Income Tax Appellate Tribunal – Lucknow
Shri Manoj Kumar Agarwal, Kanpur vs Deputy Commissioner Of Income … on 16 December, 2021 I.T.(SS)A. No.427 & 428/Lkw/2019
Assessment year:2010-11 & 11-12 1
IN THE INCOME TAX APPELLATE TRIBUNAL
LUCKNOW BENCH ‘A’, LUCKNOW
(THROUGH VIRTUAL HEARING)
BEFORE SHRI A. D. JAIN, VICE PRESIDENT
AND SHRI T. S. KAPOOR, ACCOUNTANT MEMBER
I.T.(SS)A. No.427 & 428/Lkw/2019
Assessment Years:2010-11 & 2011-12
Shri Manoj Kumar Agarwal, Vs. Dy.C.I.T.,
X-1/135, G. T. Road, Central Circle-2,
Krishna Puram, Kanpur.
Kanpur.
PAN:AFPPA5170H
(Appellant) (Respondent)
Appellant by Shri P. K. Kapoor, C. A.
Respondent by Smt. Sheela Chopra, CIT, D.R.
Date of hearing 14/12/2021
Date of pronouncement 16/12/2021
ORDER
PER T. S. KAPOOR:A.M.
These two appeals have been filed by the assessee against the
common order of learned CIT(A)-IV, Kanpur dated 29/03/2019. The
grounds of appeal taken by the assessee are similar in both the appeals.
Both the appeals were heard together therefore, for the sake of
convenience a common and consolidated order is being passed.
2. The Learned counsel for the assessee, at the time of hearing,
argued only grounds Nos. 1 and 2 which are common in both the appeals
and for the sake of completeness the same are reproduced below:
I.T.(SS)A. No.427 & 428/Lkw/2019
Assessment year:2010-11 & 11-12 2
“1. Because the learned CIT(A) was wrong in law & on
facts in confirming the assessment order passed by Assessing
Officer u/s 153A of the Act as the same was not in
consonance with the settled position of law vis-à-vis search
cases.
2. Because the learned CIT(A) has erred in law and on
facts in upholding the assessment ignoring the settled position
of law that provisions of section 153A, in case where
proceedings are not pending, could not be applied in absence
of any incriminating material.”
3. Learned counsel for the assessee invited our attention to the facts of
these cases and submitted that a search & seizure operation was carried
out on 27/11/2015 on Chaurasia Group and accordingly assessee was
required to file income tax returns u/s 153A of the Act and which the
assessees had duly filed. It was submitted that Assessing Officer, in both
the years, while making the addition, has not referred to any incriminating
documents but has made the additions on the basis of entries in the books
of accounts which is not permissible under the law as in these years, the
assessments stood completed before the date of search and under these
circumstances the Hon’ble Delhi High Court in the case of Pr. CIT vs.
Meeta Gutgutia [2017] 395 ITR 526 has held that in the case of completed
assessments, the additions can only be made on the basis of incriminating
material, if any. It was submitted that the SLP filed by the Revenue
against the order of Hon’ble Delhi High Court has also been dismissed by
Hon’ble Supreme Court. Learned counsel for the assessee submitted that
Hon’ble Delhi High Court has categorically held that in the absence of
incriminating documents the additions cannot be made in case of
completed assessments. The Learned counsel for the assessee further
submitted that the Lucknow Bench of the Tribunal, in various cases, has
allowed appeals of the various assessees under similar facts and
I.T.(SS)A. No.427 & 428/Lkw/2019
Assessment year:2010-11 & 11-12 3
circumstances and in this respect reference was made to the following
case laws decided by Lucknow Bench of the Tribunal:
(i) I.T.(SS)A. No.551/Lkw/2019 in the case of Ashish Kumar
Chaurasia HUF vs. Dy. CIT, Central Circle-II, Kanpur
(ii) I.T.(SS)A. No.89/Lkw/2019 in the case of Ashish Kumar
Chaurasia HUF vs. Dy. CIT, Central Circle-II, Kanpur
(iii) I.T.(SS)A. Nos.379 & 380/Lkw/2019 in the case of Smt.
