TMI Blog2014 (2) TMI 937X X X X Extracts X X X X X X X X Extracts X X X X ..... rch action – the AO made additions by reassessing u/s 153A on the completed assessment u/s 143(1) of the Act – thus, the issue of notice u/s 153A of the Act is valid - 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 – The arguments relating to the validity of the notice u/s 153 are disapproved - the validity of the notice issued u/s 153A of the Act confirmed – the additions made by the AO in the absence of any incriminating material are not sustainable – Decided in favour of Assessee. Addition u/s 68 of the Act - Unexplained gifts received – Held that:- The decision in M/s. Govind Agarwal (HUF) vs. DCIT [2014 (1) TMI 1394 - ITAT MUMBAI] followed - there is no reference to any seized material or any incriminating documents so as to suggest that addition made in the assessment order are based on any incriminating material found at the time of search - Once that is so and also that the assessment for the assessment year has attained finality before the date of search, then no addition can be made under section 153A - the disallowance made u/s 68 is uncalled for as the same is b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... As soon as the file was put up for before me for preparation of written submission, I noticed that the Cross Objection against the Revenue's appeal were not prepared and filed before the Hon'ble Tribunal. v) I reiterate that the above mistake was a bona fide mistake and an inadvertent lapse on our part and assessee should not be allowed to suffer because of it. 2.1. In this regard, Ld Counsel for the assessee relied on the judgment of the Hon'ble Supreme Court in the case of Collector, Land Acquisition vs. Mst. Katiji Ors [1987] 167 ITR 471 another judgment of the Apex Court in the case of Concold of India Insurance Co. Ltd vs. Smt. Nirmala Devi, 118 ITR 507 and some other decisions of the Hon'ble High Courts of which are relevant for the proposition that the delay in filing of appeal due to lapse on part of assessee's Counsel who was looking after tax matters, is a sufficient cause for condonation of delay. 2.2 On hearing the above submissions of the Ld Counsel and after hearing the Ld DR on this issue, we find that there is a reasonable and sufficient cause for delay of 51 days in filing the Cross Objections before the Tribunal, considering th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 53A of the Act. In this regard, Ld Counsel for the assessee submitted various arguments before us, which are common to the ones already mentioned in detail and adjudicated by us in connection with the appeals filed in the case of Shri Govind Agarwal vs. ACIT vide ITA Nos.3389/M/2011 (AY: 2002-2003) and ITA No. 3390/M/2011 (AY: 2004-2005) vide order dated 10.01.2014. For the sake of completeness of this order, relevant port ions of the said order of the Tribunal (supra) are reproduced here under: 6. Before the Tribunal: During the proceedings before us, Ld Counsel for the assessee brought our attention to the contents of the relevant assessment order passed u/s 153A r w s 143(3) of the Act and demonstrated that no seized material was used for making the additions either on account 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 not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition that where noting incriminating was found in course of search relating to assessments, assessment for such years cannot be disturbed. He culled out many other decisions which are as under. a) Anil P Khimani vs. DCIT 2010 TIOL-177-ITAT-MUM b) Meghmani Organics Ltd vs. DCIT [2010] 36 DTR 187 (Ahd) c) Suncity Allys Pvt. Ltd. vs. ACIT [2009] 124 TTJ 674 (Jodh) d) ACIT vs. PACL India Ltd [ITA No.2637/ Del/2010] e) Shri Deepen A Parekh vs. ACIT [ ITA No.467/Mum/2011] f) MGF Automobiles Ltd vs. ACIT [ITA No.4212 4213/Del/2011] Further, Ld Counsel filed a copy of the order of the Tribunal in the case of Govind Agarwal HUF vs ACIT vide ITA No.217/Mum/2011 (AY 2008-2009) which is a part of the assessee's group and where 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 d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O in the absence of any incriminating material. The burden vests on the Revenue in such cases. Referring to the facts of the present case, Ld Counsel mentioned that the assessee disclosed investment of ₹ 46,13,007/- on the house as on 31.3.2002 whereas the AO came to the conclusion that the land value of ₹ 14.8 lakhs is the only investment on the house, no construction was undertaken by this date. AO came to such conclusion for assessee's failure to furnish the supporting bills to demonstrate the fact of part construction of the impugned residential property. It is a case of mere presumption and the additions are unsustainable on such presumption. AO has no evidence to infer that the assessee's figure of ₹ 46,13,007/- is bogus and ₹ 14.8 lakhs is the 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 he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ebate relating to the incriminating material based additions in the cases of completed assessments. Decision of the Tribunal: 9. We have heard both the parties on the legal issue relating to the sustainability or validity of the additions made in the assessments made u/s 153A read with section 143(3) of the Act in respect of completed assessments. 10. The stand of the Revenue is that the first proviso to section 153A empowers the AO to issue notice u/s 153A of the Act in respect of the 6 AYs prior to the assessment year in which the search took place. The relevance of the existence of incriminating material is not provided in the said provisions. As per the revenue there should not be any difference qua the completed assessments and the abated assessments for all six AYs 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 otherwise. 