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Jakson Enterprises 626, 6th Floor, Tower-A, DLF Tower, Jasola, New Delhi-110076 Vs. ACIT, Central Circle-25, New Delhi.
May, 28th 2015
           IN THE INCOME TAX APPELLATE TRIBUNAL
                 DELHI BENCH: `D' NEW DELHI
         BEFORE SHRI N. K. SAINI, ACCOUNTANT MEMBER
                                 AND
              SHRI I. C. SUDHIR, JUDICIAL MEMBER
                        I.T.A .No.-383/Del/2013
                       (Assessment Year-2006-07)

Jakson Enterprises                    Vs.         ACIT,
626, 6th Floor, Tower-A,                          Central Circle-25,
DLF Tower, Jasola,                                New Delhi.
New Delhi-110076
PAN: AAEFJ2136J
 (APPELLANT)                                      (RESPONDENT)

                   Assessee by:-Sh. Ved Jain, & Rano Jain, CA.
                   Revenue by:-Ms. Sulekha Verma, CIT DR.
                   Date of Hearing: 07.04.2015
                   Order pronounced on: 27.05.2015
                                  ORDER

PER I. C. SUDHIR, JM


      The assessee has impugned first appellate order on several grounds. The

ground no. 1 is general in nature. In ground nos. 2 to 6 the assessee has

questioned validity of initiation of proceedings u/s 153A of the Income Tax Act

and framing of assessment in furtherance thereto r.w.s. 143(3) of the Act, in

absence of incriminating material found during the course of search and

pendency of assessment proceedings for the year on the date of search.


2.    In ground no. 7 the disallowance on account of scrap sale for the purpose

of deduction u/s 80IB of the Act has been questioned and in ground no. 8

disallowance made u/s 14A of the Act has been impugned.
                                                   I.T.A .No.-383/Del/2013    2


3.    Since the issue raised in ground nos. 2 to 6 is legal in nature and going to

the root of the matter, we preferred to adjudicate it first.


4.    We have heard and considered the arguments advanced by the parties on

the issue, material available on record and the decisions relied upon in this

regard.


5.    The facts in brief are that the assessee belongs to Jakson Group of

Companies headed by Shri S. K. Gupta and is in the area of assembly of DG

Sets. The search operation was conducted on 10.02.2010 in the group. Notice

u/s 153A was issued and in response the assessee filed return of Rs.25,72,304/-

and assessment was framed u/s 153A r.w. s.143(3) of the Act. During the course

of assessment proceedings the assessee questioned the validity of initiation of

proceedings u/s 153A of the Act on the basis that no incriminating material was

found during the course of search and the assessment u/s 143(3) was already

framed before the date of search. The AO did not agree with the assessee and

rejected the objection with this finding that there was no requirement that an

assessment made u/s 153A of the Act should based on any material seized in the

course of search. The AO also made disallowance of Rs.12,32,226/- on account

of scrap sale for the purposes of deduction u/s 80IB of the Act and disallowance

of Rs.61,412/- u/s 14A of the Act in the assessment framed.


6.    The assessee questioned the validity of above assessment both on initiaon

of proceedings u/s 153A of the Act in absence of incriminating material found
                                                 I.T.A .No.-383/Del/2013      3


during the course of search and in absence of pendency of the assessment on the

date of search as well as the disallowances made, but could not succeed.


7.    In support of legal issue raised in ground nos. 2 to 6, the ld. AR submitted

that in the present case assessment was completed u/s 143(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.).
                                                 I.T.A .No.-383/Del/2013    4


          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 hand submitted that there is no need of

finding of incriminating material during the course of search to justify the

validity of assessment framed under sec. 153A read with sec. 143(3) of the

Income-tax Act, 1961 and the only requirement is that search has been

conducted at the premises of the assessee under sec. 132 of the Act. In support,

he placed reliance on the following decisions:


     i) CIT vs. Fila Tex India Ltd. ­ ITA No. 269/2014 dated 14.7.2014
     (Del.);

     ii) Canara Housing Development Co. vs. DCIT ­ ITA No. 38/2014
     dated 25.7.2014 (Karnataka).