Sandhya Agarwal vs. Dy. CIT, Central Circle-1, Kanpur
(iv) I.T.(SS)A. No.417/Lkw/2019 in the case of Siddarth Gupta
vs. Dy. CIT, Central Circle-II, Kanpur.
3.1 Learned counsel for the assessee further submitted that the
proposition that in the cases of completed assessments, the additions can
only be made on the basis of incriminating material is further strengthened
by the order of Hon’ble Supreme Court in the landmark decision of CIT vs.
Sinhgad Technical Education Society (2017) 397 ITR 344 (SC) wherein
Hon’ble Supreme Court held that there must be incriminating material
relating to that year while making additions u/s 153C of the Act. It was
submitted that with these findings Hon’ble Supreme Court has further
affirmed that for making additions u/s 153A/153C, the existence of
incriminating material is sine qua non. Learned counsel for the assessee
filed a chart containing therein the I.T.A. Nos., assessment years involved,
date of filing of income tax returns along with mentioning of respective
paper book pages. The chart further contained time limits for issuing
notice u/s 143(2) where assessment was not completed u/s 143(3) of the
Act. It was argued that since in all these cases additions have not been
made on the basis of incriminating material and the assessments stood
completed before the date of search therefore, additions sustained by
learned CIT(A) are not in accordance with law and needs to be deleted. It
was submitted that learned CIT(A) has dismissed this ground of appeal by
holding that for making addition u/s 153A, there is no requirement that the
I.T.(SS)A. No.427 & 428/Lkw/2019
Assessment year:2010-11 & 11-12 4
addition can only be made on the basis of incriminating material only.
Learned counsel for the assessee submitted that the case laws relied on by
learned CIT(A) are not applicable to the facts and circumstances of the
assessee as Hon’ble Supreme Court in the case of Pr. CIT vs. Meeta
Gutgutia (supra) has confirmed the findings of Hon’ble Delhi High Court
wherein it has been held that the addition u/s 153A cannot be made in the
absence of incriminating material.
4. Learned CIT, D.R., on the other hand, heavily placed reliance on the
orders of the authorities below.
5. We have heard the rival parties and have gone through the material
placed on record. We find that in these cases, the assessment years
involved are 2010-11 and 2011-12. For assessment year 2010-11, the
original return of income was filed on 19/09/2010, a copy of
acknowledgment of return of income is placed at page 1 of the paper
book. No assessment has been made u/s 143(3) of the Act and time limit
for issuing a notice u/s 143(2) expired on 30/09/2011 and therefore, the
assessment in this year stood completed before the date of search i.e.
27/11/2015.
5.1 For assessment year 2011-12, the original return of income was
filed on 30/09/2011, a copy of acknowledgment of return of income is
placed at page 3 of the paper book and the return was processed on
11/11/2011, the evidence of which is placed at page 4 of the paper book.
No assessment in this case was completed u/s 143(3) of the Act and time
for issuing notice u/s 143(2) expired on 30/09/2012 and therefore, the
assessment in this year also stood completed before the date of search i.e.
27/11/2015.
I.T.(SS)A. No.427 & 428/Lkw/2019
Assessment year:2010-11 & 11-12 5
6. The above facts clearly demonstrate that the assessment years
involved in these appeals stood completed before the date of search and
additions, if any, were to be made on the basis of incriminating material
only which has not been done as the orders of Assessing Officer with
respect to additions do not indicate or refer to any incriminating material.
Before ld. CIT(A) the assessee took a specific ground that in the absence
of incriminating material the additions cannot be made in the years where
the assessments stood completed. The learned CIT(A) has held that the
law does not require the Assessing Officer to make addition in such cases
only on the basis of incriminating material and therefore, he dismissed this
ground of appeal. While holding so the learned CIT(A) has relied on a
number of case laws and has made similar findings in all cases. For the
sake of completeness, the findings of learned CIT(A) in I.T.A. No.427 are
reproduced below:
“5.1 Ground no. 1, 2 and 3 for A.Y. 2010-11, AY. 2011-12
and for A.Y. 2015-16 pertain to legal challenge to notice u/s
153A of the Act. It is also submitted by the ld. A.R. of the
appellant that order u/s 153A of the Act is invalid in absence
of incriminating material found as a result of search for these
relevant assessment years in appeals. Appellant also placed
reliance on the following case laws.
