Pr. Commissioner Of Incometax-8 v. S.p. Singla Construction Pvt.ltd

Signature Not Verified $~9 IN THE HIGH COURT OF DELHI AT NEW DELHI +ITA 29/2019 & CM APPL. 1733/2019 PR. COMMISSIONER OF INCOMETAX-8 ..... Appellant Through:Mr. Sanjay Kumar, Senior StandingCounsel for Revenue. versus S.P. SINGLA CONSTRUCTION PVT.LTD ..... RespondentThrough:Ms.KavitaJha,advocate,Mr.VaibhavKulkarniandMr.Udit,Advocates. %Date of decision:14[th]November, 2022 CORAM:HON'BLE MR. JUSTICE MANMOHANHON'BLE MS. JUSTICE MANMEET PRITAM SINGH ARORA J U D G M E N T MANMEET PRITAM SINGH ARORA, J (ORAL): CM APPL. 1733/2019 (for condonation of delay) Keeping in view the averments in the application, the delay of 45 daysin filing of the present appeal is condoned. Accordingly, present application stands disposed of. ITA 29/2019 1.Present Income Tax Appeal has been filed challenging the order dated27[th]February, 2018 passed by the Income Tax Appellate Tribunal (‘ITAT’)in ITA No. 4594/DEL/2016 for the Assessment Year (‘AY’) 2009-10. 2.The facts of the case relevant for deciding the present appeal are asfollows: 2.1.On 27.09.2009, the Assessee filed Income Tax Return (‘ITR’)declaring an income of Rs. 9,93,09,210. The return filed by the Assesseewas processed under Section 143(1) of the Income Tax Act, 1961 (‘theAct’). The assessment under Section 143(3) was completed on 28.02.2011 atthe returned income. 2.2.On 10.12.2013, a search and seizure operation under Section 132 ofthe Act was carried out in the case of the Assessee. During the assessmentproceedings it was observed that as per the balance sheet of the Assessee,there was a substantial increase in the share capital and induction of theshare premium for the AY under consideration. The Assessee was directedto furnish necessary details in support of the identity of the shareholders. 2.3.The Assessee was issued with an assessment order dated 31[st]March,2015 by the Assessing Officer (‘AO’) resulting in an addition of Rs.8,00,00,000/- under Section 68 of the Act. The AO noted that the detailssubmitted by the Assessee was not found to be satisfactory. 2.4.Aggrieved by the assessment order dated 31[st]March, 2015, theAssessee preferred an appeal before the Commissioner of Income TaxAppeals [‘CIT(A)’], whereby vide order dated 31[st]May, 2016, the aforesaidaddition was deleted. It was noted by CIT(A) that it is clearly brought out by the AO in her report that addition was not made on the basis of anyincriminating document or material found during the course of search butthe addition was made due to the failure of the appellant to discharge itsonus to prove the identity, creditworthiness and genuineness of thetransactions. 2.5.Aggrieved by the order dated 31[st]May, 2016, the Revenue preferredan appeal before the ITAT. By virtue of the impugned order, the ITATconcurred with the findings of the CIT(A) and held that no incriminatingmaterial was found during the course of the search. 3.Learned Counsel for the Appellant states that the ITAT has erred inholding that the addition which is not based on incriminating material foundduring the search could not be made in assessment under Section 153A ofthe Act and, consequently, deleted the addition without going to merits ofthe same. He states that the ITAT failed to appreciate that the incriminatingevidence in the present case was discovered during the simultaneous searchcarried out on the premises of an entry operator Sh. Tarun Goel andinformation was received by the AO from the report of the InvestigationWing. He states that the ITAT failed to appreciate that the impugnedaddition under Section 68 of the Act was not based merely on the report orthe statement of the entry operator Sh. Tarun Goel, these were used only as astarting point for further investigations by the AO and the same lead to beimpugned addition. He states that the ITAT failed to appreciate that thescope and meaning of incriminating evidence cannot be restricted to justdocumentary evidence or admission by the Assessee itself. Signature Not Verified Signature Not Verified 4.He further states that the addition under Section 68 was made by theAO as the Assessee has failed to establish the identity, credit worthiness andgenuineness of the share capital and premium received by the Assessee. 