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2015 (9) TMI 961 - ITAT COCHIN

2015 (9) TMI 961 - ITAT COCHIN - TMI - Addition on unsecured creditors - Validity of proceedings u/s 153C - Held that:- Second Proviso to section 153A clearly says that the assessment or re-assessment, if any, relating to any assessment year falling within the period of six assessment years pending on the date of initiation of search u/s 132 shall abate. In other words, if the assessment is completed or terminated by operation of law on the basis of the return of income filed in the regular cour .....

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sing officer. In the case before us, admittedly, the assessee has filed the return of income on 27-03-2006. The period of 12 months for issuing notice u/s 143(2) expires on 31-03-2007. It is also not disputed that the Commissioner of Income-tax by an order dated 27-11- 2007, in exercise of his powers u/s 127(2) transferred the jurisdiction from Ward.1, Ernakulam to DyCIT / ACIT, Central Circle.1, Ernakulam. Therefore, the assessing officer of the assessee, the DyCIT / ACIT Central Circle, Ernaku .....

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he return filed in regular course on 27-03-2006 on the basis of the balance-sheet as on 31-03-2005 cannot be disturbed by the assessing officer unless there is a specific material found during the course of search operation.

In this case, it is not in dispute that there is no material found during the course of search operation for the assessment year 2005-06. The assessing officer made the addition only on the basis of the balance-sheet as on 31-03-2005 which was filed by the assess .....

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rch operation, the assessing officer cannot reopen the assessment completed on the basis of the return filed by the assessee on 27-03-2006 wherein the unsecured creditors of ₹ 12,42,000 was disclosed. Hence, the CIT(A) has rightly deleted the addition. - Decided against revenue.

CROSS Objection - AR now submitted before us that the framing of assessment u/s 153C r.w.s 153A/143(3) of the Act is bad in law - Held that:- Since there was a document found in the case of search action .....

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nesan And Chandra Poojari, A.M., J. For the Petitioner : Shri K P Paulson , CA For the Respondent : Shri Shantam Bose, CIT-DR ORDER Per George George K, JM Since there was a difference of opinion between the two Members constituting the Division Bench of ITAT, Cochin, the matter was referred to the Third Member by the Hon'ble President u/s. 255(4) of the Act. The ld. Third Member has framed following question after the consent of both the parties in appeal:- "1. Whether in the facts and .....

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amination." 2. The Hon'ble Third member has agreed with the view taken by the Hon'ble Judicial Member in respect of both the questions referred above. Accordingly, as per the majority view, the appeal filed by the revenue is dismissed and the Cross Objection filed by the assessee is allowed. 3. In the result, the appeal filed by the revenue stands dismissed and the Cross Objections filed by the assessee is allowed. (Order pronounced in the open Court on this 16.9.2015) IN THE INCOME .....

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ded to the Hon'ble President. 2. At the time of hearing, the Ld. A/R and CIT D/R submitted that the questions do not properly focus the points in dispute. Therefore, the parties were directed to reframe the questions which would cover the issues emerging out of the orders passed by the Hon'ble JM and Hon'ble AM. Upon verifying the reframed questions based on the material available on record and also after considering the facts and circumstances of the case, I am of the opinion that t .....

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C being valid, whether the Hon'ble. Accountant Member was justified in setting aside the order of the Ld. CIT(A) on merits for re-examination. 3. The above two reframed questions are put to the parties and they have admitted that the above questions would appropriately cover the issues in dispute, emerging out of the orders passed by the Hon'ble JM and Hon'ble AM. D Manmohan, VP Date of Decision: September 8, 2015 ORDER U/s 255(4) of I-T Act, 1961 ORDER Per: D Manmohan: The assessee .....

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nce sheet and profit and loss account of the assessee company, i.e., M/s. Royal Cartons (P) Ltd. for the period 01/04/2005 to 31/03/2006 were found which were forwarded to the concerned Assessing officer by the search team. Based on the balance sheet and profit and loss account pertaining to the assessment year 2006-07, the Assessing officer issued notice u/s. 153A r.w.s. 153C of the Act on 12-02- 2008 calling upon the assessee to file return of income within 30 days from the date of receipt of .....

