TaxTMI 
TaxTMI 
2018 (12) TMI 1266
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....eals) [CIT(A) for short] in the case of M/s Saluja Construction Co. Ltd. in Appeal No. 28/14-15/1605 for AY 2006-07. The grounds of appeal in these three appeals filed by Revenue are as under: ITA No. 2045/Del/2016:- 1. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and on facts in directing the A.O to delete the addition made u/s 68 of the I T. Act on account of unexplained cash credits. 2. On the facts and in the circumstances of the case, the Ld. CIT(A) had erred in law and on facts by relying on the decision in the case of Sh. Kabul Chawla by the jurisdictional High Court which has not been accepted by the department and SLP against the same has been filed before Hon'ble Supreme Court. 3. On the facts and in the circumstances of the case, the Ld. CIT(A) had erred in law and on facts in arriving at the conclusion that the words 'total income' as used in Section 153A would only mean undisclosed income discovered from seized / incriminating material. 4. On the facts and in the circumstances of the case, the Ld. CIT(A) had erred in law and on facts in adopting a restrictive and pedantic interpretation ....
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....hat the decision of Hon'ble High Court in the case of CIT(Central)-lll vs Kabul Chawala is equivalent to a parallel legislation as the word 'Incriminating document' is not defined anywhere in the Act and is open to various interpretations. 6. On the facts and in the circumstances of the case, the Ld. CIT(A) had erred in law and on facts in arriving at the conclusion that the words 'total income' as used in section 153A would only mean income unearthed during search when the decision of the Hon'ble High Court of Karnataka in the case of Canara Housing Development Company Vs. DCIT dated 09-08-2014 has held that total income includes income unearthed during search and any other income. 7. That the order of the CIT(A) is perverse, erroneous and is not tenable on facts and in law. 8. That the grounds of appeal are without prejudice to each other. 9. That the appellant craves leave to add, amend, alter or forgo any ground(s) of appeal either before or at the time of hearing of the appeal. ITA No. 2050/Del/2016:- 1. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and on facts in directing the A.O. to ....
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....s. 22,17,50,000 was made U/s 68 of I.T. Act, 1962 towards unexplained cash credits. Separate Assessment Order U/s 153A, read with Section 143(3) of I.T. Act was passed on 14.03.2014 in the case of Smt. Archana Saluja wherein an addition of Rs. 24,74,32,560 was made U/s 68 of I.T. Act towards unexplained cash credits. Another separate Assessment Order was passed on 14.03.2014 in the case of Mr. Ankush Saluja U/s 153C, read with Section 153A of I.T. Act wherein an addition of Rs. 18,81,42,080 was made U/s 68 of I.T. Act towards unexplained cash credits. The three Assessees filed separate appeals before the Ld. CIT(A). Vide separate appellate Orders as mentioned earlier (The impugned Orders) the Ld. CIT(A) deleted the aforesaid additions in the cases of all the three Assessees; on the ground that these additions were not based on any incriminating document found during search U/s 132 of I.T. Act. The Ld. CIT(A) placed reliance on Order of Hon'ble Delhi High Court in the case of CIT vs. Kabul Chawla 61 Taxmann.com 412 (Delhi) / 380 ITR 0573 (Del) and another Order of Hon'ble Delhi High Court in the case of CIT vs. Jakson Engineers Ltd. 2015-T10L- 2789-HC-DEL-IT. The three appeals filed....
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....any incriminating material during the course of search, the Ld. CIT(A) was justified in relying upon the decision of the Hon'ble Delhi High Court in the case of Kabul Chawla (supra) for the purpose of deleting the addition. Merely because departmental SLP is pending before the Hon'ble High Court is no ground to take a contrary decision against the decision of the jurisdictional Delhi High Court. We may also refer to judgment of Hon'ble Gujrat High Court in the case of Vijay Bhai N. Chandrani vs. ACIT 333 ITR 436 in which it was held as under.] "Held, Allowing the petition, that admittedly, three loose papers recovered during the course of search proceedings did not belong to the petitioner. It was not the case of the Revenue that three documents were in hand-writing of the petitioner. In the circumstances, when the condition precedent for issuance of notice was not fulfilled, action taken under section 153C of the Act stood vitiated." In the present case, even no incriminating document was found during the course of search so as to make the addition under section' 68 of the I.T. Act on account of unexplained cash credit. The Ld. CIT(A) in view of t....