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 decisions i.e.? Jai Steel (India) Ltd (supra), Scope (P) Ltd (supra) etc. However, in case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l, we are of the opinion, such assessments or additions are unsustainable in law. 13. For the sake completeness of the assessee, we insert here some of the extracts from relevant judgments and they are: A. [2013 36 taxmann.com 523 (Rajasthan) in the case of Jai Steel (India) vs. ACIT - From Held portion: The requirement of assessment or reassessment under the said section has to be read in the context of sections 132 or 132A, inasmuch as, in case nothing incriminating is found on account of such search or requisition, then the question of reassessment of the concluded assessments does not arise, which would require more reiteration and it is only in the context of the abated assessment under second proviso which is required to be assessed. From a plain reading of the provision along with the purpose and purport of the said provision, which is intricately linked with search and requisition under sections 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; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isfaction of this condition, the AO is under obligation to issue notice to the person requiring him to furnish the return of income for six years immediately preceding the year of search. The Special Bench further held that in case assessment has abated, the AO retains the original jurisdiction as well as jurisdiction under section 153A for which assessment shall be made for each assessment year separately. Thus in case where assessment has abated the AO can make additions in the assessment, even if no incriminating material has been found. But in other cases the Special Bench held that the assessment under section 153A can be made on the basis of incriminating material which in the context of relevant provisions means books of account and other documents found in the course of search but not produced 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r has not considered the then existing decision of the Coordinate Bench decision in the case of Pratibha Industries Ltd (supra) which is relevant for the proposition that the completed assessment may not be disturbed in the absence of any incriminating material specific to the assessee. In fact, all these judgments take spirit from the Special Bench decision in the case of All Cargo Global Logistics Ltd (supra), which is relevant for the proposition that the assessment u/s 153A will be made on the basis of incriminating material such as books of accounts, other documents found in the search but not produced in the course of original assessment and undisclosed income or property discovered in the course of the search. 15. We also find that the CIT(A) made a reference to the incriminating material, which 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 in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d would be 25.3.2010, by virtue of First Proviso to section 153'C', i.e., the date of passing an order u/s 127 transferring the cases of the assessee to the present Assessing Officer no assessment or reassessment was pending. When no assessment has abated, the question of making any addition or making disallowance which are not based on only material found during the search is bad in law. 16. In these circumstances, we have no doubt about the absence of any seized material which are incriminating in nature to back the additions u/s 68 or 14A o 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, we find that the report suffers from certain deficiencies qua cost of construction of residential property 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... additions raised in both the appeals, considering the relief granted to the assessee on the legal ground, we find the adjudication is only of academic importance. Therefore, we dismiss the same academic. 19. In the result, both the appeals of the assessee are partly allowed. 7. From the above, it is evident that the arguments relating to the validity of the notice u/s 153 are disapproved. Consequently, we confirm the validity of the notice issued u/s 153A of the Act. However, considering the judgment of the Rajasthan High Court judgment in the case of Jai Steel (India) Ltd and other orders of the Tribunal (supra), we are of the opinion that the additions made by the AO in the absence of any incriminating material are not sustainable. Accordingly, additions are deleted and the ground nos.1 2 raised by the assessee are allowed. 8. In the result, Cross Objection of the assessee is allowed. I.T.A. No.879/M/2011 (AY: 2003-2004) 9. This appeal filed by the Revenue on 31.01.2011 is against the order of the CIT (A)-41, Mumbai dated 25.11.2010 for the AY 2003-2004. 10. In this appeal, Revenue raised the following grounds which read as under: i) Whether, o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransactions were genuine cannot be treated as conclusive. 11. The issues raised by the Revenue in this appeal relates to the additions made by the AO on account of 'sale proceeds on shares of Database Finance Ltd', which are otherwise accounted in the books of accounts, towards unexplained expenditure relating to the long term capital gains on sale of the same shares. No incriminating material suggesting the bogus nature of the transactions is brought to our notice by the Revenue. Considering the fact that we have already deleted the additions made by the AO in this regard, while adjudicating the appeal CO No.204/M/2013 in the above paragraphs of this order. We rely on the judgment in the case of Jai Steel (India) (supra) too. Therefore, the adjudication of these grounds becomes academic. Accordingly, grounds raised by the Revenue are dismissed as academic. 