Principal Commissioner Of Income Tax-20… v. Suman Agarwal…

$~S-1 IN THE HIGH COURT OF DELHI AT NEW DELHI +ITA 189/2022 & CM APPL.29956/2022 PRINCIPAL COMMISSIONER OF INCOME TAX-20….. Appellant Through:Mr. Ajit Sharma, Sr. StandingCounsel.Counsel. versus SUMAN AGARWAL….. Respondent Through:Mr. Gautam Jain, Advocate withMr.Piyush Kumar Kamal, Advocate.Mr.Piyush Kumar Kamal, Advocate. Date of Decision: 14[th]July, 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.29956/2022 (condonation of delay) For the averments made in the application, the delay of 177 days infiling the present appeal is condoned. Accordingly, the application stands disposed of. ITA 189/2022 1.The present Income Tax appeal arises out of common impugned orderdated 6[th]October, 2020 passed by the Income Tax Appellate Tribunal(hereinafter referred to as the ‘ITAT’) in ITA No. 6181/Del/2018 forassessment year 2010-11. 2.The facts giving rise to the present appeal are that the InvestigationWing of the Income Tax Department carried out a search and seizure operation against M/s K.R. Pulp & Papers Limited under Section 132(1) ofthe Income Tax Act, 1961 (hereinafter referred to ‘the Act’) on 8[th]July,2015 at various residential and business premises. The said company isstated to be managed and controlled by Shri Madho Gopal Agarwal, ShriRaj Gopal Agarwal and Shri Gopal Agarwal. The statement of Shri GopalAgarwal was recorded on 8[th]July, 2015 and the statement of Shri MadhoGopal Agarwal was recorded during post search inquiry. 3.Pursuant to the aforesaid search, notice under Section 153A of the Actwas issued on 26[th]September, 2016 by the Assessing Officer and the samewas duly served upon the assessee. In response, the assessee filed herIncome Tax Return declaring income of Rs. 7,48,080/- on 2[nd]March, 2017.The Assessing Officer, after making reference to the documents discoveredduring the raid, vide order dated 29[th]December, 2017 made the followingadditions to the income of the assessee under Section 69B and Section 68 ofthe Act respectively: 4.Being aggrieved by the same, an appeal was filed by the assesseebefore the Commissioner of Income Tax (Appeals) [hereinafter referred toas ‘CIT(A)’]. It is stated by the counsel for the appellant that, vide orderdated 17[th]July, 2018, the CIT(A) allowed the appeal of the assessee, deleted additions and held that in the absence of any incriminating material, theAssessingOfficercannotre-appriseandreviewalreadycompletedassessment and settled issues before the date of search under Section 153Aof the Act.5.The department preferred an appeal before the ITAT which wasdismissed vide an order dated 6[th]October, 2020. 6.TheITAT concluded that the additions made by the AssessingOfficer for the assessment year under consideration was not based on anyincriminating material found during the course of search on 8[th]July, 2015. Itheld that the documents referred to by the Assessing Officer pertains to theperiod w.e.f. 1[st]April, 2010 to 31[st]March, 2011 which relate to theassessment year 2011-12 and not for the impugned assessment year 2010-11. The ITAT observed that the original return of income was filed by theassessee for the assessment year under appeal on 28[th]September, 2011. Thesearch was conducted on 8[th]July, 2015 and on the date of the search, theassessment under appeal was completed as the time period to issue noticeunder Section 143(2) of the Act for the said year has expired. The ITATthus, observed that on the date of search i.e. on 8[th]July, 2015, assessment forthe assessment year 2010-11 had attained finality and was not pendingassessment. The ITAT, therefore, held that any additions over and above theearlier assessed income could not be made in the absence of anyincriminating material found during the course of search. 7.No material has been placed on record before this Court to rebut theaforesaid findings of the ITAT. 7.No material has been placed on record before this Court to rebut theaforesaid findings of the ITAT. 8.The ITAT, upon appreciation of the documents on record, concludedthat the documents referred to by the Assessing Officer as ‘incriminating’ were admittedly not found from the address of the assessee. Further, uponappreciation of the material, the ITAT concluded that the said list of transferof shares relied upon by the Assessing Officer could not be considered as anincriminating material, as it merely reflected the date, name of the transferorand transferee as well as the number of the shares. The documents did notrecord any unexplained investment made by the assessee. The ITATconcluded that no material was found during the course of search so as toindicate any unaccounted investment made by the assessee. The ITAT,therefore, determined that the Assessing Officer made the additions of theunaccounted investment merely on the basis of presumptions. The ITATwhile dismissing the appeal observed that in the group cases of ACIT vs.Madho Gopal Agarwal in ITA No. 6184/Del/2018 and ACIT vs. M/s KapisImpex LLP in ITA No. 6180/Del/2018 the department’s appeal had beendismissed by the ITAT vide its orders dated 1[3th]January, 2020 and 3[0th]June,2020. Upon inquiry from the learned counsel for the appellant, he stated thathe has no instructions if any challenge has been laid by the department to theaforesaid orders of the ITAT passed in the case of ACIT vs. Madho GopalAgarwal and ACIT vs. M/s Kapis Impex LLP. 9.In group cases of Madho Gopal Agarwal and M/s Kapis Impex LLP(supra), the ITAT has noted that identical grounds of appeal have beenraised and as noted above, the said appeals, already stood dismissed. TheITAT, therefore, concluded that there was no new ground made out by thedepartment for taking a view different from Madho Gopal Agarwal and M/sKapis Impex LLP (supra). 