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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 ..... orted by the decision of the Hon ble Supreme Court in the case of PCIT vs. Abhisar Buildwell Pvt. Ltd [ 2023 (4) TMI 1056 - SUPREME COURT] wherein the Hon ble Supreme Court has expounded that no addition can be made when the assessment framed u/s. 153A dehors incriminating material found during the search. Decided in favour of assessee. - Shri Shamim Yahya, Accountant Member, And Shri Anubhav Sharma, Judicial Member For the Department : Shri Surender Pal, CIT(DR) For the Assessee : Shri Ashok Kumar Jain, CA ORDER PER SHAMIM YAHYA, AM : These appeals filed by the Revenue are directed against the separate orders both dated 17.03.2020 of the Ld. CIT(A)-30, New Delhi relating to assessment years 2012-13 2013-14. 2. The grounds raised in assessment year 2012-13 read as under :- I. Ld. CIT(A) has erred in law and facts in deleting addition while relying on the decision of the Hon ble High Court in the case of Kabul Chawla 380 ITR 573, whereas, Department s SLP in the case of APAR Industries against Bombay High Court s Order in ITA No. 1669 of 2013 dated 08.05.2015 has been admitted alongwith 115 cases on the issue of restriction of addition only to incriminating material found during s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3,049/- as name of Nisha Tanwar who have submitted her confirmation was not mentioned in the bills. VII. In view of the above, facts and circumstances of the case, the decision of Ld. CIT(A) is not acceptable on merits. Moreover, the tax effect for the year under concerned is above the limit prescribed for filing appeal before ITAT as per CBDT Circular No. 17/2019 dated 8.8.2019 as well as CBDT s Notification vide F.No. 279/Misc/142/2007-ITJ(Pt.) dated 20.8.2018. VIII. That the grounds of appeal are with prejudice to each other. IX. That the appellant craves leave to add, amend, alter or forego any ground (s) of appeal either before or at the time of hearing of appeal. 3. 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 29.09.2012, declaring income at Rs. 39,75,700/-. Subsequently, the case of the appellant was selected for scrutiny and the assessment was completed vide order dated 25.03.2015 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sis of DVO s report. Further, the appellant has pointed out that no incriminating material was found during the course of search. 10 Now, I proceed to outline the issues for my adjudication: (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 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) 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 otherwis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 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 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 assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Jai Steel (India), Jodhpur v. ACIT (supra) involved a case where certain books of accounts and other documents that had not been produced in the 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 reassessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ately 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. Hi. 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 absen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ely preceding the assessment year relevant to the previous year in which such search is conducted or 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of Jai Steel (India)v. Asst. CIT (supra), the earlier assessment would have to be reiterated, 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 would 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 disti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he decision in Kabul Chawla (supra). The decision 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 Hon ble 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 n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only confirmed the transactions but also confirmed that the payment was made from her drawings out of her income. Therefore, the owner of the document/bill has owned the said document/bill and explained the ownership and mode and source of payment. Therefore, the said document/bill cannot be treated as incriminating material in the hands of the appellant as the identity of the person meeting the expenditure, source of expenditure and genuineness of expenditure stands explained by Ms. Nisha Tanwar. In view of the above analysis, the addition made by the AO amounting to Rs. 33,049/- is hereby deleted. Accordingly, ground No. 15 is hereby allowed. ITA No. 1311/Del/2020 (AY 2013-14) 5. The grounds raised in assessment year 2013-14 read as under:- I. Ld. CIT(A) has erred in law and facts in deleting addition while relying on the decision of the Hon ble High Court in the case of Kabul Chawla 380 ITR 573, whereas, Department s SLP in the case of APAR Industries against Bombay High Court s Order in ITA No. 1669 of 2013 dated 08.05.2015 has been admitted alongwith 115 cases on the issue of restriction of addition only to incriminating material found during search, has been admitted vide Dia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate mentioned in page no. 166 of Annexure A-2, seized from the residence of Rajan Sharma. Ld. CIT(A) has erred in law or facts in holding that page no. 166 of