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TMI Blog2025 (1) TMI 563X X X X Extracts X X X X X X X X Extracts X X X X ..... ts named "sale.xls" which was recovered from the soft data impounded as Annexure-Al from, D-56, Chatarpur Enclave, New Delhi during the course of action u/s 133A of the I.T. Act, on 27.07.2016 at the office of R.K Horticulture Pvt. Ltd and D. R. Horticulture Pvt. Ltd. Ld. CIT (A) has erred in facts in para 8 of its order whereas it has been stated that document has been found from third party. Kartar Singh Tanvvar (main person on which search took place), brother of the assessee, is the director of R.K Horticulture Pvt. Ltd and D. R. Horticulture Pvt. and D-56, Chatarpur Enclave, New Delhi is the office where all construction and real estate related work take place. III. Ld. CIT (Appeal) has erred in law or facts in appreciating the fact that assessee has not brought on record the very purpose of creating excel sheet Sale.xls. The sheet enlists various properties of the area along with their actual market rates, real owners and the disclosed or white component expected in the deal of the property. From this sheet it is evident that the actual market price is much higher than the govt, rates and the unaccounted and undisclosed component in these deals can be as high as 75% of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7.2016 and 23.08.2016 in the case of the appellant along with the group cases of Shri Kartar Singh. Accordingly, the A.O. issued notice u/s 153A of the Act on 06.04.2018 requiring the appellant to file the return of income. In response to this, the assessee filed his return 02.07.2018 at the income of Rs. 41,88,880/-. Accordingly, the A.O. issued notice u/s 143(2) of the Act, on 07.08.2018. The AO completed the assessment u/s 153A of the Act, for the year under consideration by making the additions on the basis of assessment order passed u/s 143(3) of the Act amounting to Rs. 7,78,81,880/-, on account of Undisclosed Consideration received from sale of Property No. D-89, village Chattarpur, Delhi amounting to Rs. 1,08,33,000/-, on account of Undisclosed Consideration received from sale of Property at W4B/5, West Avenue, Sainik Farms amounting to Rs. 63,57,859/-, on account of undisclosed income spent on Construction Expenses of property at Village Khanpur, Delhi amounting to Rs. 44,13,547/-, on account of Unexplained Repair Expenditure amounting to Rs. 33,049/-. The A.O. completed assessment u/s 153A of the Act, at the assessed income of Rs. 10,37,08,230/-. 4. Upon assessee's appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e treated as incriminating: In this case, search u/s 132 of the Act, was carried out on 27.07.2016 and 23.08.2016. The document was recovered /found in a survey u/s 133A of the Act, on 27.07.2016. The said document does not have any dates. The said document has certain average/estimated rates of certain properties. The details in this sheet do not relate to the appellant's property at all. The details do not speak of any transaction, per se. The details do not even carry any date. The document has been owned up by a 3rd person Shri Sumit Tanwar from whose hard disk this document was extracted pursuant to survey u/s 133A of the Act, 27.07.2016. In my understanding, the A.O. was also aware of this information not being of incriminating. Further, such document having been recovered from a 3rd party cannot be treated as incriminating for purposes of assessment u/s 153A of the Act. In this connection, the position of law has been elucidated by the Hon'ble Delhi High Court in the case of CIT vs Kabul Chawla, 380 ITR 573. (i) I find that the assessment order does not speak of any incriminating document or material found during search. In fact the assessment order is not based on any s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. vii Completed assessments can be interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment. " (iii) The Hon'ble Delhi High Court has also held in the case of Pr. CIT vs Meeta Gutgutia, 395 ITR 526(Delhi), order dated 25.05.2017 at paras 58 till 53 as follows- "58. In Kabul Chawla (supra), the Court discussed the decision in Filatex India Ltd. (supra) as well as the above two decisions and observed as under: "31. What distinguishes the decisions both in CIT v. Chetan Das Lachman Das (supra), and Filatex India Ltd. v. CIT-IV (supra) in their application to the present case is that in both the said cases there was some material unearthed during the search, whereas in the present case there admittedly was none. Secondly, it is plain fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the AO was free to disturb income de hors the incriminating material while making assessment under Section 153A of the Act was specifically rejected by the Court on the ground that it was "not borne out from the scheme of the said provision" which was in the context of search and/or requisition. The Court also explained the purport of the words "assess" and "reassess", which have been found at more than one place in Section 153A of the Act as under: "26. The plea raised on behalf of the assessee that as the first proviso provides for assessment or reassessment of the total income in respect