10.The ITAT, therefore, concluded that since no assessment was pendingfor the relevant assessment year 2010-11 on the date of search and no incriminating material was found during the course of search, the issue iscovered in favour of the assessee by the judgment of this Court in the case ofCommissioner of Income Tax vs. Kabul Chawla (2016) 380 ITR 573 andPrincipal CIT vs. Meeta Gutgutia (2017) 395 ITR 526 as well as by theorders of the ITAT in the group cases of Madho Gopal Agarwal and M/sKapis Impex LLP (supra). 11.A predecessor Division Bench of this Court in Kabul Chawla (supra)has held that if no incriminating material is found during the course of thesearch in respect of an issue, then no addition in respect of such an issue canbe made in the assessment under Sections 153A and 153C of the Act. Thelegal position summarized in the subsequent decision of Meeta Gutgutia(supra) is reproduced hereinbelow:- "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 asunder: i. Once a search takes place under Section 132 of the Act, noticeunder Section 153 A (1) will have to be mandatorily issued to theperson searched requiring him to file returns for six AYsimmediately preceding the previous year relevant to the AY inwhich the search takes place. ii. Assessments and reassessments pending on the date of thesearch shall abate. The total income for such AYs will have to becomputed by the AOs as a fresh exercise. iii. The AO will exercise normal assessment powers in respect ofthe six years previous to the relevant AY in which the search takesplace. The AO has the power to assess and reassess the 'totalincome' of the aforementioned six years in separate assessmentorders for each of the six years. In other words there will be onlyone assessment order in respect of each of the six AYs "in whichboth the disclosed and the undisclosed income would be brought to tax". ii. Assessments and reassessments pending on the date of thesearch shall abate. The total income for such AYs will have to becomputed by the AOs as a fresh exercise. iii. The AO will exercise normal assessment powers in respect ofthe six years previous to the relevant AY in which the search takesplace. The AO has the power to assess and reassess the 'totalincome' of the aforementioned six years in separate assessmentorders for each of the six years. In other words there will be onlyone assessment order in respect of each of the six AYs "in whichboth the disclosed and the undisclosed income would be brought to tax". iv. Although Section 153 A does not say that additions should bestrictly made on the basis of evidence found in the course of thesearch, or other post-search material or information availablewith the AO which can be related to the evidence found, it does notmean that the assessment "can be arbitrary or made without anyrelevance or nexus with the seized material. Obviously anassessment has to be made under this Section only on the basis ofseized material." v. In absence of any incriminating material, the completedassessment can be reiterated and the abated assessment orreassessment can be made. The word 'assess' in Section 153 A isrelatable to abated proceedings (i.e. those pending on the date ofsearch)andtheword'reassess'tocompletedassessmentproceedings. vi. Insofar as pending assessments are concerned, the jurisdictionto make the original assessment and the assessment under Section153A merges into one. Only one assessment shall be madeseparately for each AY on the basis of the findings of the searchand any other material existing or brought on the record of theAO. vii. Completed assessments can be interfered with by the AO whilemaking the assessment under Section 153 A only on the basis ofsome incriminating material unearthed during the course of searchor requisition of documents or undisclosed income or propertydiscovered in the course of search which were not produced or notalready disclosed or made known in the course of originalassessment." 12.Though the judgment in Kabul Chawla (supra) has been challenged inconnected matters and is pending before the Supreme Court, yet there is nostay of the said judgment till date. Accordingly, this Court finds no groundnot to follow the said judgment. 13.Keeping in view the aforesaid, this Court is of the opinion that the question of law raised in present appeal has been settled by earlier DivisionBench in Kabul Chawla (supra) and no incriminating documents ormaterials had been found and seized at the time of search.14.The present appeal is dismissed along with all the pendingapplications. MANMEET PRITAM SINGH ARORA, J JULY 14, 2022j/ msh MANMOHAN, J