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TMI Blog2018 (12) TMI 1266X X X X Extracts X X X X X X X X Extracts X X X X ..... R) ORDER PER: ANADEE NATH MISSHRA, AM These three appeals filed by Revenue are being disposed off through this consolidated Order for the sake of convenience because similar / another related Assessments are inward in these appeals. Appeal vide ITA No. 2045/Del/2016 is against impugned Order dated 25.01.2016 in the case of Smt. Archana Saluja in Appeal No. 25/14-15/1602 for Assessment Year (AY for short) 2006-07. Appeal vide ITA No. 2046/Del/2016 is filed against Order dated 25.01.2016 in the case of Mr. Ankush Saluja in Appeal No. 21/14-15/1598 for AY 2006-07. Appeal vide ITA No. 2050/Del/2016 filed against separate Order dated 25.01.2016 of Ld. Commissioner of Income Tax (Appeals) [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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st 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 of the scope of assessment u/s 153A of the Act. 5. On the facts and in the circumstances of the case, the Ld. CIT(A) had erred in law and on facts in not appreciating that 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... craves leave to add, amend, alter or forgo any ground(s) of appeal either before or at the time of hearing of the appeal. (2) A search under Section 132 of Income Tax Act ( I.T. Act for short) was conducted on 12.01.2011 in the Saluja Group of cases. All the three Assessees are part of the aforesaid Saluja Group of cases. The premises searched U/s 132 of I.T. Act included the premises of aforesaid M/s Saluja Construction Co. Ltd. and the premises of aforesaid Smt. Archana Saluja. Assessment Order U/s 153A of I.T. Act, dated 14.3.2014, was passed in the case of M/s Saluja Construction Co. Ltd. in which an addition of ₹ 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 ₹ 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 ₹ 18,81,42,080 was made U/s 68 of I.T. Act towards unexplained cash credits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reported at (2017) 51CCH 0509 (DelTrib) for AY 2007-08 in which on identical facts, relying on Order of Hon ble Delhi High Court in the case of CIT Vs. Kabul Chawla (Supra) and on Vijay Bhai N. Chandrani vs. ACIT 333 ITR 436 (Gujarat); and observing that no incriminating document was found during the course of search so as to make the addition U/s 68 of the I.T. Act on account of unexplained cash credit, Co-ordinate Bench of ITAT, Delhi, decided the issue in favour of the Assessee. The relevant portion of the aforesaid Order dated 07.12.2017 in the case of DCIT vs. Ankush Saluja (2017) 51CCH 0509 (DelTrib) is reproduced as under: . It is also an admitted fact that during the course of search and seizure no incriminating evidence as regards the addition under section 68 of the act were found and seized during the course of search. Therefore, no assessment/reassessment were pending as on the date of search. In the absence of 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utia {395 ITR 0526} [Del], Excel Infotech Ltd. vs. DCIT {3492 to 3494/Del/2014}[Del Trib] and Sanjay Aggarwal vs. DCIT {150 ITD 0692}[Del Trib]. The Ld. AR of the Assessees also relied on consolidated Order dated 31.10.2018 of Co-ordinate Bench of ITAT, Delhi in the cases of Sh. Brij Bhushan Singal vs. ACIT [in ITA No. 1412/Del/2018 for AY 2010-11; ITA No. 1413/Del/2018 for AY 2011- 12 and ITA No. 1414/Del/2018 for AY 2012-13], Smt. Ritu Singal vs. ACIT [in ITA No. 1476/Del/2018 for AY 2010-11; ITA No. 1477/Del/2018 for AY 2011-12 and ITA No. 1478/Del/2018 for AY 2012-13], Smt. Uma Singal vs. ACIT [ITA No. 1482/Del/2018 for AY 2010-11] and Sh. Neeraj Singal vs. ACIT [in ITA No. 1485/Del/2018 for AY 2010-11; ITA No. 1486/Del/2018 for AY 2011-12 and ITA No. 1487/Del/2018 for AY 2012- 13]. (7) We have heard both sides patiently. We have perused materials on record carefully. We have considered the judicial precedents mentioned in the 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 concerne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter, it is relevant to note that both the learned Members, apart from differing on the merits of the case, also could not be in unison in making reference u/s 255(4) of the Act. The ld. JM, being the senior Member, proposed the following question for reference to the Third Member: - Whether, in the absence of recovery of any incriminating material during the course of search against the assessee, when assessments have already completed, authorities below were justified in invoking section 153A of the I.T. Act for the purpose of making additions by disallowing claim of losses and brought forward of losses qua each of assessments under appeals i.e 2004-05, 2005-06 and 2006-07? 3. On the other hand, the ld. AM proposed the following two questions:- ( a) Whether, when we are presented with two precedents of equal strength from higher court(s), and specially when the earlier precedent has already been considered 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment years 2003-04, 2004-05 and 2005-06. The Assessing Officer completed assessments on 29.12.2011 determining Nil income for the assessment year 2004-05; Nil income for the assessment year 2005-06; and total income of ₹ 52,49,283/- for the assessment year 2006-07. In other words, he did not allow the carry forward of the losses for the assessment years 2003-04, 2004-05 and 2005-06 and as the sequitur, did not permit the set off of such brought forward losses against the positive income for the assessment year 2006-07. The assessee remained unsuccessful before the ld. CIT(A) as well. Aggrieved thereby, it came up before the Tribunal contending that such losses should be allowed to be carried over for set off against the positive income for the assessment year 2006-07. The contention of the assessee for carry forward was based on the premise that no incriminating material