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....e records of these cases in ITAT and also the judicial precedents brought to our notice in the course of hearing before us. The facts of these cases are not in dispute. Both sides agree that the additions made by the AO, in the case of the three concerned Assessees, are not based on any incriminating materials found in the course of search U/s 132 of I.T. Act. Both sides agree that there was no pending assessment in the case of any of the three concerned Assessees on the date of search U/s 132 of I.T. Act i.e. on 12.01.2011. From perusal of records, we find that in the case of Saluja Construction Co. Ltd. earlier return U/s 139(1) of I.T. Act on 31.07.2006 pursuant to which Assessment Order U/s 143(3) of I.T. Act on 28.12.2007. No assessment proceeding was pending on date of search i.e. 12.01.2011. Therefore, the aforesaid Assessment Order dated 14.03.2014, was not in pursuance of an abated Assessment within the meaning of 2nd Proviso to Section 153A(1) of I.T. Act. In the case of Smt. Archana Saluja earlier return U/s 139(1) of I.T. Act on 31.07.2006 pursuant to which Assessment Order U/s 143(3) of I.T. Act on 28.12.2007. No assessment proceeding was pending on date of search i.e.....
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....idered in the later one; harmonious reading of precedents requires that both precedents are treated by us with equal respect; that the distinguishable facts of the two precedents are appreciated; and that the precedent which is closer to facts of the case before us, is preferred by us for our guidance? (b) Whether, additions can be made in assessments u/s 153A of I.T. Act even for those assessment years in respect of which no incriminating material was unearthed during search u/s 132 of I.T. Act even if no assessments or reassessments are pending for those assessment year(s) on the date of search u/s 132 of I.T. Act; provided some incriminating material in the case of the assessee for any assessment year(s) { referred to in clause (b) of section 153A(1) of Income Tax Act} is unearthed as a result of search u/s 132 of I.T. Act whether by way of statement u/s 132(4) of I. T. Act or by way of undisclosed investment, or by way of incriminating documents, or in any other manner?" 4. I have gone through the relevant material on record and considered the rival submissions in so far as understanding the difference of opinion between the two Members is concerned. In my con....
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....sessment years and, hence, the Assessing Officer was not within his power to disallow the loss claimed in the returns of income for these years. The ld. AM, who passed the draft order first, noticed that the Assessing Officer disallowed the loss claimed by the assessee for the assessment years 2004-05 and 2005-06 on the ground that claim of various expenses was not verifiable. In the absence of such details furnished before the ld. CIT(A) as well as the Tribunal, he approved the action of the authorities below. He, however, did not approve the view point of the Revenue in not allowing set off of loss for the assessment year 2003-04 against the income for the assessment year 2006-07 and for this limited purpose, remitted the matter to the file of Assessing Officer for fresh adjudication. The ld. JM did not concur with the view canvassed by the ld. AM in not allowing the loss for the assessment years 2004-05 and 2005-06. He opined that since no incriminating material was found during the course of search in respect of expenses claimed as deduction and, hence, the loss so determined was eligible for carry forward to be set off against the income for assessment year 2006-07. That is ho....
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....the course of search in relation to such two assessment years and, hence, the loss so claimed for carry forward and set off should be allowed against the income for the A.Y. 2006-07. 7. It has been noticed above that search in this case was conducted on 20.11.2009. The assessment years under consideration are 2004-05, 2005-06 and 2006-07. The assessee filed returns for these years originally u/s 139 at the material time. Whereas the return for the assessment year 2004-05 was processed u/s 143(1) of the Act, assessments were completed u/s 143(3) in respect of the assessment years 2005-06 and 2006-07. The assessee's Profit & Loss Account for the assessment year 2004-05 shows incurring of expenses at Rs. 95.21 lac against which loss of Rs. 24.30 lac was computed and claimed in the return of income. The return of the assessee was processed u/s 143(1) determining loss at the declared figure. Profit & Loss Account of the assessee for the assessment year 2005-06 shows incurring of expenses at Rs. 1.31 crore and the assessee filed return at a loss of Rs. 23,59,200/-. After making some disallowance, the Assessing Officer completed assessment u/s 143(3) on 30.11.2007 at a loss of Rs....
