Principal Commissioner Of Incometax Central 3 Delhi v. Alchemist Capital Ltd

$~17 *IN THE HIGH COURT OF DELHI AT NEW DELHI +ITA 289/2022 PRINCIPAL COMMISSIONER OF INCOMETAX CENTRAL 3 DELHI ..... Appellant Through:Mr. Abhishek Maratha, Sr. StandingCounsel for Revenue. versus ALCHEMIST CAPITAL LTD Through:None. ..... Respondent %Date of Decision: 30[th]August, 2022 CORAM: 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 Appeal has been filed challenging the order dated16[th]July, 2021 passed by the Income Tax Appellate Tribunal (‘ITAT’) inITA No.7773/Del./2017 for Assessment Year 2009-10. The relevantportion of the impugned order is reproduced hereinbelow: “6. We have gone through the records in the light of submissionsmade by Id. DR. There is no dispute of the fact that the search &seizure operation in this case took place on 20.06.2014, by whichdate the time period to issue notice u/s. 143(2) for assessment year2009-10stoodexpired.Thereisalsonodisputethatnoincriminating material was found during the search and seizureoperation to base any addition qua this assessment year. 7. In CIT vs. Kabul Chawla (supra), Hon’ble Delhi High Court heldthat the assessment cannot be made arbitrarily without anyrelevance or nexus with the seized material and the assessment insuch cases has to be made only on the basis of incriminatingmaterial found during the search and completed assessmentscannot be interfered with arbitrarily. In such circumstances, thefinding of the ld. CIT(A) cannot be interfered with.” 2.Learned counsel for the Appellant states that the ITAT has erred inholding that no addition can be made under Section 153A of the IncomeTax Act, 1961 (‘the Act’), if it is not based on seized material/documentsfound during the course of search and seizure operations under Section 132of the Act. 3.He states that the Supreme Court of India has admitted SLP videDiary No.37848/2015 in the case of Apar Industries Ltd. decided byBombay High Court in ITA No.1669/2013 dated 08[th]May, 2015, which isa lead case tagged with more than 115 cases on the issue of restriction ofaddition only to incriminating material found during search. 4.This Court finds that the conclusion reached in Commissioner ofIncome Tax vs. Kabul Chawla, (2016) 380 ITR 573 was summarized inPCIT vs. Meeta Gutgutia, (2017) 82 taxmann.com 287 Del. The relevantportion of the Judgment passed in PCIT vs. Meeta Gutgutia (supra) isreproduced 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,notice under Section 153 A (1) will have to be mandatorilyissued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to theAY in which the search takes place. ii. Assessments and reassessments pending on the date of thesearch shall abate. The total income for such AYs will have tobe computed by the AOs as a fresh exercise. iii. The AO will exercise normal assessment powers in respectof the six years previous to the relevant AY in which the searchtakes place. The AO has the power to assess and reassess the'total income' of the aforementioned six years in separateassessment orders for each of the six years. In other wordsthere will be only one assessment order in respect of each of thesix AYs "in which both the disclosed and the undisclosed incomewould be brought to tax". six AYs immediately preceding the previous year relevant to theAY in which the search takes place. ii. Assessments and reassessments pending on the date of thesearch shall abate. The total income for such AYs will have tobe computed by the AOs as a fresh exercise. iii. The AO will exercise normal assessment powers in respectof the six years previous to the relevant AY in which the searchtakes place. The AO has the power to assess and reassess the'total income' of the aforementioned six years in separateassessment orders for each of the six years. In other wordsthere will be only one assessment order in respect of each of thesix AYs "in which both the disclosed and the undisclosed incomewould 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 doesnot mean that the assessment "can be arbitrary or made withoutany relevance or nexus with the seized material. Obviously anassessment has to be made under this Section only on the basisof seized 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 dateof search) and the word 'reassess' to completed assessmentproceedings. vi.Insofaraspendingassessmentsareconcerned,thejurisdiction to make the original assessment and the assessmentunder Section 153A merges into one. Only one assessment shallbe made separately for each AY on the basis of the findings ofthe search and any other material existing or brought on therecord of the AO. vii. Completed assessments can be interfered with by the AOwhile making the assessment under Section 153 A only on thebasis of some incriminating material unearthed during the course of search or requisition of documents or undisclosedincome or property discovered in the course of search whichwere not produced or not already disclosed or made known inthe course of original assessment." 5.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 had attained finality prior to thedate 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. 6.Further, both the CIT(A) and the ITAT have given concurrentfindings of fact that no incriminating evidence had been brought on recordby the Assessing Officer and the time for issuing notice under Section143(2) had elapsed at the time the search proceedings had been undertaken. 7.Keeping in view the aforesaid mandate of law as well as the facts, thisCourt is of the view that no substantial question of law arises forconsideration in the present appeal.Accordingly, the present appeal isdismissed. MANMOHAN, J AUGUST 30, 2022msh/KA MANMEET PRITAM SINGH ARORA, J ITA 289/2022