No addition in case of unabated assessment which had attained finality on search date if no incriminating material found during search

Anurag Dalmia Vs DCIT (ITAT Delhi)

In the case of the unabated assessment which had attained finality on the date of search, which are reckoned as unabated assessments, no addition over and above the originally assessed income can be made sans any incriminating material found or unearthed during the course of search. The principle reiterated time and again is that something should be found as a result of search which is incriminating in nature so as to implicate the assessee and acquire jurisdiction to make the addition, because for the completed assessment, or in other words, assessment which are not abated, the Assessing Officer is required to make re­assessment u/s.153A which is only possible when any incriminating material has been found during the course of search. If the Revenue has any information in its possession prior to the date of search and no corroborative evidence was found during the course of search so as to link the information already in hand with the material found during the course of search, then such an information for making any kind of addition ostensibly is outside the purview of Section 153A as per the binding judicial precedents of the Hon’ble Jurisdictional High Court. We again reiterate that if the Income Tax Department had any material information in its possession received from any external source and in wake of such an information search u/s 132 has been carried out and nothing incriminating has been found having live-link nexus with the said information already in hand, then the Revenue has other courses open to implicate the assessee or carry out further inquiry under the other provisions of the Act, but definitely not u/s.153A.

Thus, we hold that despite there being incriminating material in the possession of the Revenue which may implicate assessee, but same cannot be used within the scope of Section 153A when nothing has been found from the search, especially when assessee too has denied any such involvement and there is no material gathered during the search to rebut such a denial by the assessee. Accordingly, the addition made by the Assessing Officer for sum of Rs.28,24,48,860/- is deleted.

Here in this case as per the Assessing Officer still certain information are yet to be received and the material and information available with the department needs to be corroborated and needs to be further inquired into. Under these circumstances also in our opinion same cannot be done within the scope of Section 153A as we have already held that nothing has been found from the assessee during the course of search, which can preempt any post search inquiry. Albeit in abated assessments AO may have power to conduct further inquiry but not in case of unabated assessments.

ORDER

PER AMIT SHUKLA, J.M.:

The aforesaid appeals have been filed by the Assessee against the separate impugned order dated 11.08.2017, passed by the ld. CIT(Appeals)-29, New Delhi, for the quantum of assessment passed u/s.153A/143(3) for the Assessment Years 2006-07 & 2007-08. Since issues involved in both the appeals are common, arising out of identical set of facts, therefore, same were heard together and are being disposed of by way of this consolidated order.

2. We will first take up the appeal for the Assessment Year 2006-07, wherein following grounds have been raised.

“1. The impugned appellate / assessment orders are bad in law and on facts as those have been passed disregarding the codified law and as has been laid down by the jurisdictional courts besides ignoring the submissions of the appellant before the said authorities. Thus, the impugned orders of the authorities below must be annulled.

2. The CIT(A) erred in law and on facts in confirming the assessment order passed on the basis of an illegal and invalid notice issued u/s 143(2) of the Act for the first time on 21/10/2013 though the same should have been issued statutorily by 30/09/2013 as the return of income was filed before 31/03/2013. The appellant never received any notice before the said date as has been alleged by the CIT(A) by referring to the assessing officer. Thus the assessment should be annulled.

3. That the impugned assessment order dated 23/03/2015 is barred by limitation as the time to pass the assessment order had already expired on 31/03/2014 but the proposal for reference to seek information from the foreign jurisdictions u/s 153B( 1) Explanation (viii) of the Act was made by the assessing officer first time vide his letters dated 27/02/2015, i.e. much after expiry of the time to pass the assessment order. Thus the assessment order should be annulled.

4. Without prejudice to the above ground, the appellant was not informed in any manner before the alleged extension of limitation period by the assessing officer. Thus, this alleged extension of the limitation period in absence of the principles of natural justice and fair play is bad in law and the impugned assessment order deserves to be annulled.

5. That on the facts and circumstances of the case, the assessment order passed u/s 153 A of the Act making addition is bad in law as no incriminating material in any manner in respect of the same was found in and seized from the premises of the appellant during the course of search u/s 132 of the Act on 20/01/2012 as the earlier assessment proceeding was already completed and not abated. Thus, the assessment order should be annulled.