of each assessment year falling within the six assessment years, is merely reading the said provision in isolation and not in the context of the entire section. The words 'assess' or 'reassess'-have been used at more than one place in the Section and a harmonious construction of the entire provision would lead to an irresistible conclusion that the word assess has been used in the context of an abated proceedings and reassess has been used for completed assessment proceedings, which would not abate as they are not pending on the date of initiation of the search or making ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment." 61. It appears that a number of High Courts have concurred with the decision of this Court in Kabul Chawla (supra) beginning with the Gujarat High Court in Saumya Construction ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section (2) of section 153A of the Act provides that if any proceeding or any order of assessment or reassessment made under sub-section (1) is annulled in appeal or any other legal provision, then the assessment or reassessment relating to any assessment year which had abated under the second proviso would stand revived. The proviso thereto says that such revival shall cease to have effect if such order of annulment is set aside. Thus, any proceeding of assessment or reassessment falling within the six assessment years prior to the search or requisition stands abated and the total income of the assessee is required to be determined under section 153A of the Act. Similarly, sub-section (2) provides for revival of any assessment or reassessment which stood abated, if any proceeding or any order of assessment or reassessment made under section 153A of the Act is annulled in appeal or any other proceeding. 16. Section 153A bears the heading "Assessment in case of search or requisition". It is "well settled as held by the Supreme Court in a catena of decisions that the heading or the Section can be regarded as a key to the interpretation of the operative portion of the section and if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment. Under section 153A of the Act, assessment has to be made in relation to the search or requisition, namely, in relation to material disclosed during the search or requisition. If in relation to any assessment year, no incriminating material is found, no addition or disallowance can be made in relation to that assessment year in exercise of powers under section 153A of the Act and the earlier assessment shall have to be reiterated. In this regard, this court is in complete agreement with the view adopted by the Rajasthan High Court in the case of Jai Steel (India) v. Asst. CIT (supra). Besides, as rightly pointed out by the learned counsel for the respondent, the controversy involved in the present case stands concluded by the decision of this court In the case of CIT v. Jayaben Ratilal Sorathia (supra) wherein it has been held that while it cannot be disputed that considering section 153A of the Act, the Assessing Officer can reopen and/or assess the return with respect to six preceding years ; however, there must be some incriminating material available with the Assessing Officer with respect to the sale transactions in the particular assessment year.' 62. Subsequen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and do not have sanction of law within the meaning of section 153A of the Income Tax Act, 1951. (B) Whether assessment made only on the basis of DVO's valuation report is a valid assessment u/ s 153A for an unabated assessment year? In view of analysis made under the earlier sub-heading, it is clear that additions u/s 153A of the Act, in an unabated assessment year can be made only on the basis of incriminating material found during the course of search. As analyzed by me earlier, no incriminating material relating to the appellant was found during the course of search. Even the A.O. appears to have concluded that there was no incriminating material within the meaning of section 153A of the Act, and therefore made additions of Rs. 1,08,33,000/-, Rs. 63,57,859/- and Rs. 44,13,547/-, on the basis of DVO's report. In my understanding, based upon the position of law as laid down addition in an assessment u/s 153A of the Act, only on a DVO's report cannot be sustained, in an unabated assessment year. (C) Does the valuation suffer from inconsistencies and is not sustainable on merit? Since I have held that the foundational jurisdictional requirement for purposes of making assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been admitted vide Diary No. 37848/2015. II. Ld. CIT (A) has erred in law or facts without considering the incriminating documents named "sale.xls" which was recovered from the soft data impounded as Annexure-Al from, D-56, Chatarpur Enclave, New Delhi during the course of action u/s 133A of the I.T. Act, on 27.07.2016 at the office of R.K Horticulture Pvt. Ltd and D. R. Horticulture Pvt. Ltd. Ld. CIT (A) has erred in facts in para 8 of its order whereas it has been stated that document has been found from third party. Kartar Singh Tanvvar (main person on which search took place), brother of the assessee, is the director of R.K Horticulture Pvt. Ltd and D. R. Horticulture Pvt. and D-56, Chatarpur Enclave, New Delhi is the office where all construction and real estate related work take place. III. Ld. CIT (Appeal) has erred in law or facts in appreciating the fact that assessee has not brought on record the very purpose of creating excel sheet Sale.xls. The sheet enlists various properties of the area along with their actual market rates, real owners and the disclosed or white component expected in the deal of the property. From this sheet it is evident that the actual marke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or forego any ground (s) of appeal either before or at the time of hearing of appeal. 