(i) CTV v. Kabul Chawla [2016] 380 ITR 573(Delhi),
(ii) CIT v. Deepak Kumar Agarwal (2017) 251 Taxman 22
(Bom.)/86 tQxmann.com.
(iii) CIT v. Vikas Gutgutia (2017) 396 ITR 691 (Del.),
(iv) CIT v. Devangi (2017) 394 ITR 184 (6uj.), etc.
5.2 Undersigned has carefully considered the submission
and the case laws cited by the appellant. However,
considering the express provisions of section 153A of the Act,
undersigned would like to differ with the submission of the
appellant, because section 153A of the Act clearly provides
I.T.(SS)A. No.427 & 428/Lkw/2019
Assessment year:2010-11 & 11-12 6
the power to AO to assess/reassess the cases of person
searched u/s 132(1) of the Act for immediately six preceding
years. Section 153A of the Act does not provide existence of
incriminating material as essential requirement. In the opinion
of the undersigned, the action u/s 132/132A of the Act would
automatically trigger the provisions of section 153A of the Act
for computation of total income of the appellant. This
provision does not restrict the Assessing Officer to take action
in those cases where assessment has already been completed.
Since, the AO has rightly exercised his powers to
assess/reassess the case u/s 153A of the Act. The
undersigned find no force in the submission of the appellant
and therefore, this ground is dismissed.
5.3 The contention of the Id. A.R. is also not acceptable after
placing reliance on following judicial pronouncement.
In the case of E.N. Gopakumar Vs CIT (2Q16) 75
taxmann.com 215 (Kerala))]- Hon’ble Kerala High Court held
that assessment proceedings generated by issuance of a
notice under section 153A(l)(a) can be concluded against
interest of assessee including making additions even without
any incriminating material being available against assessee in
search under section 132 on basis of which notice was issued
under section 153A(1)(a).
The above order has been passed after considering
cases of;
(i) CIT v. Kabul Chawla [2016] 380 ITR 573/(20151 234
Taxman 300/61 taxmann.com 412 (Delhi),
(ii) CIT v. Continental Warehousing Corpn.
(NhavaSheva) Ltd. [2015] 374 ITR 645/232
Taxman 270/58 taxmann.com 78 (Bom.).
(iii) Principal CIT v. Kurele Paper Mills (P.) Ltd. [2016]
380 ITR 571 (Delhi),
(iv) CIT v. Lancy Constructions [2016] 383
ITR 168/237 Taxman 728/66 taxman.com 264
(Kar.),
(v) CIT v. ST. Francies Clay Decor Tiles [2016] 240
Taxman 168/70 taxmann.com
I.T.(SS)A. No.427 & 428/Lkw/2019
Assessment year:2010-11 & 11-12 7
234 (Ker.) and (vi) CIT v. Promy Kuriakose [2016]
386 ITR 597 (Ker.).
Further, in the case of CIT Vs Raj Kumar Arora [2014]
52 taxmann.com 172 (Allahabad) [20141 367 ITR 517
(Allahabad)- Hon’ble Allahabad High Court held that Assessing
Officer has power to reassess returns of assessee not only for
undisclosed income found during search operation but also
with regard to material available at time of original
assessment.
Similarly, in the case of CIT Vs Kesarwani Zarda
Bhandar Sahson Alld. ITA No. 270 of 2014 (Allahabad)-
Hon’ble Allahabad High Court held that Assessing Officer has
power to reassess returns of assessee not only for undisclosed
income found during search operation but also with regard to
material available at time of original assessment.
Also, in the case of CIT Vs St. Francis Clay Decor Tiles
(385 ITR 624)-Hon’ble Delhi Kerala Court held that notice
issued under section 153A- return must be filed even if no
incriminating documents discovered during search.
In the case of CIT Vs Anil Kumar Bhatia (24
taxmann.com 98. 211 Taxmcm 453. 352 ITR493)-Hon’ble
Delhi High Court held that jurisdiction of AO under 153A is to
assess total income for/the year and not restricted to seized
material. Post search reassessment in respect of all 6 years
can be made even if original returns are already processed u/s
143(1)(a) – Assessing Officer has power u/s 153A to make
assessment for all six years and compute total income of
assessee, including undisclosed income, notwithstanding that
returns for these years have already been processed u/s
143(1)(a). Even if assessment order had already been passed
in respect of all or any of those six assessment years, either
under section 143(l)(a) or section 143(3) prior to initiation of
search/requisition, still Assessing Officer is empowered to
reopen those proceedings under section 153A without any
fetters and reassess total income taking note of undisclosed
income, if any, unearthed during search.
