Pr. Commissionerof Incometax-(Central-Ii v. Ita 493/2015

$~ *IN THE HIGH COURT OF DELHI AT NEW DELHI 5. +ITA 634/2015 PR. COMMISSIONEROF INCOMETAX-(CENTRAL-II) Appellant Through: Ms Lakshmi Gurung, Junior StandingCounsel. versus SMT. KUSUMGUPTA, Respondent Through: Mr Salil Aggarwal and Mr Ravi PratapMall, Advocates. 7. + WITH ITA 493/2015 PR. COMMISSIONEROF INCOMETAX-(CENTRAL-II) Appellant Through: Through: Ms Lakshmi Gurung, JuniorStanding Counsel. versus SMT. KUSUM GUPTA, Respondent Through: Mr Salil Aggarwal and Mr Ravi PratapMall, Advocates. WITH 22. +ITA 578/2013 THE COMMISSIONEROF INCOME TAX Signature Not Verified Digitally SignedBy:AMULYA ITA 634/2015 & Connected matters versus KUSUM GUPTARespondentThrough: Mr Salil Aggarwal and Mr Ravi PratapMall, Advocates. KUSUMGUPTA _ Respondent _Through: Mr Sahl Aggarwaland Mr Ravi PratapMall, Advocates. AND 28. +ITA 584/2013 CIT Appellant Through: Mr P. Roy Chaudhuri,Senior StandingCounsel. versus KUSUSMGUPTA Respondent Through: Mr Salil Aggarwaland Mr Ravi PratapMall, Advocates. CORAM:HON'BLE DR. JUSTICE S.MURALIDHARHON'BLE MR. JUSTICE VIBHU BAKHRUORDER%01.09.2015 1. In all these appeals one; common questionthat arises is regardingthejustificationfor the additionsmade by the AssessingOfficer('AO') in thecourse of the assessmentsmade pursuantto notices issued to the AssesseeunderSection153(A)(1)(a)ofthe IncomeTax Act, 1961. 2. The search operationwas carried on 7'^ February, 2007 under Section153Aofthe Act, and the Assesseewas calleduponto file returnsfor the sixpreceding assessmentyears. It is common ground that as on the date of ITA 634/2015&Connectedmatters 'Z o/7 search, there was no pending assessment or re-assessment proceedings quathe Assessee. 3. The next undisputed fact as noted by the AO in the Office Note of theassessmentorderdated29"^December,2008 is as under: "1.There is no incriminating document pertaining to theassessee for this assessment year in the seized recordfound from the residence of the assessee." 4. The third important fact, which is again not in dispute, is that although thestatement of the Assessee was recorded during the search, nothing in thatstatement was found to be incriminatingas far as the Assessee wasconcerned. The AO also considered the reply of the Assessee to a queryletterdated 14"^ November,2008 of the AO and stated "no adverseview istaken on this score." 5. With the above being admitted factual position, the decision of this Courtdated 28"^ August, 2015 in ITA Nos. 707, 709 and 713 of 2014 {CIT v.Kabul Chawid) would apply on all fours. The summary of the legal positionas set out in the said decision is as under: "37. On a conspectus of Section 153A(1) of the Act, readwith the provisos thereto, and in the light of the law explainedin the aforementioned decisions, the legal position that emergesis as under: i.Once a search takes place under Section 132 of theAct, notice under Section 153 A (1) will have to bemandatorilyissuedtothe • personsearchedrequiringhimtofilereturnsforsixAYsimmediately preceding the previous year relevant to the AY in which the search talcesplace, ii.Assessments and reassessments pending on thedate of the search shall abate. The total income forsuch AYs will have to be computed by the AOs asa fresh exercise.date of the search shall abate. The total income forsuch AYs will have to be computed by the AOs asa fresh exercise. "37. On a conspectus of Section 153A(1) of the Act, readwith the provisos thereto, and in the light of the law explainedin the aforementioned decisions, the legal position that emergesis as under: i.Once a search takes place under Section 132 of theAct, notice under Section 153 A (1) will have to bemandatorilyissuedtothe • personsearchedrequiringhimtofilereturnsforsixAYsimmediately preceding the previous year relevant to the AY in which the search talcesplace, ii.Assessments and reassessments pending on thedate of the search shall abate. The total income forsuch AYs will have to be computed by the AOs asa fresh exercise.date of the search shall abate. The total income forsuch AYs will have to be computed by the AOs asa fresh exercise. iii.The AO will exercisenormalassessmentinpowerspowersrespect of the six years previous to the relevant AYin