TMI Blog2014 (2) TMI 810X X X X Extracts X X X X X X X X Extracts X X X X ..... tainable in law. Relying upon Gurinder Singh Bava vs. DCIT [2014 (2) TMI 731 - ITAT MUMBAI] In the absence of any seized material which are incriminating in nature to back the additions u/s 68 or 14A of the Act made in the assessment made u/s 153A of the Act for the AY under consideration - Regarding the DVO s report gathered during the search action, the report suffers from certain deficiencies quacost of construction of residential property and the land obtained thereto - This is merely a presumption rather conclusion based on any evidences - Such additions are unsustainable in law in the assessments made u/s 153A r.w.s 143(3) of the Act notice u/s 153A of the Act and (2) in disapproving the making of the impugned additions u/s 68 and 14A of the Act, which are not backed by the incriminating materials - In the absence of incriminating material, the role of the AO is only to reiterate the returned income filed in response to the notice u/s 153A of the Act - Decided partly in favour of Assessee. - I.T.A. No.3389.3390/M/2011 - - - Dated:- 10-1-2014 - D. KARUNAKARA RAO AND Dr. S.T.M. PAVALAN, JJ. For the Appellant : Shri Devendra Mehta For the Respondent : Shri Pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Evershine Group of cases. There was as earch action u/s 132 of the Act on the said group on 3.1.2008. The residential premisesas well as the office premises of the assessee located at Mumbai and Udaipur were covered. The search action the group resulted in the discovery of undisclosed income. However, this is the submission of the assessee that there is no incriminating material seized implicating the assessee for the AYs under consideration. Otherwise, this assessee filed the return of income for the AY 2002-03 on 28.10.2002 declaring the total income of ₹ 6,21,051/- . The return was processed u/s 143(1) of the Act. Thus, there was no regular assessment in this case and thus, the question of abetment of the assessment does not arise here. Consequent to search action, AO issued noticed for all the six AYs u/s 153A of the Act in accordance with the provisions of the first proviso and present AY 2002-2003 is one of the 6 AYs. In response to the said notice, assessee filed the return of income declaring the income of ₹ 6,21,051/- as done originally. The case was heard as per the provisions of section 143(3) read with section 153A of the Act and the assessment was competed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mption of jurisdiction by the AO to issue the impugned noticed u/s 153A of the Act. In this regard, before us, Ld Counsel relied on various decisions in his support. Referring to the Hon‟ble Rajasthan High Court judgment in the case of Jai Steel (India) ltd vs. ACIT [2013] 36 Taxmann.com 523 (Rajasthan),and relying various other decisions of the Tribunal, Ld Counsel explained relevant provisions of section 153A in general and first proviso to the said section, in particular and concluded by stating that the impugned notice is bad in law. Further, relying on the Coordinate Bench decision of Mumbai in the case of ACIT vs. Pratibha Industries Ltd [2012]28 Taxmann.com 246 (Mumbai Trib.) Ld Counsel mentioned that the completed assessments, where no incriminating material was found, should not be disturbed by invalidly issuing notice u/s 153A of the Act. In this regard, Ld Counsel relied on the contents of para 41-44 of the said order of the Tribunal. Further, Ld Counsel brought our attention to the another decision of the Coordinate Bench in the case of Gurinder Singh Bawa vs. DCIT [2012] 28 Taxmann.com 328 (Mumbai Trib.) and read out the contents of para 6.1 6.2 and stated that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccount of inflated investment or on account of disallowance u/s 14A of the Act. Fairly referring to the proceedings during the search action, Ld Counsel mentioned that it is the valuation report of the DVO which was garnered by the office of the DIT (inv) during the search action. This was the only material collected by the Revenue in the search, which was available for the AO both for issuing the notice as well as for making additions. He reasoned that the Valuation report can as well be obtained during the normal assessment or reassessment proceedings and there is no need for invoking the provisions of section 153A of the Act in this regard. 7. Further, Ld Counsel has two fold arguments to make before us i.e., (i) considering the fact that no incriminating material was found from the assessee ‟s premises during the search action , the notice u/s 153A was not required to be issued. Even it is issued validly, no addition can be made in the cases of completed assessments without the support of the incriminating material issued or acquired in search action u/s 132 / 132A of the Act. In this regard, Ld Counsel relied on the Rajasthan High Court judgment in the case of Jai Ste ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice u/s 153C was issued. Ld Counsel mentioned that the Tribunal has upheld the invalidity of such notice and deleted the additions made on account of gift emanated from the books of accounts. (ii) The second aspect of his arguments relates to the treatment to be given to the DVO‟s report, if the said report constitutes any incriminating material. Mentioning that the Revenue did not consider the same as a incriminating material for the purpose of issuance of notice u/s 153A of the Act, Ld Counsel mentioned that the office of DIT (Inv) referred the impugned house property (Mangaldeep at Udaipur) to the valuation cell for identifying the market value of the property, not the cost of acquisition. ( Aarch Consulatants Valuers, Mumbai) The valuers submitted a report on 16.2.2008 determining the value of the property at ₹ 3,67,09,000/- as the fair market value as against the disclosed amount of ₹ 1.56 Crs by the assessee in the books of accounts as on 31.3.2007. It is the submission of the assessee that such reports of the DVO ignored by the DIT office during the search proceedings cannot constitute incriminating material and the AO should not rely on such r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he only investment on the said property. In fact, ₹ 14.8 lakhs is the cost of the land plots on which the house was constructed and assessee spent the balance of ₹ 31,33,007/- in construction of the house. Therefore, the proceedings initiated u/s 153A is required to be quashed and the addition based on the surmises of the AO should not be sustained. 