6. That in law and on facts, some unauthorized and unverified material sourced from a third country by the revenue authorities cannot be made a basis to pass an assessment order u/s 153 A of the Act in the case of the appellant and which needs to be cancelled.

7. That on the facts and in the circumstances of the case and in law, the CIT(A) erred in confirming the addition of Rs. 27,91,72,017/- made u/s 69 of the Act is ‘unexplained investment’ in relation to an alleged offshore Bank account with HSBC Bank, Geneva, Switzerland without having on record any legally acceptable and credible evidence to support the same. The appellant prays that ne addition should be deleted.

8. That on the facts and in the circumstances of the case and in law, the CIT(A) erred in not appreciating that the impugned assessment framed in pursuance to show cause notice issued to a Permanent Account Number not belonging to ne appellant vitiates the assessment. Accordingly, the assessment itself is invalid and non-est which should be cancelled.

9. That the allegation of the assessing officer that the assessee has not complied with notice issued u/s 142(1) of the Income-tax Act, 1961 on 18th July, 2013 is contrary to the facts of the case and deserves to be expunged.”

2. At the outset, ld. counsel for the assessee, Shri V.K. Bindal first pressing the legal issue raised vide ground no. 5, submitted that here in this case, the addition which has been made by the Assessing Officer is not based on any incriminating material found during the course of search, and therefore, no addition could have been made in the assessment framed u/s.153A/143(3) for the impugned Assessment Year, as on the date of search, i.e., 20.01.2012, the assessment for the Assessment Year 2006-07 was not pending and had attained finality. Accordingly, in view of the various judgments of the Hon’ble Jurisdictional High Court, especially in the case of CIT vs. Kabul Chawala (2016) 380 ITR 570; and Pr. CIT vs. Meeta Gutgutia, Prop. M/S. FERNS N’ PETALS, in ITA No. 306 and 310/2010, the additions made for the assessment years which are unabated assessments are beyond the scope of assessment u/s 153A. Since the aforesaid issue raised by the learned counsel before us goes to the very root of the addition, therefore, we are taking up this issue first.

3. The brief facts and background of the case are that, the assessee is an individual deriving income from salary, short term capital gain and income from other sources. He has filed his return of income for the Assessment Year 2006-07 in the month of July, 2006, declaring total income of Rs.27,86,027/-. The said return was duly accepted and processed u/s. 143(1) vide intimation dated 25.05.2007. Thereafter no notice u/s. 143(2) was issued and accordingly, such a return of income stood finally assessed and had attained finality under the provisions of the Income Tax Act. A search and seizure action u/s. 132(1) was carried out in the premises of the assessee and group cases on 20.01.2012 and in pursuance to such action, notices u/s.153A were issued on 17.10.2012 for the six assessment years prior to the year in which search took place. In response to such notice for the impugned assessment year assessee filed the return of income declaring the same income as was shown in the original return of income. As regard the nature of addition in dispute qua the scope of section 153A, it is borne out from the impugned assessment order, the appellate order and the records produced before us, that an information was received in the form of a document collected by the Government of India as a part of tax information exchange treaty. As per the said information received in form of USB, certain persons in India held bank accounts with HSBC Pvt. Bank (SUISSE), SA, Switzerland. The said documents also contained information with regard to the assessee which was 11 pages document, the relevant portion of which have been incorporated by the Assessing Officer in the impugned assessment order. The learned Assessing Officer has very meticulously analyzed the documents and noted that the documents contained the name of the assessee through various entities wherein assessee was linked with these accounts in some manner or the other, like;

> Portland Holding Ltd., where in the account of the said entity, assessee was shown as one of the beneficial owner of the account;

> Shagun-21, wherein the assessee has been shown as person having right of inspection;

> Willaston Investments Ltd., wherein the assessee has been found to be related to this account being beneficial owner; and

> Chotuman-1, wherein again the assessee has been shown as account holder in the bank account relating to this entity.

