Citation Codes

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citation codes

Case Number

ITA 777/DEL/2019

Advocates

Judges

[SHRI BHAVNESH SAINI, JUDICIAL MEMBER
SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER]

Acts

section 153A r.w.s. 143(3) Dated 21.03.2014. PB-32
provisions of section 153C, section 147/148
section 148 Dated 12.02.2015. PB-9
section 143(3)/148 of the I.T. Act,
section 132 of the I.T. Act, 1961
section 147/148 of the I.T. Act
u/s 132 of the I.T. Act
u/s. 148 of the I.T. Act
2(b) to section 147

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Smart Summary

Structured Summary of the Opinion — ITA No.777/Del./2019 (Shri Adarsh Agrawal)

Factual and Procedural Background

This appeal by the assessee, Shri Adarsh Agrawal, challenges the order of the Learned CIT(A)-27, New Delhi dated 20.11.2018 for the assessment year 2010-11. The initiating fact was information received from the DCIT, Central Circle, Jammu dated 09.04.2014 that during a search under section 132 of the Income Tax Act, 1961 on 07.04.2011 in the case of Shri Naresh Sabharwal a loan agreement was found. The agreement purportedly recorded a cash loan of Rs.1 crore given by the assessee to Shri Naresh Sabharwal on 17.02.2009 at 24% p.a. interest.

Both the assessee and Shri Naresh Sabharwal denied that any loan had been advanced or taken and the transaction was not reflected in the assessee's books. The Assessing Officer (A.O.) reopened the assessee's assessment by issuing notice under sections 147/148, relied on the agreement (a photocopy in the file), and made additions of Rs.1 crore (loan) and Rs.6,96,774 (interest). The assessee contested reopening and the additions before the CIT(A), who dismissed the appeal. The assessee then appealed to the Income Tax Appellate Tribunal (ITAT).

Legal Issues Presented

Whether reopening of assessment under sections 147/148 was valid when the incriminating document (loan agreement) was found during a search in the case of another person and proceedings against that person under section 153A had been initiated (i.e., whether the A.O. should have proceeded under section 153C instead).
Whether additions based solely on a photocopy of an agreement—where the other party denies the transaction and no corroborative evidence or original document or examination of witnesses was undertaken—can be sustained.

Arguments of the Parties

Assessee's Arguments

The assessee denied having advanced any cash loan; the original agreement was not in the assessee's possession and, at best, a photocopy could have been retained by the other party.
Since the agreement was found during a search in the case of Shri Naresh Sabharwal and assessments under section 153A were completed in his case, the correct procedure to proceed against the assessee was under section 153C (a special provision). Reopening under sections 147/148 was therefore improper.
No corroborative evidence existed: both parties denied the loan and the agreement on the file was not supported by examination of witnesses, production of original document, or handwriting expertise.
The assessee relied on multiple judicial decisions to support the propositions above (see table of precedents below).

