Conclusion: Where there were no incriminating materials found with respect to the disallowance of expenditure made by AO, addition could not be made under section 153A by reopening the assessment on the matter, which was examined earlier during original assessment.
Held: During search operation, AO made addition by reopening the assessment under section 153A. It was held without any incriminating material during the course of search operation, addition could not be made by reopening the assessment on the matter, which was examined earlier during original assessment concluded under section 143(3). Admittedly there were no incriminating materials found with respect to the disallowance of expenditure made by AO.
FULL TEXT OF THE ITAT JUDGMENT
This appeal is preferred by assessee against the order of Commissioner of Income Tax (Appeals)–3, Gurgaon, dated 10.12.2014, for assessment year 2008-09 wherein the assessee has raised following grounds :-
“ 1. That the Ld. Assessing Officer erred in law and on facts by completing assessment under section 153A(1)(b) of The Act, 1961 vide order dated 28.12.2011. The Ld Assessing Officer passed the order without finding any incriminating evidence against the appellant is totally wrong, unjustified & illegal and same deserves to be quashed.
2. That on facts and in law disallowing expenses of Rs.1,54,988/-in totality without raising any question, without affording reasonable opportunity of being heard and without issuing the mandatory show cause notice is totally wrong, unjustified & illegal and same deserves to be allowed in full.
3. That without prejudice to the above, the Ld. CIT (Appeals) erred in law and on facts in not admitting additional evidence under rule 46A. The additional evidence was adduced due to the fact that no query was raised by the Ld. Assessing Officer before making the disallowance, without affording opportunity of being heard to the appellant. Therefore, the basis taken for not allowing the admission of additional evidence is totally wrong, unjustified, illegal and deserves to be admitted.
4. That the Appellant craves leave to add any more grounds of appeal and modify / alter any of the grounds or withdraw any of the grounds before or at the time of hearing of the appeal. ”
2. The brief facts of the case is that assessee is a director in one of the company. Search and seizure under section 132 of the Act were conducted at the residential premises of the assessee on 6.11.2009. For assessment year 2008-09 the assessee filed her return of income of Rs.92,93,960/-. In the return of income assessee has shown commission income of Rs.1,19,250/- on net basis.
3. The learned Assessing Officer on examination of the details noted that assessee has earned total receipt of Rs.2,74,238/- as commission and brokerage, other claim deduction of expenses of Rs.1,54,988/- and shown profit of Rs.1,19,250/-. During the course of assessment proceedings the assessee could not submit the supporting documents and bills etc. of the expenditure claimed of Rs.1,54,988/- and, therefore, the learned Assessing Officer disallowed the same. Vide order dated 28.12.2011 the learned Assessing Officer determined the total income of the assessee at Rs.94,48,948/-.
4. The assessee preferred appeal before the learned CIT (Appeals) and submitted that assessee has paid a sum of Rs.1,54,988/- to Mr. Vikas Babbar and further sum towards reimbursement of expenses incurred by him. Assessee submitted the confirmation and PAN number of the recipient of the income. The learned CIT (Appeals) was also requested to admit the above evidence under Rule 46A of the Act. The assessee also raised an additional ground of appeal submitting that in absence of any incriminating documents found during the course of search, no addition can be made. The learned CIT (Appeals) obtained the remand report of the Assessing Officer wherein it was submitted that search was conducted on 6.11.2009 and the impugned assessment year is 2008-09 and, therefore, during the course of search unaccounted cash was found and, therefore, the same is incriminating material. On the merits of the case the Assessing Officer submitted that in the absence of the details of expenses same cannot be accepted. The assessee submitted the rejoinder and submitted that for assessment year 2008-09 the assessment is concluded. Assessee further submitted that assessee submitted return under section 139(1) on 29.03.2008 and, therefore, in absence of any notice under section 143(2) on the date of search i.e. on 6.11.2009 the assessment was completed. On the merits the additional evidence was requested for admission.
5. The learned CIT (Appeals) dismissed the application of additional evidence of the assessee and further relying on the Bangalore Bench decision dismissed the additional ground. On the merits he also dismissed the appeal of the assessee. Therefore, assessee is in appeal before us.
