IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 740 of 2016 ========================================================== PRINCIPAL COMMISSIONER OF INCOME TAX-2....Appellant(s) Versus JAY INFRASTRUCTURE AND PROPERTIES PVT. LTD....Opponent(s) ========================================================== Appearance: MRS MAUNA M BHATT, ADVOCATE for the Appellant(s) No. 1 ========================================================== CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI HONOURABLE MR.JUSTICE A.J. SHASTRI Date : 10/10/2016 (PER : HONOURABLE MR.JUSTICE AKIL KURESHI)
1. Revenue has challenged the judgment of the Income Tax Appellate Tribunal ('the Tribunal for short) dated 12.02.2016 raising following question for our consideration: Whether the Income Tax Appellate Tribunal has substantially erred in law and on facts, in deleting the addition, made u/s 2(22)(e) on a ground that no incriminating material were recovered during search proceedings?
2. The issue pertains to assessment year 200708. The assessee was subjected to search operations. The assessment was framed under section 143(3) read with section 153A of the Income Tax Act, 1961 ('the Act' for short). The Assessing Officer made additions with the aid of section 2(22)(e) of the Act.
3. Before the Tribunal, the assessee contended that there was no material found during the search which promoted the Assessing Officer to make such additions. Additions according to the Assessing Officer, therefore, were not justified. The Tribunal accepted the assessee's contention following the decision of Delhi High Court in case of Commissioner of Income tax (Central)III v. Kabul Chawla reported in [2015]
61 Taxmann.com 412 (Delhi).
4. Though counsel for the Revenue submitted that different High Courts have taken a view in this respect, we notice that such an issue came up before this Court in case of Pr. Commissioner of Income Tax
4 v. Saumya Construction Pvt. Ltd. The Division Bench of this Court held the issue in favour of the assessee by making following observations:
16. Section 153A bears the heading Assessment in case of search or requisition. It is well settled as held by the Supreme Court in a catena of decisions that the heading of the section can be regarded as a key to the interpretation of the operative portion of the section and if there is no ambiguity in the language or if it is plain and clear, then the heading used in the section strengthens that meaning. From the heading of section 153, the intention of the legislature is clear viz., to provide for assessment in case of search and requisition. When the very purpose of the provision is to make assessment in case of search or requisition, it goes without saying that the assessment has to have relation to the search or requisition. In other words, the assessment should be connected with something found during the search or requisition, viz., incriminating material which reveals undisclosed income. Thus, while in view of the mandate of subsection (1) of section 153A of the Act, in every case where there is a search or requisition, the Assessing Officer is obliged to issue notice to such person to furnish returns of income for the six years preceding the assessment year relevant to the previous year in which the search is conducted or requisition is made, any addition or disallowance can be made only on the basis of material collected during the search or requisition. In case no incriminating material is found, as held by the Rajasthan High Court in the case of Jai Steel (India), Jodhpur v. Assistant Commissioner of Income Tax (supra), the earlier assessment would have to be reiterated. In case where pending assessments have abated, the Assessing Officer can pass assessment orders for each of the six years determining the total income of the assessee which would include income declared in the returns, if any, furnished by the assessee as well as undisclosed income, if any, unearthed during the search or requisition. In case where a pending reassessment under section 147 of the Act has abated, needless to state that the scope and ambit of the assessment would include any order which the Assessing Officer could have passed under section 147 of the Act as well as under section 153A of the Act.
17. In the facts of the present case, a search came to be conducted on 07.10.2009 and the notice was issued to the assessee under section 153A of the Act for assessment year 200607 on 04.08.2010. In response to the notice, the assessee filed return of income on 18.11.2010. In terms of section 153B, the assessment was required to be completed within a period of two years from the end of the financial year in which the search came to be carried out, namely, on or before 31st March, 2012. Here, insofar as the impugned addition is concerned, the notice in respect thereof came to be issued on 19.12.2011 seeking an explanation from the assessee. The assessee gave its response by reply dated 21.12.2011 calling upon the Assessing Officer to provide copies of statements recorded on oath of Shri Rohit P. Modi and Smt. Pareshaben K. Modi during the search as well as the copies of the documents upon which the department placed reliance for the purpose of making the proposed addition as well as the copy of the explanation given by Shri Rohit P. Modi and Smt. Pareshaben K. Modi regarding the onmoney received, copies of the assessment orders in case of said persons and also requested the Assessing Officer to permit him to crossexamine the said persons. The Assessing Officer issued summons to the said persons, however, they were out of station and it was not known as to when they would return. In this backdrop, without affording any opportunity to the assessee to crossexamine the said persons, the Assessing Officer made the addition in question.
5. In the result, tax appeal is dismissed. (AKIL KURESHI, J.) (A.J. SHASTRI, J.) ANKIT