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rprises Ltd. It is well-settled that a return processed u/s. 143(1) of the Act can be taken up for scrutiny by issuing notice u/s. 143(2) of the Act within a period of 12 months from the date of filing of return of income. In this case, notice u/s. 143(2) could have been issued on or before 31/03/2007. No such notice having been issued, the proceedings u/s. 143(1) of the Act attained finality. 2. In this case, the jurisdiction of the assessee was originally vested with Assessing officer, Ward-1, .....

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ial pertaining to previous year 2004-05 was found during the course of search so as to assume jurisdiction u/s. 153C of the Act. 3. The Assessing officer however observed that as per the balance sheet, as on 31/03/2005, filed alongwith the return of income by the assessee, unsecured creditors during the year were to the tune of ₹ 12,42,000/- and the assessee did not file confirmation letters of the sundry creditors. Therefore, the Assessing officer treated the same as unexplained cash cred .....

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before the Tribunal and the assessee-company, by way of Cross Objections, contended that the Assessing officer made the additions u/s. 153C of the Act without obtaining any incriminating material during the course of search and he erred in making addition merely on the basis of figures available in balance sheet filed alongwith the return. 5. The appeal and the Cross Objections were heard by the Division Bench. The Ld. Judicial Member observed that the proceedings were initiated against the asse .....

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rch. In this case, the seized documents would have been handed over to the Assessing officer on or after 27/11/2007 by which date assessment proceedings completed on the strength of return filed on 27/03/2006 attained finality. Since assessment proceedings attained finality, by operation of law, the same cannot be re-opened by invoking provisions of section 153C of the Act. The Ld. Judicial Member extracted the provisions of section 153C to highlight that the said section comes into play only wh .....

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iso to section 153C, the date of initiation of search proceedings u/s. 132 is the date of receipt of books of account, etc. by the Assessing officer having jurisdiction over such other person. The said proviso reads as under: "Provided that in case of such other person, the reference to the date of initiation of the search u/s. 132 or making of requisition u/s. 132 in the second proviso to sub section (1) of section 153A shall be construed as reference to the date of receiving the books of .....

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operation of law on the basis of the return of income filed in the regular course, the assessment proceedings shall not be abated. On conjoint reading of section 153A and 153C of the Act and the facts of the case, the Ld. Judicial Member was of the view that the assessment proceedings for assessment year 2005-06 can be said to have been terminated by operation of law as on 31/03/2007. If the Assessing officer seeks to initiate proceedings u/s. 153C of the Act, he has to prove that there is some .....

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eet as on 31/03/2005 which was filed alongwith the return of income as on 27/03/2006 itself. In such circumstances, the Ld. JM concluded that in the absence of any incriminating material found during the course of search, the Assessing officer cannot re-open the assessments completed on the basis of the return filed by the assessee on 27/03/2006 wherein the unsecured creditors of ₹ 12,42,000/- was disclosed. He, accordingly, deleted the addition on the ground of lack of jurisdiction to ini .....

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on 153A and 153C of the Act and observed that proviso to section 153A mandates Assessing officer to assess or reassess the total income in respect of each assessment year falling within six assessment years. The proviso further mandates that any assessment or re-assessment in respect of any of those six years which are pending shall not abate. In his opinion, a careful perusal of the provisions show that the assessments have to be compulsorily made for all the six years and nowhere it is mention .....

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the Jharkhand High Court in the case of Abhay Kumar Shroff vs. CIT (290 ITR 114) wherein the court observed that as per the provisions of section 153A single assessment of undisclosed income of a block period, in a case where search is conducted is permissible. He also referred to a host of other decisions wherein the provisions of section 153A and 153C were highlighted and in most of the cases, the courts held that irrespective of availability of incriminating material, block assessment can be .....

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going through the material placed before the CIT(A). It may be noticed that the Ld. Judicial Member having quashed the proceedings, there was no occasion for him to consider the order of the CIT(A) on merits. The Ld. Accountant Member noticed that the CIT(A) deleted the addition of ₹ 2 lakh received from Shri Nelson stating that Mr. Nelson had enough resources in the form of agricultural income. The Ld. AM was of the opinion that the assessee having produced documents for the first time b .....

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ssessee filed the return of income on 27-03-2006 and the assessment proceedings are terminated by operation of law on expiry of time limit for issuing notice u/s. 143(2) on 31-03-2007 and the books of account of the assessee received by the Assessing officer on or after 27-11-2007, whether the addition made by the Assessing officer to the extent of ₹ 12,42,000/- was correct especially when copy of the balance sheet said to be found during the course of search operation was filed by the ass .....