The total amount which stood deposited in these bank accounts for the relevant financial year, aggregated to Rs. 27,91,72,017.47, the details of which are as under:-

4. All these documents were in the possession of the Department as it was received from FT&TR Division of CBDT, much before the date of search and based on this information only search and seizure action was carried out at the various premises of the assessee. At the time of search, assessee was confronted with the said documents and his statement on oath u/s 132(4) was recorded on 20.01.2012, to verify the contents of the information contained in the said documents. The relevant question and answer have been reproduced by the Assessing Officer in his impugned assessment order. Apart from that, during the course of the assessment proceedings u/s 153A also, statement of the assessee was recorded on 03.12.2014 which too has been reproduced by the Assessing Officer in his assessment order. Since these question are quite pertinent, therefore, for the sake of ready reference, the relevant questions asked and answer given by the assessee are reproduced hereunder:-

During the assessment proceedings u/s 153A, statement of the assessee was recorded on 03.12.2014 and the relevant part of the questions and answers of this statement are reproduced as under:

5. From the perusal of the aforesaid question and answer, it is clearly evident that, firstly, no documents or any incriminating material relating to HSBC accounts in Switzerland was found from the possession and premises of the assessee; secondly, in the statement on oath recorded u/s.132(4) and also recorded during the course of assessment proceedings, nowhere the assessee has admitted of having such bank accounts or being any beneficial owner in the said bank accounts, albeit he has denied in all the questions put forth by the investigation authorities and the Assessing Officer; and lastly, the entire information and material was in possession of the Department prior to the date of search. A very important fact noted by the Assessing Officer that with a view to get further details relating to foreign bank account, reference has been sent to competent authorities in Switzerland and other authorities through FT & TR, Division of CBDT for getting the details of the account and other details which are yet to be received. This is evident from paragraph 9 of the assessment order. All these information/documents received through FT&TR, Division of CBDT were confronted to the assessee firstly during the course of search and again during the course of assessment proceedings and on both the occasions assessee has denied the entire details or having any kind of link with HSBC account. After detailed discussion, AO held that the amount as reflected in these bank accounts aggregating to Rs.27,91,72,017/- is to be taxed u/s.69. Apart from that he also held that amount of Rs.4,88,816/- is the interest which has been calculated on said deposits and the same too has been added by him u/s.69.

6. Before the ld. CIT (A), the assessee had challenged the same very legal issue, that no incriminating material has been found during the course of search, and therefore, no addition could have been made in the assessment made u/s.153A, as the earlier assessment had attained finality which remained unabated. Before the ld. CIT (A), reliance was placed upon the judgment of Hon’ble Delhi High Court in the case of Kabul Chawla (supra). However, ld. CIT (A) rejected the assessee’s ground in this score, after holding as under:-

9.1 I have considered the facts and circumstances of the case, submissions/rejoinder of the appellant inter-alia the case laws relied upon by him and perused the assessment order/remand reports of the AO. I find that an information was received from the French government under DTAA/DTAC between India “and” other countries that the appellant was having four bank accounts in/HSRC Bank Geneva, Switzerland details of the same are mentioned by the AO in the assessment order in detail.

9.2 On the basis of information received a search action was carried out on 20.01.2012 at the premises of the appellant. It is a settled law that any evidence available howsoever collected or receipt is a valid material/evidence so long as it is relevant information related to the person against whom it is utilized as has been held by the Hon’ble Supreme court in the case of Pooran Mal Etc. vs. Director of Inspection (1974) 93 ITR 505 wherein, it has been held that even if the search was illegal the material found and seized would be liable to be used against the person from whose custody it was seized.

