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TMI Blog2016 (9) TMI 198X X X X Extracts X X X X X X X X Extracts X X X X ..... s squarely covered in favour of the assessee by the said decision of the Hon’ble Jurisdictional High Court in the case of CIT Vs. Sadhu Forging Ltd [2011 (6) TMI 9 - DELHI HIGH COURT ] - ITA Nos. 6791 to 6793/Del/2013 - - - Dated:- 29-7-2016 - SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER, AND SHRI L.P. SAHU, ACCOUNTANT MEMBER For The Assessee : Shri Ved Jain, Adv, Shri Pranjal Srivastava, Adv, Shri Ashish Chadha, CA For The Revenue : Shri Sanjay Kumar, CIT- DR. ORDER PER CHANDRA MOHAN GARG, JUDICIAL MEMBER These three appeals have been filed by the assessee and directed against the order of the CIT(A)-I, New Delhi, dated 17/09/2013 passed in first appeal No. 459/2011-12 for AYs 2008-09 to 2010-11. Since all the three appeals pertain to same assessee and were heard together, we are disposing them off by this common order for the sake of convenience and brevity. 2. The assessee has raised the following grounds of appeal in all the three appeals: A.Y. 2008-09 1. On the facts and circumstances of the case, the order passed by the learned Commissioner of Income Tax (Appeals) [CIT(A)] under section 153A/143(3) is bad both in the eye of law and on fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . (2011) 336 ITR 444 (Del) which is squarely applicable to the facts of this case. A.Y. 2010-11 1. On the facts and circumstances of the case, the order passed by the learned Commissioner of Income Tax (Appeals) [CIT(A)] is bad both in the eye of law and on facts. 2. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the action of the AO in making an addition of ₹ 2,64,039/- being income from sale of scrap treating the same as not eligible for deduction under Section 80-IB of the Act. 3. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in not following the judgment of the jurisdictional Delhi High Court in the case of Sadhu Forgings Ltd. (2011) 336 ITR 444 (Del) which is squarely applicable to the facts of this case. Ground Nos. 1 2 A.Y. 2008-09 3. We have heard the rival submissions and have perused the relevant material on record, inter alia the assessment order, impugned order of the CIT(A) and order of the Tribunal D Bench, New Delhi in assessee s own case in ITA No. 383/Del/2013 for AY 2006-07 dated 27.05.2015, as relied u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 43(3) of the Act, where the issue of deduction u/s 80IB was elaborately investigated and discussed. He contended that the proceedings initiated u/s 153A are bad in law as no incriminating material belonging to the assessee being found during the course of search. In support he placed reliance on the following decisions: i) Al-Cargo Global Logistic Ltd. vs. ACIT - 137 ITD 287 (Mum.)- (S.B); ii) DCIT vs. Devi Dayal Petro-Chemical Pvt. Ltd. - ITA Nos. 5430 to 5436/Del/2013, C.O. Nos. 83 to 88/Del/14 dated 10.9.2014; 6 iii) SSP Aviation Ltd. vs. DCIT - 346 ITR 177; iv) Kusum Gupta vs. DCIT - ITA No. 4873/Del/2009 dt. 28.3.2013; v) ACIT vs. Asha Kataria - ITA No. 3105/Del/2011 dated 20.5.2013; vi) Sanjay Aggarwal vs. DCIT - ITA No. 3184/Del/2013 dt. 16.2.2014; vii) Jai Steel India vs. ACIT - 259 CTR 281 (Raj.); viii) CIT vs. Anil Kumar Bhatia - 352 ITR 493 (Del.). ix) Jakson Engineering Ltd. Vs. ACIT Ors. ITA Nos. 349/Del/2013 (2005-06) to 2007-08) ors. Order dated 11.04.2014. x) Raj Kumar Chawla Vs. ACIT ITA Nos. 1682/Del/2013 and ors. (A.Ys. 2004-05 ors) order dated 17.02.2015. 8. Learned CIT DR on the other han ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccount, other documents, found in the course of search but not produced in the course of original 8 assessment, and (ii) undisclosed income or property discovered in the course of search. 11. The issue raised before the Special Bench was as to whether scope of assessment u/s 153A encompasses additions not based on any incriminating material found during the course of search? 12. In the case of Kusum Gupta (supra) also the return was processed u/s 143(1) of the Act and time limit for issuance of notice u/s 143(2) had expired on the date of search and it was held that no assessment was pending in that case and thus there was no question of abatement of assessment. Therefore, the addition in the assessment u/s 153A would be made only on the basis of incriminating material found during the search. The Delhi Bench of the Tribunal in its recent decision on the issue in the case of Shri Kabul Chawla (supra) and others vide order dated 23.5.2014 has expressed the similar view. It has also discussed the decision of Hon'ble Jurisdictional Delhi High Court in the case of CIT vs. Anil Kumar Bhatia (2012) 211 Taxmann 453 (Del.), while deciding the issue. The relevant para No. 