IN INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : C NEW DELHI BEFORE SHRI H.S.SIDHU, J.M. AND SHRI J.SUDHAKAR REDDY, AM ITA No: 2285/Del/2013 AY : 2007-08 ACIT, Circle 5 vs. Gunvardhan Vyapar Pvt.Ltd. New Delhi 13-B, 3rd Floor, Netaji Subhash Marg Darya Ganj New Delhi 110 002 ITA No: 2286/Del/2013 AY : 2008-09 ACIT, Circle 5 vs. Gunvardhan Vyapar Pvt.Ltd. New Delhi 13-B, 3rd Floor, Netaji Subhash Marg Darya Ganj New Delhi 110 002 & Cross Objection No. 90/Del/2014 (In ITA 2286/Del/2013) A.Y. 2008-09 Gunvrdhan Vyapar Pvt.Ltd. vs. ACIT, Circle 5 New Delhi New Delhi (Appellant) (Respondent) 1 Appellant by : Sh. Gautam Jain, FCA And Mr.Piyush Kr.Kamal, Adv. Respondent by : Sh.AK Saroha, CIT, DR ORDER PER J.SUDHAKAR REDDY, ACCOUNTANT MEMBER Both these appeals are filed by Revenue directed against order of Ld.CIT(Appeals) for A.Y. 2007-08 and 2008- 09 dated 4.2.2013. Cross Objection is filed by assessee. 2. Facts in brief:- search and seizure operation u/s 132 of Income Tax Act, 1961 (the Act) was carried on in Rajdarbar Group cases on 31.8.2007. Notice u/s 153C of Act was issued to assessee on 21.7.2010. Assessment order was framed u/s 153C read with s.143(3) of Act on 27.10.2012. Admittedly there is no incriminating material found during course of search, based on which additions were made for both Assessment Years. 3. Ld.Counsel for assessee raised legal issue under Rule 27 of ITAT Rules. He submitted that as additions in question for both A.Ys were not based on any incriminating 2 material found and seized during course of search in case of Rajdarbar Group, and as assessments for both A.Ys have not abated, issues are covered in favour of assessee by decision of Jurisdictional High Court in case of CIT, Central Circle-3 vs. Kabul Chawla (2015) 16 Taxmann.com 412(Delhi). 4. Ld.D.R. on other hand strongly disputed contentions of assessee and submitted that : (a) judgement of Jurisdictional High Court in case of Kabul Chawla (supra) concerns interpretation of S.153A of Act only and does not cover case of assessee. (b) case of assessee is covered by propositions laid down by Division Bench of High Court in case of Filatex India Ltd. vs. CIT (2014) 49 Taxmann.com 465 (Delhi). He extensively read decision and argued that Bench should follow binding decision of Jurisdictional High Court in case of Filatex India Ltd. (supra). He also relied on judgement of Hon ble Delhi High Court in case of CIT vs. Shri Anil Kumar Bhatia, 24 Taxmann.com 98 (Del). (c) He further relied on decision of Jurisdictional High Court in case of CIT vs. RRJ Securities Ltd. (2015) 62 Taxmann.com 391 (Del) and submitted that propositions laid down therein squarely applies to facts of this case. 3 (d) He argued that Cross Objections cannot be admitted as Registry has been asked to clarify date of service of notice to department and as apparently there is delay of more than one year in filing Cross Objections. (e) That as on date of search i.e. 31.7.2008 assessments for A.Y. 2007-08 and 2008-09 have abated and hence A.O. was right in passing his orders by taking into account all material that was required for completing assessments. 5. In reply Ld.Counsel for assessee submitted that, this ground was raised before Ld.CIT(A) and was decided against him and hence under Rule 27 of ITAT Rules assessee has right to defend case on this ground. On issue of abatement he submitted that time for issue of notice u/s 143(2) of Act had expired and that no assessment proceeding was pending before A.O. for both A.Ys as on date of issue of notice u/s 153C of Act and that in terms of decision in case of RRJ Securities Ltd. (supra), date of initiation of search for purpose of Second Proviso to S.153A shall be construed with reference to date on which valuable assets or documents were received by assessee (other than searched person). He relied on para 37 and 38 of decision in case of CIT vs. RRJ Securities Ltd. (supra) as well as on para 22 to counter submissions of Ld.D.R. 4 6. After hearing rival contentions we find as follows. 6.1. This legal issue was raised before Ld.CIT(A) by way of ground no.1. At para 3.1.4, Ld.CIT(A) has held as follows. 