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h) without giving any opportunity to both parties? 11. The Ld. Accountant Member on the other hand was of the opinion that the questions framed by the Ld. Judicial Member do not appropriately cover the issues in dispute and therefore, he framed the following questions which in his opinion, would help in properly adjudicating all the issues: (1) In the facts and circumstances of the case, whether the assessment framed u/s. 153C r.w.s. 153A of the I.T. Act could be quashed, though the document sei .....

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cted both the parties to suggest whether all the four questions need to be answered or whether they need to be reframed. 13. The Ld. A/R and D/R submitted that the order of the Bangalore Bench of this Tribunal dated 05/12/2014, in Nandini Deluxe vs. ACIT in I.T.A. Nos. 446 to 448/Bang/2013, was not filed at the time of the passing of the order by the Ld. Judicial Member, but the Ld. Accountant Member chose to incorporate the same in his dissent order, but such facts can always be taken into cons .....

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1) Whether in the facts and circumstances of the case, the documents found during the course of search can be considered as incriminating material to initiate proceedings u/s. 153C of the Act, even though the assessment u/s. 143(1) was completed and attained finality before satisfaction was reached by the Assessing Officer who initiated proceedings u/s. 153C of the Act. 2) In the event of proceedings u/s. 153C being valid, whether the Hon ble. Accountant Member was justified in setting aside the .....

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section 153C of the Act. 16. On the other hand, the Ld. Counsel for the assessee submitted that the proceedings initiated by the Assessing officer are invalid in law since there is no incriminating material found during the course of search. The concerned assessment year was 2005-06. He mainly contended that the assessment proceedings for the assessment year 2005-06 are terminated by the operation of law on expiry of time limit for issuing notice u/s. 143(2) on 13-02-2007 whereas the loose shee .....

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date of pronouncement of the order by the Bangalore Bench and thus the same could not have been taken into consideration. In such an event, the Ld. AM, while passing a dissent order, was not justified in referring to a later judgment that too without giving opportunity to both the parties as well as to the Ld. JM. 17. He also submitted that during the course of search and seizure operations in the business premises of M/s. Matha Enterprises Ltd. material pertaining to assessment year 2006-07 wa .....

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e had accounted for all the transactions in the books of account. So, the document seized cannot be treated as an incriminating material. In the document seized, the value of opening and closing stock are the same, i.e., ₹ 5,19,998.60. The assessee submitted that in the software, the value of the stock has to be entered manually after making physical valuation of closing stock as otherwise the opening stock value will continue to appear as closing stock value which will give absurd profit .....

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er initiated proceedings u/s. 153C of the Act without giving proper reasons. 19. He strongly relied on the order of the CIT(A) for the assessment year 2006-07 to contend that the Department having not preferred any appeal on the findings of the CIT(A), it cannot now be said that it can be treated as incriminating material for the year under consideration. The original return of income filed by the assessee discloses the total figure of sundry creditors and the Assessing officer, while framing th .....

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f a third party. Therefore, in section 153C(1) of the Act suitable amendment was made by the Finance Act, 2014 wherein it was clarified that the proceedings u/s. 153C can be initiated only if the Assessing officer is satisfied that the books of account or documents seized or requisitioned have a bearing on the total income of the assessee of the other person for the relevant assessment year. Since the provisions were amended to eliminate practical difficulties, the same has to be considered as c .....

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ounsel submitted that the proposition of the Ld. AM, that even bald documents, which do not have any bearing on the assessment, were enough to trigger the provisions of section 153C of the Act, is fraught with absurdity. In this regard, he referred to the relevant observations of ITAT, Kolkata Bench in the case of Trishul Hi-Tech Industries (unreported decision). In his opinion, if any undisclosed income is not found relating to a person, in principle no action is liable to be taken against him. .....

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, it is stated that the Ld. Accountant Member has exceeded his jurisdiction in relying on the decision of the Bangalore Bench of the Tribunal which was pronounced not only after the date of hearing but also after the order was forwarded by the Ld. Judicial Member. The appeal was heard on 29/10/2014 and soon thereafter the Ld. Judicial Member forwarded the draft order to the Ld. Accountant Member. The Ld. AM referred to the above case law in his dissent order which was neither available at the ti .....