5.Learned counsel for the respondent relies upon the judgment of thisCourt in PCIT Vs. Meeta Gutgutia, (2017) 82 taxmann.com 287 (Del)which followed the decision of this Court in CIT Vs. Kabul Chawla (2016)380 ITR 573 (Del) and reiterated that if no incriminating material was foundduring the course of search in respect of issue then no addition in respect ofany issue can be made to the assessment under Sections 153A and 153C ofthe Act. 6.Upon a perusal of the paper book, this Court finds that both CIT(A)and the ITAT have given concurrent findings of fact that no incriminatingmaterial has been found during the search. The ITAT also recorded that thepresent case of the respondent was of non-abated assessment. In fact, theAO in his remand report filed before the CIT(A) admitted that no documentswere found or seized during the course of search nor there was anyadmission by the Assessee. The relevant extract of the impugned order isreproduced herein below:- “12. We have considered the submissions of both the parties and carefullygone through the material available on the record. In the present case, it is anadmitted fact that the original assessment was framed by the AO vide orderdated 08.12.2009 u/s 143(3) of the Act, thereafter, the case was reopened andthe assessment was framed u/s 147/143(3) of the Act vide order dated03.12.2012. After it, a search and seizure operation u/s 132 of the Act wascarried out on 10.12.2012. During the course of search, no incriminatingmaterial was found and the AO made the addition on account of increase inshare capital which was recorded in the books of accounts. The Assessee hadtaken a plea before the ld. CIT(A) that the assessment was completed beforethe date of search and the addition was not based on any incriminating Signature Not Verified material found during the course of search. The ld. CIT(A) specifically askedthe remand report of the AO on the aforesaid contention of the Assessee. Inresponse, the AO in his remand report dated 16.03.2016 admitted that thoughno documents were found/seized nor there was any admission by the Assesseeduring the course of search but the addition was made as the Assessee failedto establish the identity, creditworthiness and genuineness of the sharecapital/premium. From the above observation of the AO, it is crystal clearthat no incriminating material was found during the course of search relatingto the impugned addition.” (Emphasis Supplied) 7.The ITAT by relying upon the judgment of this Court in the case ofKabul Chawla (supra) held that the addition made by the AO is not calledfor and is liable to be deleted. 8.In this regard we may note the legal position was summarized inKabul Chawla (supra) as under: “37. On a conspectus of Section 153A(1) of the Act, read with the provisosthereto, 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 underSection 153 A (1) will have to be mandatorily issued to the person searchedrequiring him to file returns for six AYs immediately preceding the previousyear relevant to the AY in which the search takes place.Section 153 A (1) will have to be mandatorily issued to the person searchedrequiring him to file returns for six AYs immediately preceding the previousyear relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the search shallabate. The total income for such AYs will have to be computed by the AOsas a fresh exercise.abate. The total income for such AYs will have to be computed by the AOsas a fresh exercise. 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 person searchedrequiring him to file returns for six AYs immediately preceding the previousyear relevant to the AY in which the search takes place.Section 153 A (1) will have to be mandatorily issued to the person searchedrequiring him to file returns for six AYs immediately preceding the previousyear relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the search shallabate. The total income for such AYs will have to be computed by the AOsas a fresh exercise.abate. The total income for such AYs will have to be computed by the AOsas a fresh exercise. iii. The AO will exercise normal assessment powers in respect of the six yearsprevious to the relevant AY in which the search takes place. The AO has thepower to assess and reassess the ‘total income’ of the. aforementioned sixyears in separate assessment orders for each of the six years. In otherwords, there will be only one assessment order in respect of each of the sixAYs “in which both the disclosed and the undisclosed income would bebrought to tax”.previous to the relevant AY in which the search takes place. The AO has thepower to assess and reassess the ‘total income’ of the. aforementioned sixyears in separate assessment orders for each of the six years. In