TMI Blog2014 (7) TMI 897X X X X Extracts X X X X X X X X Extracts X X X X ..... ingle document has been pointed out relating to the assessee even after specifically asked by the assessee - no incriminating documents or material were found during the course of search in the case of the assessee - Revenue has failed to point out any contrary material to the facts recorded and finding given by the CIT(A) - the additions are not warranted in the hands of the assessee - assessee has filed return for the AY under consideration in due course on 21.10.2004 declaring income which is same as per return filed u/s. 153A on 16.09.2011 after the search operations on 11.03.2010 - there are no pending proceedings to be abated, therefore, routine additions are not warranted - CIT(A) has rightly decided the issue in favour of the assessee – Decided against Revenue. - ITA No.519/Agra/2012, C.O. No.10/Agra/2013 - - - Dated:- 17-5-2013 - Shri Bhavnesh Saini And Shri A. L. Gehlot,JJ. For the Petitioner : Shri Waseem Arshad, Sr. D. R. For the Respondent : Shri S. K. Garg, Advocate ORDER Per A. L. Gehlot, Accountant Member: Appeal by the Revenue and Cross Objection by the assessee have been filed against the order dated 31.08.2012 passed by the ld. CIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ils Group, it was revealed that group has initially been engaged in manufacturing and trading of edible oil. They have made huge unaccounted purchases and sales either themselves or through brokers. They have also formed several dummy concerns, companies and other entities to carry out business operation for generating unaccounted income. The A.O. at page nos.2 to 4 noted list of such associate companies of K.S. Oils group. The A.O. has also noted that K.S. Oils Limited was having undisclosed bank accounts. The A.O. at page no.5 6 has also noted that in K.S. Oils Limited Group some surrender were made of which details of statement of the party recorded were reproduced. On the basis of above observation made in respect of K.S. Oils Limited Group, the A.O. on a perusal of assessee s Balance Sheet noticed the following liabilities :- (Page no.7) (i) Partners Capital Account - ₹ 13,80,770/- (ii) Unsecured Loans - ₹ 28,36,730/- (iii) Sundry Creditors - ₹ 11.85,95,936/- (iv) Advance from customers - Ras.2,53,768/- 5. The A.O. made addition of above liabilities ₹ 28,72,532/- under section 68 of the Act. Similarly, the A.O. noticed that threw was a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4, 04-05 2005-06, as desired by the A.O. Therefore, A.O. has issued detailed questionnaire/notice u/s 142(1) on 31.10.2011 asking for details regarding addition to fixed assets, unsecured loan, gross profit, sundry creditors etc. on the basis of return and balance sheet of the appellant. As regards, seized documents, it states as under:- 9. As photocopies of the seized materials have already been taken, therefore, you are requested to please explain each and every transaction of the seized material which pertains to the year under consideration. You are also requested to please furnish the year wise brake up of all the seized material in respective assessment years. In response, vide letter dated 11.11.2011, the appellant has submitted as under:- 8. To the best of my knowledge or belief no documents have been seized by the department relating to the concern. As regards other seized material we have taken the copies of seized material and nothing incriminating has been found so as to disclose any undisclosed income as regards the assessee from the seized material. Please let us know which loose paper or document seized from which premises (as searches were conducted in se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lity of concluded assessments without any material to indicate undisclosed income of the year found during the course of search. The scheme of the ACT is very clear regular assessments are made in items of Sec.139, 142 143; concluded assessments can be reopened as per Section 147 148 in case A.O. has reasons to believe that the income chargeable to tax has escaped assessment; and the provisions of Section 153A to 153C can be resorted to for the assessment of undisclosed income in search cases. All the three procedures of assessment operate in different fields and have different purpose to be fulfilled altogether. Items of regular assessment cannot be added back in the proceedings u/s 153A/C when no incriminating documents are found in respect of the disallowed amounts in the search proceedings. Chapter XIV-B does not authorize the A.O. to review the assessment completed unless and until there is any direct or indirect or clinching evidence to indicate that the appellant has withheld or had not disclosed any income. Section 153A does not empower the A.O. to go into the areas other than areas in respect of which some material or documents or assets have been found. In the appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of making search assessment under section 153A of the Act where no incriminating materials were found during the course of search. To examine this issue, we would like to see the scheme of various assessments under the Act. 8.1 Chapter XIV of the Act deals with the procedure for regular assessment. It begins with section 139, which makes it obligatory for a person who is assessable under the Act and whose income exceeds the maximum limit shall furnish return of his income in the prescribed form. Assessment can be made on the basis of return filed under section 139 of the Act. On the basis of the evidence adduced. Best judgment under section144 of the Act. Income escaped assessment and assessment in case of search. The word assessment must be under stood in each section of the Act with reference to the context in which it is used. Section 142 of the Act prescribes the procedure of inquiry before assessment. This section confers power upon the assessing authority to make inquiry by issuing notice upon the assessee for the compliance of the requirements of the Act. After furnishing of the return under section 139 or in response to a notice under section 142, the assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Under this provision, the authority competent to make the block assessment shall be an Assessing Officer not below the rank of the Assistant Commissioner and the timelimit for completion of block assessment is within one year from the end of the month in which the authorization for Search under section 132 and requisition under section 132A was executed. 