which the search takes place. The AO has thepower to assess and reassessthe 'total income' oftheaforementionedsixyearsinseparateassessment orders for each of the six years. Inother words there will be only one assessmentorder in respect of each of the six AYs "in whichboththedisclosedandtheundisclosedincomewould be brought to tax".in which the search takes place. The AO has thepower to assess and reassessthe 'total income' oftheaforementionedsixyearsinseparateassessment orders for each of the six years. Inother words there will be only one assessmentorder in respect of each of the six AYs "in whichboththedisclosedandtheundisclosedincomewould be brought to tax".iv.Although Section 153 A does not say that additionsshould be strictly made on the basis of evidencefound in the course of the search, or other post-search materialor informationavailablewith theAO which can be related to the evidence found, itdoesnotmeanthattheassessment"canbearbitrary or made without any relevance or nexuswith the seized material. Obviously an assessmenthas to be made under this Section only on the basisof seized material."should be strictly made on the basis of evidencefound in the course of the search, or other post-search materialor informationavailablewith theAO which can be related to the evidence found, itdoesnotmeanthattheassessment"canbearbitrary or made without any relevance or nexuswith the seized material. Obviously an assessmenthas to be made under this Section only on the basisof seized material." V.In absence of any incriminatingmaterial, thecompletedassessmentcan be reiteratedand theabatedassessmentor reassessmentcan be made.The word 'assess'in Section153 A is relatabletoabated proceedings (i.e. those pending on the dateof search) and the word 'reassess' to completedassessment proceedings.completedassessmentcan be reiteratedand theabatedassessmentor reassessmentcan be made.The word 'assess'in Section153 A is relatabletoabated proceedings (i.e. those pending on the dateof search) and the word 'reassess' to completedassessment proceedings. vi.Insofar as pending assessments are concerned, the jurisdiction to make the original assessment andthe assessment under Section 153A merges intoone. one assessmentshall be made Only separatelyfor each AY on the basis of the findings of thesearch and any other material existing or broughton the record of the AO. vii.Completedassessmentscan be interferedwith bythe AO while making the assessment under Section153 A only on the basis of some incriminatingmaterial unearthed during the course of search orrequisition of documents or undisclosed income orproperty discoveredin the course of search whichwere not produced or not already disclosed ormade known in the course of original assessment."the AO while making the assessment under Section153 A only on the basis of some incriminatingmaterial unearthed during the course of search orrequisition of documents or undisclosed income orproperty discoveredin the course of search whichwere not produced or not already disclosed ormade known in the course of original assessment." vii.Completedassessmentscan be interferedwith bythe AO while making the assessment under Section153 A only on the basis of some incriminatingmaterial unearthed during the course of search orrequisition of documents or undisclosed income orproperty discoveredin the course of search whichwere not produced or not already disclosed ormade known in the course of original assessment."the AO while making the assessment under Section153 A only on the basis of some incriminatingmaterial unearthed during the course of search orrequisition of documents or undisclosed income orproperty discoveredin the course of search whichwere not produced or not already disclosed ormade known in the course of original assessment." 6. In that view of the matter in all these cases the question that arises isansweredin favourofthe Assesseeand againstthe Revenueby holdingthatthe additions made in the assessmentsmade search are pursuant to theunsustainablein law. Consequently,the questionof any penaltyproceedingsbeing initiated,pursued or continuedagainstthe Assesseedoes not arise. 7. The appeals are dismissed. S.MURALIDHAR,J SEPTEMBER 01,2015 MK VIBHU BAKHRU, J