otherwords, there will be only one assessment order in respect of each of the sixAYs “in which both the disclosed and the undisclosed income would bebrought to tax”. iv. Although Section 153 A does not say that additions should be strictly madeon the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be relatedto the evidence found, it does not mean that the assessment “can beon the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be relatedto the evidence found, it does not mean that the assessment “can be arbitrary or made without any relevance or nexus with the seized material.Obviously an assessment has to be made under this Section only on thebasis of seized material.” v.In absence of any incriminating material, the complete assessment can bereiterated and the abated assessment or reassessment can be made. Theword ‘assess’ in Section 153 A is relatable to abated proceedings (i.e.those pending on the date of search) and the word ‘reassess’ to completedassessment proceedings.reiterated and the abated assessment or reassessment can be made. Theword ‘assess’ in Section 153 A is relatable to abated proceedings (i.e.those pending on the date of search) and the word ‘reassess’ to completedassessment proceedings. vi.Insofar as pending assessments are concerned, the jurisdiction to make theoriginal assessment and the assessment under Section 153A merges intoone. Only one assessment shall be made separately for each AY on thebasis of the findings of the search and any other material existing orbrought on the record of the AO.original assessment and the assessment under Section 153A merges intoone. Only one assessment shall be made separately for each AY on thebasis of the findings of the search and any other material existing orbrought on the record of the AO. vii.Completed assessments can be interfered with by the AO while making theassessment under Section 153 A only on the basis of some incriminatingmaterial unearthed during the course of search or requisition of documentsor undisclosed income or property discovered in the course of searchwhich were not produced or not already disclosed or made known in thecourse of original assessment.”assessment under Section 153 A only on the basis of some incriminatingmaterial unearthed during the course of search or requisition of documentsor undisclosed income or property discovered in the course of searchwhich were not produced or not already disclosed or made known in thecourse of original assessment.” vii.Completed assessments can be interfered with by the AO while making theassessment under Section 153 A only on the basis of some incriminatingmaterial unearthed during the course of search or requisition of documentsor undisclosed income or property discovered in the course of searchwhich were not produced or not already disclosed or made known in thecourse of original assessment.”assessment under Section 153 A only on the basis of some incriminatingmaterial unearthed during the course of search or requisition of documentsor undisclosed income or property discovered in the course of searchwhich were not produced or not already disclosed or made known in thecourse of original assessment.” 9.Even, this Court in Principal Commissioner of Income Tax. vs. Shiv Kumar Agarwal (2022) 143 Taxmann.com 55 (Del) has held whereassessment of the respondent had attained finality prior to the date of searchand no incriminating material of document has been found at the time ofsearch, no addition could be made under Section 153A of the Act as the caseof the respondent was of non-abated assessment. 10.Though the judgment in Kabul Chawla (supra) has been challengedby Revenue in connected matters and is pending before the Hon’bleSupreme Court, yet there is no stay of the said judgment till date.Consequently, in view of the judgment passed by the Hon’ble SupremeCourt in Kunhayammed and Others. Vs. State of Kerala and Another,(2000) 6 SCC 359, the present appeal is covered by the judgment of thiscourt in Kabul Chawla (supra) and Shiv Kumar Agarwal (supra). Signature Not Verified 11.We are of the considered view that the facts and law have beencorrectly assessed by the CIT(A) and ITAT and, therefore, no substantialquestion of law arises for consideration in the present appeal. Accordingly,the present appeal stands dismissed. 12.However, it is clarified that the orders passed in the present appealshall abide by the final decision of the Supreme Court in the aforesaid SLP. MANMEET PRITAM SINGH ARORA, J MANMOHAN, J NOVEMBER 14, 2022hp/kv