Revenue's (Respondent's) Arguments

The Revenue relied upon the orders of the authorities below and contended that reassessment proceedings had been rightly instituted based on the agreement found during the search in the case of Shri Naresh Sabharwal.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
ITO vs. Arun Kumar Kapoor [2011] 140 TTJ 249 (Amritsar ITAT)	Cited for the proposition that where documents are seized during search under section 132 and forwarded to the A.O. of another person, the procedure under section 153C (read with section 153A) applies and supersedes sections 147/148.	The Tribunal relied on this decision to conclude that assessment proceedings under sections 147/148 were improper when the material originated from a search in another person's case and that section 153C should have been invoked.
Order of ITAT, Delhi D-Bench in Rajat Shubra Chatterji vs. ACIT, Circle 37(1), New Delhi (ITA No.2430/Del./2015) Dated 20.05.2016	Cited in support of the assessee's contention concerning the applicability of section 153C where documents are found in search of another person.	Used as supporting authority for the proposition that reassessment under sections 147/148 is not the correct procedure when material arises from search in another person's case.
Order of ITAT, Delhi SMC-Bench in Sushil Gaur & Shelly Agarwal vs. ITO, Ward-2(3), Ghaziabad (ITA Nos.1500 & 1501/Del./2017) Dated 08.08.2017	Cited in support of the assessee's position regarding procedure where documents seized in another case are concerned.	Identified by the Court as one of the decisions supporting the proposition that section 153C procedure should be followed.
Order of ITAT, Delhi SMC-Bench in Shri Girish Chandra Sharma vs. ITO, Ward-3(1), Bulandshahr (ITA No.987/Del./2018) Dated 30.11.2018	Cited in support of the same procedural proposition regarding section 153C supplanting sections 147/148 when relevant material is found in search of another person.	Referenced as part of a line of decisions relied upon by the assessee to challenge the reopening.
M/s. Rayoman Carriers Pvt. Ltd. vs. ACIT, Central Circle-12, Mumbai (ITA Nos.3275 & 3276/Mum/2015) Dated 16.03.2018 (ITAT Mumbai SMC-Bench)	Cited in support of the proposition that reassessment under sections 147/148 is improper when materials originate from search of another person and section 153C procedure is applicable.	Included among the authorities the Tribunal considered as supporting the assessee's procedural argument.
G. Koteswara Rao vs. DCIT, Central Circle-1, Visakhapatnam [2015] 64 taxmann.com 159 (ITAT Visakhapatnam Bench)	Cited for the proposition that where documents originate from a search in another case the proper procedure is under section 153C and not sections 147/148.	The Tribunal explicitly relied on this decision (cited by the assessee) to support the conclusion that the reassessment under sections 147/148 was invalid.
Indian Express Newspapers (Bombay) P. Ltd. & Another vs. Union of India & Others [2008] 300 ITR 351 (Bom. HC)	Cited for the principle that reopening must be supported by sufficient reasons and that documentary evidence may outweigh retracted statements; insufficient reason for reopening can invalidate notice.	The Court quoted this decision to underscore that, where documentary evidence is not sufficiently corroborated and the other party denies the transaction, reopening may be unjustified.
Commissioner of Income Tax (Central)-1, New Delhi vs. Ved Prakash Choudhary [2008] 169 Taxman 130 (Delhi HC)	Cited to support the proposition that additions cannot be made when both parties deny the transaction and there is no corroborative evidence.	Used by the Court as one of the authorities showing that without corroborative material, additions are not sustainable.
Commissioner of Income Tax, Central-II, New Delhi vs. S.M. Aggarwal [2007] 293 ITR 43 (Del. HC)	Cited in support of the principle that mere documentary entries or photocopies without corroboration are insufficient for additions where parties deny transactions.	Cited among authorities reinforcing the need for corroborative evidence before making additions.
ACIT vs. Kences Foundation (P.) Ltd. [2007] 289 ITR 509 (Madras HC)	Cited in the context of requiring corroborative evidence for sustaining additions where denials exist.	Included by the Court as one of the supporting authorities for the assessee's evidentiary contention.
Commissioner of Income Tax, Central-III vs. Suneet Verma [2007] 145 DLT 280 (DB) (Del. HC)	Cited for the same evidentiary principle regarding unsustainability of additions without corroboration.	Recognized by the Tribunal among the decisions invoked by the assessee.
Commissioner of Income Tax vs. Lubtec India Ltd. [2009] 311 ITR 175 (Del. HC)	Cited to support the proposition that documentary evidence must be corroborated before sustaining an addition.	Relied upon as part of the body of decisions weighing against making additions based solely on disputed documents.
Amarjit Singh Bakshi (HUF) vs. ACIT [2003] 86 ITD 13 (Del.) [TM] (ITAT)	Cited in support of the assessee's evidentiary arguments (insufficiency of uncorroborated documents).	Referenced among the Tribunal and High Court decisions cited by the assessee to challenge the additions.
M/s. Fantastic Buildcon Pvt. Ltd. vs. ITO, Ward-2(1), Guwahati (ITA No.104/Gau/2011 & SP.No.09/Gau/2011) Dated 07.02.2012 (ITAT Guwahati Bench)	Cited to support that additions should not be made on the basis of disputed documents without corroboration.	Included as supporting caselaw for the assessee's evidentiary position.
S.P. Goyal vs. DCIT [2002] 82 ITD 85 (Mumbai ITAT D-Bench)	Cited for the principle that uncorroborated entries or documents are insufficient to sustain additions.	Cited as part of the line of ITAT authorities relied upon by the assessee.
Commissioner of Income Tax vs. Smt. P.K. Noorjahan [1999] 237 ITR 570 (Supreme Court)	Cited by the assessee as authority on standards for making additions and on the requirement of reliable evidence.	Recognized by the Tribunal as part of the higher court authority supporting caution before making additions on disputed documentary material.
Manish Maheshwari v. Asstt. CIT [2007] 289 ITR 341 / 159 Taxman 258 (Supreme Court)	Cited (within an ITAT decision quoted by the Tribunal) for the proposition that failure to follow a special procedural code (section 158BD in block proceedings) renders proceedings illegal; used by analogy to section 153C.	The Tribunal referenced the analogy drawn in earlier ITAT decisions to support the view that failure to follow section 153C procedure rendered reassessment under sections 147/148 invalid.