6. The brief facts of the case are that the assessee is an individual and is engaged in the business of contractor, construction of roads and building of government department in the name and style of proprietorship concern M/s Chattar Singh Construction Co. and Income from House Property and Interest Income. The return of income was filed on 29.09.2013, declaring income at Rs. 76,49,160/-. Subsequently, the case of the appellant was selected for scrutiny and the assessment was completed vide order dated 25.03.2016 at the assessed income of Rs. 1,76,92,090/-. Later on search and seizure action u/s 132 of the Act, was carried out on 27.07.2016 and 23.08.2016 in the case of the appellant along with the group cases of Shri Kartar Singh. The A.O. issued notice u/s 153A of the Act on 06.04.2018 requiring the appellant to file the return of income. In response to this the appellant filed his return 11.07.2018 at the income of Rs. 74,30,300/-. Accordingly, the A.O. issued notice u/s 143(2) of the Act, on 07.08.2018. The AO completed the assessment u/s 153A of the Act, for the year under consideration by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of survey (and not search) can be used for framing an assessment u/s 153A for an unabated assessment year? Even otherwise, without prejudice, whether the document found during the course of survey that too on a third party can be treated as incriminating. (B) Whether assessment made only on the basis of DVO's valuation report is a valid assessment u/s 153A for an unabated assessment year? (C) Whether addition of Rs. 1,68,55,466/-, made on the basis of documents seized during the course of search in the case of Mr. Rajan Sharma is an incriminating material in the hands of the appellant? (D) Does the valuation suffer from inconsistencies and is not sustainable on merit ? (A) Whether the assessment order is bad since this is an unabated assessment year and not based on any incriminating material found during the course of search? Whether the document found during the course of survey (and not search) can be used for framing an assessment u/s 153A for an unabated assessment year? Even otherwise, without prejudice, whether the document found during the course of survey too on a third party can be treated as incriminating: In this case, search u/s 132 of the Act, was carried ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... course of original assessment were found in the course of search. It was held where undisclosed income or undisclosed property has been found as a consequence of the search, the same would also be taken into consideration while computing the total income under Section 153A of the Act. The Court then explained as under: "22. In the firm opinion of this Court from a plain reading of the provision along with the purpose and purport of the said provision, which is intricately linked with search and requisition under Sections 132 and 132A of the Act, it is apparent that: (a) the assessments or reassessments, which stand abated in terms of II proviso to Section 153A of the Act, the AO acts under his original jurisdiction, for which, assessments have to be made; (b) regarding other cases, the addition to the income that has already been assessed, the assessment will be made on the basis of incriminating material; and (c) in absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made." 34. The argument of the Revenue that the AO was free to disturb income dehors the incriminating material while making ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 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 re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... requisition is made and assess or reassess the same. Since the assessment under section 153A of the Act is linked with search and requisition under sections 132 and 132A of the Act, it is evident that the object of the section is to bring to tax the undisclosed income which is found during the course of or pursuant to the search or requisition. However, instead of the earlier regime of block assessment whereby, it was only the undisclosed income of the block period that was assessed, section 153A of the Act seeks to assess the total income for the assessment year, which is clear from the first proviso thereto which provides that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years. The second proviso makes the intention of the Legislature clear as the same provides that assessment or reassessment, if any, relating to the six assessment years referred to in the sub-section pending on the date of initiation