9.3 I find that the statement has been recorded on the basis of good and cogent material considering the specific information contained in the corroborative bank statements. I hold that the statement u/s 132(4) of the Act recorded on 20.01.2012 do constitute incriminating material within the meaning or section 153A of the Act. It is settled law that the statement u/s 132(4) is deemed to be evidence under the Act. Since, the statement u/s 132(4) has been corroborated by other relevant and sufficient corroborative evidence, i.e, the documents related to foreign bank accounts received under exchange of information, it may be validly utilized as ‘incriminating material’. Therefore, considering that the assessment has been made not merely on basis of the statement but based on the information and contents of the impugned foreign bank statement/documents. Therefore, I hold that the assessment made u/s 153A of the Act is not in conflict with the judgments of the Hon’ble Courts relied upon by the appellant including that of Kabul Chawla and others. So far as decision of ITAT relied upon by the appellant in the case of Shyam Sunder Jindal is concerned, the Hon’ble ITAT has set aside the issue to the file of the AO to be adjudicated afresh after providing a reasonable opportunity of being heard and by confronting the assessee with the documents which relates to him. Further, whether an authentic document confronted to the assessee or not but in the present case even during the appellate proceedings remand reports were called for from the AO on various issues raised by the appellant and on the remand reports the appellant was given proper opportunity to file rejoinders. Further, the appellant was confronted with the authentic document, i.e. the information received from the French authorities with regard to the bank accounts of the appellant in HSBC Geneva under the DTAA/DTAC between India and other countries, Reliance is placed on judgement of Honble Delhi high court in the case of Smt. Dayawanti Vs CIT also which supports the facts of the present case. In view of the above discussion, appeal on these grounds arc dismissed.”

[Emphasis added is ours]

7. From the above finding of Ld. CIT(A), following conclusions are quite palpable:-

> Firstly, the information was received from the French Government under DTAA between India and other countries, wherein it was found that assessee was having four bank accounts in HSBC bank, Geneva, Switzerland.

> Secondly, it was on the basis of the said information received, a search was carried out on 20.01.2012.

> Thirdly, he has held that even if the material is not found from the search proceedings, then also it is a settled law that any evidence available in whatsoever manner is a valid material so long as it relevant information relating to the person against whom it is utilized.

> Fourthly, the statement recorded at the time of search itself constitute incriminating material within the meaning of Section 153A, and therefore, assessment made u/s.153A is not in conflict with the judgment of Hon’ble Delhi High Court in the case of Kabul Chawla (supra); and

> Lastly, he held that decision of the ITAT Delhi Bench in the case of Shyam Sunder Jindal in ITA No.5448/Del/2016, wherein the matter was set aside to the file of the Assessing Officer would not be applicable, because in the present case remand reports were called for on various issues and proper opportunity has been given to the assessee to file rejoinder and assessee has been confronted with the authentic document, i.e., the information received from the French Authorities with regard to the bank accounts in HSBC Geneva. He also referred to the judgment of Hon’ble Delhi High Court in the case of Smt. Dayavanti vs. CIT.

8. Before us, ld. counsel for the assessee submitted that from the perusal of the entire material placed on record and the order of the Assessing Officer as well as ld. CIT (A), it can be seen that the information as received is under DTAA by the foreign authority was made available to the Department on 28.06.2011, i.e., prior to the date of search. This fact, he submitted is also borne out from the documents submitted by the learned Department Representative which is a letter given by the Assessing Officer. Based on this information, the investigation wing carried out the search operation on the premises of the assessee on 20.01.2012 and during the course of search no document or any single material was found either relating to opening of foreign bank account or to link assessee with any of the bank account or to infer that assessee was any kind of beneficial owner in the bank account of the various entities. Even during the course of statement on oath recorded u/s. 132(4), the assessee had denied having any such bank accounts and also any kind of a link with these entities. Once neither any material has been found during the course of search nor there is any admission by the assessee in the statement recorded on oath, then it cannot be held that any kind of incriminating material or evidence has been found during the course of search and if that is so, then no addition could have been made in the assessment passed u/s.153A in view of the settled judicial principle laid down by the Hon’ble Jurisdictional High Court in various other High Courts. In support, he has relied upon the judgment of Hon’ble Delhi High Court in the case of PCIT vs. Kurele Paper Mills Pvt. Ltd., (2016) 380 ITR 0571 (Del) and reiterated the judgment of Hon’ble Jurisdictional High Court in the case of Kabul Chawla (supra) and PCIT vs. Meeta Gutgutia (supra). He also placed strong reliance upon the recent judgment of Hon’ble Delhi High Court in the case of PCIT vs. Best Infrastructure (India) Pvt. Ltd., wherein the Hon’ble High Court has held that statement recorded u/s. 132(4) by themselves does not constitute incriminating material, and therefore, the observation made by the ld. CIT (A) is again contrary to the judgment of Hon’ble Delhi High Court. Thus, he submitted that on this legal proposition only the addition made by the Assessing Officer cannot be sustained and deserves to be quashed being beyond the scope of assessment u/s.153A for the impugned assessment year.