Court's Reasoning and Analysis

The Tribunal examined the reasons recorded by the Assessing Officer for reopening the assessment (these reasons were reproduced in the record). The reasons indicated that information from the DCIT, Central Circle, Jammu stated that during a search under section 132 in the case of Sh. Naresh (name incorrectly recorded in places as Naresh Aggarwal) a loan agreement was found indicating that the assessee had given cash loan of Rs.1 crore at 24% p.a. Both parties denied the transaction but the agreement on file purported to show the loan. The A.O. invoked Explanation 2(b) to section 147 and issued notice under section 148, concluding that income had escaped assessment.

The Tribunal identified several infirmities in the A.O.'s approach as recorded in the reasons:

The document relied upon was a photocopy of an agreement found during a search in another person's case; no original agreement had been produced or examined by the A.O.
Although the photocopied agreement was signed by two witnesses, the A.O. did not examine those witnesses to confirm genuineness.
No handwriting expert's report was sought to verify authenticity.
Crucially, the other party (Shri Naresh Sabharwal) denied having taken the loan; hence the agreement's genuineness was in doubt and it lacked corroboration.
The agreement had been found during a search in the case of another person and proceedings under section 153A had been initiated against that person; in such circumstances the A.O. of the assessee should have proceeded under section 153C (a special code) rather than under sections 147/148.

The Tribunal relied on a line of authorities (including ITAT and High Court decisions) holding that where documents are found during a search in another person's case and transferred to the A.O. of the assessee, the procedure under section 153C must be followed and that proceeding under sections 147/148 in such circumstances is illegal. The Tribunal also cited authority for the proposition that uncorroborated documentary evidence—particularly when the other party denies the transaction—cannot sustain an addition.

Applying these principles to the facts, the Tribunal concluded that the A.O.'s initiation of reassessment under sections 147/148 was improper because the material originated from a search in another person's case and the required procedure under section 153C was not followed. Further, the evidence relied upon (a photocopy of the agreement) was not sufficiently corroborated to justify additions when the other party denied the transaction and procedural safeguards (examination of witnesses, production of original, expert verification) were not undertaken.

Holding and Implications

Holding: The Tribunal allowed the appeal. It set aside the orders of the authorities below, quashed the reopening of the assessment under sections 147/148, and deleted the additions made by the A.O. (i.e., the addition of Rs.1 crore and interest of Rs.6,96,774).

Implications: The direct effect of the decision is that the reassessment initiated under sections 147/148 was held invalid in this case, all additions made on that basis were deleted, and the appeal of the assessee was allowed. The Tribunal's reasoning rests on two main consequences: (1) where material is discovered during a search of another person, the A.O. must follow the procedure under section 153C (and not proceed under sections 147/148), and (2) uncorroborated documentary material (a photocopy of an agreement) which is disputed by the other party and is not subjected to ordinary evidentiary verification cannot sustain an addition.

The opinion itself does not purport to establish a broader novel principle beyond the application of established precedents; its practical consequence is confined to quashing the reassessment and deleting the additions in this appeal.

Order pronounced in open Court on 14 January 2020. Members: (N.K. Billaiya) Accountant Member; (Bhavenesh Saini) Judicial Member.