I.T.(SS)A. No.427 & 428/Lkw/2019
Assessment year:2010-11 & 11-12 8
In the case of Filatex India Ltd Vs CIT (49 taxmann.com
465) Hon’ble Delhi High Court held that during assessment
under section 153A, additions need not be restricted or limited
to incriminating material, found during course of search.
5.4 In view of the detailed discussion mentioned here-in-
above and considering the jurisdictional pronouncements cited
here-in-above, legal grounds of appeal of the appellant are
hereby dismissed for each assessment year i.e. A.Y. 2010-11,
A.Y. 2011-12 & A.Y. 2015-16.”
7. The above findings of learned CIT(A) along with the findings of
Assessing Officer clearly demonstrate that there was no incriminating
material on the basis of which the Assessing Officer had made the
additions. The Assessing Officer while making additions has not relied on
any incriminating material but has made additions on the basis of entries
in the books of accounts. When this grievance was taken to learned CIT(A)
he held that law does not require that additions u/s 153A can only be
made on the basis of incriminating material. While holding so, the ld.
CIT(A) has also relied on certain case laws which has been decided against
the assessee. First case law of E. N. Gopakumar vs. CIT was pronounced
in 2016. Second case law of CIT vs. Raj Kumar Arora was pronounced in
2014. Third case law of CIT vs. Kesarwani Zarda Bhandar Sahson
Allahabad was pronounced in 2014. Similarly case law of CIT vs. St.
Francis Clay Décor tiles was pronounced in the year 2016 whereas the
Hon’ble Delhi High Court has pronounced the case law in the case of Pr.
CIT vs. Meeta Gutgutia in 2017 after considering the other case laws
referred by learned CIT(A) and which has been confirmed by Hon’ble
Supreme Court wherein the Hon’ble Supreme Court has dismissed the SLP
filed by Revenue. Therefore, the case laws relied on by learned CIT(A) are
of no help to Revenue. The Lucknow Bench of the Tribunal in a number of
I.T.(SS)A. No.427 & 428/Lkw/2019
Assessment year:2010-11 & 11-12 9
cases, after relying on the judgment of Hon’ble Supreme Court in the case
of Pr. CIT vs. Meeta Gutgutia (supra) has allowed the appeals of various
assessees in the following cases:
(i) I.T.(SS)A. No.551/Lkw/2019 in the case of Ashish Kumar
Chaurasia HUF vs. Dy. CIT, Central Circle-II, Kanpur
(ii) I.T.(SS)A. No.89/Lkw/2019 in the case of Ashish Kumar
Chaurasia HUF vs. Dy. CIT, Central Circle-II, Kanpur
(iii) I.T.(SS)A. Nos.379 & 380/Lkw/2019 in the case of Smt.
Sandhya Agarwal vs. Dy. CIT, Central Circle-1, Kanpur
(iv) I.T.(SS)A. No.417/Lkw/2019 in the case of Siddarth Gupta
vs. Dy. CIT, Central Circle-II, Kanpur.