9. On the other hand, ld. CIT-DR, submitted that, here in this case information has been received from the foreign authorities under DTAA and those information categorically goes to show that assessee was not only beneficial owner of the bank accounts of HSBC, Switzerland but his name also appears on those documents sought from foreign authorities under DTAA. The entire data extracted from USB pen drive, was handed over by French competent authority on 28.06.2011 to the Government of India which again has been handed over to respective DGIT (Inv.). It was on the basis of these information, Investigation Wing of the Department has carried out search in the case of the assessee and its group cases. During the course of search, assessee though have denied any such foreign bank account, but once the assessee was so sure that he is not the beneficiary or the owner of these bank accounts, then assessee should have signed the ‘waiver consent letter’ for further investigation in respect of bank account held in HSBC bank. This itself goes to show that assessee willfully tried not to co-operate with the Department and that is the reason why further information has been requested from the Swiss and French Authorities seeking specific information, some of which has already been received now. Assessee’s profile has found to be linked with the four entities which fact is fully borne out from such information. In the wake of such definite information and looking to the fact that the search and seizure has been carried out in the case of the assessee, then Assessing Officer had no option but to utilize such vital piece of evidence while framing the assessment u/s.153A ensued after search. What is relevant to be seen is, whether at the time of search there was any information or evidence which per se is incriminating or not and not that such material has been found during the course of search. Here in this case, the material was available with the Department and to unearth other relevant information, a search and seizure action was carried out, therefore, such an information is a vital piece an evidence which can be used in a search proceedings even in an unabated evidence. She also relied upon the judgment of Anil Kumar Bhatia, that once the search has taken place, then AO has no option but to make assessment even though no material has been found during search. Thus, she strongly relied upon the order of the ld. CIT(A).

10. Alternatively, Ld. CIT DR submitted that, precisely similar issue had come up for consideration before this Tribunal in the case of Shyam Sunder Jindal Vs. ACIT (2017) 81 com 123 (Del. Tribunal), wherein this Tribunal has set aside the matter to the file of the Assessing Officer to be adjudicated afresh, therefore following the same, this appeal should also be remanded back to the file of the Assessing Officer.

11. In rejoinder, learned counsel submitted that the decision in the case of Shyam Sunder Jindal was relied upon by the assessee before the ld. CIT (A) and ld. CIT(A) has held that here in this case assessee was given full opportunity and Assessing Officer has given remand report for each and every issues. Further there is no contradictory observation in the assessment order as was there in the case of Shyam Sunder Jindal. Moreover here in the case, the assessee has raised primarily the legal issue that the addition made by the Assessing Officer and confirmed by the ld. CIT (A) is beyond the scope of assessment u/s.153A. Hence the matter should not be restored back to the file of the Assessing Officer.

12. We have heard the rival submissions, perused the relevant material placed on record and the finding given in the impugned order with respect to legal issue raised vide ground no.5 by the assessee that the additions made in this year are beyond the scope of assessment u/s.153A, as no incriminating material was found during the course of search for the impugned Assessment Year; and the assessment had attained finality and was not abated in terms of 2^nd Proviso to Section 153A. As stated above, the original return of income was filed in July, 2006 and said return was duly accepted and processed u/s. 143(1) vide intimation dated 25.05.2007. Since no notice u/s. 143(2) was issued thereafter or any other proceedings have been commenced to disturb said return of income, accordingly, it had attained finality much prior to the date of search which was on 20.01.2012. Hence in terms of 2nd Proviso to Section 153A the assessment for the Assessment Year 2006-07 was not pending and accordingly, has to be reckoned as unabated assessment. Under the jurisdiction of Hon’ble Delhi High Court, the law is well settled that in case of unabated assessment, the additions which can be roped-in, in the assessments framed u/s.153A, would only be with regard to any incriminating material or evidence unearthed or found during the course of search. If no incriminating material has been found during the course of search, then no addition can be made in the assessment years where assessments had attained finality. The relevant observations and the ratio laid down would be discussed in the later part of this order.