8.4 In 2003, new provisions, i.e., sections 153A, 153B and 153C in Chapter XIV have been inserted in the Finance Act, 2003 relating to assessment in the case of search or requisition made on or after June, 1, 2003, specifying the time-limit for completion of assessment or reassessment of income. By virtue of the aforesaid amendments, the assessment in the case of search or Requisition made on or after 1-6-2003, is to be governed by the provisions contained in the new sections 153A, 153B and 153C and not by the provisions contained in Chapter XIV-B, i.e., sections 158B to section 158BH. For better appreciation, sections 153A, 153B and 153C are reproduced here in below: 153A. Assessment in case of search or requisition (1)Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rn of income in respect of the six assessment years immediately preceding the assessment year relevant to the previous year in which the search was conducted under section 132 or requisition was made under section 132A. The Assessing Officer shall assess or reassess the total income of each of these six assessment years. Section 153B provides the time limit for completion of assessment. It provides that the Assessing Officer shall make the order of assessment or reassessment in respect of the each assessment year falling within the six assessment years under section 153A within a period of two years from the end of the financial year in which search under section 132 or requisition under section 132A was executed. 8.7 The scope and effect of sections 153A, 153B, 153C and 158BI have been explained elaborately by a departmental Circular No.7 of 2003, dated 05.09.2003 (see [2003] 263 ITR (St.) 62), which is reproduced here in below (page 106): 65.1 The existing provisions of the Chapter XIV-B provide for a single assessment of undisclosed income of a block period, which means the period comprising previous years relevant to six assessment years preceding the previous year in wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the Assessing Officer shall make an order of assessment or reassessment in respect of each assessment year, falling within, six assessment years under section 153A within a period of two years from the end of the financial year in which the last of the authorizations for search under section 132 or for requisition under section 132A was executed. 65.7 This section also provides that assessment in respect of the assessment year relevant to the previous year in which the search is conducted under section 132 or requisition is made under section 132A shall be completed within a period of two years from the end of the financial year in which the last of the authorizations for search under section 132 or for requisition under section 132A, as the case may be, was executed. 65.8 It also provides that in computing the period of limitation for completion of such assessment or reassessment, the period during which the assessment proceeding is stayed by an order or injunction of any court; or the period commencing from the day on which the Assessing Officer directs the assessee to get his accounts audited under sub-section (2A) of section 142 and ending on the day on which the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revious years relating to six assessment years preceding in which the search was conducted, shall apply. 8.9 The second proviso to section 153A makes it clear that assessment or reassessment relating to any assessment year falling within the period of six assessment years pending on the date of initiation of the search under section 132 or requisition under section 132A shall abate. The word abate or abatement has not been defined in the Act or in circular. The words abate According to Chamber Dictionary means demolition or to put an end to. The Law of Lexicon defines the word abate which means to throw down, destroy or quash or to nullify. According to Black Dictionary the word abatement means the act of eliminating or nullifying or suspension or defeat of pending action. It means, if on the date of initiation of search or requisition under section 132 or 132A any assessment or reassessment proceeding is initiated relating to any assessment year falling within the period of six assessment years, it shall stand abated and assessing authority cannot and shall not proceed with such pending assessment after initiation of search or requisition as contemplated herein above. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 97[Assistant Director 98[or Deputy Director]], 99[Assistant Commissioner 98[or Deputy Commissioner] or Income-tax Officer], (the officer so authorised in all cases being hereinafter referred to as the authorised officer) to ] (i) enter and search1 any 2[building, place, vessel, vehicle or aircraft] where he has reason to suspect that such books of account, other documents, money, bullion, jewellery or other valuable article or thing are kept; (ii) break open the lock of any door, box, locker, safe, almirah or other receptacle for exercising the powers conferred by clause (i) where the keys thereof are not available; 3[(iia) search any person who has got out of, or is about to get into, or is in, the building, place, vessel, vehicle or aircraft, if the authorised officer has reason to suspect that such person has secreted about his person any such books of account, other documents, money, bullion, jewellery or other valuable article or thing;] 4[(iib) require any person who is found to be in possession or control of any books of account or other documents maintained in the form of electronic record as defined in clause (t) of sub-section (1) of section 2 of the Informati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er or Joint Director or Joint Commissioner on or after the 1st day of October, 2009 unless he has been empowered by the Board to do so.] 14[(1A) Where any 15[Chief Commissioner or Commissioner], in consequence of information in his possession, has reason to suspect that any books of account, other documents, money, bullion, jewellery or other valuable article or thing in respect of which an officer has been authorised by the 16[Director General or Director] or any other 17[Chief Commissioner or [Commissioner] or 18[Additional Director or Additional Commissioner] 19[or Joint Director or Joint Commissioner] to take action under clauses (i) to (v) of sub-section (1) are or is kept in any building, place, vessel, vehicle or aircraft not mentioned in the authorisation under sub-section (1), such 20[Chief Commissioner or Commissioner] may, notwithstanding anything contained in section 21[120], authorise the said officer to take action under any of the clauses aforesaid in respect of such building, place, vessel, vehicle or aircraft.] (2) The authorised officer may requisition the services of any police officer or of any officer of the Central Government, or of both, to assist him f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r part of such books of account and other documents which purport to be in the handwriting of any particular person or which may reasonably be assumed to have been signed by, or to be in the handwriting of, any particular person, are in that person s handwriting, and in the case of a document stamped, executed or attested, that it was duly stamped and executed or attested by the person by whom it purports to have been so executed or attested.] (5) 27[***] (6) 28[***] (7) 29[***] (8) The books of account or other documents seized under sub-section (1) 30[or sub-section (1A)] shall not be retained by the authorised officer for a period exceeding 31[thirty days from the date of the order of assessment under 32[section 153A or] clause (c) of section 158BC] unless the reasons for retaining the same are recorded by him in writing and the approval of the 33[Chief Commissioner, Commissioner, Director General or Director] for such retention is obtained : Provided that the 33[Chief Commissioner, Commissioner, Director General or Director] shall not authorise the retention of the books of account and other documents for a period exceeding thirty days after all the proceedings unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the procedure to be followed by the authorised officer (i) for obtaining ingress into 45[any building, place, vessel, vehicle or aircraft] to be searched where free ingress thereto is not available ; (ii) for ensuring safe custody of any books of account or other documents or assets seized. 46[Explanation 1. For the purposes of sub-section (9A), execution of an authorisation for search shall have the same meaning as assigned to it in Explanation 2 to section 158BE.] Explanation 2. In this section, the word proceeding means any proceeding in respect of any year, whether under the Indian Income-tax Act, 1922 (11 of 1922), or this Act, which may be pending on the date on which a search is authorised under this section or which may have been completed on or before such date and includes also all proceedings under this Act which may be commenced after such date in respect of any year.] 47[Powers to requisition books of account, etc. 48132A. 49(1) Where the 50[Director General or Director] or the 51[Chief Commissioner or Commissioner], in consequence of information in his possession, has reason to believe that (a) any person to whom a summons under sub-section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the books of account, other documents or assets to the requisitioning officer either forthwith or when such officer or authority is of the opinion that it is no longer necessary to retain the same in his or its custody. (3) Where any books of account, other documents or assets have been delivered to the requisitioning officer, the provisions of sub-sections (4A) to (14) (both inclusive) of section 132 and section 132B shall, so far as may be, apply as if such books of account, other documents or assets had been seized under sub-section (1) of section 132 by the requisitioning officer from the custody of the person referred to in clause (a) or clause (b) or clause (c), as the case may be, of sub-section (1) of this section and as if for the words the authorised officer occurring in any of the aforesaid sub-sections (4A) to (14), the words the requisitioning officer were substituted.] 