3.1.4. U/s 153A/153C A.O. is duty bound to issue notices requesting for filing returns separately for each of six A.Ys immediately preceding A.Y. relevant to P.Y. in which search has been conducted or requisition u/s 132A of Act has been made. There is mandate in section to assess or reassess income for all such A.Ys. Thus AO is required to assess income afresh. legislature in their wisdom have deemed it fit not to restrict assessment u/s 153A/153C to undisclosed income found during search. There is no requirement that assessment can be done only if evidences relating to undisclosed income have been seized. There is also no requirement that assessment needs to be based only on evidences gathered in course of action u/s 132 or requisition u/s 132A. Further assessment u/s 153A/153C is not comparable to block assessment under chapter XIV-B where there was concept of assessment of undisclosed income for block period as whole. 3.1.5. In view of above, first ground raised by assessee regarding validity of assessment u/s 153C is rejected. 5 7. Thus in terms of Rule 27 of ITAT Rules, assessee is entitled to defend appeal on this legal issue de hors Cross Objection. Even otherwise Hon ble Bombay High Court in case of 83 ITR 245 B.R.Barsani held that respondent can defend appeal on any new legal ground, though for first time. Hence we admit this legal issue. 8. next issue is whether assessments for both these A.Ys have abated or not? Notice u/s 153C of Act was issued to assessee on 21.7.2010. 8.1. At para 14 of decision in case of RRJ Securities (supra) reads as follows. 14. Proviso to S.153C(1) of Act expressly indicates that reference to date of initiation of search for purposes of second proviso to s.153A shall be construed as reference to date on which valuable assets or documents are received by AO of assessee (other than searched person). Thus, by virtue of second proviso to s.153A of Act, assessments/reassessments that were pending on date of receiving such assets, books of accounts or documents would abate. 15. controversy in this regard is no longer res integra. Coordinate Bench of this Court in SSP Aviation Ltd. vs. DyCIT (2012) 346 ITR 177 has held that: 6 in case of searched person, date with reference to which proceedings for assessment or reassessment of any Assessment Year within period of six A.Ys shall abate, is date of initiation of search u/s 132 or requisition u/s 132A. However, in case of other person, such date will be date of receiving books of accounts or documents or assets seized or requisition by AO having jurisdiction over such other person. In case of other person, question of pendency and abatement of proceedings of assessment or reassessment to six AYs would have to be examined with reference to such date. 8.2. Respectfully applying binding propositions of law laid down by Jurisdictional High Court to facts of case on hand, we hold that assessment for both these A.Ys have not abated. returns of income for both these A.Ys were filed on 31.10.2007 and 30.9.2008 respectively and time limit allowed for issue of notice u/s 143(2) of Act has expired prior to 21.7.2010. 8.3. assessee has placed copy of satisfactory note for initiating proceedings u/s 153C of Act at page 79 of paper book. There is some over writing on date of recording Satisfaction Note but year 2010 is clear. Even going by year of recording this Satisfaction Note, we have to hold that assessment in impugned A.Ys have not abated. 7 9. This brings us to issue whether decision of Jurisdictional High Court in case of Kabul Chawla (supra) applies to facts of this case. Ld.D.R. has not disputed fact that additions in this case are not based on any incriminating material. Hon ble Court has held as follows. 