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relevant observations of Kolkata Bench are extracted for immediate reference: "The provisions of s.153C of the Act was amended to obviate practical difficulties which arose in its interpretation from time to time. The amendment made by Finance (No.2) Act, 2014 as the Legislature found that different authorities were assigning different meanings to the provisions. As such, a state of affairs resulted in ambiguities which gave rise to conflicting decisions on subject, the Legislature in its .....

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h seized material acts mechanically initiates proceedings u/s. 153C of the Act without any verification. Such interpretation is never the intendment of the Legislature. The Legislature found that multiplicity of proceedings resulted and confusion reigned supreme. In order to eliminate such contradictory situations, it was made clear that the Assessing Authority while receiving such seized material belonging to the other person shall be satisfied that such material must be of incriminating nature .....

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ng materials found. In fact a logical conclusion was drawn to that effect. In fact, the interpretation of the existing provisions was defeating the object and purpose of the enactment and was leading to infructuous litigation without any rhyme or reason. By such interpretation, there were two assessment orders standing on the same issues raising identical tax demands for the same assessment years which is an absurd proposition. This based on the maxim Ut Res Magis Valeat Quam Pareat. The constru .....

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ment." 25. Therefore, in the light of the above decision, I am of the firm view that the order passed by the Ld. Judicial Member is in accordance with law. I, therefore, answer Question No. 1 accordingly, i.e. in the absence of any incriminating material, to initiate proceedings u/s. 153C of the Act, the Assessing officer is not justified in re-opening the assessment for the assessment year 2005-06 which has attained finality. 26. The Ld. Accountant Member was of the opinion that any docume .....

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e was clear finding by the Ld. CIT(A) in his order, in respect of assessment year 2006- 07, wherein it was stated that there was no incriminating document found during the course of search; the Revenue has not preferred any appeal against the order of the CIT(A). Under these circumstances, it cannot be said that the same document can be treated as incriminating material for the assessment year under consideration. Since Point No. 1 is decided in the negative, i.e. the document found cannot be co .....

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he assesee has filed cross objection. Therefore, we heard both the appeal of the revenue and the cross objection of the assessee together and dispose of the same by this common order. 2. Shri K.P. Paulson, the ld.representative for the assessee submitted that for the assessment year 2005-06 the assessee filed the return of income on 27-03-2006 which is evident from the intimation issued by the department u/s 143(1) of the Act, copy of which is available at page 7 of the paper book. The time limi .....

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Act, more particularly, Proviso to section 153C, the ld.representative submitted that in case of the person other than the searched person, the date on which the books of account or documents, etc. is received by the assessing officer having jurisdiction over the person other than searched person shall be treated as the date of initiation of search. According to the ld.representative, the jurisdiction of the assessee vested with the Assessing Officer, Ward-1, Ernakulam. The jurisdiction was tra .....

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ely not earlier to that. Therefore, according to the ld.representative, the proceedings on the basis of the return filed by the assessee on 27-03-2006 were terminated by operation of law on 31-03- 2007. Therefore, according to the ld.representative, the assessment which was completed on the basis of the regular return of income filed cannot be reopened in view of the specific provision contained in section 153A of the Act. 3. The ld.representative further submitted that the notice requiring the .....

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the return of income filed in the regular course on 27-03- 2006. Therefore, the unsecured creditors declared in the balance-sheet which was filed alongwith the return of income cannot be taken up for enquiry or adjudication in the block assessment u/s 153C unless and until there is some search material found during the course of search operation. Referring to the provisions of section 153C, the ld.representtive submitted that unless, the assessing officer satisfied that the material found durin .....

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he contrary, Shri M Anil Kumar, the ld.DR submitted that there was a search in the premises of Matha Enterprises on 13-02-2007. During the course of search operation bunch of loose sheets containing balancesheet, profit & loss account, etc. was found which reveals the income of the assessee. On the basis of the seized document notice was issued u/s 153C asking the assessee to file the return of income. In response the assessee filed the return of income declaring a loss of ₹ 2,65,510.a .....

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ion made by the assessing officer. According to the ld.DR, the addition was made on the basis of the balance-sheet filed by the assessee along with the return of income. 5. We have considered the rival submissions on either side and also perused the material available on record. We have carefully gone through the provisions of section 153C of the Act which reads as follows: "153C.(1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and se .....

