1.Present Income Tax Appeals have been filed challenging the commonOrder dated 15[th]July, 2021 passed by the Income Tax Appellate Tribunal(‘ITAT’) in ITA No.5070/Del./2017 for the Assessment Year (‘AY’) 2010-11, ITA No.5033/Del./2017 for AY 2011-12, ITA No.5069/Del./2017 forAY 2008-09, ITA No.5031/Del./2017 for AY 2009-10. 2.Learned Counsel for the Appellant states that the ITAT has erred inholding that additions which were not based on incriminating material foundduring the search could not be made in assessments under section 153A ofthe Income Tax Act, 1961 (the ‘Act’) and, consequently, deleted additionswithout going into merits of the same. 3.He states that the ITAT has erred in relying upon the judgement ofthis Court in the case of CIT vs Kabul Chawla 380 ITR 573 (Del) ignoring ITA 436/2022 & connected mattersPage 2 of 5 Signature Not Verified the fact that Revenue's SLP bearing Diary No.37848/2015, on similar issueis pending before the Supreme Court. 4.Upon perusal of the paper book, this Court finds that both theCommissioner of Income Tax (Appeals) [‘CIT(A)’] and the ITAT havegiven concurrent findings of fact that no incriminating evidence/material hadbeen found during the search. The ITAT also recorded that the present casesof the Respondent are of concluded assessments which cannot be disturbedin the absence of incriminating material. The relevant extract of theimpugned order is reproduced herein below: “ 11. It is categorically held ·by the learned CIT - A that forassessmentyear2008-09tillassessmentyear2011-12,noincriminating material was foundduring the course of, searchpertaining to these years , ·we also do not find any material referredin the assessment order, the learned CIT DR also could not show usany incriminating material for all these years, therefore as these arethe concluded assessment years, which could have been disturbedonly if there is any incriminating material found during the course ofsearch, we also find that the issue is squarely covered by the decisionof the honourable Delhi High Court in case of CIT V Kabul Chawla[2015)61 taxmann.com412(Delhi)/[2015)234Taxman·300·(Delhi)/[2016], 380 ITR 573 (Delhi)/[2015) 281 CTR 45 (Delhi).Therefore we uphold the order of the learned CIT - A deleting all theadditions for all these years i.e. assessment vear 2008-09 toassessment year 2011 - 12 and appeal of the revenue for all theseyear are dismissed.” 5.ThisCourtfindsthattheconclusionreachedin Kabul Chawla (supra) hasbeensummarizedin PCITvs.MeetaGutgutia, (2017) 82 taxmann.com287 Del. The relevant portion of theJudgment passed in PCIT vs. Meeta Gutgutia (supra) is reproducedhereinbelow:- 5.ThisCourtfindsthattheconclusionreachedin Kabul Chawla (supra) hasbeensummarizedin PCITvs.MeetaGutgutia, (2017) 82 taxmann.com287 Del. The relevant portion of theJudgment passed in PCIT vs. Meeta Gutgutia (supra) is reproducedhereinbelow:- "37. On a conspectus of Section 153A(1) of the Act, read with theprovisos thereto, and in the light of the law explained in theaforementioned decisions, the legal position that emerges is as under: ITA 436/2022 & connected matters i. Once a search takes place under Section 132 of the Act, notice underSection 153 A (1) will have to be mandatorily issued to the personsearched requiring him to file returns for six AYs immediatelypreceding the previous year relevant to the AY in which the search takesplace. ii. Assessments and reassessments pending on the date of the searchshall abate. The total income for such AYs will have to be computed bythe AOs as a fresh exercise. iii. The AO will exercise normal assessment powers in respect of the sixyears previous to the relevant AY in which the search takes place. TheAO has the power to assess and reassess the 'total income' of theaforementioned six years in separate assessment orders for each of thesix years. In other words there will be only one assessment order inrespect of each of the six AYs "in which both the disclosed and theundisclosed income would be brought to tax". iv. Although Section 153 A does not say that additions should be strictlymade on the basis of evidence found in the course of the search, orother post-search material or information available with the AO whichcan be related to the evidence found, it does not mean that theassessment "can be arbitrary or made without any relevance or nexuswith the seized material. Obviously an assessment has to be made underthis Section only on the basis of seized material." v. In absence of any incriminating material, the completed assessmentcan be reiterated and the abated assessment or reassessment can bemade. The word 'assess' in Section 153 A is relatable to abatedproceedings (i.e. those pending on the date of search) and the word'reassess' to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the jurisdiction tomake the original assessment and the assessment under Section 153Amerges into one. Only one assessment shall be made separately for eachAY on the basis of the findings of the search and any other materialexisting or brought on the record of the AO. vii. Completed assessments can be interfered with by the AO whilemaking the assessment under Section 153 A only on the basis of someincriminating material unearthed during the course of search orrequisition of documents or undisclosed income or property discoveredin the course of search which were not produced or not alreadydisclosed or made known in the course of original assessment." 6.Even, this Court in Principal Commissioner of Income Tax vs.Bhadani Financiers Pvt. Ltd., [2021] SCC OnLine Del 4430 has held thatwhere the assessment of the Respondents has attained finality prior to the ITA 436/2022 & connected matters Signature Not Verified date of search and no incriminating documents or materials had been foundand seized at the time of search, no addition could be made under Section153A of the Act as the cases of the Respondents were of non-abatedassessment. 7.Thoughtheissueinvolvedin Kabul Chawla (supra) hasbeenchallenged and is pending adjudication before the Supreme Court, yet thereis no stay of the said judgment till date. 8.Consequently, in view of the judgments passed by the Supreme Courtin Kunhayammed and Others vs. State of Kerala and Another, (2000) 6SCC 359 and Shree Chamundi Mopeds Ltd. Vs. Church of South IndiaTrust Association CSI Cinod Secretariat, Madras (1992) 3 SCC 1, thepresent appeals are covered by the judgment passed by this Courtin Bhadani Financiers Pvt. Ltd. (supra) and Kabul Chawla (supra). 9.Accordingly, no substantial question of law arises in the presentappeals and the same are dismissed. 7.Thoughtheissueinvolvedin Kabul Chawla (supra) hasbeenchallenged and is pending adjudication before the Supreme Court, yet thereis no stay of the said judgment till date. 8.Consequently, in view of the judgments passed by the Supreme Courtin Kunhayammed and Others vs. State of Kerala and Another, (2000) 6SCC 359 and Shree Chamundi Mopeds Ltd. Vs. Church of South IndiaTrust Association CSI Cinod Secretariat, Madras (1992) 3 SCC 1, thepresent appeals are covered by the judgment passed by this Courtin Bhadani Financiers Pvt. Ltd. (supra) and Kabul Chawla (supra). 9.Accordingly, no substantial question of law arises in the presentappeals and the same are dismissed. 10.However, it is clarified that the orders passed in the present appealsshall abide by the final decision of the Supreme Court in the aforesaid SLP. MANMOHAN, J MANMEET PRITAM SINGH ARORA, J NOVEMBER 09, 2022msh ITA 436/2022 & connected matters Page 5 of 5