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing Officer is albeit duty bound to assess or reassess the total income but there is a cap on the scope of additions in such assessment, being the items of income 'unearthed during the search'. In other words, the determination of 'total income' in respect of the assessment years for which the assessments are already completed on the date of search, shall not be influenced by the items of income other than those based on the material unearthed during the course of search. There is not and cannot be any quarrel over the proposition that the Assessing Officer has no option but to determine the total income of the assessee in respect of the relevant six assessment years. However, the scope of such determination of total income is different in respect of the years for which the assessments are pending vis-a-vis the years for which assessments are non-pending. In respect to the assessment years for which the original assessments have already been completed on the date of search, the total income shall be determined by restricting additions only to those which flow from incriminating material found during the course of search. If no incriminating material is found in re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e action of the AO in denying set off, of book loss unabsorbed depreciation relatable to earlier assessment year in terms of clause (III) of Explanation 1 to section 115JB of the Act? The relevant facts of that case noted in para no. 2 of the decision are that the AO in the proceedings u/s 153A of the Act, had made several additions, relying upon the incriminating material found in the course of search, which was conducted on 18.1.2006 and subsequent dates. In this paragraph of the decision it has been perused from the impugned order of the Tribunal that incriminating material including statement of Sanjay Agarwal, GM (Marketing) have resulted in additions, which have been upheld. The Hon'ble High Court has been pleased to note in this paragraph as it is not the case of the appellant - assessee that initiation of proceedings u/s 153A was bad or unwarranted in law as no incriminating material was found during the search. The contention raised by the appellant - assessee is that the addition, which is the subject matter of questions no. (II) and (III), was/is not justified in the assessment order u/s 153, as no incriminating material was found concerning the addition u/s 115JB ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not upholding that recomputation of book profit, de-hors any material found during the course of search in the order based u/s 153A of the Act was without jurisdiction, being outside the scope of proceedings under that section. The Hon'ble High Court after discussing the issue in detail has been pleased to decide the question against the assessee and has upheld the addition made u/s 115JB of the Act. Thus, having distinguishable facts this cited the decision in the case of Filatax India Ltd. (supra) is not helpful to the revenue. 16. So far as, the decision of Hon'ble Karnataka High Court in the case of Canara Housing Development Company (supra) relied upon by the ld. CIT DR is concerned, the issue raised before the Hon'ble High Court was regarding validity of revisional order passed u/s 263 of the Act by the ld. CIT partly upheld by the Tribunal and during that course the Hon'ble High Court has also been pleased to discuss the decision in the cases of Anil Kumar Bhatia (supra) and the decision of Special Bench of the Tribunal in the case of All Cargo Global Logistic Ltd. (supra). It has been observed by the Hon'ble High Court that the condition precedent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can be made u/s 153A of the Act where the original assessment was already framed on the date of search. The Hon'ble Karnataka High Court in the case of Canara Housing Development Company (supra) has, however, been pleased to express different view, however, as per the established proposition of law, we are bound to follow the decision of Hon'ble Jurisdictional Delhi High Court and since, the Hon'ble Karnataka High Court and the Hon'ble Rajasthan High Court have expressed different views on the issue, the view favourable to the assessee is to be followed. We, thus, reiterate that in absence of incriminating material found during the course of search no addition can be made in a case where original assessment was already framed on the date when search took place. 19. In absence of rebuttal of this material fact by the Revenue in the present case before us that no incriminating material was found during the course of search relating to the assessee for the assessment year under consideration to justify the additions made in the year by the Assessing Officer and assessment based on the original return of income filed under sec. 139 of the Act was not pending as on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n facts and in law in confirming the addition made by the AO of ₹ 2,64,039/- being income from sale of scrap treating the same as non-eligible for deduction u/s 80IB of the Act. 8. The ld. DR strongly supported the action of the AO and vehemently contended that the income from sale of scrap does not constitute profits or gains derived from an industrial undertaking for the purpose of qualifying as a deduction u/s 80IB of the Act. He also drew our attention to para 4.2 to 4.4 at pages 8 and 9 of the order of the CIT(A). 9. On careful consideration of the above, from the relevant operative part of the decision of the Hon ble Jurisdictional High Court of Delhi in the case of CIT Vs. Sadhu Forging Ltd [supra], their Lordships have held as under: 13. Keeping in view the activities of the assessee in giving heat treatment for which it had earned labour charges and job-work charges, it can thus be said that the appellant had done a process on the raw material which was nothing but a part and parcel of the manufacturing process of the industrial undertaking. These receipts cannot be said to be independent income of the manufacturing activities of the undertakings of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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