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ue such other person notice and assess or reassess income of such other person in accordance with the provisions of section 153A: Provided that in case of such other person, the reference to the date of initiation of the search under section 132 or making of requisition under section 132A in the second proviso to subsection (1) of section 153A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer havi .....

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ome has been furnished by such other person and no notice under sub-section (1) of section 142 has been issued to him, or (b) a return of income has been furnished by such other person but no notice under sub-section (2) of section 143 has been served and limitation of serving the notice under sub- section (2) of section 143 has expired, or (c) assessment or reassessment, if any has been made, Before the date of receiving the books of account or documents or assets seized or requisitioned by the .....

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d to in section 153A, then the same shall be handed over to the assessing officer having jurisdiction over such person other than searched person for proceeding further. Proviso to section 153C say that the date of initiation of search u/s 132 in respect of person other than searched person is the date of receipt of books of account or document seized by the assessing officer having jurisdiction over such other person. 7. We have also gone through the provisions of section 153A which provides fo .....

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ding assessment proceedings on the date of the search, the assessment shall be made on the basis of the seized material and other material found on record. However, in respect of the assessment proceeding which is not pending on the date of search has to be made only on the basis of the material found during the course of search operation. The completed proceedings on the date of search cannot be reopened by the assessing officer. In the case before us, admittedly, the assessee has filed the ret .....

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ot before that. Therefore, the assessment proceedings on the basis of the return of income filed in the regular course on 27-03- 2006 got terminated by operation of law on 31-03-2007. In other words, the assessment proceedings on the basis of the return of income filed on 27-03-2006 is not pending as on 27-11-2007 when the assessing officer is supposed to have received the seized document of the assessee. Hence, the income disclosed in the return filed in regular course on 27-03-2006 on the basi .....

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. Therefore, even if the copy of the said document was found on the date of search still, that document cannot be treated as seized material. In other words, the copy of the balance-sheet s on 31-03-2005 is very much available with the revenue authorities along with the return of income filed on 27-03-2006. Therefore, this Tribunal is of the considered opinion that in the absence of any material found during the course of search operation, the assessing officer cannot reopen the assessment compl .....

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/2013 CROSS Objection No.37/Coch/2013 Dated: December 29, 2014 ORDER Per: Chandra Poojari, AM: I have gone through the order proposed by the ld JM and after careful perusal of the same, I am unable to convince myself with regard to the conclusion in reached by the ld JM and I proceed to record my note of dissent as follows: 2. The assessee filed cross objection stating that the claim of assessment u/s 153C is bad in law as there was no incriminating material relating to the assessee was found du .....

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s 153A r.w.s. 153C of the Act dated 12.2.2008 was issued requiring the assessee to file return of income . The said notice was served on the assessee on 18.2.2008. In response to the said notice, the assessee filed its return of income on 30.4.2008 declaring a loss of ₹ 2,65,510/- which was originally returned. There was an unsecured creditor in the balance sheet as on 31.3.2005 filed with the return of income for which the AO called for confirmation, which was not filed and the same was c .....

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; but also be prima facie incriminating one' for attracting sec.153C. 3.2 The ld AR of the assessee submitted that unless the AO is satisfied that the material found during the course of search operation belong to the person other than the searched person, there cannot be any initiation of proceedings u/s 153A of the Act. He submitted that as on date of search action, proceedings under the Act are not pending and when there is no incriminating material found during the course of search indic .....

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g judgments: i) Shivnath Rai Harnarain (India) Ltd vs DCIT 117 TTJ 480 ii) Shyam Lata Kaushik vs ACIOT 114 ITD 305 iii) Rajat Tradecom India 120 ITD 48 (Ind)) 4. I have carefully gone through the provisions of sec. 153A and 153C which read as under: "153A. (1) Notwithstanding anything contained in s. 139, s. 147, s. 148, s. 149, s. 151 and s. 153, in the case of a person where a search is initiated under s. 132 or books of account, other documents or any assets are requisitioned under s. 13 .....

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required to be furnished under s. 139; (b) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made: Provided that the AO shall assess or reassess the total income in respect of each assessment year falling within such six assessment years: Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six asse .....

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o sub-so (1), shall stand revived with effect from the date of receipt of the order of such annulment by the CIT : Provided that such revival shall cease to have effect, if such order of annulment is set aside." "153C. (1) Notwithstanding anything contained in s. 139, s. 147, s. 148, s. 149, s. 151 and s.153, where the AO is satisfied that any money, bullion, jewellery or other valuable article orthing or books of account or documents seized or requisitioned belongs or belong to a pers .....