was found during the course of search in relation to these assessment 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 l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incriminating materials was unearthed during search u/s 132 of the IT Act; and even if no assessments or re-assessments are pending for those assessment year (s) on the date of search u/s 132 of the IT Act; there is no obstacle in making addition u/s 153A of the IT 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 the Income-tax Act) is unearthed as a result of search u/s 132 of the IT Act whether by statement u/s 132(4) of the IT Act or by way of undisclosed investment or by way of incriminating documents or in any other manner. This is how, he held that the disallowance of loss claimed by the assessee for the assessment years 2004-05 and 2005-06 on the ground of claim of various expenses made by the assessee, not being fully verifiable, was in order. The ld. JM reiterated the fact that no incriminating material or document or evidence was found during 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble by, or the amount of refund due to, the assessee and the amount of refund due to the assessee in pursuance of the determination under clause (c) shall be granted to the assessee. Processing of the return u/s 143(1) and the consequential issuing of Intimation is construed as passing of the assessment order except where a notice u/s 143(2) is issued for a scrutiny assessment u/s 143(3) of the Act. In a case, where notice u/s 143(2) is issued, the processing of return u/s 143(1) and the consequential issuance of Intimation does not amount to passing of the assessment order because the assessment order, in such circumstances, is passed after due scrutiny u/s 143(3) of the Act. There can be only one assessment order for one year. The crux of the matter is that where no notice u/s 143(2) is issued within the permissible maximum time, the issuance of Intimation on processing the return u/s 143(1) of the Act, is construed as completion of assessment. However, where such 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uring the course of search . That is how, the additions made u/s 2(22)(e), which were not based on any incriminating material found during the course of search, were held to be unsustainable in law and, hence, deleted. The Hon'ble High Court approved the view taken by the Tribunal. It summarized the legal position in para 37 of its judgment as under:- On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: i. Once a search takes place under Section 132 of the Act, notice under Section 153 A (1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the course of search, then, the amount of total income determined under the earlier completed assessments, is to be adopted in such fresh assessments u/s 153A without making any further addition. 13. The ld. AM has preferred the judgment in Dayawanti (supra) over Kabul Chawla (supra) by finding it more closer to the facts of the present case. In the case of Dayawanti (supra), a search and seizure operation was carried out on 22.03.2006. The assessee, along with other family members, surrendered ₹ 3.5 crore at the time of search as additional income in respect of business carried on outside the books of account in connection with production and sale of gutka. She further admitted in her statement not to have any source of income or any bank account. She still further admitted to being proprietor only on record and, in fact, Shri Anup Gupta looked after all the operations along with the help of other family members. Notice u/s 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 ₹ 7.30 lac on sales of ₹ 69.28 lac, yielding gross profit rate of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee were not fully verifiable. It is not even a case of disallowing any particular amount of expense for whatever reason. Thus, it is manifest that only a part of the expenses, representing loss of ₹ 23.05 lac, were disallowed and that too, on the ground that complete details in respect of the expenses incurred were not furnished by the assessee during the course of proceedings u/s 153A of the Act. Similar is the position for the assessment year 2005-06 in which the assessee incurred expenses of ₹ 1.31 crore and claimed loss of ₹ 23.59 lac. The Assessing Officer, in the proceedings u/s 153A, reduced such loss to Rs. Nil, thereby implying that only a part of the expenses to the extent of the amount of loss, was disallowed for non-furnishing of necessary details in support of expenses. The crux of the matter is that only a part of the expenses representing loss for the assessment years 2004-05 and 2005-06 was disallowed and not allowed to be carried forward 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 proceedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich some incriminating material indicating recording of bogus expenses in the subsequent years was found, which could have reflection on the years in question. The ld. DR has not drawn my attention towards any part of the statement u/s 132(4) of the assessee, which suggests, even remotely, that the assessee was booking bogus expenses in its books of account for the succeeding years, so as to extrapolate the same to the years under consideration. The trump card of the Department s case is the ratio of Dayawanti (supra), which could have been applied only if the Revenue had established the recording of some bogus expenses by the assessee in later years, so as to enable it to draw an adverse inference for the current years. This is absent in the facts and circumstances of the case. Thus, it is vivid that the ratio decidendi in the case of Dayawanti (supra) does not apply to the facts of the case. In the absence of any material, the genuineness of expenses incurred by the assessee, and that 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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