13. Now keeping in view the binding judicial precedents of the Jurisdictional High Court, we shall proceed to examine the facts as are available on record. The Income Tax Department through its FT & TR Division of CBDT had received information pertaining to foreign bank accounts either held by certain Indians or were beneficiaries in these bank accounts under the exchange of information between India and France. The French Authorities on 28.06.2011 gave information in USB that certain persons in India held bank accounts in HSBC Pvt. Bank (SUISSE), Switzerland. In the said information, the name of the assessee had also figured and 11 pages document pertaining to the assessee was also received. The contents of the documents have been reproduced in the assessment order. These documents revealed that in the bank accounts of certain entities, the assessee was either beneficial owner in the account or had been shown as the person having right of inspection or as account holder. The name of the entities which held the bank accounts have already been discussed above. The total sums standing in the bank accounts for the relevant financial year, aggregated to Rs.27.92 crore in terms of INR. The details of amount appearing in the account of various entities have already been incorporated above. After receiving the said information, the Investigation Wing of the department carried out search and seizure action in the case of the assessee and group cases on 20.01.2012, to find out the assessee’s link with these bank accounts and to get some corroborative material or documents. During the course of search and seizure action, as culled out from the impugned orders as well as the material placed on record, it is an admitted fact that no documents or any incriminating material whatsoever was found or seized during the course of search and seizure action so as to remotely suggest that either the assessee was having any bank account in Switzerland with HSBC or assessee was any way linked to these bank accounts. In the statement recorded u/s. 132(4) the assessee had categorically denied having such bank accounts or having any link with the bank accounts of such entities. No material or evidence was found to rebut the denial statement of the assessee. Apart from that, even during the course of the assessment proceedings when statement was recorded by the AO, assessee continued to deny such kind of transaction and even at the stage of the assessment proceedings the Assessing Officer did not confront with any material which can be said to have been recovered from the possession of the assessee in the course of search with regard to the deposits or any kind of link in the foreign bank accounts. The ld. CIT (A) in the impugned order also (which has been incorporated above) has not held that any document or evidence qua any link with the foreign bank accounts has found during the course of search, albeit he has given a finding that to the effect that it was on the basis of the information received which was precursor to carry out search and seizure action at the premises of the assessee and such an information/material even though not found in the course of search can be utilized for the purpose of assessment. For which reference was to made judgment of Hon’ble Supreme Court in the case of Pooranmal vs. DIT, (1974) 93 ITR 505 (SC). In the said judgment, Hon’ble Supreme Court held that if any evidence or material which has been found during the course of search can still be used/utilised, even if search has been held to be invalid. Nowhere has it been laid down by the Hon’ble Supreme Court that any material or information gathered prior to the search has to be reckoned or is deemed to be found during the course of search. It was never a case of the department either before us or before the first appellate stage that in the post search anything has been found, except that the information which though was incriminating against the assessee was already in the possession of the department. Ld. CIT (A) though has tried to rope in the element of incriminating material/evidence found during the course of search by holding that statement u/s. 132(4) it constitutes incriminating material within the meaning and scope of Section 153A. However, such an observation and the finding is de hors the fact as admittedly in the statement recorded on oath u/s 132(4) at the time of search, assessee has categorically denied having such transaction or any kind of link with the foreign bank accounts. Thus, the observation of the ld. CIT (A) to this extent is erroneous on facts and hence cannot be upheld. In the letter filed by the ld. CIT-DR written by the Assessing Officer before us, it is clearly established that the information was received by the French Authority on 28.06.2011 and based on this information the investigation wing had carried out search in the case of the assessee. This fact itself is a testament that the material information which has been referred to in the assessment order was prior to the date of search and not found in the course of search or even in the post search events.