Annexure A-2 is not incriminating. It is fact on record that Sh. Rajan Sharma and the assessee Sh. Chattar Singh had business relation and involved in sale / purchase of properties. VII. The Ld. CIT(A) has erred in law or facts in deleting the addition of Rs. 1,06,231/- as name of Mrs. Shimlesh and Mr. Kapil Tanwar who have submitted their confirmation was not mentioned in the bills. VIII. The decision of Ld. CIT(A) with regard to cash receipt in sale of property at Chattarpur Enclave is accepted. IX. In view of the above, facts and circumstances of the case, the decision of Ld. CIT(A) is not acceptable on merits. Moreover, the tax effect for the year under concerned is above the limit prescribed for filing appeal before ITAT as per CBDT Circular No. 17/2019 dated 8.8.2019 as well as CBDT s Notification vide F.No. 279/Misc/142/2007-ITJ(Pt.) dated 20.8.2018. X. That the grounds of appeal are with prejudice to each other. XI. That the appellant craves leave to add, amend, alter or forego any ground (s) of appeal either before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent order, it is clear that no incriminating material was found during the course of search related to this assessment year. The first objection of the appellant is that the addition (without prejudice to the appellant s stand) is based on the so called incriminating material that was found not in a search but in a survey, that too on a 3rd party. Further, the appellant has pointed out that the document does not contain any incriminating information. The document at hand does not contain the details of the subject properties in question at all. The document merely speaks of estimated value of some other properties. 9. Thus, primary contention of the appellant is that the addition is not based on any incriminating material but on the basis of DVO s report. Further, the appellant has pointed out that no incriminating material was found during the course of search. 10. Now, I proceed to outline the issues for my adjudication: (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 ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of CIT vs Kabul Chawla, 380 ITR 573. It has been held in that order by the Hon ble Delhi High Court. Para 37 is as follows- 37. 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... even if no incriminating material whatsoever was unearthed during the search. 32. Recently by its order dated 6th July 2015 in ITA No. 369 of 2015 (Pr. Commissioner of Income Tax v. Kurele Paper Mills P. Ltd.), this Court declined to frame a question of law in a case where, in the absence of any incriminating material being found during the search under Section 132 of the Act, the Revenue sought to justify initiation of proceedings under Section 153A of the Act and make an addition under Section 68 of the Act on bogus share capital gain. The order of the CIT (A), affirmed by the 1TAT, deleting the addition, was not interfered with. 59. In Kabul Chawla (supra), the Court referred to the decision of the Rajasthan High Court in Jai Steel (India) w Asstt. CIT f20131 36 taxmann.com 523/219 Taxman 223. The said part of the decision in Kabul Chawla (supra) in paras 33 and 34 reads as under: 33. The decision of the Rajasthan High Court in Jai Steel (India), Jodhpur v. ACIT (supra) involved a case where certain books of accounts and other documents that had not been produced in the course of original assessment were found in the course of search. It was held where undisclosed income or undi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of documents.' 60. In Kabul Chawla (supra), the Court also took note of the decision of the Bombay High Court in CIT v. Continental Warehousing Corpn (Nhava Sheva) Ltd. [20151 58 taxmann.com 78/232 Taxman 270/374ITR 645 (Bom.) which accepted the plea that if no incriminating material was found during the course of search in respect of an issue, then no additions in respect of any issue can be made to the assessment under Section 153A and 153C of the Act. The legal position was thereafter summarized in Kabul Chawla (supra) as under: 37. 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es against declared income of Rs. 3.44 crores. The ITAT deleted the additions on the ground that it was not based on any incriminating material found during the course of the search in respect of AYs under consideration i.e., AY 2006-07. The Gujarat High Court referred to the decision in Kabul Chawla (supra), of the Rajasthan High Court in Jai Steel (India) (supra) and one earlier decision of the Gujarat High Court itself. It explained in para 15 and 16 as under: '15. On a plain reading of section 153A of the Act, it is evident that the trigger point for exercise of powers thereunder is a search under section 132 or a requisition under section 132A of the Act. Once a search or requisition is made, a mandate is cast upon the Assessing Officer to issue notice under section 153A of the Act to the person, requiring him to furnish the return of income in respect of each assessment year falling within six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and requisition. When the very purpose of the provision is to make assessment In case of search or requisition, it goes without saying that the assessment has to have relation to the search or requisition, in other words, the assessment should connected With something