37. On conspectus of Section 153A(1) of Act, read with provisos thereto, and in light of law explained in aforementioned decisions, legal position that emerges is as under: (i) Once search takes place under Section 132 of Act, notice under Section 153 (1) will have to be mandatorily issued to person searched requiring him to file returns for six AYs immediately preceding previous year relevant to AY in which search takes place. (ii) Assessments and reassessments pending on date of search shall abate. total income for such AYs will have to be computed by AOs as fresh exercise. (iii) AO will exercise normal assessment powers in respect of six years previous to relevant AY in which search takes place. AO has power to assess and reassess total income of aforementioned six years in separate assessment orders for each of six years. In other words there will be only one assessment order in respect of each of six AYs in which both disclosed and undisclosed income would be brought to tax . (iv) Although Section 153 does not say that additions should be strictly made on basis of evidence found in course of search, or other post-search material or information available with AO which can be related to evidence found, it does not mean that assessment can be arbitrary or made without any relevance or nexus with seized material. Obviously assessment has to be made under this Section only on basis of seized material. (v) In absence of any incriminating material, completed assessment can be reiterated and abated assessment or reassessment can be made. word 8 assess in Section 153 is relatable to abated proceedings (i.e. those pending on date of search) and word reassess to completed assessment proceedings. (vi) Insofar as pending assessments are concerned, jurisdiction to make original assessment and assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on basis of findings of search and any other material existing or brought on record of AO. (vii) Completed assessments can be interfered with by AO while making assessment under Section 153 only on basis of some incriminating material unearthed during course of search or requisition of documents or undisclosed income or property discovered in course of search which were not produced or not already disclosed or made known in course of original assessment. 9.1. submissions by Ld.D.R. that proposition laid down in this case is not applicable to amount done in pursuance to notice u/s 153C of Act is devoid of merit. 10. In case of RRJ Securities Ltd. Hon ble High Court has held at para 22 as follows. 22. aforesaid principles would be equally applicable to proceedings initiated under Section 153C of Act as Section 153C(1) of Act expressly provides that once AO has received money, bullion, jewellery or other valuable articles or thing or books of account or documents seized from AO of searched person, he would proceed to assess or reassess income of person to whom such assets/books belong in accordance with Section 153A of Act. 9 10.1. Thereafter at paras 37 and 38 it is held as follows. 37. As expressly indicated under Section 153C of Act assessment or reassessment of income of person other than searched person would proceed in accordance with provisions of Section 153A of Act. concluded assessments cannot be interfered with under Section 153A of Act unless incriminating material belonging to Assessee has been seized. 38. As indicated above, in present case, documents seized had no relevance or bearing on income of Assessee for relevant assessment years and could not possibly reflect any undisclosed income. ITA 164/2015 & Other Connected Matters Page 40 of 40 This being undisputed position, no investigation was necessary. Thus, provisions of section 153C, which are to enable investigation in respect of seized asset, could not be resorted to; AO had no jurisdiction to make reassessment under Section 153C of Act. 10.2. Jurisdictional High Court in case of Kabul Chawla has considered decision in case of Filatex (supra) as well as judgement in case of Anil Kumar Bhatia (supra), so there is no merit in submissions of Ld.D.R. 10 11. We respectfully follow decision of Jurisdictional High Court in case of Kabul Chawla (supra) and RRJ Securities (supra) and uphold contentions of assessee. In result we dismiss both appeals of Revenue. 12. In result both appeals of Revenue are dismissed, whereas C.O.90/Del/14 is allowed. Order pronounced in Open Court on 27th September,2016 Sd/- Sd/- (H.S. SIDHU) (J.SUDHAKAR REDDY) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 27th September, 2016 *manga 11 Copy of Order forwarded to: 1. Appellant; 2.Respondent; 3.CIT; 4.CIT(A); 5.DR; 6.Guard File By Order Asst. Registrar 12 ACIT, Circle-5, New Delhi v. Gunvardhan Vyapar Pvt. Ltd