14. The information which has been received from the foreign authorities wherein the name of the assessee is appearing at the outset appears to be incriminating which warrants not only inquiry but also can lead to prima facie belief that assessee may be somehow link to these bank accounts. However whatever may be the incriminating information which can implicate assessee but the said information has been received as a result of search carried out on 20.01.2012. Once any document which though is in the nature of incriminating material but if it has not been found in the course of search, then in view of the principle laid down by the Hon’ble Jurisdictional High Court in several cases, such an addition cannot be roped in the assessment u/s.153A especially in the assessments which are not abated. If the Revenue had any incriminating material antecedent to the search, that is, it was found during the course of search or as a result of search, then in that case Revenue had various other courses of action left under the provisions of Income Tax Act, but certainly not within the ambit and scope of Section 153A read with 2^nd proviso thereto.

15. Now coming to the ratios laid down by the Hon’ble Jurisdictional High Court, first of all, in the case of Kabul Chawala (supra), the Hon’ble Court after discussing the issue threadbare and analysing the various judgments of different High Courts laid down the following legal proposition in terms of scope of addition which can be made u/s. 153A(1) which are 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 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 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.”

This judgment of the Hon’ble Delhi High Court has been followed in several judgments not only by the Hon’ble Delhi High Court but also by other Hon’ble High Court like, Pr. CIT vs. Somaya Construction Pvt. Ltd. 387 ITR 529 (Guj), CIT vs. IBC Knowledge Park Pvt. Ltd. 385 ITR 346 (Kar) and CIT vs. Gurinder Singh Bawa reported in 386 ITR 483. In the latest judgment the Hon’ble Delhi High Court in Pr. CIT vs. Meeta Gutgutia, their Lordships reiterated the same principle after discussing and analyzing catena of decisions including that of Anil Kumar Bhatia (supra) and Dayawanti Gupta. The Hon’ble High Court observed and held as under:-

“62. Subsequently, in Principal Commissioner of Income Tax-1 v. Devangi alias Rupa {supra), another Bench of the Gujarat High Court reiterated the above legal position following its earlier decision in Principal Commissioner of Income Tax v. Saumya Construction P. Ltd. {supra) and of this Court in Kabul Chawla (supra). As far as Karnataka High Court is concerned, it has in CIT v. 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 CIT-2 v. Salasar Stock Broking Ltd. {supra), too, followed the decision of this Court in Kabul Chawla (supra). In CIT v. 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 CIT v Mahesh Kumar Gupta {supra) and The Pr. Commissioner of Income Tax-9 v. Ram Avtar Verma {supra) followed the decision in Kabul Chawla (supra). The decision of this Court in Pr. Commissioner of Income Tax v. 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.”

16. Thus, following the aforesaid proposition of law and admitted fact of the case that there is no incriminating material found during the course of search qua the assessment year for which impugned addition has been made, we hold that such an addition cannot be roped in in the assessment order passed u/s 153A. Accordingly, same is directed to be deleted.

17. So far as the reliance placed by the Learned CIT DR on the judgment of Anil Kumar Bhatia, we find that the Hon’ble High Court itself had clarified that there no incriminating material was found during the course of search and therefore, no express opinion as to whether the addition can be made u/s 153A was made by their Lordships. The relevant observation in para 23 of the judgment reproduced here under, clarifies this aspect:-

“We are not concerned with a case where no incriminating material was found during the search conducted u/s 132 of the Act. We, therefore, express no opinion as to whether Section 153A can be invoked even in such a situation. That question is therefore left open.”

Hence, the reliance placed by the Learned CIT-DR on this judgment is wholly misplaced.

