TMI Blog2013 (10) TMI 520X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act. Once search takes place u/s 132(1) of the Act and completion of proceeding is pending on that date then such proceedings abate. Thus, the scope of assessment u/s 153A depends upon whether any assessment or reassessment proceedings were pending or completed on the date of the search. Whenever the abated proceedings are merged with the proceedings u/s 153A then scope of assessment is vide and it will cover all issues arising from the original return and issue arising on the basis of incriminating documents, and assets found and seized during the search. Wherever the proceedings are completed prior to the search then nothing merges with proceding u/s 153A of the Act and nothing abates. In such a situation, the AO has to respect the completeness of the proceedings. Admittedly, in the case of assessee, no incriminating documents were found and seized. The provisions of section 153A give power to assessing officer to assess and reassess the income. The assessing officer is empowered to make addition on account of undisclosed income or income escaped assessment. In the case under consideration, there is no incriminating material found during the course of search relating to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5JB at Rs. 74,80,591/-. The time period for issuance of notice u/s 143(2) expired as on 31.12.2004 before the date of the first search on 22.09.2005. As a result of search on 22.09.2005 the return was filed u/s 153A on 21.08.2006 declaring same NIL income and income u/s 115JB at Rs. 74,80,951/-. The search u/s 132 of the Act was again conducted at the premises of the Assessee Company on 25.08.2006. The notice u/s 153A was issued on 14.11.2007. The proceedings for assessment initiated u/s 153A as a result of first search were abated when the proceedings u/s 153A were initiated after the second search. In either of the two searched carried out by the department no material was found which could indicate that any part of Land Development Expenses (LDE) was not genuine. However, during the course of assessment proceedings the Ld. AO seems to have carried out some enquiries according to which his inspector has reported that 8 parties to whom Land Development Expenditure (LDE in short) was paid were not found at the given addresses. The details of these 8 parties are mentioned by him in para 5.2 of his assessment order. On this basis he came to the conclusion that LDE to the extent of Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nses. Under these circumstances, the CIT appeal was not justified to delete the addition. 6. On the other hand, the Ld. AR submitted as under that assessee is engaged in the business of development of farm land and sale thereof. The original return of income was filed on 2.12.2003. The time period for issuing notice u/s 143(2) expired on 31st December, 2004. This period was expired prior to the first search conducted on 22.9.2005. The 2nd search was carried out on 25.8.2006 and in both the searches no incriminating material/ documents were found and seized in respect of land development expenses. While supporting the order of the CIT (A). The Ld. AR extended following arguments during the proceedings. (i) Carrying out search against a person u/s 132 of the Act gives jurisdiction to the AO to issue notices u/s 153A (or u/s 153C as the case may be) for 6 assessment years prior to the A.Y. in which search is carried out. (ii) Hon'ble Delhi High Court in CIT Vs. Anil Kumar Bhatia (2012) 24 Taxmann.com 98 (Del.) has held that A.O. is bound to issue notice to the Year of the assessee to furnish the returns for six assessment years prior to the year of the search, but at anot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... original assessment is pending on the date of the search than the proceedings relating to pending assessments shall abate and proceedings initiated as a result of search will be continued. The scope of assessment will cover issues arising from pending assessment and freshly initiated proceedings will cover issues which could arise from the originally pending proceedings. (vii) Where no incriminating material is found in the search relating to an A.Y. and proceedings for that A.Y. are completed that is not pending on the date of the search than no addition on the issues which pertain to the original assessment cannot be raised like those which could be raised when such assessments were pending and abated. (viii) If issues pertaining to regular assessment or issues which are not based on any material found in the search (as no such material was found in the search) are allowed to be raised in the completed assessment in the same way as in the pending assessment (which would merge/abate in the proceedings initiated u/s 153A) then the provision relating to pending assessment being abated, as contained in second proviso u/s 153A will become otiose. The AO will be free to rais ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m 2008) and COs thereon order dated 19.12.2012 (a copy thereof is enclosed). (c) CIT Vs. Priyanka Ship Breaking Co. Ltd. (2012) 26 Taxmann.com 321 (Del.) to the effect that where no link was established between accommodation entries and seized documents addition on account of undisclosed income in assessee's hands was unjustified. (d) Gurinder Singh Bawa Vs. DCIT (2012) 28 Taxmann.com 328 (Mum) wherein it is held that, where assessments pertaining to 6 immediately preceding assessment years were complete, A.O. cannot make any addition there under unless there is any incriminating material recovered during the search. (e) LMJ International Ltd. Vs. DCIT (2008) 22 SOT 351 (Kol) (f) ACIT Vs. Mrs. Uttara S. Shorewala (2011) 12 Taxmann.com 460 (Mum) wherein it is held that, once revenue has accepted the stand of the assessee and had accepted the order, the A.O. was not justified in repeating the same addition in subsequent search proceedings by merely seeking to rely on statement and affidavit of the third party. (g) S.K. Jain Vs. ACIT Bhopal in IT(SS).A.Nos 210 to 216/Ind/2007 dated 28.01.2010 wherein it is held that, if no incriminating material is found in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvoicing or suppression of sales. They also found that the documents on which the Assessing Officer has placed reliance, were seized from a different person and not from the assessee and that no nexus between that person and the assessee has been established beyond doubt. In such circumstances, it has been held that the seized material cannot be used against the assessee. (iii) ACIT Vs. Mrs. Uttara S. Shorewala [2011] 12 taxmann.com460(Mum.): In this case, the Assessing Officer had accepted the version of the assessee in the earlier assessment proceedings. However, in the proceedings, as a result of search, he proposed the addition in respect of same issues. It was held that the A.O. was not justified in repeating same additions in subsequent search proceedings by merely seeking to rely on statement and affidavit of a third party, which were nothing but reiteration of stand which he took in earlier reassessment proceedings also. (iv) Suncity Alloys (P) Ltd. Vs. ACIT [2009] 124 TTJ 674(JD): Assessment or reassessment made pursuant to notice under section 153A is not de novo assessment; therefore, there is no merit in ground to make a new claim of deduction or all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) In this regard, we refer to para 39 - 44 from the decision of Hon'ble ITAT in the case of ACIT Vs. M/s Pratibha Industries Ltd., Mumbai (ITA Nos. 2197 - 2199,2200 -2201/M/2008) date of pronouncement 19.12.2012, in support of our contention. 39. the section starts with the non obstante phrase "Notwithstanding ... ", therefore, as soon as the search is concluded, the AO having jurisdiction over the assessee, a jurisdiction is cast upon the AO to issue notices under section 153A( 1), for the preceding six years, calling upon that person to file its returns. As soon as the notices are issued, due process of law shall begin and AO and the assessee are required to follow the same, which shall culminate with the AO to assess or reassess the total income of the searched person in all the six years in question. While casting this jurisdiction over the AO, the legislature, to remove all the difficulties with regard to the multiplicity of proceedings pending on the date of initiation of search, through 2nd Proviso, expunged all those proceedings, so that the assessee and the AO shall deal with only one type of proceedings, wherein the AO shall, as per clause (ii), assess or reassess th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A shows that it starts with a non obstante clause relating to normal assessment, procedure which is covered by Sections 139, 147, 148, 149, 151 and 153 in respect of searches made after 31.5.2003. These Sections, the applicability of which has been excluded, relate to returns, assessment and reassessment provisions. Prior to, the introduction of these three Sections, there was Chapter XIV-B of the Act, which took care of the assessment to be made in cases of search seizure. Such an assessment was popularly known as 'block assessment' because the Chapter provided for a single assessment be made in respect of a period of a block of ten assessment years prior to the assessment year in which the search was made. In addition to these ten assessment years, the broken period up to the date on which the search was conducted was also included in what was known as 'block period'. Though a single assessment order was to be passed, the undisclosed income was to be assessed in the different assessment yeas to which it related. But all this had to be made in a single assessment order. The block assessment so made was independent of and in, addition to the normal assessment proceedings as clari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sly been passed prior to the initiation of the search/requisition, the Assessing Officer is empowered to reopen those proceedings and reassess the total income taking note of the undisclosed income, if any, unearthed during the search For this purpose, the fetters imposed upon the Assessing Officer by the strict procedure to assume jurisdiction to reopen the assessment under Section 147 and 148, have been removed by the non obstante clause with which sub section (1) of Section 153A opens. The time-limit within which the notice under Section 148 can be issued, as provided in Section 149 has also been made inapplicable by the non obstante clause. Section 151 which requires sanction to be obtained by the Assessing Officer by issue of notice to reopen the assessment under Section 148 has also been excluded in a case covered by Section 153A. The time limit prescribed for completion of an assessment or reassessment by Section 153 has also been done away with in a case covered by Section 153A With all the stop having been pulled out, the Assessing Officer under Section 153A has been entrusted with the duty of bringing to tax the total income of an assessee whose case is covered by Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... situation, the Assessing Officer will reopen the assessments or reassessments already made (without having the need to fallow the strict provisions or complying with the strict conditions of Sections 147, 148 and 151) and determine the total income of the assessee. Such determination in the orders passed under Section 153A would be similar to the orders passed in any reassessment, where the total income determined in the original assessment order and the income that escaped assessment are clubbed together and assessed as the total income". 41. On going through the provisions of section 153A, clause (b) of section 153A, 2nd Proviso and the various decisions cited before us, three possible circumstances emerge on the date of initiation of search under section 132(1) of the Income Tax Act, (a) proceedings are pending; (b) proceedings are not pending but some incriminating material found in the course of search, indicating some income and/or assets not disclosed in the return and (c) proceedings are not pending and no incriminating material has been found. 