85 total views
(a) Returns for year under consideration has been processed u/s 143(1); and
(b) Time period to issue notice u/s 143(2) has lapsed.
then assessment stood completed as on date of search
any addition u/s 153A can be made only on the basis of incriminating material found during course of search.No addition can be made on the basis of papers / information submitted during proceedings
Full decision is as under:-
D ART FURNITURE SYSTEMS P. LTD. vs. DEPUTY COMMISSIONER OF INCOME TAX
N. K. BILLAIYA, AM & BEENA A PILLAI, JM.
ITA No. 5750/Del/2014
Feb 6, 2019
(2019) 55 CCH 0115 DelTrib
Legislation Referred to
Section 132, 139(1), 142(1), 143(2), 153A
Case pertains to
Asst. Year 2008-09
Decision in favour of:
Pro.CIT vs. Ram Avtar Verma, followed.
In favour of
Cases Referred to
Kabul Chawla v. CIT  380 ITR 573/ 234 Taxman 300
Anil Chopra, C.A for the Assessee.: Nidhi Srivastava, CIT, D.R for the Department
BEENA A PILLAI, JM.
1. Present appeal has been filed by assessee against order dated 28/07/14 passed by Ld. CIT (A)-25, New Delhi on following grounds of appeal:
“1. That on the facts and in the circumstances of the case, the CIT has erred in law as well as on facts while upholding the provisions of Section 153A and sustaining additions to the income of assessee company arbitrarily beyond the scope of the section.
2. That on the facts and in the circumstances of the case, the CIT has erred in law as well as on facts while sustaining additions of Rs.2,73,753/- of MCD conversion charges.
3. That on the facts and in the circumstances of the case, the CIT has erred in law as well as on facts while sustaining additions of Rs.31,320/- on account of disallowance for personal expenses.
4. That on the facts and in the circumstances of the case, the CIT has erred in law as well as on facts sustaining additions of Rs.97,761/- on account of commission paid to specified persons.
5. That on the facts and in the circumstances of the case, the CIT has erred in law as well as on facts sustaining additions of Rs.1,84,92,150/- on account of disallowance of unexplained purchases.
6. The assessee craves leave to add, alter, modify any of the grounds mentioned above.”
2. Brief facts of the case are as under:
Assessee during year under consideration filed its return of income on 29/09/08 declaring total income of Rs. 10, 90, 326/-. The same was processed under section 143(1) of the I.T.Act, 1961 (the Act). Subsequently search and seizure operation under section 132 of the Act was conducted at business and residential premises of assessee on 19/10/10. Following which notice under section 153A of the Act was issued for filing return of income on basis of incriminating materials seized during course of search. In response to notice, assessee filed return stating that return filed under section 139(1) of the Act may be treated as return filed in pursuance to notice under section 153A of the Act.
2.1. Ld. AO accordingly issued notice under section 143(2), 142(1) along with questionnaire. In response to statutory notices representative of assessee appeared before Ld.AO and filed requisite details and information. Ld. AO completed assessment at Rs.2,03,35,310/-by making various additions.
3. Aggrieved by additions made by Ld. AO assessee preferred appeal before Ld.CIT (A) who confirmed addition so made.
4. Aggrieved by order of Ld.CIT (A) assessee is in appeal before us now.
5. At the threshold, Ld.AR submitted that Ground No. 1 has been raised challenging additions made by Ld.AO under section 153A of the Act, without there being any incriminating material.
5.1. He submitted that additions made by Ld.AO are not based on any incriminating material found during search operation therefore are not sustainable in eyes of law. He further submitted that time period for issuance of notice under section 143(2) has also lapsed, thus assessment has attained finality. It has been argued by Ld.AR that, under such circumstances without there being any incriminating material, no additions could be made for year under consideration. He placed reliance upon decision of Hon’ble Delhi High Court in case of CIT vs Kabul Chawla reported in (2015) 61 taxman.com 412.
5.2. Ld.CIT, DR though supported orders passed by authorities below but could not controvert aforestated argument advanced by Ld.AR.
6. We have perused records placed before us in light of arguments advanced by both sides.
6.1. Ld.AR submitted that assessment stood completed as on date of search due to following reasons:
(a) Returns for year under consideration has been processed u/s 143(1);
(b) Time period to issue notice u/s 143(2) has lapsed.
6.2. It has been thus argued that assessment stands concluded as on date of search. This fact has not been denied either by Ld.AO or by Ld.CIT,D.R.
6.3. Under such circumstances, any addition u/s 153A could be made only on the basis of incriminating material found during course of search.
6.4. It is observed that Ld.AO made additions based upon audited balance sheet, filed during assessment proceedings. Hon’ble Delhi High Court in case of Pro.CIT vs. Ram Avtar Verma, reported in (2017) 88 Taxmann.com 666, has held as under:
“4. The Revenue urges that the non-obstante clause in Section 153A together with Section 158BD removes the barrier vis-a- vis restriction upon search assessments being confined to “undisclosed income”. In other words, it is stated that none of the provisions confine the enquiry of the AO to evaluating incriminating materials. This aspect, in the opinion of the Court, was extensively dealt with in Kabul Chawla v. CIT  380 ITR 573/ 234 Taxman 300/6 1 taxmann.com 412 (Delhi) which has, by now, been followed consistently in several appeals. The non- obstante clause, in the opinion of the Court, was necessary, given that there is a departure from the pre-existing provisions, which applied for the previous years and had a different structure where two sets of assessment orders were made by the AO during block periods. With the unification of assessment years for the block period, i.e. only one assessment order for each year in the block period, it was necessary for an overriding provision of the kind actually adopted in Section 153A. But for such a non-obstante clause, the Revenue could possibly have faced hurdles in regard to unadopted/current assessment years as well as reassessment proceedings pending at the time of the search in respect of which proceedings were to be completed under Sections 153A/ 153C. Having regard to the above directions, we are of the opinion that the ITAT decision does not call for interference. Both appeals are accordingly dismissed.”
6.5. Respectfully following the same, we allow ground no.1 raised by assessee.
7. Ground No.2 to 5, now becomes academic in nature.
8. In the result appeal filed by assessee stands allowed.
Order pronounced in the open court on 06th February, 2019.