Full Judgment Text
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* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment reserved on: 04.12.2023
Judgment pronounced on: 08.12.2023
+ ITA 680/2023
PRINCIPAL COMMISSIONER OF INCOME TAX -CENTRAL -1
..... Appellant
Through: Mr Ruchir Bhatia, Sr. Standing
Counsel with Ms Deeksha Gupta,
Advocate.
versus
OXYGEN BUSINESS PARK PVT. LTD (FORMERLY KNOWN
AS ACHVIS SOFTECH PVT. LTD.) ..... Respondent
Through: Mr Ajay Vohra, Sr. Advocate with
Mr Rohit Jain, Mr Aniket D. Agrawal
and Mr Samarth Chaudhari,
Advocates.
CORAM:
HON'BLE MR. JUSTICE RAJIV SHAKDHER
HON'BLE MR. JUSTICE GIRISH KATHPALIA
[Physical Hearing/Hybrid Hearing (as per request)]
GIRISH KATHPALIA, J.:
1. By way of this appeal brought under Section 260A of the Income Tax
Act, the appellant/revenue has assailed order dated 28.06.2021 of the
Income Tax Appellate Tribunal, whereby appeal bearing No. ITA
7826/Del/2018 filed by the revenue against the assessee ( respondent herein )
pertaining to the Assessment Year 2011-12 was dismissed. On advance
notice, the respondent/assessee entered appearance through counsel. We
heard learned counsel for both sides.
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2. The appellant/revenue has proposed in this appeal the following
questions as substantial questions of law:
2.1 Whether the scope of assessment under section 153A
extends to income unearthed on the basis of
statements recorded during post search proceedings?
2.2 Whether the decision in the case of CIT Vs Kabul
Chawla (2015) 61 Taxman.com 412 (Del) applies to a
case where a fresh material/information received
after the date of search is sufficient to reopen the
assessment under section 153A [see Dr. A.V.
Sreekumar Vs CIT (2018) 90 taxman.com 355]?
However, after preliminary hearing held on 04.12.2023, learned counsel for
appellant/revenue stated that the proposed question No. 2.1 is not pressed for
the time being. That being so, we have examined only the proposed question
No. 2.2.
3. Briefly stated, circumstances relevant for present purposes are as
follows. The respondent/assessee was engaged in development of Special
Economic Zone (SEZ) for information technology enabled services in
Noida, U.P. On 30.09.2011, the respondent/assessee filed its return of
income for the Assessment Year 2011-12 and the same was processed under
Section 143(1) of the Act. Thereafter, on 29.10.2013, search and seizure
action under Section 132 of the Act was carried out at the premises of the
respondent/assessee and accordingly, notice dated 11.11.2014 under Section
153A of the Act was issued, calling upon the respondent/assessee to file
return of income consequent to the search action. On 22.03.2016, the
respondent/assessee requested the appellant/revenue to treat the original
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return of income as the return filed in response to notice under Section 153A
of the Act. In the said return of income, the respondent/assessee had
declared net profit of Rs.1,55,13,39,200/- and the same was claimed as
deduction under Section 80IAB of the Act. The Assessing Officer
disallowed the deduction claimed under Section 80IAB of the Act to the
extent of Rs.13,30,50,000/- and added back the same to the income declared
in the return of income. Further, the Assessing Officer also initiated penalty
proceedings under Section 271(1)(c) of the Act against the respondent/
assessee. Feeling aggrieved, the respondent/assessee challenged the said
order of the Assessing Officer by way of appeal before the Commissioner of
Income Tax (Appeals). In the course of appellate proceedings before
CIT(A), the respondent/assessee raised additional ground contending that
since no incriminating material belonging to the assessee was found during
the course of the said search proceedings, initiation of proceedings under
Section 153A of the Act was bad in law, especially because the assessment
proceedings stood closed under Section 143(1) of the Act. Vide order dated
27.09.2018, CIT(A) partly allowed the said appeal, including the said
additional ground, holding that according to the settled legal position,
invocation of Section 153A by revenue would not be sustainable in law
where no incriminating material pertaining to the assessee was recovered
during the search action. The appellant/revenue assailed the said order of
CIT(A) by way of appeal before the Tribunal, which appeal was dismissed
by way of the impugned order. Hence, the present appeal.
4. As mentioned above, in the course of preliminary hearing learned
counsel for the appellant/revenue did not press the proposed question No.
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2.1 and opted to confine this appeal only to the extent as to whether the
decision of this court in the case titled CIT vs Kabul Chawla, (2015) 61
taxmann.com 412 (Del) would apply also to a case where fresh material or
information is received after the date of search and consequently sufficient
to reopen the assessment under Section 153A of the Act as laid down in the
case titled Dr. A.V. Sreekumar vs CIT, (2018) 90 taxmann.com 355. On
this aspect, learned counsel for appellant/revenue submitted that although
during the search action, no incriminating material against the
respondent/assessee was recovered, but subsequently statement of the valuer
Shri B.P. Singh was recorded in post-search proceedings, which formed the
basis of disallowance of deduction claimed under Section 80IAB of the Act.