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....ch notice is issued, the intimation issued u/s 143(1)(a) loses the character of an assessment order, which in that case, is passed u/s 143(3) after thorough scrutiny. To sum up, an assessment is termed as completed on the passing of an order u/s 143(3) of the Act, but, in a case, where a return has been filed by the assessee, which is processed u/s 143(1), but no further notice u/s 143(2) is issued and the same cannot be issued because of the time limit setting in, the Intimation sent to the assessee u/s 143(1) is also treated as a completed assessment for this purpose. 10. Au contraire, the assessment years having non-completed or pending assessments mean the years for which the assessments were pending on the date of search which are abated in terms of the express provisions of the second proviso to section 153A. This will also embrace the years in respect of which the time limit for issuing notice u/s 143(2) is still available with the AO as on the date of search. 11. Adverting to the extant factual matrix, it is seen that the assessment years under consideration fall in the category of 'completed assessments' and not the 'pending assessments' abating on the da....
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....s will have to be computed by the AOs as a fresh exercise. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs "in which both the disclosed and the undisclosed income would be brought to tax". iv. Although Section 153 A does not say that additions should be strictly made on 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 related to 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 the basis of seized material." v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Sect....
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....153A was issued requiring the assessee to furnish returns. In response, she filed a photo copy of the return earlier filed u/s 139(1) declaring gross profit of Rs. 7.30 lac on sales of Rs. 69.28 lac, yielding gross profit rate of 10.55%. Since no proper books of account were presented, the Assessing Officer rejected the book version u/s 145 and estimated the sales at Rs. 1 crore. He applied GP rate of 20% and determined total income at Rs. 45.90 lac as against the declared income of Rs. 2.42 lac. The CIT (A) reduced the gross profit rate to be applied at 12%. Some additions were sustained and others were deleted. The Tribunal rejected the plea of the assessee that since no material was recovered during the course of search, finalized assessments for the periods covered by the block years could not be reopened. The assessee relied on the judgment in the case of Kabul Chawla (supra) and argued that since no incriminating material was found, no additions could be made in respect of the completed assessments. The Hon'ble High Court dismissed the appeals on the ground that the additions were not baseless as these were based on the inferences drawn by the Assessing Officer. It furthe....
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.... for set off against the income for assessment year 2006-07 simply on the ground that expenses were not fully verifiable since complete details were not furnished during the course of assessment proceedings. 16. Admittedly, assessments for the A.Ys. 2004-05 and 2005-06 stood completed on the date of search. The amount of loss finally determined for the A.Y. 2004-05 in the original assessment was Rs. 23,05,880/-. Similarly, the amount of loss finally determined by the AO in the original assessment order passed u/s 143(3) on 30.11.2007 for the assessment year 2005-06 was Rs. 18,17,685/-. In the fresh assessments u/s 153A, the Assessing Officer was authorized to repeat the originally assessed income (loss) plus fresh additions, if any, based on the incriminating material found at the time of search. Admittedly, no incriminating material was found in respect of the assessment years under consideration. There is no reference whatsoever to any incriminating material found during the course of search casting shadow of doubt on the genuineness of such expenses. Since these expenses were claimed as deduction in the original returns and the Assessing Officer accepted the loss so dec....
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....at too partly to the extent of losses claimed, could not have been disturbed by the Assessing Officer in the assessment u/s 153A of the Act. Be that as it may, it is further relevant to note that the operation of the judgment in the case of Dayawanti (supra) has been stayed by the Hon'ble Supreme Court vide its judgment dated 03.10.2018, a copy of which has been placed on record. 18. Thus, it is apparent that between the two judgments of Kabul Chawla (supra) and Dayawanti (supra), the facts and circumstances of the instant case are fully covered by the ratio in the case of Kabul Chawla (supra), which view has been reiterated by the Hon'ble Delhi High Court in a more recent decision in Principal CIT vs. Meeta Gutgutia (2017) 395 ITR 526 (Del). In view of the foregoing discussion, I agree with the view canvassed by the ld. JM in holding that the amount of determined loss for the assessment years 2004-05 and 2005-06 be allowed to be carried forward for set off against the income for the assessment year 2006-07. The question proposed is, therefore, answered in negative by holding that the ld. CIT(A) was not justified in upholding the additions made by the AO for the ye....