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adarsh agrawal, delhi v. ito, ward-61(1), new delhi

PER BHAVNESH SAINI, J.M. This appeal by Assessee has been directed against the Order of the Ld. CIT(A)-27, New Delhi, Dated

20.11.2018 for the A.Y. 2010-2011. ITA.No.777/Del./2019 Shri Adarsh Agrawal, Delhi.

2. Briefly the facts of the case are that in this case information has been received from Central Circle, Jammu, Dated 09.04.2014 that during the course of search under section 132 of the I.T. Act, 1961 on 07.04.2011 in the case of Shri Naresh Sabharwal of New Delhi, loan agreement was found. As per the loan agreement assessee has given cash loan of Rs.1 crore to Shri Naresh Sabharwal on 17.02.2009 @ 24% interest per annum. Both the assessee as well as Shri Naresh Sabharwal has claimed that this loan was never advanced. However, as per the agreement it was clearly mentioned that loan has been given. Both the parties have denied the transaction as the same was not accounted for in the books of account. The A.O. on that basis reopened the assessment in the case of the assessee and questionnaire was issued seeking explanation of assessee. Assessee was directed to file return of income under section 147/148 of the I.T. Act. The assessee submitted that earlier return filed originally may be treated as return having been filed in response to notice under section 148 of the I.T. Act. The assessee at the re-assessment stage denied to have given ITA.No.777/Del./2019 Shri Adarsh Agrawal, Delhi. any cash loan to Shri Naresh Sabharwal. It was explained that assessee had agreed to arrange the loan for him through the Financer which was not materialised, therefore, original agreement was scrapped. It may be possible that photocopy have been retained by the said party. The A.O, however, did not accept the contention of assessee and made addition of Rs.1 crore on account of cash loan given to Shri Naresh Sabharwal as well as made addition on account of interest of Rs.6,96,774/-.

3. The assessee challenged the reopening of the assessment as well as addition on merit before the Ld. CIT(A). The detailed written submissions of the assessee is reproduced in the appellate order. The Ld. CIT(A), however, dismissed the appeal of assessee.

4. The assessee in the present appeal has challenged the reopening of the assessment as well as both the additions on merit.

5. We have heard the Learned Representatives of both the parties and perused the material on record. ITA.No.777/Del./2019 Shri Adarsh Agrawal, Delhi.

6. Learned Counsel for the Assessee reiterated the submissions made before the authorities below and referred to PB-8 which is original return of income filed on

09.12.2010. PB-1 is notice under section 148 Dated

12.02.2015. PB-9 is letter of the A.O. extracting the reasons for notice under section 148. PB-10 is reply of the assessee denying giving any loan to Shri Naresh Sabharwal supported by the affidavit which was filed during the assessment proceedings in the case of Shri Naresh Sabharwal. PB-25 is copy of the loan agreement provided by the Department. PB-27 is assessment order in the case of Shri Naresh Sabharwal under section 153A r.w.s. 143(3) Dated 21.03.2014. PB-32 is reasons for reopening of the assessment. Learned Counsel for the Assessee submitted that since Shri Naresh Sabharwal as well as assessee have denied giving of any cash loan and that no evidence have been found giving loan by assessee to Shri Naresh Sabharwal, therefore, reopening of the assessment is bad in law. Further the loan agreement was found during the course of search in the case of Shri Naresh Sabharwal and ITA.No.777/Del./2019 Shri Adarsh Agrawal, Delhi. assessment under section 153A have been completed in his case, therefore, assessment in the case of assessee should have been made under section 153C only which is a special provision. Therefore, re-assessment in the matter is wholly unjustified, invalid and bad in law. In support of his contention, he relied upon the following decisions :