8. On the other hand,Ld DR relied heavily on the order of the AO and the CIT (A). In connection with the legal issue regarding the validity of the notice u/s 153A of the Act, Ld DR filed a copy of the order of the Tribunal in the case of Scope (P) Ltd vs. DCIT [2013] 33 Taxmann.com 167 (Mumbai Trib.) dated 20.3.2013 and stated that under the provisions of section 153A of the Act, AO is bound to proceed for all the 6 AYs immediately preceding AY relevant to the previous year in which search was conducted even if there is no incriminating material to indicate any undisclosed income during the original assessment completed u/s 143(3) for any year. This is the case where regular assessment u/s 143(3) was completed on 7.11.2007 prior to the date of search on 15.11.2007 and the addition was made u/s 14A of the Act and not based ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in so far as the powers of the AO is concerned and he is empowered to issue notice u/s 153A and make additions either based in the incriminating material or othe rwise. 11. Per contra, the case of the assessee is that the AO may be empowered to issue notices for all the six AYs in view of the cited decisionsie Jai Steel (India) Ltd (supra), Scope (P) Ltd (supra) etc. However, in case of completed assessments, AO is empowered to made additions only based on the incriminating materials and not otherwise Jai Steel (India) Ltd (supra), LMJ International Ltd (supra),Gurinder Singh Bawa (supra) etc. For making the routine additions, which are normally done in the regular assessments, the completed assessment need not be disturbed by invoking the provisions of section 153A of the Act if not for reiterating the returned or assessed income as the case may be. Judgment in the case of Jai Steel (India) Ltd (supra) supports the above legal proposition. As per the assessee, regarding the cases of abated assessments, considering the scheme of assessments u/s 153A,per contra , even the routine additions are done in these assessments. 12. We have heard the parties and their divergent stand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing of the provision along with the purpose and purport of the saio provision, which is intricately linked with search and requisition under section 132 and 132A, it is apparent that: (a) the assessments or reassessments, which stands abated in terms of second proviso to section 153A, the Assessing Officer acts under his original jurisdiction, for which, assessments have to be made; (b) regarding other cases, the addition to the income that has already been assessed, the assessment will be made on the basis of incriminating material and (c) in absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. ..... The argument of the assessee that the Assessing Officer is also free to disturb income, expenditure or deduction de hors the incriminating material, while making assessment under section 153A is also not borne out from the scheme of the said provision which as noticed above is essentially in context of search and/or requisition. Para 26 of the Judgment: The plea raised on behalf of the assessee that as the first proviso provides for assessment or reassessment of the total income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the course of original assessment and undisclosed income or property disclosed during the course of search. In the present case, the assessment had been completed under summary scheme under section 143(1) and time limit for issue of notice under section 143(2) had expired on the date of search. Therefore, there was no assessment pending in this case and in such a case there was no question of abatement. Therefore, addition could be made only on the basis of incriminating material found during search. B. All Cargo Global Logistics Ltd.v. Deputy Commissioner of Income-tax,Central Circle-44 [2012] 23 taxmann.com 103 (Mum.) (SB) Para 58 of SB decisions: Thus, question No.1 before us is answered as under : (a) In assessments that are abated, the AO retains the original jurisdiction as well as jurisdiction conferred on him u/s 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 u/s 153A will be made on the basis of incriminating material, which in the context of relevant provisions means-(i) books of account, other docume ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yielded disclosure of some undisclosed income. But, on perusal of the documents, we find that the CIT(A) entered into an error zone and the disclosure is only ₹ 5 crores in this case and the same relates to the lands deals. In principle this disclosure has nothing do with the impugned additions u/s 68 or 14A of the Act. In the instant case, specific to the assessee, no incriminating material with the details was referred either in the assessment order or in the order of the CIT (A) for making the impugned additions. As per the cited judgment in the case of Jai Steels Ltd, supra, the assessment u/s 153A is only for reiteration rather than making any additions in a routine manner without the strength of the incriminating materials. Similar view was taken up by the ITAT, Delhi H‟ Bench, in the case of V.K. Fiscal Services P Ltd vs. DCIT vide ITA Nos.5460 to 5465/Del/2012. In this regard, para 13 from the said order of the ITAT Delhi Bench (supra) is relevant and the same reads as under: 13. Applying the above case laws to the facts of the case, we have to necessarily quash the assessment proceedings for AY 2004- 2005, 2005-06,2007-08, 2008-09 on the following gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rty and the land obtained thereto. The said report constitutes an opinion of the third party which cannot be used by the AO for making additions and such additions, if any, cannot be sustained legally . As such, we find that the AO has not used the said report of the DVO also for making additions of ₹ 31,33,007/-, the difference between accounted amount of ₹ 46,13,007/-, claimed as the amount spent on construction of house and acquisition of land as on 31.3.2002 minus Rs. ₹ 14.8 lakhs, the investment made on the land plots. AO made addition for assessee‟s failure to provide evidences / bills in support of the claim of expenditure on the construction. It the presumption of the AO that the plots since acquired only by July 2001, the assessee would not have spend ₹ 31,33,007/- by 31.3.2002. This is merely a presumption rather conclusion based on any evidences. Such additions are unsustainable in law in the assessments made u/s 153A r.w.s 143(3) of the Act. 17. Rajasthan High Court judgment in the case of Jai Steel (India) (supra), vide para 18, it is categorically mentioned that the requirement of assessment or reassessment under the said section (153 ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