of search under section 132 or requisition under section 132A, as the case may be, shall abate. Subsection (2) of section 153A of the Act provides that if any proceeding or any order of assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted, in case where pending assessments have abated, the Assessing Officer can pass assessment orders for each of the six years determining the total income of the assessee which would include income declared in the returns, if any, furnished by the assessee as well as undisclosed income, if any, unearthed during the search or requisition. In case where a pending reassessment under section 147 of the Act has abated, needless to state that the scope and ambit of the assessment woidd include any order which the Assessing Officer could have passed under section 147 of the Act as well as under section 153A of the Act. ** ** ** 19. On behalf of the appellant, it has been contended that if any incriminating material is found, notwithstanding that in relation to the year under consideration, no incriminating material is found, it would be permissible to make additions and disallowance in respect of an the six assessment years. In the opinion of this court, the said contention does not merit acceptance, inasmuch as the assessment in respect of each of the six assessment years is a separate and distinct assessment. Under section 153A of the Act, assessment has to be made in relation to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of this Court in Kurele Paper Mills (P.) Ltd. (supra) which was referred to in Kabul Chawla (supra) has been affirmed by the Supreme Court by the dismissal of the Revenue's SLP on 7th December, 2015. " I find that the additions made in the assessment order are not based on any incriminating material or documents found during search. In fact, the assessment order does not refer to any seized material or any incriminating material found during the course of search. This position of law (that addition u/s 153A/153C can be made only on the basis of incriminating material etc. found during search), has been elaborated by the Honhle jurisdictional High Court in a plethora of cases as discussed above : CIT vs Kabul Chawla, 380 ITR 570 (Delhi) and Pr CIT vs Meeta Gutgutia, 395 ITR 526 (Delhi) I am bound by law as laid down by my jurisdictional High Court as elaborated above. As such, I hold that the additions made by the Assessing Officer, not being based upon any seized material or incriminating material found during the course of search, are not sustainable. The additions are based merely on the report of the Valuation Officer, and do not have sanction of law within the meaning ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsidered as rate for the A/Y 2013-14. * Further no statement of the buyer Smt. Renu Goyal was recorded by Ld AO that she paid extra consideration to assessee. * Further, the said seized paper contains no mention of the property which was sold to Renu Goyal. In view of the above facts, the addition of Rs. 1,68,55,466/- made by the AO on the basis of seized documents during the course of search of Mr. Raj an Sharma does not belong to the appellant and actually belongs to Mr. Rajan Sharma, has not been correctly made in the hands of the appellant. In view of the above, the addition made by the AO amounting to Rs. 1,68,55,466/-, is hereby deleted. (D) Does the valuation suffer from inconsistencies and is not sustainable on merit? Since I have held that the foundational jurisdictional requirement for purposes of making assessment u/s 153A of the Act, is missing, this issue becomes academic and needs no adjudication. 11. In view of the aforesaid analysis, the assessment order passed by the Assessing Officer is not based on any incriminating material unearthed/found during the course of search. As laid down by Hon'ble Jurisdictional High Court an addition for an unabated asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 19.09.2013, and iii. Rs. 5,00,000/- vide Cheque No. - dated - both drawn on Dena Bank, Chatarpur, New Delhi paid by Sh. Rajan Sharma The receipt of which First Party hereby admits and acknowledges in full and final settlement." From the above, it/s seen that in the said Agreement to Sell the First Party refers to the Assessee, Chattar Singh as Vendor and Second Party refers to Rajan Sharma and Sunil Goel as Purchasers. From the perusal of agreement to sell, it is seen that it mentions sale consideration of Rs. 1,30,0 0,000/- but payment made and acknowledged by both the parties only to the extent of Rs. 1,25,00,000/- as full and final settlement and received by way of two cheques vide cheque number 008161 dated 19.09.2013 for Rs. 65,00,000/- and vide cheque number 151630 dated 19.09.2013 for Rs. 60,00,000/-, respectively. Thus, the documents itself make it categorically clear that the consideration in pursuance of the Agreement to Sell was only Rs. 1,25,00,000/-. The said fact that the consideration was Rs. 1,25,00,000/- has been further confirmed from the purchaser Sh. Sunil Goel and Sh. Rajan Sharma during the course of assessment proceedings. Further, both the partie ..... X X X X Extracts X X X X X X X X Extracts X X X X
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