42. When we tread to trace the correct and logical answers to the above circumstances, circumstance (a) is answered by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... graphic). In the circumstance, what we are dealing in instantly, there are finalized assessment proceedings and no incriminating material indicating any escaped income (situation 2B in the graphic). Taking a cue from the decision of Hon'ble Delhi High Court in the case of Anil Kumar Bhatia (supra) we can tread on the same premise and hold that on clubbing, what remains is the income originally determined or assessed (i.e. income originally determined + Zero = income originally determined - as there was no incriminating material). (VIII) In ACIT v. Asha Kataria (I.T.A. Nos. 3105, 3106 3107/Del/2011A.Yrs. 2002-03,2003-04 2006-07 dt. 20-05-2013): ITAT Delhi bench held as under: "29. We have carefully considered the submissions and perused the records. We find that the value of the property in this case as reflected in the registered sale deed was Rs. 33,00,000/-. Reference u/ s. 142A was made to the DVO by the Assessing Officer. DVO determined the value of the property at Rs. 63,74,700/- as against Rs. 33,00,000/ - shown by the assessee. Hence, there was difference of Rs. 30,74,700/-. This was added to the income of the assessee. However, Ld. Commissioner of Income Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DCIT (ITA Nos. 4873/DeI2009, (2005-06) 2510(A.Y. 2003-04), 3312 (A.Y. 2004-05) 2833/Del/2011 (A.Y. 2006l -07) order dt. 28-03 2013): ITAT Delhi bench also held as under: 10. On perusal of the assessment order for the year under consideration and others in question in the appeals before us, we find substance in the contention of Ld. AR that no incriminating material found or statement recorded during the course of search was there to suggest even prima facie that some undisclosed income was there to attract the invocation of the provisions laid down u/ s 153A of the Act for the addition as per the decision of Special Bench of the Tribunal on the issue in the case of Alcargo Global Logistics Ltd. Vs. DCIT (Supra). As discussed above the ratio laid down is that when no assessment has been abated, addition in the assessment u/ s 153A can be made only on the basis of incriminating material recovered during search. Respectfully following this decision of the Special Bench of the Tribunal we hold that in the A. Y. involved in the appeal since assessment has been abated, addition made in the assessment u/ s 153A, in absence of incriminating material recovered or statement recorded du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tice u/s 143(2) for selecting return for scrutiny has elapsed then what nature of proceedings commenced and concluded u/s 143(1) (a). How these are different from the proceedings commenced and concluded u/s 143(3) of the Act. There is no doubt that once the proceedings u/s 143(3) are completed and concluded then there is nothing which will abate as per provisions of section 153A of the Act. 9. In our considered opinion, section 153A referred to pending assessment or reassessment and not assessment orders . The assessment may not be pending even though there is no formal order u/s 143(1)(a). The moment return is filed and acknowledgement or intimation issued, the proceedings initiated by filing the return are closed, unless they are again triggered by issuing notice u/s 143(2) of the IT Act. In the case under consideration, the period for issuing the notice u/s 143(2) elapsed. The process has attained the finality which can only be assailed u/s 148 or 263 of the IT Act. Such proceedings can never be initiated u/s 143(2) when the time period for issuing notice u/s 143(2) has expired. Hon'ble ITAT, Mumbai C Bench in the case of ACIT Vs. Pratibha Industrialist Ltd. reported in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment proceeding for assessment year 2002-03, assessee filed details of gift received in the shape of gift deeds, bank statements, confirmations and acknowledgement of income tax return filed by the donor. Thereafter the assessment under section 143(3) was completed and no addition on account of gift received by the assessee was made. It clearly shows that the AO was satisfied in respect to gift received by the assessee. Similarly, for assessment year 2001-02, the assessee has enclosed all the details of the gift along with return and the same was processed under Section 143(1) and thereafter no proceeding was initiated either by issuing notice under Section 143(2) or 148 within the stipulated period of time. Now, during the assessment proceeding under Section 153A, the assessee was required to produce the donor once again, in my considered view, is not justified or tenable in the eyes of law. This very issue has been decided by the Special Bench of the Tribunal in case of ALL Cargo Global Logistics Ltd. (supra). The Special Bench of the Tribunal has answered the question in the following manner :- (a) In assessments that are abated, the AO retains the original jurisdiction a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act within the time available u/s 153(1) of the Act. Once search takes place u/s 132(1) of the Act and completion of proceeding is pending on that date then such proceedings abate. Thus, the scope of assessment u/s 153A depends upon whether any assessment or reassessment proceedings were pending or completed on the date of the search. Whenever the abated proceedings are merged with the proceedings u/s 153A then scope of assessment is vide and it will cover all issues arising from the original return and issue arising on the basis of incriminating documents, and assets found and seized during the search. Wherever the proceedings are completed prior to the search then nothing merges with proceding u/s 153A of the Act and nothing abates. In such a situation, the AO has to respect the completeness of the proceedings. Admittedly, in the case of assessee, no incriminating documents were found and seized. The provisions of section 153A give power to assessing officer to assess and reassess the income. The assessing officer is empowered to make addition on account of undisclosed income or income escaped assessment. In the case under consideration, there is no incriminating material found d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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