Pr. Commissioner Of Income Tax (Central) -1 v. Ita Nos. 775 & 797 Of2016

$-2 & 29 *IN THE HIGH COURT OF DELHI AT NEW DELHI +ITA 775/2016775/2016+ITA 797/2016 ITA 775/2016775/2016 PR. COMMISSIONER OF INCOME TAX (CENTRAL) -1 Versus Appellant JAIPURIA INFRASTRUCTURE P. LTD. RespondentThrough: Mr. P. Roychaudhuri, Advocate forthe Appellants. CORAM:HON'BLE MR. JUSTICE S. RAVINDRA BHATHON'BLE MR. JUSTICE NAJMIWAZIRIORDER%30.01.2017 % 1. The Revenue urges a common question of law in these appeals,namely, whether the Income Tax Appellate Tribunal's (ITAT) judgment,holding that the additions were made, in excess of the powers under Section153A of the Income Tax Act, 1961 (for short 'the Act'), is correct in law?2. The brief facts of the case are that for Assessment Years (AY) 2006-07 and 2007-08, the assessee had claimed certain expenditure. In AY 2007-08, the Assessment Officer (AO) had conducted a scrutiny assessment inwhich the identity of the suppliers and the nature/genuineness of theexpenditure were examined. After satisfying himself, the AO framed theassessment. For the previous AY 2006-07, the assessments were completedwithout scrutiny; the expenditure was similarly claimed in respect of thesame kind of suppliers. ITA Nos. 775 & 797 of2016 Page 1 of 4 Signature Not Verified 3. In these circumstances, on 27.03.2012, the asscssec's premises weresearched and after considering the materials, notice was issued underSection 153 A of the Act. The final assessment made certain additions inrespect of all these expenditures, which was the subject matter of thescrutiny assessment for AY 2007-08 and the previous year. The AO'sadditions were confirmed by the Commissioner of Income Tax (Appeals).However, the IT AT directed that they be deleted, holding that there was noincriminating material warranting additions. The relevant extract of theimpugned order is as foliows:- "21. However, in the backdrop of aforesaid undisputed factsdiscussed in the preceding paras and law laid down by Hon'blejurisdictional High Court in the case cited as Kabul Chawla(supra), we are of the considered view that completed assessmentinterfered with by the AO u/s 153A and confirmed by the Id. CIT(A) are not sustainable in the eyes of law for the followingreasons (i) that in the instant case, undisputedly the AO has notmade assessment on the basis of incriminating materialunearthed during search and seizure operationconducted u/s 132 rather proceeded u/s 153A of the Acton the basis of some pre-search enquiries to make anaddition as has specifically been recorded in para 6 ofthe assessment order that, "Pre search enquiries revealedthat M/s Jaipuria Infrastructure Developers Pvt. Ltd., themade assessment on the basis of incriminating materialunearthed during search and seizure operationconducted u/s 132 rather proceeded u/s 153A of the Acton the basis of some pre-search enquiries to make anaddition as has specifically been recorded in para 6 ofthe assessment order that, "Pre search enquiries revealedthat M/s Jaipuria Infrastructure Developers Pvt. Ltd., theflagship company involved in the real estate business ofthe SK Jaipuria group is indulged in inflating the cost ofthe project by debiting bogus expenses by raising billsthe SK Jaipuria group is indulged in inflating the cost ofthe project by debiting bogus expenses by raising billsfrom the non-existing parties or the entry providers." (ii) that the ratio of the judgment in case of Kabul Chawla(supra) is required to he extracted by perusing thejudgment in entirety and not by picking up the favourablesentences and by ignoring the unfavourable one.Highlighted portion of para 37 (iv), (v)^ (vi) & (vii) ofKabul Chawla (supra) is crux of the issue involved whichis applicable to the facts and circumstances of the case;(supra) is required to he extracted by perusing thejudgment in entirety and not by picking up the favourablesentences and by ignoring the unfavourable one.Highlighted portion of para 37 (iv), (v)^ (vi) & (vii) ofKabul Chawla (supra) is crux of the issue involved whichis applicable to the facts and circumstances of the case; (ii) that the ratio of the judgment in case of Kabul Chawla(supra) is required to he extracted by perusing thejudgment in entirety and not by picking up the favourablesentences and by ignoring the unfavourable one.Highlighted portion of para 37 (iv), (v)^ (vi) & (vii) ofKabul Chawla (supra) is crux of the issue involved whichis applicable to the facts and circumstances of the case;(supra) is required to he extracted by perusing thejudgment in entirety and not by picking up the favourablesentences and by ignoring the unfavourable one.Highlighted portion of para 37 (iv), (v)^ (vi) & (vii) ofKabul Chawla (supra) is crux of the issue involved whichis applicable to the facts and circumstances of the case; (vi) that there is not an iota of material with the AO to initiateproceedings u/s 153A what to talk of incriminating seizedmaterial;proceedings u/s 153A what to talk of incriminating seizedmaterial; (vii) that the Id. CIT (A) affirmed the assessment order byrelying upon the decisions relied upon by Hon'blerelying upon the decisions relied upon by Hon'blejurisdictional High Court in the case cited as FilatexIndia Ltd. vs. CIT-IV - (2014) 49 Taxmann.com 465(Delhi) which has been distinguished in the KabulChawla (supra) on the ground that in the said case, therewas some material unearthed during the search whereasin the instant case there is admittedly no incriminatingmaterial unearthed during the search to proceed u/s153A.India Ltd. vs. CIT-IV - (2014) 49 Taxmann.com 465(Delhi) which has been distinguished in the KabulChawla (supra) on the ground that in the said case, therewas some material unearthed during the search whereasin the instant case there is admittedly no incriminatingmaterial unearthed during the search to proceed u/s153A. 22. In view of what has been discussed above, we are of theconsidered view that without entering into the merits of this case,addition made in both the cases u/s 153A read with section143(3) is not sustainable in the eyes of law, hence deleted.Consequently, both the appeals filed by the assessee are herebyallowed." 4. This Court has considered the submissions. It is evident that thereason which prevented the ITAT was the ratio in Commissioner of Incometax (Central) III Vs. Kabul Chawla /2016/ 380 ITR 573 (Delhi), where itwas categorically ruled that assessments cannot be arbitrarily made withoutany relevance or nexus with the seized materials and in the absenceITA Nos. 775 & 797 of2016 Page 3 of 4 of seized materials additions based upon existing materials are unjustified.This Court finds no infirmity with the application of the Kabul Chawla'scase (supra), in the circumstances of this case by the ITAT. No question oflaw arises. 5. The appeals are accordingly dismissed. S. RAVINDRA BHAT, J. JANUARY 30,2017sb NAJMTWAZIRI, J. ITA Nos. 775 & 797 of2016