For the sake of completeness the findings of Lucknow Tribunal in
I.T.A.551/Lkw/2019 in the case of Ashish Kumar Chaurasia HUF vs. Dy
CIT, Central Circle-II, Kanpur are reproduced below:
“7. We have heard the rival submissions and have gone
through the material placed on record. We find that a search
took place on 27.11.2015 and the cases belonging to various
assessees of the group were reopened u/s. 153A/153C of the
Act and various additions were made. The additions made by
the Assessing Officer does not relate to any incriminating
material found during search and rather the Assessing Officer
has made the additions on the basis of examination of books of
account. For the sake of completeness the findings of
Assessing Officer in IT(SS) No. 551/Lkw/2019 are reproduced
below:
“During the year under consideration, the assessee
has raised unsecured loans of Rs. 30,00,000/- from
M/s Neil industries Ltd.. The assessee was required to
furnish the identity genuineness and creditworthiness
of the lender. However the fact is that M/s Neil
Industries Ltd. is engaged in providing accommodation
entry in the form of unsecured loans/share
I.T.(SS)A. No.427 & 428/Lkw/2019
Assessment year:2010-11 & 11-12 10
capital/share premium etc. which is evident from the
copy of assessment order of M/s Neil Industries Ltd. all
the facts have already been confronted with the
assessee and no proper and satisfactory explanation
has been furnished by the assessee. In view of above
documentary and circumstantial evidence the so called
unsecured loan of Rs. 30,00,000/- is nothing but the
unexplained income of the assessee which has been
received in the form of unsecured loans, therefore the
so called unsecured loan of Rs. 30,00,000/- is being
added to the total income of the assessee u/s 68 of the
I T Act, 1961. Further commission paid for obtaining
entry @5% on 30,00,000/- which conies to Rs.
1,50,000/- is also bang added to the total income of the
assessee u/s 69 of the I.T. Act, 1961. Penalty
proceedings u/s 271(1)(c) of the I.T. Act, 1961 are
being initiated separately for concealment of income by
furnishing in accurate particulars of income.
(Addition of Rs. 31.50.000/-)”
8. Before ld. CIT(A) a specific ground was taken regarding
completed assessment wherein the additions could have been
made only on the basis of incriminating material if any found
during search. The ld. CIT(A), however, dismissed this ground
of appeal by holding that once the cases are reopened u/s.
153A of the Act the Assessing Officer can make the addition
even in the absence of any incriminating material. The ld.
CIT(A) has made similar findings in all the cases. For the sake
of completeness the findings of ld. CIT(A) in ITA No.
551/Lkw/2019 is reproduced below:
“5.2 Undersigned has carefully considered the
submission and the case laws cited by the appellant.
However, considering the express provisions of
section153A of the Act, undersigned would like to
differ with the submission of the appellant, because
section 153A of the Act clearly provides the power to
AO to assess/reassess the cases of person
searched u/s 132(1) of the Act for immediately
six preceding years. Section 153A of the Act does
I.T.(SS)A. No.427 & 428/Lkw/2019
Assessment year:2010-11 & 11-12 11
not provide existence of incriminating material as
essential requirement. In the opinion of the
undersigned, the action u/s 132/132A of the Act
would automatically trigger the provisions of section
153A of the Act for computation of total income of
the appellant. This provision does not restrict the
Assessing Officer to take action in those cases
where assessment has already been completed.
Since, the AO has rightly exercised his powers to
assess/reassess the case u/s 153A of the Act. The
undersigned find no force in the submission of the
appellant and therefore, this ground is dismissed.
9. The above findings of both authorities clearly
demonstrate that Assessing Officer had not made the
addition on the basis of any incriminating material and
rather he has made the addition on the basis of entries in
the books of account which is not in accordance with the
settled law as in a number of cases it has been held by
various High Courts that in case of concluded
assessments the addition can be made only on the basis
of incriminating material found during search. Even
Hon’ble Supreme Court in the case of Kabul Chawla
(Supra) and Meeta Gutgutia (Supra) has dismissed the
SLP filed by the Department against the order of Hon’ble
High Courts. The Lucknow Bench vide order dated
16.12.2020 in a consolidated order after considering the
written submissions of Revenue has decided the issue in
favour of the assessee by holding as under:
“5. We have heard the rival parties and have gone through
the material placed on record. We find that the first argument
of Learned counsel for the assessee was that in case of
completed assessments, the addition cannot be made if there
is no incriminating material. In this regard Learned counsel for
the assessee had submitted that in the year 2013-14 and
2015-16 the assessments stood completed and there was no
incriminating material found during the search. In this respect
the Bench had asked both the parties to furnish the material
which was impounded during the search and which both the
parties had filed with the Bench which we have examined and
I.T.(SS)A. No.427 & 428/Lkw/2019
Assessment year:2010-11 & 11-12 12
have compared with the material used by Assessing Officer in
assessment order. We found that none of the material seized
during the search was used by the Assessing Officer for
making addition and instead had relied on a document
marked as BK-2, which was seized during a search operation
on a different group of company and that too on 28/04/2015
that is more than one year before the date of search on
assessees. This fact is further strengthened from the
assessment order wherein the Assessing Officer, at page 8,
has observed as under:
“In this context, it Is noteworthy that a search & seizure
operation u/s 132 of the I. T. Act, 1961 conducted upon
the companies of Shashwat Agarwal on 28.04.2015 by
the Investigation Wing, Kanpur. The incriminating
documents which were found and seized are the
premises also include a diary identified as BK-2,
containing ledgers of different parties. On going
through pages of these ledgers, it was found that the
companies of Sri Shashwat Agarwal are paper
companies and are engaged in providing the
accommodation entries of bogus LTCG, unsecured
loan etc, to various parties by accepting undisclosed
cash from beneficiaries. Name of such beneficiaries,
date-wise receipt of cash and issuance of cheques
from and to them, is recorded in this diary very vividly.
