Validity of Addition made pursuant to search operation on the same subject-matter, which was examined during original assessment
short overview: Since no incriminating material was unearthed by AO during the course of search operation under section 132, therefore no addition could be made during the relevant assessment year under section 153A by reopening the assessment on the matter, which was examined earlier during original assessment.
Assessment of assessee was originally concluded under section 143(3). Consequent to search operation conducted on assessee, AO made addition by reopening the assessment under section 153A.
it is held that Since no incriminating material was unearthed by AO during the course of search operation under section 132, therefore no addition could be made during the relevant assessment year under section 153A by reopening the assessment on the matter, which was examined earlier during original assessment concluded under section 143(3).
Decision: In assessee’s favour.
Followed: CIT v. Kabul Chawla (2016) 380 ITR 573/(2015) 234 Taxman 300/61 taxmann.com 412 (Delhi) : 2015 TaxPub(DT) 3486 (Del-HC)
IN THE ITAT DELHI, BENCH
N.K. BILLAIYA, A.M. & K.N. CHARY, J.M.
D-Art Furniture Systems (P) Ltd. v. DCIT
ITA No. 1354/DEL/2018
16 May, 2019
Assessee by: Vicky Kumar, Sr Accountant.
Revenue by: Abhiskek Kumar, Sr. DR
N.K. Billaiya, A.M.
This appeal by the assessee is preferred against the order of the Commissioner (Appeals) 27, New Delhi dated 10-1-2018 pertaining to assessment year 2008-09.
2. The solitary grievance raised by the assessee is that the Commissioner (Appeals) erred in upholding penalty levied under section 271(1)(c) of the Income Tax Act, 1961 [hereinafter referred to as ‘the Act’] on the additions made while framing the assessment order dated 12-3-2013 under section 153A of the Act.
3. The facts on record show that the assessment was completed on an income of Rs. 2,03,35,310. When the assessment was assailed before the Commissioner (Appeals), the assessee could get only a relief of Rs. 31,320 and the matter travelled upto the Tribunal. The Tribunal in [ITA No. 5750/DEL/2014 vide order dated 6-2-2019] : 2019 TaxPub(DT) 0955 (Del-Trib) set aside the findings of the Commissioner (Appeals) and deleted the addition by allowing the appeal of the assessee.
4. The relevant part of the decision of the Tribunal [supra] reads as under :–
“6.4. It is observed that learned assessing officer made additions based upon audited balance sheet, filed during assessment proceedings. Hon’ble Delhi High Court in case of Pr. CIT v. Ram Avtar Verma, (2017) 88 Taxmann.com 666 (Del) : 2017 TaxPub(DT) 1854 (Del-HC), has held as under:
“4. The Revenue urges that the non-obstante clause in section 153A together with section 158BD removes the barrier vis-a- vis restriction upon search assessments being confined to “undisclosed income”. In other words, it is stated that none of the provisions confine the enquiry of the assessing officer to evaluating incriminating materials. This aspect, in the opinion of the Court, was extensively dealt with in Kabul Chawla v. CIT (2016) 380 ITR 573/(2015) 234 Taxman 300/61 taxmann.com 412 (Delhi) : 2015 TaxPub(DT) 3486 (Del-HC) which has, by now, been followed consistently in several appeals. The non- obstante clause, in the opinion of the Court, was necessary, given that there is a departure from the preexisting provisions, which applied for the previous years and had a different structure where two sets of assessment orders were made by the assessing officer during block periods. With the unification of assessment years for the block period, i.e. only one assessment order for each year in the block period, it was necessary for an overriding provision of the kind actually adopted in section 153A. But for such a non-obstante clause, the Revenue could possibly have faced hurdles in regard to unadopted/current assessment years as well as reassessment proceedings pending at the time of the search in respect of which proceedings were to be completed under sections 153A/ 153C. Having regard to the above directions, we are of the opinion that the ITAT decision does not call for interference. Both appeals are accordingly dismissed.”
6.5. Respectfully following the same, we allow ground no.1 raised by assessee.”
5. When the foundation [assessment] is removed, the super structure [penalty] must fall.
6. In the result, the appeal filed by the assessee in ITA No. 1354/DEL/2018 is allowed.