TMI Blog2014 (2) TMI 1131X X X X Extracts X X X X X X X X Extracts X X X X ..... und during the search – Relying upon Jai Steel (India) v. ACIT [2013 (6) TMI 161 - RAJASTHAN HIGH COURT] - in case nothing incriminating is found on account of search or requisition, the question of reassessment of the concluded assessment does not arise - Once assessment u/s. 143(3) had been annulled by higher authorities on the ground of legality of notice u/s. 143(2) of the Act, re-opening u/s. 147 on that very ground would mean nothing else but the abuse of process of law - the contention of the Revenue cannot be accepted that as the return was processed u/s. 143(1) and it was a mere intimation, the AO had reason to believe that income had escaped assessment and it was open to the AO to re-assess the income u/s. 153A, even without any incriminating material found during the search action – decided against Revenue. Validity of assessment proceedings u/s 153A of the Act – Held that:- There is no condition in section153A that additions should be strictly made on the basis of evidence found during the course of search or other post search material or information available with the AO which can be related to the evidence found and that the seized material can be relied upon to al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... net profit of the assessee s proprietary concern, M/s. J. P. Exports @ 0.99% on the basis of net profit ratio of certain other persons who were engaged in a similar business as that of the assessee and thus made the additions accordingly to the total income of the assessee. The AO further disallowed the deductions under Chapter VI claimed by the assessee and also declined to give credit of tax paid for want of proof. 3. The CIT(A) upheld the action of the AO for passing the order u/s. 144 r.w.s 153A of the Income Tax Act. However he directed the AO to re-compute the net profit of the assessee by adopting the net profit of 0.14% and deleted the balance addition out of that was made by the AO. He further directed the AO to look into the record and allow the credit of tax paid as per law. 4. The revenue thus is in appeal before us, against the action of the CIT(A) in directing the AO to rework the net profit of the assessee at the lower rate of 0.14% as against the 0.99% estimated by the AO. Whereas the assessee has filed the cross objections against the action of the CIT(A) in upholding of assessment proceedings made by the AO under section 153A of the Act. 5. The learned repre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion has been rightly made u/s. 153A of the Act by the AO. He has further contended that the principal laid down by the Special Bench of the Tribunal in the case of All Cargo Global Logistics Ltd. 137 ITD 287 can be applied to the case where the original assessment was completed u/s. 143(3) of the Act and not to the case where the return was processed u/s. 143(1) of the Act. 9. We have considered the submissions of the learned DR. So far so the reliance placed by him in the case of Rajesh Jhaveri Stock Brokers P. Ltd. (supra) is concerned, we may observe that the issue before the Hon ble Supreme Court in that case was regarding the reopening of the assessment u/s. 147 of the Act. The Hon ble Supreme Court held that the proposition of law laid down by the Hon ble Gujarat High Court in the case of Adani Exports v. Deputy CIT , (1999) 240 ITR 224 (Guj) was not applicable in that case. In the case of Adani Exports (supra), where the assessment was made u/s. 143(3) of the Act, and the AO did not hold any belief that income had escaped assessment on account of erroneous computation, the re-opening u/s. 147 made merely on the basis of audit objections was held to be bad in law by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be accepted, which however, can be re-opened u/s. 147 of the Act subject to the fulfillment of ingredients of section 147 and within the time period as prescribed u/s. 149 of the Act, as discussed in the preceding para. So under such circumstances if the return is processed u/s. 143(1) and not u/s. 143(3) and after the prescribed period of limitation, the same cannot be assessed u/s. 143(3) though it may be interpreted as mere intimation assessment or otherwise, but the same shall be deemed to be accepted by the AO and it will not have any different colour other than the return which is processed u/s. 143(3) of the Act. The only distinguishing feature as held by the Hon ble Supreme Court in the case of Rajesh Jhaveri Stock Brokers P. Ltd. (supra), would be that if to a set of facts and circumstances, the AO has applied his mind and he was of the belief that there was no escapement of income then for invoking the provisions of section 147 of the Act, he is precluded, on the basis of same facts and circumstances, to say that he has reason to believe that income of the assessee has escaped assessment. Whereas in case of returns processed u/s. 143(1), since the AO does not apply hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso necessarily support the interpretation that for the completed assessments, the same can be tinkered only on the basis of the incriminating material found during the course of search or requisition of documents. The Hon ble High Court while reproducing the proposition of law laid down by the Hon ble Supreme Court in the case of K P Varghese v. ITO (1981) 24 CTR 358 that it is recognized rule of construction that a statutory proviso must be so construed, if possible, that absurdity and mischief may be avoided has observed that if the argument of the counsel for the assessee was to be accepted, it would mean that even in case where the appeal arises out of the completed assessment has been decided by the CIT(A) or Tribunal and the High Court, on a notice issues u/s. 153A of the Act, the AO would have power to undo what has been concluded by the High Court. Any interpretation which leads to such conclusion has to be repelled and/or avoided as held by the Hon ble Supreme Court in the case of K P Varghese (supra). Almost similar proposition of law has been laid down by the co-ordinate Bench of the Tribunal in the case of M/s Deepa Restaurant Bar P. Ltd. in ITA No.1336/M/2012 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elied upon by the learned DR, is also of no help to the revenue but to the assessee only. In the said case the Hon ble Delhi High Court, in para 11 of the order, though has held that there is no condition in section153A that additions should be strictly made on the basis of evidence found during the course of search or other post search material or information available with the AO which can be related to the evidence found and that the seized material can be relied upon to also draw inference that there can be similar transactions throughout the relevant period, yet, at the same time it has been further observed that this however, does not mean that assessment u/s 153 A can be arbitrarily made without any relevance or nexus with the seized material. The proposition of law which emerges out in the light of the law laid down by the Rajasthan High Court in the case of Jai Steel (India) (supra) , Hon ble Gujarat High Court in the case of Gopal Lal Badruka (supra) and also by the Hon ble Delhi High Court in the case of Chetan Dass lachman Dass is that where incriminating material is found during the search action, the AO while making assessment u/s. 153A can take note of other m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances of the case under which a certain proposition of law is laid down by the Hon ble Supreme Court and then to compare the same with the facts and circumstances of the case under adjudication before it. However, this proposition of law, put by the learned DR, in our view, is of no help to the revenue but to the assessee only. As observed above, the various case laws relied upon by the learned DR are quite distinguishable on their own facts whereas, the proposition of law laid down in the case of Jai Steel (India) (supra), decided by Hon ble Rajasthan High Court better fits into the facts and circumstances of the present case. 15. In view of our above observations, it is accordingly, held that the reassessments made by the AO under section 153A, without any incriminating material being found during the search action conducted u/s. 132 of the Act, were not in accordance with law and the same are hereby set aside and the consequential result is that the return/original assessments which have acquired finality are to be reiterated. Since the cross-objections of the assessee have been allowed, the dispute relating to the additions made in consequence of the reassessments ..... X X X X Extracts X X X X X X X X Extracts X X X X
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