     iii) CIT vs. Anil Kumar Bhatia 24 Taxman.com 98 (Del).

     iv) Promain Ltd. Vs. DCIT 95 ITD 489 (Del) (SB).

     v) M.B. Lal 279 ITR 298 (Del)

     vi) Dr. A.K. Bansal, 355 ITR 513 (All).

     vii) ITO vs. Varia Pratik Engineering 120 TTJ 1 (Ahd)

     viii) CIT vs. Raj Kumar Arora, ITA No. 56/2011 (All. H.C.)

     ix) DCIT vs. Apoorva Extrusion Pvt. Ltd. & ors.            ITA Nos.
     3308/Del/2010 (A.Y. 2002-03) & ors. Order dated 09.10.2014.
                                                  I.T.A .No.-383/Del/2013   5




9.     Having gone through the orders of the authorities below, we find that the

Learned CIT(Appeals) has rejected the contentions of the assessee on the issue

of validity of assessment framed under sec. 153A read with sec. 143(3) of the

Income-tax Act, 1961 in absence of incriminating material found during the

course of search and in the absence of the pendency of the assessment as on the

date of search on the basis that for framing assessment under sec. 153A, no such

requirement is there and the only requirement is that search has been conducted

under sec. 132 of the Act.


10.     Having gone through the decisions cited by the learned AR including the

decision of Special Bench of the ITAT in the case of AL Cargo Global Logestic

Ltd. vs. CIT (supra), we find that the ratio laid down therein, supports the

contentions of the assessee on the issue. It reads as under:


      "58. Thus, question No. 1 before us is answered as under :-

      (a) In assessments that are abated, the AO retains the original
      jurisdiction as well as jurisdiction conferred on him u/s 153A for
      which assessments shall be made for each of the six assessment year
      separately :

      (b) In other cases, in addition to the income that has already been
      assessed, the assessment u/s 153A will be made on the basis of
      incriminating material, which in the context of relevant provisions
      means (i) books of account, other documents, found in the course of
      search but not produced in the course of original 8 assessment, and
                                                 I.T.A .No.-383/Del/2013       6


      (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 & 9 in this regard is being reproduced as under :-


      "8. We are unable to accept the contention advanced on behalf of the
      Revenue for the reason that if both the pending and completed
      assessment were to be taken on same pedestal, then there was no need
      to enshrine second proviso to sec. 153A( 1) providing that the pending
      assessments within the period of six assessment years shall abate. The
      Hon'ble Delhi High Court in the case of Anil Kumar Bhatia (supra)
      dealt with a situation in which some incriminating material was found
                                           I.T.A .No.-383/Del/2013        7


in respect of a non-pending assessment. It was in that background that
the Hon'ble High Court held that sec. 153A applies if incriminating
material is found even if assessments are completed. The question as
to whether any addition can be made in respect of completed
assessments when no incriminating material was found, was
apparently left open. However, we find that there are sufficient
indirect hints given by the Hon 'ble Delhi High Court in the case of
Anil Kumar Bhatia (supra) about not making of any addition in
respect of an assessment year for which the assessment is already
completed unless some incriminating material is found during the
course of search. This can be seen from the following observations of
the Hon'ble High Court :-

"20. A question may arise as to how this is sought to be achieved
where an assessment order had already been passed in respect of all
or any of those six assessment years, either under Section 143(1)(a) or
Section 143(3) of the Act. If such an order is already in existence,
having obviously been passed prior to the initiation of the
search/requisition, the Assessing Officer is empowered to reopen
those proceedings and reassess the total income, taking note of the
undisclosed income, if any, unearthed during the search."

