Case Law Details
Meena Nayyar Vs ACIT (ITAT Delhi)
The Income Tax Appellate Tribunal (ITAT), Delhi Bench, has recently, in an appeal filed before it, held that no additions can be made de hors any incriminating material for assessment under Section 153A of the Income Tax Act.
The aforesaid observation was made by the Delhi ITAT, when appeals were filed before it by the assessee, as against the four separate orders of the CIT (Appeals), New Delhi, all dated 29.08.2019 for Assessment Years 2011-12, 2013-14, 2014-15 7 2015-16.
The common thread running through the assessee’s appeals being that additions had been made de hors any incriminating material as it is an assessment under Section 153A of the Income Tax Act, 1961 pursuant to search, the brief facts of the case were that a search & seizure operation and survey operation under Section 132/132A of the Income Tax Act was conducted by the Investigation Wing of the Department on 18.11.2016 in Nayyar Group of cases.
In the said operation, the assessee’s residential premise was also covered. And, a notice under Section 153A of the Income Tax Act was issued.
In ITA No.8721/Del/2019 (AY 2011-12), the assessee was aggrieved by the addition of Rs.85,300/- by the CIT (A), wherein the plea of the assessee was that the addition is not based upon any incriminating material found but that the AO had made the assessment on the basis of bank statement of assessee, submitted during the course of assessment. Hence, it was pleaded by the assessee that this addition is not based upon incriminating material and, therefore that, the same is not sustainable in law.
Thereafter, the CIT (A) further made a cash inflow & outflow statement on the basis of assessee’s submission only and made an addition of Rs.85,300/, while it was pleaded by the counsel of the assessee that there is no incriminating material found in this regard.
He also added that It is only the documents submitted during the course of assessment proceedings and that it is based on the above, addition had been arrived at.
In ITA No.8722/Del/2019 (AY 2013-14), the assessee was aggrieved by the addition of Rs.53,500/- on account of deposit in the bank account. In this case also, assessee’s plea was similar that no incriminating material was found and that addition is based upon assessee’s submission made during the assessment proceedings.
In ITA No.8723/Del/2019 (AY 2014-15), the assessee was aggrieved by the addition of Rs.4,60,653/-, Rs.37,180/-, Rs.67,617/- & Rs.10,070/- on account of deposit made in the bank account being long term capital gain on the sale of jewellery, on account of cash transactions, on account of accumulated rental income & on account of investments respectively. Here again, the assessee’s plea was that the addition is based upon documents submitted by the assessee during the course of the assessment and that it was not that any incriminating material was found.
In ITA No.8724/Del/2019 (AY 2015-16), the assessee was aggrieved by the addition of Rs.64,602/-, Rs.2,73,270/- & Rs.1,34,520/- on account of a deposit made in the bank account being capital gain on the sale of jewellery, on account of cash transactions & on account of accumulated rental income respectively. Here again, the assessee’s plea was the same that the addition was made de hors any incriminating material found but from the documents submitted by the assessee during the course of the assessment.
Hearing the opposing contentions of both sides as submitted by Shri Anil Jain, CA, on behalf of the assessee, and by Ms Sarita Kumari, the CIT DR, on behalf of the Revenue, the ITAT observed:
“We have carefully considered the submissions and perused the orders of the authorities below. The undisputed fact is that all the assessment years are completed assessments. It is not disputed that the impugned additions are devoid of any incriminating material whatsoever found during the course of search. There is no mention of incriminating material found at the time of search on the basis of which the addition has been made. The ratio laid down by the Hon’ble High Court of Delhi in the case of Kabul Chawla (supra) squarely apply on the facts of the case.”
“We find that facts in the present case are similar to the above case of Hon’ble Delhi High Court and moreover, in similar circumstances, in the assessee’s son case in ITA Nos.20 to 24/Del/2020 for AYs 2011-12 to 2015-16, ITAT has deleted the similar additions vide order dated 21.06.2022. Ld. DR for the Revenue could not dispute the proposition that these additions are made de hors of any incriminating material”, the coram of Astha Chandra, the Judicial Member, and Shamim Yahya, the Accountant Member added.
Thus, the Delhi ITAT finally held:
“Hence, we set aside the orders of the authorities below and delete the additions in all the four appeals. In the result, all the four appeals filed by the assessee are allowed.”
FULL TEXT OF THE ORDER OF ITAT DELHI
The above four separate appeals by the assessee preferred against the four separate orders of ld. CIT (Appeals)-27, New Delhi all dated 29.08.2019 for AYs 2011-12, 2013-14, 2014-15 7 2015-16.
2. Since the common grievance is involved in all these appeals in different quantum, these appeals are heard together and disposed off by this common order for the sake of convenience.
