The Pr. Commissioner Of Income Tax -Central -1 v. Gautam Bhalla

$~40 IN THE HIGH COURT OF DELHI AT NEW DELHI +ITA 410/2022 THE PR. COMMISSIONER OF INCOME TAX -CENTRAL -1 ..... AppellantThrough:Mr. Ruchir Bhatia, Advocate forRevenueRevenue versus GAUTAM BHALLA ..... Respondent Through:Mr. Ravi Pratap Mall, Advocate %Date of Decision: 18[th]October, 2022 CORAM: HON’BLE MR. JUSTICE MANMOHANHON’BLE MS. JUSTICE MANMEET PRITAM SINGH ARORA J U D G M E N T MANMOHAN, J: 1.Present Income Tax Appeal has been filed challenging the order dated31[st]July, 2020 passed by the Income Tax Appellate Tribunal (‘ITAT’) inITA No. 3584/Del./2017 for the Assessment Year 2010-11. 2.Learned counsel for the Appellant states that the ITAT has erred inholding that the addition which was not based on incriminating materialfound during the search could not be made in assessment under Section153A of the Income Tax Act, 1961 (for short ‘Act’) and, consequently,deleted the addition without going into merits of the same. 3.He states that the ITAT has erred in relying upon the judgement ofthis Court in CIT vs Kabul Chawla (2016) 380 ITR 573 ignoring the fact Signature Not Verified that Revenue's SLPs on similar issue are pending before the Supreme Courtinmanyothercasesincluding CITvContinentalWarehousingCorporation (Nhava Sheva) Ltd., (2015) 374 ITR 645. 4.Upon a perusal of the paper book, this Court finds that both theCIT(A) and the ITAT have given concurrent findings of fact that noincriminating material / evidence had been found during the search. TheITAT also recorded that the present case of the Respondent was of non-abated assessment. The relevant extract of the impugned order is reproducedherein below: “13. In such a scenario, we have to see the discovery ofincriminating material vis-a-vis two stages of assessmenti.e. abated and non-abated assessment. It is not the dictateof the Hon’ble High Court that in the absence of anyincriminating material, in any of the years, no additionscan be made. The Hon’ble High Court is very clear in itsfindings. So, to apply the principle laid down by theHon’ble High Court (supra), it is the first step to findwhether the proceedings had abated or non-abated andalso to determine any incriminating material was found ornot. 14. The Ld.AR before us has pointed out that noincriminating material was found and also that theproceedingsarenon-abated.Inthesefactsandcircumstances, following the dictate of Hon’ble Delhi HighCourt in Kabul Chawla (supra), we hold that no additionu/s 68 of the Act is warranted. 15. In the result, the appeals of the assessee are allowedand appeals of the Revenue are dismissed.” 5.ThisCourtfindsthattheconclusionreachedin Kabul Chawla (supra) was summarized in PCIT vs. Meeta Gutgutia,(2017) 82 taxmann.com 287 Del. The relevant portion of the judgment Signature Not Verified passed in PCIT vs. Meeta Gutgutia (supra) is reproduced hereinbelow:- "37. On a conspectus of Section 153A(1) of the Act, read withthe provisos thereto, and in the light of the law explained inthe aforementioned decisions, the legal position that emergesis as under: 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 forsix AYs immediately preceding the previous year relevant tothe AY 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 thesearch takes place. The AO has the power to assess andreassess the 'total income' of the aforementioned six years inseparate assessment orders for each of the six years. In otherwords there will be only one assessment order in respect ofeach of the six AYs "in which both the disclosed and theundisclosed 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 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 thesearch takes place. The AO has the power to assess andreassess the 'total income' of the aforementioned six years inseparate assessment orders for each of the six years. In otherwords there will be only one assessment order in respect ofeach of the six AYs "in which both the disclosed and theundisclosed income would be brought to tax". iv. Although Section 153 A does not say that additions shouldbe strictly made on the basis of evidence found in the courseof the search, or other post-search material or informationavailable with the AO which can be related to the evidencefound, it does not mean that the assessment "can be arbitraryor made without any relevance or nexus with the seizedmaterial. Obviously an assessment has to be made under thisSection only on the basis of 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 153A is relatable to abated proceedings (i.e. those pending on thedate of search) and the word 'reassess' to completedassessment proceedings. vi. Insofar as pending assessments are concerned, thejurisdictiontomaketheoriginalassessmentandtheassessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basisof the findings of the search and any other material existingor brought on the record 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 thecourse 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." 6.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. 7.Though,theissueinvolvedin Kabul Chawla (supra) hasbeenchallenged and is pending adjudication before the Supreme Court, yet thereis no stay of the said judgment till date. 8.Consequently, in view of the judgments passed by the Supreme Courtin Kunhayammed and Others vs. State of Kerala and Another, (2000) 6SCC 359 and Shree Chamundi Mopeds Ltd. Vs. Church of South IndiaTrust Association CSI Cinod Secretariat, Madras (1992) 3 SCC 1, thepresent appeal is covered by the judgment passed by this Court in BhadaniFinanciers Pvt. Ltd. (supra) and Kabul Chawla (supra). 9.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 for Signature Not Verified consideration in the present appeal. Accordingly, the present appeal isdismissed. MANMOHAN, J MANMEET PRITAM SINGH ARORA, J OCTOBER 18, 2022AS