round during the search or requisition viz., incriminating material which reveals undisclosed income. Thus, while in view of the mandate of sub-section (1) of section 153A of the Act, in every case where there is a search or requisition, the Assessing Officer is obliged to issue notice to such person to furnish returns of income for the six years preceding the assessment year relevant to the previous year in which the search is conducted or requisition is made, any addition' or disallowance can be made only on the basis of material collected during the search or requisition, in case no incriminating material is found, as held by the Rajasthan High Court in the case of Jai Steel (India vs. Asst. CIT (supra), the earlier assessment would have to be reiterated, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court is concerned, it has in IBC Knowledge Park (P.) Ltd. (supra) followed the decision of this Court in Kabul Chawla (supra) and held that there had to be incriminating material qua each of the AYs in which additions were sought to be made pursuant to search and seizure operation. The Calcutta High Court in Salasar Stock Broking Ltd. (supra), too, followed the decision of this Court in Kabul Chawla (supra). In Gurinder Singh Bawa (supra), the Bombay High Court held that: 6 once an assessment has attained finality for a particular year, i.e., it is not pending then the same cannot be subject to tax in proceedings under section 153A of the Act. This of course would not apply if incriminating materials are gathered in the course of search or during proceedings under section 153A of the Act which are contrary to and/or not disclosed during the regular assessment proceedings. 63. Even this Court has in Mahesh Kumar Gupta (supra) and Ram Avtar Verma (supra) followed the decision in Kabul Chawla (supra). The decision 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& ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... value of property at Rs. 8,06,66,400/- thereby making an addition of Rs. 1,68,55,466/- (half share of the appellant) on the basis of alleged documents seized during the course of search on third party i.e. Shri Rajan Sharma on 27.07.2016 which is alleged receipt of advance payment for the sale of property at 90, Sainik Farms @ Rs. 60,000/- per square yards signed by Ms. Alka Bareja. The said seized documents cannot be considered as incriminating document in the hands of the appellant due to the following reasons: Firstly the said seized paper was not seized during the course of search on assessee. The said paper was seized during the course of search on Rajan Sharma which is separate assessee with distinct PAN Number and independent legal entity. The appellant has not done any purchase or sale transaction with Alka Bareja. The appellant has never owned or possessed nor sold 90 Sainik Farms to Alka Bareja. Further the document was written as dated 25.05.2016 therefore cannot be considered 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 mentio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alysis, the addition made by the AO amounting to Rs. 1,06,231/- is hereby deleted. Accordingly, ground No. 13 is hereby allowed. 13. In ground No. 17 the appellant has challenged the addition of Rs. 5,0,000/-, on account of unexplained receipts from the sale of property at Chattarpur Enclave. From the submissions, it is seen that during the year under consideration the appellant sold the property at Chatarpur Enclave for a consideration of Rs. 1,25,00,000/- to Rajan Sharma, and Sunil Goel, vide agreement to sell dated 22.01.2013. The relevant extract of agreement to sell regarding the sale consideration is as under: That in consideration of the sum of Rs. 1,30,00,000/- (Rupees One Crores Thirty Lacs only), which has been already been received by the First Party from the Second Party, in the following manner: i. Rs. 65,00,000 vide Cheque No. 008161dated 19.09.2013, drawn on AXIS Bank Ltd, paid by Sh. Sunil Goel ii. Rs. 60,00,000 vide Cheque No. 151630 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale.xls documents found. However, we find that the said document was found in the course of action u/s. 133A of the Act and nothing to do with the seized found during search. In this view of the matter, when the Revenue in the ground itself admitted that addition has been made dehors incriminating material found during search and on perusal of the AO s order it reveals no reference has been found that any material found during search on the basis of which he made the addition. The elaborate findings of the Ld. CIT(A) that incriminating material found during search has not been controverted by the Revenue. In this view of the matter, we find that Ld. CIT(A) has passed a well reasoned orders, by relying upon the relevant case laws, hence, we do find any infirmity in his orders, thus, we confirm the same. Our aforesaid view is fully supported by the decision of the Hon ble Supreme Court in the case of PCIT vs. Abhisar Buildwell Pvt. Ltd., CA No. 67580 / 2021 dated 24.4.2023, (2023) SCC Online SC 481, wherein the Hon ble Supreme Court has expounded that no addition can be made when the assessment framed u/s. 153A dehors incriminating material found during the search. 10. In the resul ..... X X X X Extracts X X X X X X X X Extracts X X X X
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