Commissioner of Income Tax (Central)-1 v. Jaipuria Infrastructure P. Ltd.

1. The Revenue urges a common question of law in these appeals, namely, whether the Income Tax Appellate Tribunal's (ITAT)judgment, holding that the additions were made, in excess ofthepowers under Section 153A oftheIncome Tax Act, 1961(forshort 'the Act'), is correctin law?

2. The brieffacts ofthe case are that for Assessment Years(AY)2006- 07 and 2007-08,the assessee had claimed certain expenditure. In AY 2007- 08, the Assessment Officer(AO)had conducted a scrutiny assessment in which the identity of the suppliers and the nature/genuineness of the expenditure were examined. After satisfying himself, the AO framed the assessment. For the previous AY 2006-07,the assessments were completed without scrutiny; the expenditure was similarly claimed in respect of the same kind ofsuppliers. ITA Nos. 775& 797of2016 Page 1 of[4] 2017:DHC:9033-DB

3. In these circumstances, on 27.03.2012, the asscssec's premises were searched and after considering the materials, notice was issued under Section 153A of the Act. The final assessment made certain additions in respect of all these expenditures, which was the subject matter of the scrutiny assessment for AY 2007-08 and the previous year. The AO's additions were confirmed by the Commissioner ofIncome Tax (Appeals). However,the ITAT directed that they be deleted, holding that there was no incriminating material warranting additions. The relevant extract of the impugned order is as foliows:- "21. However, in the backdrop ofaforesaid undisputedfacts discussed in the preceding paras and law laid down by Hon'ble jurisdictional High Court in the case cited as Kabul Chawla (supra), we are ofthe considered view thatcompleted assessment interfered with by the AO u/s 153A and confirmed by the Id. CIT (A) are not sustainable in the eyes of law for the following reasons

(i) that in the instant case, undisputedly the AO has not made assessment on the basis ofincriminating material unearthed during search and seizure operation conducted u/s 132 rather proceeded u/s 153A ofthe Act on the basis ofsome pre-search enquiries to make an addition as has specifically been recorded in para 6 of the assessmentorder that, "Pre search enquiries revealed thatM/s JaipuriaInfrastructure Developers Pvt. Ltd., the flagship company involved in the real estate business of the SKJaipuria group is indulged in inflating the cost of the project by debiting bogus expenses by raising bills from the non-existingparties or the entryproviders." ITA Nos. 775& 797of2016 Page2of[4]

(ii) that the ratio ofthejudgment in case ofKabul Chawla

(supra) is required to he extracted by perusing the judgmentin entirety and not bypicking up thefavourable sentences and by ignoring the unfavourable one. Highlighted portion ofpara 37 (iv), (v)^ (vi) & (vii) of KabulChawla(supra)is crux ofthe issue involved which is applicable to thefacts andcircumstances ofthe case;

(vi) thatthere is notan iota ofmaterial with the AO to initiate proceedings u/s 153A whatto talk ofincriminatingseized material;

(vii) that the Id. CIT(A) affirmed the assessment order by relying upon the decisions relied upon by Hon'ble jurisdictional High Court in the case cited as Filatex India Ltd. vs.

CIT-IV - (2014) 49 Taxmann.com 465 (Delhi) which has been distinguished in the Kabul Chawla(supra)on the ground that in the said case, there was some material unearthed during the search whereas in the instant case there is admittedly no incriminating material unearthed during the search to proceed u/s 153A.

22. In view ofwhat has been discussed above, we are ofthe considered view that withoutentering into the merits ofthis case, addition made in both the cases u/s 153A read with section 143(3) is not sustainable in the eyes of law, hence deleted. Consequently, both the appealsfiled by the assessee are hereby allowed."

4. This Court has considered the submissions. It is evident that the reason which prevented the ITAT was the ratio in Commissioner ofIncome tax (Central)III Vs. Kabul Chawla /2016/380ITR 573(Delhi), where it was categorically ruled that assessments cannot be arbitrarily made without any relevance or nexus with the seized materials and in the absence ITA Nos. 775& 797of2016 Page3of[4] b of seized materials additions based upon existing materials are unjustified. This Court finds no infirmity with the application ofthe Kabul Chawla's case(supra),in the circumstances ofthis case bytheITAT. No question of law arises.

5. The appeals are accordingly dismissed.

S.RAVINDRA BHAT,J. NAJMTWAZIRI,J. JANUARY 30,2017 sb ITA Nos. 775& 797of2016 Page4of[4]