12. In the result, appeal of the Revenue is dismissed. I.T.A. No.8915/M/2010 (AY: 2004-2005) (By assessee) 13. This appeal filed by the assessee on 21.12.2010 is against the order of the CIT-41, Mumbai dated 25.11.2010 for the AY 2004-2005. 14. In this appeal, assessee raised the following grounds whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re based on any incriminating material found at the time of search. Once that is so and also that the assessment for the assessment year 2005- 06 has attained finality before the date of search, then no addition can be made under section 153A. The Mumbai Special Bench decision of the Tribunal in All Cargo Global Logistic Ltd. (supra), after analyzing the relevant provisions of the Act, came to the following conclusion and ratio:- (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. 7. In this case, the question answered in clause (b) would be applicable as the addition in the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er 31.5.2003 and on satisfaction of this condition, the AO is under obligation to issue notice to the person requiring him to furnish the return of income for six years immediately preceding the year of search. The Special Bench further held that in case assessment has abated, the AO retains the original jurisdiction as well as jurisdiction under section 153A for which assessment shall be made for each assessment year separately. Thus in case where assessment has abated the AO can make additions in the assessment, even if no incriminating material has been found. But in other cases the Special Bench held that the assessment under section 153A can be made on the basis of incriminating material which in the context of relevant provisions means books of account and other documents found in the course of search but not produced 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 su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g that no expenditure whatsoever was incurred by the assessee and claimed as a deduction while computing her total income. 21. Ground No.1 raised in this appeal is identical to that of the ground raised by the assessee vide CO No. 204/M/2013 for the assessment year 2003-2004, which is adjudicated by us in the above paragraphs of this order. While adjudicating the said appeal, we have already decided the issue in favour of the assessee. Considering the same and following the principles of consistency, ground no.1 of the instant appeal should also be decided in favour of the assessee. Accordingly, the legal issue involved in ground no.1 is allowed in favour of the assessee. 22. Ground no.2 relates to the disallowance u/s 68 of the Act on account of 'unexplained gifts received by the asessee'. This ground is exactly identical to that of the ground no.2 raised by the assessee for the AY 2004-05. Keeping in view the findings given by us in assessee's appeal ITA No. 8915/M/2010 (AY: 2004-2005), vide para .of this order and following the same, we hold that the disallowance made u/s 68 is beyond the scope of section 153A, therefore, the ground no.2 raised by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the returned income which has become final prior to the date of search and there is no material found at the time of search. The aforesaid Mumbai Special Bench decision of the Tribunal in All Cargo Global Logistic Ltd. (supra) has also been reaffirmed and applied by the co-ordinate bench in Gurinder Singh Bawa (supra). The relevant observation of the Tribunal is reproduced herein below:- 6. We have perused the records and considered the rival contentions carefully. The dispute raised is regarding legal validity of addition made by AO under section 153A of the Act. Under the provisions of section 153A, in all cases, where search is conducted under section 132 of the Act, AO is empowered to assess or reassess total income of six assessment years preceding the assessment year in which search was conducted. The section also provides that assessment or reassessment relating to any assessment year falling within period of six assessment year if pending on the date of initiation of search shall abate. There have been divergent views regarding scope of application of section 153A in cases where no incriminating material was found indicating any undisclosed income. Some of the Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h regard to unexplained gift of ₹ 10,00,000, made under section 68 and disallowance of ₹ 1,01,300 under section 14A, are beyond the scope of section 153A / 153C. Consequently, we set aside the impugned order passed by the learned Commissioner (Appeals) and on the preliminary ground itself, both the additions are deleted. Thus, the issues arising out of the ground are treated as allowed. 24. Considering the above settled position of the issue, we are of the opinion that the disallowance made u/s 14A is uncalled for as the same is beyond the scope of section 153A / 153C of the Act. No incriminating material was brought to our notice by the Revenue in support of the additions made u/s 14A of the Act. Therefore, the addition made u/s 14A of the Act is deleted and the ground no.3 raised by the assessee is allowed. 25. In the result, appeal of the assessee is allowed. I.T.A. No.880/M/2011 (AY: 2005-2006) (By Revenue) 26. This appeal filed by the Revenue on 31.01.2011 is against the order of the CIT (A)-41, Mumbai dated 25.11.2010 for the assessment year 2005-2006. 27. In this appeal, Revenue raised the following grounds which read as under: 1. Wheth ..... X X X X Extracts X X X X X X X X Extracts X X X X
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