01. ITO vs., Arun Kumar Kapoor [2011] 140 TTJ 249 [Amritsar-ITAT]. 02. Order of ITAT, Delhi D-Bench, Delhi in the case of Rajat Shubra Chatterji, New Delhi vs., ACIT, Circle 37(1), New Delhi in ITA.No.2430/Del./2015 Dated 20.05.2016. 03. Order of ITAT, Delhi SMC-Bench, Delhi in the case of Sushil Gaur & Shelly Agarwal, New Delhi vs., ITO, Ward-2(3), Ghaziabad in ITA.No.1500 & 1501/Del./2017, Dated 08.08.2017 04. Order of ITAT, Delhi SMC-Bench, Delhi in the case of Shri Girish Chandra Sharma, Bulandshahr vs., ITO, Ward-3(1), Bulandshahr in ITA.No.987/Del./2018, Dated 30.11.2018. 05. Order of ITAT, Mumbai SMC-Bench, Mumbai in the case of M/s. Rayoman Carriers Pvt. Ltd., Mumbai vs., ACIT, Central Circle-12, Mumbai in ITA.Nos.3275 & 3276/Mum/2015, Dated 16.03.2018. 06. Order of ITAT, Visakhapatnam Bench, Visakhapatnam in the case of G. Koteswara Rao vs., DCIT, Central Circle-1, Visakhapatnam [2015] 64 taxmann.com 159.

6.1. The Learned Counsel for the Assessee also submitted that since both the parties denied to have entered into loan transactions and there is no other corroborative ITA.No.777/Del./2019 Shri Adarsh Agrawal, Delhi. evidence on record, therefore, no addition could be made. In support of this submission, he has relied on the following decisions. 01. Commissioner of Income Tax (Central)-1, New Delhi vs., Ved Prakash Choudhary [2008] 169 Taxman 130 [Delhi] [HC] 02. Commissioner of Income Tax, Central-II, New Delhi vs., S.M. Aggarwal [2007] 293 ITR 43 [Del.] [HC].

03. ACIT vs., Kences Foundation (P.) Ltd., [2007] 289 ITR 509 [Madras] [HC].

04. Commissioner of Income Tax, Central-III vs., Suneet Verma [2007] 145 DLT 280 [DB] [Del.] [HC].

05. Commissioner of Income Tax vs., Lubtec India Ltd., [2009] 311 ITR 175 [Del.] [HC]. 06. Order of ITAT, Delhi C-Bench, Delhi in the case of Amarjit Singh Bakshi (HUF) vs., ACIT [2003] 86 ITD 13 [Del.] [TM]. 07. Order of ITAT, Guwahati Bench, Guwahati in the case of M/s. Fantastic Buildcon Pvt. Ltd., Guwahati vs., ITO, Ward-2(1), Guwahati in ITA.No.104/Gau/2011 & SP.No.09/Gau/2011, Dated 07.02.2012.

08. Order of ITAT, Mumbai D-Bench-T.M. Mumbai in the case of S.P. Goyal vs., DCIT [2002] 82 ITD 85 [Mum.].

09. Judgment of Hon’ble Supreme Court in the case of Commissioner of Income Tax vs., Smt. P.K. Noorjahan [1999] 237 ITR 570 [SC].

7. On the other hand, Ld. D.R. relied upon the Orders of the authorities below and submitted that re- assessment proceedings have been rightly initiated based on the agreement found during the course of search in the case of Shri Naresh Sabharwal. ITA.No.777/Del./2019 Shri Adarsh Agrawal, Delhi.

8. We have considered the rival submissions. It is well settled Law that validity of the re-assessment proceedings are to be determined with reference to the reasons recorded for reopening of the re-assessment. Learned Counsel for the Assessee filed copy of the reasons recorded for reopening of the assessment as provided under RTI Act, copy of the same is filed at Page-32 of the Paper Book which reads as under :