3. The common thread running through the assessee’s appeals in all the above four cases is that additions have been made de hors any incriminating material as it is an assessment under section 153A of the Income-tax Act, 1961 (for short ‘the Act’) pursuant to search.
4. A search & seizure operation and survey operation under section 132/132A of the Act was conducted by the Investigation Wing of the Department on 18.11.2016 in Nayyar Group of cases. Assessee’s residential premise was also covered. A notice u/s 153A of the Act was
5. In ITA No.8721/Del/2019 (AY 2011-12), the assessee is aggrieved by the addition of Rs.85,300/- by the ld. CIT (A). The plea of the assessee is that the addition is not based upon any incriminating material found but AO has made the assessment on the basis of bank statement of assessee submitted during the course of assessment. Hence, it is assessee’s plea that this addition is not based upon incriminating material and, therefore, not sustainable in law.
5.1 Ld. CIT (A) further has made a cash inflow & outflow statement on the basis of assessee’ s submission only and made an addition of Rs.85,300/-. Ld. Counsel of the assessee pleaded that there is no incriminating material found in this regard. It is only the documents submitted during the course of assessment proceedings and the above addition has been arrived at.
6. In ITA No.8722/Del/2019 (AY 2013-14), the assessee is aggrieved by the addition of Rs.53,500/- on account of deposit in the bank account. In this case also, assessee’s plea is similar that no incriminating material was found and the addition is based upon assessee’s submission made during the assessment proceedings.
7. In ITA No.8723/Del/2019 (AY 2014-15), the assessee is aggrieved by the addition of Rs.4,60,653/-, Rs.37,180/-, Rs.67,617/- & Rs.10,070/- on account of deposit made in the bank account being long term capital gain on the sale of jewellery, on account of cash transactions, on account of accumulated rental income & on account of investments respectively. Here again, the assessee’ s plea is that addition is based upon documents submitted by the assessee during the course of assessment and it was not that any incriminating material was found.
8. In ITA No.8724/Del/2019 (AY 2015-16), the assessee is aggrieved by the addition of Rs.64,602/-, Rs.2,73,270/- & Rs. 1,34,520/- on account of deposit made in the bank account being capital gain on the sale of jewellery, on account of cash transactions & on account of accumulated rental income respectively. Here again, the assessee’ s plea is same that the addition is made de hors any incriminating material found but from the documents submitted by the assessee during the course of assessment.
9. Ld. Counsel of the assessee pleaded that search has been conducted on 18.11.2016 and the assessee has regularly filed the ITR within the time prescribed u/s 139 of the Act. So, it has been pleaded that all these four assessment years are completed assessment, hence additions in these years should have been made on the basis of incriminating material found during the course of search. He pleaded that as the additions are not based on any incriminating material found during the course of search, hence all the additions are liable to be deleted. For this proposition, he relied upon the following case laws :-
(i) PCIT vs. Meeta Gutgutia of Hon’ble Delhi High Court in ITA 306/2017;
(ii) PCIT vs. Meeta Gugutia 257 Taxman 441, wherein SLP of the Department has been dismissed by Hon’ble Supreme Court;
(iii) CIT vs. Kabul Chawla of Hon’ble Delhi High Court in ITA 707/2014; and
(iv) Further in the case of the son of the assessee, Shri Kartikay Nayyar, additions have been deleted by the coordinate Bench of the Tribunal following the judgment of Hon’ble Delhi High Court in the case of Kabul Chawla.
10. We have carefully considered the submissions and perused the orders of the authorities below. The undisputed fact is that all the assessment years are completed assessments. It is not disputed that the impugned additions are de void of any incriminating material whatsoever found during the course of search. There is no mentioning of incriminating material found at the time of search on the basis of which the addition has been made. The ratio laid down by the Hon’ble High Court of Delhi in the case of Kabul Chawla (supra) squarely apply on the facts of the case. The Hon’ble High Court concluded by holding as under:-
“37. On a conspectus of Section 153 A(1) of the Act, read with the provisions 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.
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.
Conclusion
38. The present appeals concern AYs, 2002-03, 2005-06 and 2006-07.0n the date of the search the said assessments already stood completed. Since no incriminating material was unearthed during the search, no additions could have been made to the income already assessed.”
11. We find that facts in the present case are similar to the above case of Hon’ble Delhi High Court and moreover, in similar circumstances, in assessee’s son case in ITA Nos.20 to 24/Del/2020 for AYs 2011-12 to 2015-16, ITAT has deleted the similar additions vide order dated 21.06.2022. Ld. DR for the Revenue could not dispute the proposition that these additions are made de hors of any incriminating material. Hence, we set aside the orders of the authorities below and delete the additions in all the four appeals.
12. In the result, all the four appeals filed by the assessee are allowed.
Order pronounced in the open court on this 6th day of April, 2023.
