PCIT Vs PGF LTD (Delhi High Court)
Conclusion: Where appellant-Revenue did not reveal that the statements recorded under Section 132(4) disclose some incriminating material on the basis of which orders under Section 153A had been passed then, no assessment under Section 153A should be made.
Held: An appeal had been filed by the Revenue, challenging the consolidated order passed by Tribunal whereby Tribunal had upheld order passed by CIT (Appeals) quashing the assessment order passed under Section 153A for the respective Assessment Years pursuant to the search carried out at the premises of the assessee under Section 132. Both the appellate authorities, CIT(Appeal) and the ITAT had returned concurrent findings of fact that no incriminating material was found during the search conducted, warranting assessment under Section 153A of Income Tax Act, 1961. Revenue submitted that it was not necessary that incriminating material was found during search under Section 132 for an order under Section 153A to be passed even where original assessments had attained finality and had not abated. It was held that given the fact that AO had not even referred to the judgment of the Punjab & Haryana High Court nor had he relied upon the conclusions of the High Court and that the SEBI Order, High Court judgment and the Special Audit report were made before the date of search, it could be concluded that assessment had not been framed on the basis of incriminating material culled from the decision of the High Court or found during search. Further, the judgment of the Supreme Court which was rendered on 12th March, 2013 could not be said to incriminating material found during search conducted on in 2005 and, therefore, could not form the basis of the assessment order passed in 2007. The Supreme Court in the said decision had only directed the Income tax Department to examine any wrong doings by the respondent. At best, such directions could constitute material for initiating proceedings under Section 148 provided some material was found as a result of the enquiry conducted by the Income Tax Department pursuant to the decision of the Supreme Court. However, such findings of the Supreme Court in 2013 could not constitute incriminating material found during search in 2005 which would validate assessment order under Section 1 53A passed in 2007. The issue did not arise for consideration unless it could be demonstrated by the Appellant-Revenue that the statements recorded under Section 132(4) disclose some incriminating material on the basis of which orders under Section 153A had been passed.” Consequently, given the facts and circumstances of the present cases, no substantial question of law arose for consideration of this Court.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1. The aforesaid appeals have been filed by the Appellant-Revenue, challenging the consolidated order dated 29th June, 2018 passed by the Income Tax Appellate Tribunal (for short ‘ITAT’) in ITA Nos.2131- 2134/Del/2010 for the Assessment Years 2000-01 to 2003-04, whereby the ITAT has upheld separate Orders dated 10th February, 2010 passed by the Commissioner of Income Tax (Appeals)-III, New Delhi (for short CIT(A) quashing the assessment order(s) dated 28th December, 2007 passed under Section 153A of the Income Tax Act, 1961 (for short ‘the Act, 1961’) for the respective Assessment Years pursuant to the search carried out on 22nd September, 2005 at the premises of the Respondent-Assessee under Section 132 of the Act, 1961.
2. Both the appellate authorities, viz., CIT(Appeal) and the ITAT have returned concurrent findings of fact that no incriminating material was found during the search conducted on 22nd September, 2005 warranting assessment under Section 153A of the Act, 1961.
SUBMISSIONS ON BEHALF OF THE REVENUE
3. The appeals and questions of law, as formulated by the Appellant– Revenue are premised on the submission that it is not necessary that incriminating material is found during search under Section 132 of the Act, 1961 for an order under Section 153A of the Act, 1961 to be passed even where original assessments have attained finality and have not abated. The questions of law as suggested in one of the appeal being ITA 527/2019 are reproduced here in below: –
“A. Whether Ld. ITAT has erred in dismissing the appeal of the revenue by relying on the decision of the Hon ’ble High Court in CIT v. Kabul Chawla 380 ITR 573 CIT, without properly appreciating the provisions contained in section 153A of the IT Act which does not require to have any incriminating material found during the search and seizure action as an essential requirement for making an addition in the assessment?
B. Whether the Ld. ITAT has erred in dismissing the appeal of the revenue by relying on the decision of the Hon ’ble High Court in CIT v. Kabul Chawla 380 ITR 573, without properly appreciating the provisions contained in Section 153A which starts with the non obstante clause which seeks to operate in the supersession of provisions contained in Section 139, 147, 148, 149, 151 and 153?
C. Whether Ld. ITAT has erred in dismissing the appeal of the revenue by relying on the decision of the Hon ’ble High Court in CIT Kabul Chawla 380 ITR 473, without properly appreciating the provisions contained in Section 153A which have been inserted w.e.f. 01.06.2003 after the provisions contained in Section 158 BC and other allied provisions contained in chapter XIV – B which were made inapplicable after 31.05.2003 as per section 158BI of the IT Act?
D. Whether the Hon ’ble ITAT has erred in not appreciating the Hon ’ble Allaha bad High Court’s decision in the case of CIT(Central) Kanpur vs. Rajkumar Arora (2014) 211 Taxmann 453 that the assessing officer has power to reassess returns of assessee not only for undisclosed income which was found during search operation but also with regard to material that was available at the time of original assessment?
E. Whether the Ld. ITAT has erred in allowing the appeal of the assessee without examining the merits of the additions made pursuant to the recasted Profit and Loss Account submitted by the assessee in response to notice issued under Section 153A?
4. By way of separate applications bearing CM Nos.49886-49889 of 2019, the Appellant Revenue has filed judgments of the Supreme Court of India in PGF Ltd. v. UOI [2015] 13 SCC 50 and Punjab & Haryana High Court in PGF v. UOI [2004] SCC Online P&H 676 and proposed two further questions of law on the basis of findings of the High Court and Supreme Court wherein the sale and purchase of agricultural land by the Respondent-Assessee have been held by Courts to bogus/sham/paper
5. During the course of hearing before this Court, the learned Senior Standing Counsel for the Revenue had argued that the statement recorded during the course of search under Section 132(4) of the Act, 1961 can be treated as incriminating material/document on the basis of which addition/disallowance can be made under Section 153A of the Act, 1961. For the said proposition, reliance was placed on the decision of this Court in the case of Smt. Dayawanti Gupta v. CIT: [2017] 390 ITR 496.
6. Since none had appeared for the Respondent-assessee despite being served, this Court had requested Mr. Sachit Jolly, Advocate, to appear as Amicus Curiae.
SUBMISSIONS ON BEHALF OF THE LEARNED AMICUS CURIAE
7. Sachit Jolly, learned Amicus Curiae submitted that in terms of Section 153A(1) of the Act, 1961 where search is initiated under Section 132 of the Act, 1961 assessments for six assessment years preceding the date of search may be reopened and completed under that Section. He stated that this Court as well as other High Courts have consistently held that no addition under Section 1 53A can be made in the absence of incriminating material found during the search, particularly where original assessments have already concluded.
8. Learned Amicus Curiae submitted that the second proviso to Section 153A(1) of the Act, 1961 provides that if any assessment or reassessment proceedings relating to any assessment year falling within the period of the six assessment years is pending on the date of search, then the same shall ‘abate’ and assessment shall be completed under Section 153A of the Act, 1961. He stated that in such a case, an argument can be made that the scope and remit of assessment will not only include additions on the basis of documents found during search but also additions which could have been made in the regular assessment. Therefore, according to him, the first issue which requires consideration is whether any proceedings had abated by virtue of the search or whether the scope of present Assessment Years are to be restricted to incriminating documents found during the search. In this context, the learned counsel Amicus Curiae highlighted the following facts for each of the Assessment Year(s):-