8.11 In the light of above legal position, after above discussions and after reading sections 132, 132A, 153A, 153B, 153C of the Act and the Departmental Circular dated 5-9-2003, we find that assessment of income in case of search under section 153A is to assess or reassess income for specifie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore literal interpretation should be followed. Such interpretation does not produce manifestly absurd or unjust results as section 153A(i)(b ) and the first proviso clearly provide for assessment or reassessment of all six years. It may cause hardship to some assessees where one or more of such assessments has or have been completed before the date of initiation of search. This is hardly of any relevance in view of clear and unambiguous words used by the Legislature. This interpretation does not cause any absurd etc. results. There is no casus omisus and supplying any would be against the legislative intent and against the very rule in this behalf that it should be supplied for the purpose of achieving legislative intent. The submissions are manifold, the foremost being that the provision under section 153A should be read in conjunction with the provision contained in section 132(1), the reason being that the later deals with search and seizure and the former deals with assessment in case of search etc, thus, the two are inextricably linked with each other. [Para 48] Before proceeding further, one may now examine the provisions contained in sub-section (2) of section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d conduct of the search. A search can be authorized on satisfaction of one of the three conditions enumerated earlier. Therefore, while interpreting the provision contained in section 153A, all these conditions will have to be taken into account. With this, one proceeds to literally interpret to provision in section 153A as it exists and read it alongside the provision contained in section 132(1).[Para 51] The provision comes into operation if a search or requisition is initiated after 31.5.2003. On satisfaction of this condition, the Assessing Officer is under obligation to issue notice to the person requiring him to furnish the return of income of six years immediately preceding the year of search. The word used is 'shall' and, thus, there is no option but to issue such a notice. Thereafter he has to assess or reassess total income of these six years. In this respect also, the word used is 'shall' and, therefore, the Assessing Officer has no option but to assess or reassess the total income of these six years. The pending proceedings shall abate. This means that out of six years, if any assessment or reassessment is pending on the date of initiation of the sear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raised before the Special Bench No.1 is answered as under: (a) In assessment that are abated, the Assessing Officer retains the original jurisdiction as well as jurisdiction conferred on him under section 153A for which assessments shall be made for each of the six assessment years separately; (b) In other cases, in addition to the income that has already been assessed, the assessment under section 153A will be made on the basis of incriminating material, which in the context of relevant provisions means - books of account, other documents, found in the course of search but not produced in the course of original assessment, and undisclosed income or property discovered in the course of search. [Para 58] Commissioner of Income-tax (Central), Kanpur vs. Smt. Shaila Agarwal [2011] 16 taxmann.com 232 (All.) 8.13 The brief facts of this case were that the assessee filed a return for the assessment year 2002-03 on 31-12-2002 declaring income of ₹ 3,66,438/-. The case was selected for scrutiny, on which a notice under section 143(2) was issued. On 10-11-2004 the assessee was required to produce the donors along with evidence, the source of gifts and the relationship bet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roceedings ancillary or collateral to it. The word is commonly used in the legislations, which provide for abatement of action/ suit; abatement of legacies; abatement of nuisance; and all actions for such nature, which have the pendency or continuance. The proceedings, which have already terminated are not liable for abatement unless statute expressly provides for such consequence thereof. [Para 13] The word 'pending' occurring in the second proviso to section 153A of the Act, is also significant. It is qualified by the words 'on the date of initiation of the search', and makes it abundantly clear that only such assessment or reassessment proceedings are liable to abate. [Para 14] The pendency of an appeal in the Tribunal against the order of assessment against which an appeal has been decided by Commissioner (Appeals) is not a continuation of the proceedings of assessment. An appeal under the Income-tax Act lies to the Appellate Tribunal on a question of law. Even if it is pending on the date of search, no such intention has indicated by the Tribunal arises out of the provisions of second proviso to section 153A, to abate the proceedings, which have been comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... With above back grounds of discussions, if we consider the facts of the case under consideration, we notice that in response, vide letter dated 11.11.2011, the assessee submitted that to the best of assessee s knowledge or belief no documents have been seized by the department relating to the concern. As regards other seized material, it was submitted that nothing incriminating has been found so as to disclose any undisclosed income as regards the assessee from the seized material. The assessee seeks clarification from the A.O. saying that please let them know which loose paper or document seized from which premises (as searches were conducted in several locations) requires a specific show-cause to explain so that its explanation could be given. As regards the assessee, it can give an explanation in respect of each and every seized material unless the same is a dumb document or it does not pertain to the assessee. But the A.O. failed to point any material in this regard. The A.O. has again issued detailed questionnaire on 18.11.2011 asking for further details on various items of balance sheet etc. In respect of seized documents, para 9 of the questionnaire is same as mentioned in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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