“ANNEXURE- A Sh. Adarsh Aqqarwal (PAN-AACPA1775E) A.Yr. 2010-11 FORM FOR RECORDING THE REASONS FOR INITIATING PROCEEDINGS U/S 147/148 AND FOR OBTAINING THE APPROVAL OF THE ADDITIONAL COMMISSIONER OF INCOME TAX : COMMISSIONER OF INCOME TAX / CENTRAL BOARD OF DIRECT TAXES : Letter F.No.DCIT/CC/JMU/2014-15/5 dated 09/04/2014 was received from DCIT, Central Circle. Jammu intimating that during the course of search u/s 132 of the I.T. Act on 07/04/2011 in the case of Sh. Naresh Aggarwal, 8/11, Jangcura Extension, Hospital Road, Delhi, it was found that Sh. Adarsh Aggarwal s/o Sh. Murari lal Aggarwal, R /o.N-57, Naveen ITA.No.777/Del./2019 Shri Adarsh Agrawal, Delhi. Shahdra, Delhi-32 has given a cash loan of Rs.1 crore to Sh. Naresh Sabharwal on 17/12/2009 at an interest of 24% per annum. Both Sh. Adarsh Aggarwal as well as Sh. Naresh Sabharwal have claimed that this loan was never advanced. However as per the agreement, which is placed on file, it is clearly mentioned that this loan has been given. Thus it is obvious that the parties are denying the transaction as the same has not been accounted for in the books of accounts. In view of the information as above the case Explanation 2(b) to section 147 is applicable in the case, which lays down, "where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income…… " In view of the above facts, I have the reason to believe that income to the tune of Rs.1 crore chargeable to tax has escaped assessment. Therefore, notice u/s. 148 of the I.T. Act is herby issued. Sd/- P.K. Malik, Income Tax Officer, Ward-61(1), New Delhi”

. ITA.No.777/Del./2019 Shri Adarsh Agrawal, Delhi.

8.1. In the reasons A.O. has mentioned that search was conducted in the case of Shri Naresh Aggarwal [wrongly mentioned the name] and that during the course of search it was found that assessee has given cash loan of Rs.1 crores to Shri Naresh Sabharwal on 17.12.2009. Copy of the agreement is filed at page-25 of the PB. A.O. has also mentioned in the reasons that both the parties have denied to have given or taken any cash loan. Thus, Shri Naresh Sabharwal has never agreed that he has taken any cash loan from the assessee. Copy of the agreement is filed in the paper book which is signed by 02 witnesses, but, none have been examined by the A.O. to confirm the genuineness of the transaction in the matter. No original agreement have been brought on record or examined by the A.O. No report of hand-writing expert have been obtained by the A.O. before recording the reasons for reopening of the assessment. Thus, only photo copy have been taken on record without examining the validity of the same agreement. Since Shri Naresh Sabharwal has denied to have taken any loan from the assessee, therefore, before ITA.No.777/Del./2019 Shri Adarsh Agrawal, Delhi. recording the reasons, it is the duty of the A.O. to bring some concrete and corroborative material on record to justify his conclusion that there is escapement of income in this case. The Hon’ble Bombay High Court in the case of Indian Express Newspapers (Bombay) P. Ltd., & Another vs., Union of India & Others [2008] 300 ITR 351 [Bom.] held as under :

“Held that it was the contention of the Revenue that subsequent to the finalization of the assessment of the petitioners for the assessment year 1980-81, it was found that one P was paid interest. When questioned about this, the petitioners had initially denied having any transaction with the party. However, when the evidence pertaining to loans was pointed out to the petitioners and more particularly, they were confronted with the evidence of deduction of tax at source, the petitioners had nothing to say. Further, in the course of search and seizure operation at the premises of the Calcutta party, they had stated on oath that certain loans alleged to have been paid by the petitioners were ITA.No.777/Del./2019 Shri Adarsh Agrawal, Delhi. not genuine and the entries relating thereto were hawala entries. The reasons for the notice of reassessment as contained in the affidavit in reply filed at the stage of admission was based upon the statement of B who expired after retracting the statement. The documentary evidence indicated the existence of the loan and the payment of interest after deduction of tax deducted at source. As against this documentary evidence, the Revenue had relied upon the statement of B to the effect that these were only hawala entries There was no sufficient reason for reopening the assessment. The notice was not valid.”