9. The above extracted observations of the Hon'ble High Court, which
are though obiter dicta, make the point clear that where an
assessment order has already been passed for a year(s) within the
relevant six assessment years, then also the A.O is duty bound to
reopen those proceedings and reassess the total income but by 'taking
note of the undisclosed income if any, unearthed during the search'.
The expression 'unearthed during the search' is quite significant to
denote that in respect of completed or non-pending assessments, the
                                           I.T.A .No.-383/Del/2013         8


Assessing 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 respect of such completed
assessment, then the total income in the proceedings u/s 153A shall be
computed by considering the originally determined income. If some
incriminating material is found in respect of 11 such assessment years
for which the assessment is not pending, then the 'total income' would
be determined by considering the originally determined income plus
income emanating from the incriminating material found during the
course of search. In the other scenario of the assessments pending on
the date of search which would abate in terms of second proviso to
sec. 153A( 1), the total income shall be computed afresh uninfluenced
by the fact whether or not there is any incriminating material. In fact,
this is the position which follows when we read the judgment of the
                                                  I.T.A .No.-383/Del/2013        9


      Hon'ble Delhi High Court in Anil Kumar Bhatia (supra) in
      juxtaposition to the special bench order in the case of All Cargo
      Global Logistics Ltd. (supra). The other judgment relied by the Ld.
      DR in the case of Madugulu Venu (supra) also talks about the need
      for making fresh assessment in respect of the assessment years for
      which the assessments are not pending on the date of search but does
      not set out the scope of such assessment, which is the issue before us."

13.     We, thus, find that the decision of the Hon'ble Jurisdictional Delhi High

Court in the case of Anil Kr. Bhatia (supra) supports the case of the assessee

that in absence of incriminating material found during the course of search an

addition u/s 153A of the Act cannot be made in the assessment framed

thereunder. The decisions relied upon by the ld. CIT, DR in the cases of Canara

Housing Development Company vs. DCIT (supra) of Hon'ble Karnataka High

Court and Filatex India P. Ltd. vs. CIT (supra) of Hon'ble Delhi High Court

having distinguishable facts are not applicable in the present case. In the case of

Filatex India Pvt. 12 Ltd. (supra), the question raised on the applicability of

provisions u/s 153A was that "whether the Tribunal erred on facts and in law in

not holding that re-computation of book profit, de-hors any material found

during the course of search in the order passed u/s 153A of the Act was without

jurisdiction, being outside the scope of proceedings under that section?" The

other question was, "whether on the facts and circumstances of the case, the

Tribunal erred in law in upholding the 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
                                                 I.T.A .No.-383/Del/2013       10


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 of the

Act." The Hon'ble High Court has rejected this contention of the assessee with

this finding that u/s 153A of the Act, the additions need not to be restricted or

limited to the incriminating material, which was found during the course of

search. Thus, it is clear from the facts of this case before the Hon'ble High

Court that several additions relying upon the incriminating material found in the

course of search were made by the AO in the assessment proceedings u/s 153A

of the Act and addition u/s 115JB was made by the AO in absence of

incriminating material concerning this addition. This addition was questioned

by the assessee on the basis that there was no incriminating material found
                                               I.T.A .No.-383/Del/2013      11


concerning the addition made in the assessment u/s 153A of the Act, which has

been rejected by the Hon'ble High Court with the above finding. It was held by

the Hon'ble High Court that there cannot be multiple assessments, once sec.

153A of the Act is applicable. Section 153A(1) postulates one assessment;

putting the total income of six assessment years immediately preceding the

assessment year relevant to the previous year in which search was conducted or

requisition was made.


14.   In para no. 3 of the judgment the Hon'ble Delhi High Court while

discussing the cited decisions in the cases CIT vs. Chetan Das (2012), 254 CTR

(Del) 292 and CIT vs. Anil Kr. Bhatia (2012), 2010-11 Taxman 453 (Del) cited

by the ld. AR of the assessee appellant, has noted certain observations made and

findings given by the Hon'ble Court therein. Thereafter in para no. 4 of the

judgment, the Hon'ble High Court has held as under: "The first question, we

notice was not raised by the appellant before the AO, CIT(A) and before the

Tribunal. The appellant claims that the contention being legal can be raised at

any stage. We have examined sec. 153A of the Act and find that the

submission/contention has no merit".