6. The learned authorized representative submitted a brief synopsis. He also submitted that as on the date of search, assessment year 2008-09 was a concluded assessment. Such assessment can be disturbed only when incriminating evidences were found during the course of search. He submitted that no incriminating evidences were found during the course of search. With respect to the merits of the case, he submitted that details were not considered by the learned CIT (Appeals) though requested by filing supportive application and evidences.
7. The learned Departmental Representative submitted that even in the absence of incriminating evidences the addition can be made. She relied on the decision of Hon’ble Kerala High Court in E. N. Gopakumar Vs. CIT (2016) 75 com215 (Ker). She further relied upon the decision of the Allahabad High Court in case of CIT Vs. Raj Kumar Arora (2014) 52 taxmann.com 172 (All.) and CIT Vs. Kesarwani Zarda Bhandar in I. T. A. No. 270/2014. She further relied upon the decision of Hon’ble Delhi High Court in the case of Smt. Dayawanti Vs. CIT (2016) 390 ITR 496 (Del.) and Filatex India Ltd. Vs. CIT 49 taxmann.com 465 (Del). The main argument of the learned CIT [DR] was that as assessee is situated in Faridabad, the decision of the Hon’ble Delhi High Court in the case of CIT Vs. Kabul Chawla 380 ITR 573 (Del.) does not apply to the assessee.
8. We have carefully considered the rival contentions as also perused the orders of the lower authorities. Admittedly the facts of the case that impugned assessment year involved 2008-09 for which the return was filed under section 139(1) on 29.09.2008 and the due date for issue of the notice under section 143(2) of the Act was up to 30.09.2009, no such notice was issued to the assessee. On 6.11.2009 search under section 132(1) was carried out at the residence of the assessee. Admittedly during the course of search some cash seizure was made. However, with respect to the disallowance made admittedly no incriminating documents were found. As it is held by Hon’ble Delhi High Court and several other High Courts that in case of concluded assessment same can be disturbed, consequent to search only if there are certain incriminating documents found with respect to that addition. In nut shell, concluded assessment can only be disturbed pursuant to search if there are incriminating documents found related to that assessment year. Such a view has been taken by the Hon’ble Delhi High Court, Hon’ble Gujarat High Court, Hon’ble Karnataka High Court, Hon’ble Bombay High Court. However, contrary view has also been taken by the Hon’ble Kerala High Court in 309 ITR 131 (Ker). Admittedly neither the assessee nor the Revenue could provide us any pronouncement by the Hon’ble Punjab & Haryana High Court, which is the jurisdictional High Court of the assessee. No such decision could be found on our research too. The Hon’ble Supreme Court in the case of CIT Vs. Sinhgad Technical Education Society 397 ITR 344 (SC) though in case of 153C has held that only those assessment years for which incriminating evidences were found during the course of search in case of other persons concluded assessments can be disturbed. Furthermore, Hon’ble Supreme Court in 88 ITR 192 has held that if the court find that the language of a taxing provision is ambiguous or capable of more meaning than one, then the court has to adopt the interpretation which favours the assessee, more particularly show where provision relates to imposition of a penalty. Therefore, even in case of the assessment or on the issue of addition the interpretation which favours the assessee, in case of ambiguity shall be followed. In view of this, the balance of scale is tilted in favour of the assessee. Therefore, respectfully following the decision of Hon’ble Delhi High Court, Hon’ble Bombay High Court, Hon’ble Gujarat High Court and Hon’ble Karnataka High Court, we also state that in the present case without any incriminating material, addition cannot be made. Admittedly there are no incriminating materials found with respect to the disallowance of expenditure made by the Assessing Officer. In view of this, ground No. 1 of the appeal of the assessee is allowed.
9. The other grounds of appeal becomes infructuous in view of our decision with respect to ground No. 1 hence, they are dismissed.
In the result, appeal of the assessee is allowed.
10. The order is pronounced in the Open Court on : 16th July, 2018.