With the help of judgment in the case of Dr. A.V. Sreekumar (supra),
learned counsel for appellant/revenue contended that statement of Shri B.P.
Singh, though recorded in post-search proceedings, can be the basis of
initiation of proceedings under Section 153A of the Act.
5. So far as legal position is concerned, the decision of this court in the
case of Kabul Chawla (supra) was upheld by the Supreme Court in the case
of PCIT vs Abhisar Buildwell Pvt. Ltd. , (2023) SCC OnLine SC 481. The
issue as to whether the Assessing Officer can consider all material that is
available on record, including that found during the search and make an
assessment of total income was considered by different High Courts, taking
divergent views. Some of the High Courts, including this court took a view
that where no assessment proceedings are pending on the date of initiation
of search, the Assessing Officer may consider only the incriminating
material found during the search and is precluded from considering any
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other material derived from any other source.
6. In the case of Kabul Chawla (supra), after detailed discussion, this
court held thus:
“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 153A(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 153A 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
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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”.
7. After examining the views of different High Courts, the Supreme
Court in the case of Abhisar Buildwell (supra) approved of the view taken
by this court in the case of Kabul Chawla (supra) and held thus:
“22. For the reasons stated hereinabove, we are in complete
agreement with the view taken by the Delhi High Court in the case
of Kabul Chawla (supra) and the Gujarat High Court in the case of
Saumya Construction (supra) and the decisions of the other High
Courts taking the view that no addition can be made in respect of
the completed assessments in absence of any incriminating
material.
23. In view of the above and for the reasons stated above, it is
concluded as under:
i) that in case of search under Section 132 or requisition under
Section 132A, the AO assumes the jurisdiction for block
assessment under section 153A;
ii) all pending assessments/reassessments shall stand abated;
iii) in case any incriminating material is found/unearthed, even,
in case of unabated/completed assessments, the AO would
assume the jurisdiction to assess or reassess the „total
income‟ taking into consideration the incriminating material
unearthed during the search and the other material available
with the AO including the income declared in the returns;
and
iv) in case no incriminating material is unearthed during the
search, the AO cannot assess or reassess taking into
consideration the other material in respect of completed
assessments/unabated assessments. Meaning thereby, in
respect of completed/unabated assessments, no addition can
be made by the AO in absence of any incriminating material
found during the course of search under Section 132 or
requisition under Section 132A of the Act, 1961. However,
the completed/ unabated assessments can be re-opened by the
AO in exercise of powers under Sections 147/148 of the Act,
subject to fulfilment of the conditions as envisaged/
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mentioned under sections 147/148 of the Act and those
powers are saved”.
8. The case of Dr. A.V. Sreekumar (supra), relied upon heavily by the
appellant/revenue is completely distinguishable in the sense that in the said
case, the material considered in addition to the material unearthed during
search action was the documents received by the revenue through Tax
Evasion Petition (TEP), filed prior to the search; and that one of the
contentions was that the said documents received by the revenue through
Tax Evasion Petition could not be relied upon to make additions since the
same were not seized in the search conducted. The Kerala High Court in the
said case, expressing agreement with the aforesaid legal proposition laid
down by this court, observed that the case before it stood on different footing
insofar as the said documents received by the revenue prior to search action
were incriminating material by themselves, which led to initiation of search
action. That is not the case in the present matter. In the present matter,
admittedly, the assessment for the Assessment Year 2011-12 was finalized
on 20.01.2012 and no notice under Section 143(2) of the Act was issued, as
such no assessment was pending on the date of search action i.e. 29.10.2013.
Also admittedly, in the present case, during the search action against the
respondent/assessee no incriminating material was found and the material in
the form of statement of Shri B.P. Singh now sought to be relied upon by the
appellant/revenue was recorded subsequent to the search action. Therefore,
the proposed question of law numbered 2.2 in the memo of appeal cannot be
admitted as substantial question of law.
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By:VAISHALI CHAUHAN
Signing Date:08.12.2023
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9. In view of the aforesaid, we are unable to find any substantial question
of law in this appeal for our consideration under Section 260A of the Act.
10. Therefore, the appeal is dismissed.
GIRISH KATHPALIA
(JUDGE)
RAJIV SHAKDHER
(JUDGE)
DECEMBER 08, 2023/as
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ITA 680/2023 Page 8 of 8 pages
Digitally Signed
By:VAISHALI CHAUHAN
Signing Date:08.12.2023
12:09:49