The name of Sri Navin Jain and his family members
such as his father Sri Naresh Kiunar Jain, Naresh
Kumar Jain HUF, his mother Smt Shrimati Jain and his
wife Neetu Jain also figure in this diary. Shri Navin Jain
and his aforementioned family members have taken
accommodation entries of tax exempt Long Term
Capital Gain by the way of pre-arranged and
manipulative trading in the shares Cityon Systems
(India) Limited. This sale was stage managed by Sh.
Shashwat Agarwal and his brothers as all the shares
were purchased by the companies controlled by Sh.
Shashwat Agarwal.”
5.1 The above observations, noted by the Assessing Officer,
clearly demonstrate that a diary identified as BK-2 was
impounded during search & seizure operation on 28/04/2015
in the case of search on the companies belonging to Shri
Shashwat Agarwal wherein the name of Shri Navin Jain and
I.T.(SS)A. No.427 & 428/Lkw/2019
Assessment year:2010-11 & 11-12 13
his family members were mentioned. The Assessing Officer
nowhere noted that the names of the assessees was also
mentioned in such diary. Moreover, from the findings of the
Assessing Officer, we find that the companies of Shri
Shashwat Agarwal were engaged in providing
accommodation entries of bogus Long Term Capital Gain,
unsecured loans etc. to various parties and there is no
mention of bogus transactions of cloth. Moreover, the above
findings clearly indicate that the accommodation entries of
Long Term Capital Gain and unsecured loans were obtained
by the individuals mentioned in the assessment order and
there is no mention that the assessees had taken any entry of
Long Term Capital Gain or unsecured loans from the
companies of Shri Shashwat Agarwal. This fact is further
corroborated from the fact that the Assessing Officer in the
case of the assessees did not make any addition on account
of Long Term Capital Gain or unsecured loans but he made
the additions by holding the sale and purchase of cloth which
was purchased from Rich Group of Companies to be bogus.
All these facts demonstrate that the Assessing Officer had not
made the addition on the basis of any incriminating document
but had made the addition on account of bogus sale and
purchase of cloth for which no document was found during
the course of search. Even otherwise, the documents relied
on by the Assessing Officer were found at the premises of the
companies of Shri Shashwat Agarwal wherein the search was
carried out on 28/04/2015 and there too the incriminating
material, as mentioned in the assessment order, was a diary
identified as BK-2 wherein the names of some
promoters/directors of the assessees were mentioned.
Nowhere therein the names of the assessees have been
mentioned. Learned counsel for the assessee had relied on a
number of case laws for the proposition that in case no
incriminating material is found, the additions cannot be made
in the case of completed assessments. Particular reliance
was placed on the judgment of Hon’ble Delhi High Court in
the case of Kabul Chawla (supra) wherein the SLP filed by
the Department was dismissed by Hon’ble Supreme Court.
Learned counsel for the assessee had also relied on case law
of Pr. CIT vs. Meeta Gutgutia (supra), the SLP of which has
also been dismissed by Hon’ble Supreme Court. Though the
SLP in the case of Kabul Chawla was dismissed due to low
tax effect but the SLP in the case of Meeta Gutgutia was not
dismissed due to low tax effect but was dismissed on merits.