8.2. Since Shri Naresh Sabharwal has retracted from the fact of taking any loan from assessee and genuineness of the agreement is itself in doubt which was found during the course of search and is not corroborated by any evidence or material on record, therefore, such photo copy of the agreement cannot be relied upon by the A.O. for the purpose of initiating the re-assessment proceedings in the case of the assessee. It is an admitted fact that in the ITA.No.777/Del./2019 Shri Adarsh Agrawal, Delhi. present case the agreement in question was found during the course of search in the case of Shri Naresh Sabharwal and proceedings under section 153A have been initiated against him. Therefore, the agreement in question have been transferred by A.O. of the person searched to the A.O. of the assessee for the purpose of taking remedial action in the matter. It is well settled Law that in the case of assessment made on assessee consequent to the search in another case, A.O. is bound to issue notice under section 153C and thereafter proceed to assess the income under section 153C and if A.O. had proceeded with re-assessment under section 147/148 of the I.T. Act and passed the Order under section 143(3)/148 of the I.T. Act, the same would be illegal and arbitrary and without jurisdiction. We rely upon the Order of ITAT, Visakhapatnam Bench in the case of G. Koteswara Rao (supra). In the case of ITO vs., Arun Kumar Kapoor [2011] 140 TTJ 249 (ASR-ITAT) [Paper Book at Page- 71], the ITAT, Amritsar Bench held as under :

“On a perusal of section 153C, it would be clear that the provisions of this section are applicable, ITA.No.777/Del./2019 Shri Adarsh Agrawal, Delhi. which supersedes the applicability of provisions of sections 147 and 148. In the instant case, the documents were seized during the search under section 132 and the same were sent to the Assessing Officer of the assessee and, thus, the Commissioner (Appeals) has correctly observed that only the provision in which any assessment could be made against the assessee was section 153C, read with section 153A. It was also apparent from the record that the officer in the case of 'T' Ltd. had mentioned in his letter that the necessary action may be taken as per law under section 153C/148. Hence, notice issued under section 148 and proceedings under section 147 by the Assessing Officer were illegal and void ab initio. In view of the provisions of section 153C, section 147/148 stands ousted. In the instant case, the procedure laid down under section 153C has not been followed by the Assessing Officer and, therefore, assessment has become invalid. ITA.No.777/Del./2019 Shri Adarsh Agrawal, Delhi. The Commissioner (Appeals) was justified in following the ratio laid down by the Supreme court in the case of Manish Maheshwari v. Asstt. CIT [2007] 289 ITR 341 / 159 Taxman 258 wherein it has been held that if the procedure laid down in section 158BD is not followed, block assessment proceedings would be illegal. The Commissioner (Appeals) has correctly observed that the provisions of section 153C are exactly similar to the provisions of section 158BD in block assessment proceedings. Thus, considering the entire facts and the circumstances of the case, the Commissioner (Appeals) was fully justified in quashing the reassessment order.”

8.3. The other decisions relied upon by the Learned Counsel for the Assessee are on the same proposition. Considering the facts of the case in the light of above decisions, it is clear that loan agreement was found during the course of search in the case of Shri Naresh Sabharwal which is handed-over to the A.O. of the assessee and ITA.No.777/Del./2019 Shri Adarsh Agrawal, Delhi. addition is made only on that basis. Therefore, there was no justification for the A.O. to have been initiated proceedings under section 147/148 of the I.T. Act. The correct course of action would have been to proceed against the assessee under section 153C of the I.T. Act. Therefore, initiation of re-assessment proceedings under section 147/148 of the I.T. Act is wholly invalid, void and bad in Law. Since the correct procedure have not been adopted by the A.O. and there is no justification to initiate the re-assessment proceedings against the assessee, we set aside the Orders of the authorities below and quash the reopening of the assessment. Resultantly, all additions stands deleted.

9. In the result, appeal of Assessee allowed. Order pronounced in the open Court. Sd/- Sd/- (N.K. BILLAIYA) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER Delhi, Dated 14 th January, 2020 VBP/- ITA.No.777/Del./2019 Shri Adarsh Agrawal, Delhi. Copy to

1. The appellant

2. The respondent

3. CIT(A) concerned

4. CIT concerned

5. D.R. ITAT “A” Bench

6. Guard File // BY Order // Asst. Registrar : ITAT Delhi Benches : Delhi.

adarsh agrawal, delhi v. ito, ward-61(1), new delhi

Structured Summary of the Opinion — ITA No.777/Del./2019 (Shri Adarsh Agrawal)

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Assessee's Arguments

Revenue's (Respondent's) Arguments

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

adarsh agrawal, delhi v. ito, ward-61(1), new delhi

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