15.   When we peruse the facts of the case in the case of Filatax India Ltd. and

the question raised therein it comes out that in that case admittedly during the

course of search incriminating material including statements were found and

resulted in additions and the addition made u/s 115JB of the Act was not based
                                                    I.T.A .No.-383/Del/2013   12


upon any incriminating material. Thus, the question raised before the Hon'ble

High Court was as to whether the Tribunal has erred in law in 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 for application of sec. 153A is that there should be

a search u/s 132 and initiation of proceedings u/s 153A is not dependent on any

undisclosed income being unearth during the such search. The Hon'ble

Rajasthan High Court in the case of Jai Steel (supra) has been pleased to hold

that if any books of accounts or other documents relevant to the assessment had
                                                 I.T.A .No.-383/Del/2013      13





not been produced in the course of original assessment and found in the course

of search, such books of accounts or other documents have to be taken into

consideration while assessing or re-assessing the total income under the

provisions of sec. 153A of the Act. Even any undisclosed income or undisclosed

property has been found after the conclusions of the search, same would also be

taken into consideration. The requirement of assessment or re-assessment under

the said section has to be read in the context of sections 132 or 132A of the Act,

in much as, in case nothing incriminating is found on account of such search or

requisition, then the question of re-assessment of the concluded assessment does

not arise, which would require more reiteration and it is only in the context of

the abated assessment under second proviso which is required to be assessed.


17.    In the case of SSP Aviation Ltd. vs. DCIT (supra) where the validity of

assessment framed u/s 153C was challenged it was held that if the AO is

satisfied that any money, bullion, Jewellery or other valuable article or thing or

books of account or documents seized in the course of the search belongs to a

person other than the person who was searched, then such assets or books of

accounts or documents shall be handed over by him to the AO having

jurisdiction over such other person. Once, that is done, the AO having

jurisdiction over such other person shall proceed against him for making an

assessment or reassessment of his income in accordance with the provisions of

sec. 153A. The petitioner therein was not searched u/s 132 of the Act, however,
                                                I.T.A .No.-383/Del/2013      14


some documents belonging to it were found during the search carried out in the

premises of Puri Group of Companies.


18.   We, thus, find that the ratio laid down by the Hon'ble Delhi High Court

and Hon'ble Rajasthan High Court in the above cited and discussed decisions

supports the case of the assessee that in absence of incriminating material found

during the course of search no addition 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
                                                 I.T.A .No.-383/Del/2013     15


pending as on the date of search, we following the above cited decisions by the

learned AR, discussed above, hold that the assessment framed under sec. 153A

read with sec. 143(3) of the Income-tax Act, 1961 for the assessment year under

consideration is not valid and the same is accordingly held as null and void. The

related ground nos. 2 to 6 on the issue is thus allowed.


20.     In view of the above findings, whereby the assessment itself has been

held null and void, the other issues raised in other ground nos. 7 and 8

questioning the validity of the disallowance of deduction u/s 80IB on scrap sales

(ground no.7) and disallowance made u/s 14A (ground no.8) have become

infructuous and academic only. These grounds thus do not require any

adjudication. The same are being disposed off as such.


21.      In result, appeal is allowed.


Order pronounced in the open Court on 27/05/2015.



         Sd/-                                             Sd/-
    (N. K. SAINI)                                  (I. C. SUDHIR)
ACCOUNTANT MEMBER                                JUDICIAL MEMBER

Dated: 27/05/2015
*AK VERMA*

Copy forwarded to:

1.    Appellant
2.    Respondent
3.    CIT
4.    CIT(Appeals)
5.    DR: ITAT
                                                    ASSISTANT REGISTRAR

 
 
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