For the sake of completeness, the judgment of Hon’ble Delhi
I.T.(SS)A. No.427 & 428/Lkw/2019
Assessment year:2010-11 & 11-12 14
High Court in the case of Meeta Gutgutia is reproduced
below:
“A search and seizure under section 132 urns
conducted in the premises of the FNP group which
comprised of various companies, partnerships and
proprietorship concerns. The statement of an
employee PG was recorded on oath under section
133A. The assessee was a director/partner/
shareholder in the group of companies/concerns. She
was the proprietor of the concern FNP. On the basis of
documents recovered during the search operation, a
notice under section 153A was issued to the assessee.
Thereafter, a notice and questionnaire under sections
143(2) and 142(1) were also issued. The Assessing
Officer passed separate orders in respect of the
assessment years 2000-01 to 2003-04. For the
assessment year 2004-05, as in the preceding years,
the assessee had claimed deduction on account of
franchisee commissions paid to various parties. The
Assessing Officer held that the addresses of the
franchisees were not revealed and that there were
discrepancies in the details of the accounts of the
franchisees filed by the assessee. Consequently, the
franchisee commission payments claimed by the
assessee were added back to her income. For the
assessment year 2004-05, the Assessing Officer also
made an addition on account of stock. The Assessing
Officer estimated the undisclosed income, on account
of franchisee fee, at a certain percentage for the
assessment years 2001 -02 to 2006-07. No addition
was made for the assessment year 2006-07, although
a disclosure was made. Before the Commissioner
(Appeals), the assessee produced additional evidence
under rule 46A of the Income-tax Rules,1962, which
included copies of franchisee agreements. A rejoinder
was filed by the assessee. On analysis of the
additional evidence, the Commissioner (Appeals) held
that the accounts of the assessee had been tax
audited and that no adverse remarks had been made
by the tax auditors. He further held that the Assessing
Officer had not rejected the books of account of the
assessee. Accordingly, he held that the disallowance
of the franchisee commissions paid were
unsustainable and deleted the additions made. He
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Assessment year:2010-11 & 11-12 15
deleted the additions made on account of payment of
rent, non-refundable security, income from self-
controlled outlets and reduced the addition made on
account of closing stock. He also deleted the additions
of undisclosed income, made on account of franchisee
fee, accepting the contention of the assessee that
there was no disclosure made for earlier years, or any
evidence unearthed during the search by the
Department that such franchisee fee income was not
disclosed by her. Both the Department and the
assessee filed appeals before the Appellate Tribunal.
Accepting the contention of the assessee that for the
assessment years 2000-01 to 2003-04, there was no
incriminating material seized during the course of
search, and therefore, the assessment orders in
respect of those years ought to be quashed, the
Appellate Tribunal held that the assumption of
jurisdiction under section 153 A for those assessment
years was illegal. In respect of the assessment year
2004-05, the Appellate Tribunal held that the additions
made were based on seized documents and, therefore,
the assessment under section 153A was valid. It
dismissed the appeals filed by the Department in
respect of the deletions made by the Commissioner
(Appeals) and dismissed the assessee’s appeal for
non-prosecution. On appeals:
Held, dismissing the appeals, (I) that It was only if
during the course of search under section 132
incriminating material justifying the reopening of the
assessments for six previous years was found that the
invocation of section 153 A qua each of the
assessment year would be justified.”
5.2 The above judgment of Hon’ble Delhi High Court has
been upheld by Hon’ble Supreme Court as the SLP filed by
Revenue has been dismissed which is reported at 96
Taxmann.com 468. Hon’ble Delhi High Court in above case
has distinguished the case law of Dayawanti Gupta vs. CIT
390 ITR 496 (Del) which Learned D. R. had heavily relied.
The case law of Hon’ble Allahabad High Court in the case of
Raj Kumar Arora 367 ITR 517, though supports the
contentions of the Revenue but since Hon’ble Supreme Court
has decided the issue in favour of the assessee in the case of
Meeta Gutgutia therefore, the judgment of jurisdictional High
Court will not help the Revenue. The contention of the
I.T.(SS)A. No.427 & 428/Lkw/2019
Assessment year:2010-11 & 11-12 16
Revenue that since the Department has not accepted the
decision of Hon’ble Supreme Court in the case of Kabul
Chawla and Meeta Gutgutia as SLP in the case of CIT vs.