18. Post the judgment of Meeta Gutgutia (supra), also the same principle have been reiterated in the case of PCIT vs. Best Infrastructure (India) Pvt. Ltd. (supra), wherein the Hon’ble High Court held that during the course of search, statement recorded u/s. 132(4) by themselves does not constitute incriminating material and assumption of jurisdiction by the Assessing Officer u/s.153A solely based on statement is unsustainable when there is no incriminating material found during the course of search. Again in the case of PCIT vs. Dharampal Premchand Ltd., in ITA No.512 to 514/206, the Hon’ble Delhi High Court held that ratio laid down in the case of Kabul Chawla, Meeta Gutgutia, still holds ground and the Revenue’s contention that the matter should be referred to a larger bench was turned down. Apart from these judgments, there are catena of other judgments of other High Courts laying down similar ratio and proposition. The main underlying principle permeating in all the judicial precedents is that, in the case of the unabated assessment which had attained finality on the date of search, which are reckoned as unabated assessments, no addition over and above the originally assessed income can be made sans any incriminating material found or unearthed during the course of search. The principle reiterated time and again is that something should be found as a result of search which is incriminating in nature so as to implicate the assessee and acquire jurisdiction to make the addition, because for the completed assessment, or in other words, assessment which are not abated, the Assessing Officer is required to make re­assessment u/s.153A which is only possible when any incriminating material has been found during the course of search. If the Revenue has any information in its possession prior to the date of search and no corroborative evidence was found during the course of search so as to link the information already in hand with the material found during the course of search, then such an information for making any kind of addition ostensibly is outside the purview of Section 153A as per the binding judicial precedents of the Hon’ble Jurisdictional High Court. We again reiterate that if the Income Tax Department had any material information in its possession received from any external source and in wake of such an information search u/s 132 has been carried out and nothing incriminating has been found having live-link nexus with the said information already in hand, then the Revenue has other courses open to implicate the assessee or carry out further inquiry under the other provisions of the Act, but definitely not u/s.153A.

19. Thus, we hold that despite there being incriminating material in the possession of the Revenue which may implicate assessee, but same cannot be used within the scope of Section 153A when nothing has been found from the search, especially when assessee too has denied any such involvement and there is no material gathered during the search to rebut such a denial by the assessee. Accordingly, the addition made by the Assessing Officer for sum of Rs.28,24,48,860/- is deleted.

20. Here in this case as per the Assessing Officer still certain information are yet to be received and the material and information available with the department needs to be corroborated and needs to be further inquired into. Under these circumstances also in our opinion same cannot be done within the scope of Section 153A as we have already held that nothing has been found from the assessee during the course of search, which can preempt any post search inquiry. Albeit in abated assessments AO may have power to conduct further inquiry but not in case of unabated assessments.

21. Now coming to the decision of the Tribunal in the case of Shyam Sunder Jindal vs. CIT (supra), the Hon’ble Tribunal had set aside the matter to the file of the Assessing Officer for the reason that there were certain contradictory observation made by the Assessing Officer as the requisite information from the Swiss Bank has not been received and therefore, the matter was to be adjudicated afresh after giving proper opportunity to the Assessing Officer. Here in this case, apparently no such contradiction appears to be there in the assessment order and in any case when on jurisdictional issue, we have held that such an addition itself is beyond the scope of Section 153A and for coming to this conclusion whence already the foundational facts are available on record, then we do not deem fit/ proper to remand the matter back to the file of the Assessing Officer because that would be purely an academic exercise. Hence, we reject the contention of the ld. CIT-DR that this matter should be restored back to the file of the Assessing Officer in line with the decision of the Tribunal in the case of Shyam Sunder Jindal.

22. Before parting, we are making it very clear that we have not given any finding on merits and also to veracity of the information received by the department from the foreign authorities, as to whether assessee has any link with the foreign bank accounts or not. Since we have already quashed the addition on legal ground, therefore, the other grounds raised on other legal issues as well as grounds on merits have been rendered academic and the same are dismissed as infructuous.

23. In the result, the appeal of the assessee for the Assessment Year 2006-07 is treated as allowed.

24. So far as the Assessment Year 2008-09 is concerned, the facts and material are pari materia and our finding given above would apply mutatis mutandis. Here in this case also, the return was filed on 27.07.2007 which was duly processed u/s. 143(1) of 27.03.2009 and had attained finality. Such an assessment has to be reckoned as unabated assessment at the time of search and seizure action carried out on 20.01.2012. Here also the same material facts which was in the possession of the Department prior to the date of search has been referred and relied upon by the AO and the observation and the finding of the Assessing Officer as well as of ld. CIT(A) are exactly the same. Thus, in view of our finding given above, we delete the similar addition of Rs.14,79,99,198/- on the ground that, it is beyond the scope of Section 153A. Accordingly, the appeal for the Assessment Year 2008-09 is too treated as allowed and other grounds raised on merits have been rendered academic.

25. To sum up, both the appeals of the assessee for the Assessment Years 2006-07 & 2008-09 are allowed.

Order pronounced in the open Court on 15th, February, 2018.