Continental Warehousing Corporation 235 Taxman 568 (SC)
has been admitted is also of no help to Revenue. Therefore,
in view of the above case laws, we hold that in case of
completed assessments, the addition can be made only on
the basis of incriminating material found during search. We
have already held that no incriminating material was found
from the premises of the assessee therefore, the additions
cannot be made in the case of completed assessments which
in this case is appeal for assessment year 2013-14 wherein in
I.T.A. No.510 the assessment order was already passed u/s
143(3) on 22/03/2016 which is before the search date of
23/08/2016, copy of assessment order is placed at pages 51
to 54 of the paper book. Similarly in I.T.A. No. 515, the
assessment was completed u/s 143(3) vide order dated
23/03/2016, the copy of which is placed at pages 54 to 57 of
the paper book. Similarly in I.T.A. No.517 relating to
assessment year 2013-14, the assessment order u/s 143(3)
dated 30/03/2016, a copy of which is placed in paper book at
pages 52 to 56. Therefore, the assessments in these cases
stood completed. Learned counsel for the assessee had
though argued that the assessment for assessment year
2015-16 also stood completed but in our opinion the appeals
for assessment year 2015-16 cannot be said to be completed
as time for issue of notice u/s 143(2) was still available to the
Department which was upto 30/09/2016 whereas the search
took place on 23/08/2016 which means that there was time
available to the Department to issue notice u/s 143(2)
therefore, the appeals filed for assessment year 2015-16
cannot be said to have completed. In view of the above
discussion, ground No. 2 & 7 of the appeals in I.T.A. No.510,
515 & 517 are allowed.”
10. Now to determine as to whether the assessment years
under question in these appeals stood completed or not it has
to be seen as to whether the assessments in these years were
completed u/s. 143(3) of the Act and if not whether the time for
issuing notices u/s. 143(2) of the Act had expired or not. The ld.
AR in this respect has filed a chart indicating therein the date of
filing of original return as well as time limit for the issue of notice
u/s. 143(2) of the Act and also the cases where assessment
has been completed u/s. 143(3) of the Act. The data in the
I.T.(SS)A. No.427 & 428/Lkw/2019
Assessment year:2010-11 & 11-12 17
chart has been verified from the copy of acknowledgement of
filing of return as placed in respective paper book as indicated
in the chart as reproduced below:
I.T.(SS)A. No.427 & 428/Lkw/2019
Assessment year:2010-11 & 11-12 18
11. It is seen that assessment in these years stood
concluded and Assessing Officer has not made additions
on the basis of any incriminating material and therefore
the additions sustained by the ld. CIT(A) are not
sustainable and therefore, Ground No.2 in all these
appeals is allowed.
12. We have allowed the appeals of the assessees on
Ground No.2 only. The other grounds of appeal taken by
the assessee were neither argued nor adjudicated and
hence they are dismissed as infructuous.”
I.T.(SS)A. No.427 & 428/Lkw/2019
Assessment year:2010-11 & 11-12 19
8. The existence of incriminating material for making additions u/s
153A is further strengthened from the decision of Hon’ble Supreme Court
in the case of CIT vs. Sinhgad Technical Education Society [2017] 397 ITR
344 (SC) where Hon’ble Supreme Court in a case u/s 153C has again
highlighted the importance of existence of incriminating material for
making the additions. The Hon’ble Supreme Court went on to hold that
the Assessing Officer, while relying on the incriminating material, has to
make reference in the satisfaction note regarding year-wise existence of
incriminating material. Since there is an interplay between section 153A
and section 153C, the findings of Hon’ble Supreme Court in a case u/s
153C are applicable for making additions u/s 153A also.
9. In view of these facts and circumstances and in view of the judicial
precedents, grounds No. 1 & 2 in both the appeals are allowed. Since we
have allowed the appeals of the assessee on legal issue, other grounds of
appeal do not require any adjudication.
10. In the result, both the appeals of the assessee stand partly allowed.
(Order pronounced in the open court on 16/12/2021)
Sd/. Sd/.
( A. D. JAIN ) ( T. S. KAPOOR )
Vice President Accountant Member
Dated:16/12/2021
*Singh
Copy of the order forwarded to :
1. The Appellant
2. The Respondent.
3. Concerned CIT
4. The CIT(A)
5. D.R., I.T.A.T., Lucknow
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