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making of requisition under s. 132A in the second proviso to s. 153A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the AO having jurisdiction over such other person. (2) Where books of account or documents or assets seized or requisitioned as referred to in sub-so (1) has or have been received by the AO having jurisdiction over such other person after the due date for furnishing the return of income for the assessm .....

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ent or reassessment, if any, has been made, before the date of receiving the books of account or documents or assets seized or requisitioned by the AO having jurisdiction over such other person, such AO shall issue the notice and assess or reassess total income of such other person of such assessment year in the manner provided in s. 153A." 4.1 A reading of the above makes it clear that s. 153C r/w s. 153A brings into the purview of assessment both regular and undisclosed income subsequent .....

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ot be correct to interpolate that no regular assessment or reassessment can take place under these provisions. There is no reference to incriminating search materials as in earlier s. 158BB/158BC to which the assessment has to be confined to. 4.2 Sec. 153C only mandates that where the AO is satisfied that the material, including books of accounts or documents seized or requisitioned belongs to other person, then those materials will be handed over to the AO having jurisdiction over the other per .....

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ACIT, (114 TTJ 940), it was held that there is no requirement for an assessment made u/s 153A to be based on any material seized in the course of search. Again, the Delhi Bench of the Tribunal in the case of Shivnath Rai Harnarain India Ltd vs DCIT reported in 117 TTJ 480, it was held that the AO is entitled to make assessment under special provisions even if no material is found during search. 4.4 The Hon'ble Jharkhand High Court in the case of Abhay Kumar Shroff v. Commissioner of Income- .....

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the period up to the date of commencement of such search. In such cases, the Assessing Officer shall issue notice to the assessee requiring him to furnish return 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." 4.5 Further .....

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ent or reassessment in respect of any of those six years which are pending shall abate. Hence, it is clear that under such circumstances, assessment or reassessment will be done pursuant to s. 153A or s. 153C. It will not be correct to interpolate that no regular assessment or reassessment can take place under these provisions. There is no reference to incriminating search materials as in earlier s. 158BB/s. 158BC to which the assessment has to be confined to. See. 153C only mandates that where .....

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e part of AO is not in dispute as the assessee is contending that assessment made has to be with reference to incriminating search materials." 4.6 Further, The Hon'ble Andhra Pradesh High Court in the case of Gopal Lal Bhadruka v. Deputy Commissioner of Income-tax reported in 346 ITR 106(AP) held that; "By virtue of section 158BI of the Act, the various provisions of Chapter XIV-B of the Act are made inapplicable to proceedings under section 153A/153C of the Act. The effect of this .....

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income of the assessee" 4.7 Further, the Hon'ble Delhi High Court in the case of SSP Aviation Ltd vs DCIT in 252 CTR 291 observed that Sec, 153C merely enable the revenue authorities to investigate into the contents of documents seized which belongs to a person other than a person searched so that it can be ascertained whether the transaction or the income embedded in the document has been accounted for in the case of the appropriate person. It is aimed at ensuring that income does not .....

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from such other person for 6 assessment years, the proceedings will have to be closed. If the return filed by other person for the period of 6 assessment years does not show that the income reflected in the document has been accounted for, additions will be accordingly made after following the procedure prescribed by law and after giving adequate opportunity of being heard to such other person. 4.8 The Hon'ble Delhi High Court in the case of Commissioner of Income-tax v. Anil Kumar Bhatia r .....

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e incriminating material was found in respect of a non-pending assessment. In that situation, the Court held that section 153A of the Act applies if incriminating material is found in the course of search even if assessments are completed. Now the question as to whether any assessment could be made in respect of completed assessments when no incriminating material was found apparently left open by the Delhi High Court. The observation in the judgment appears to indicate a doubt in the mind of th .....

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r income which is not disclosed in the earlier return of income or which is not unearthed in the course of search under section 132 of the Act, in order to find out and determine what is the 'total income' of each year and then pass the order of assessment. 4.10 Same view has taken by the Bangalore Bench of this Tribunal in the case of M/s Nandini Deluxvs ACIT in ITA No. 446 - 448/BANG/2013 vide order dtd 5TH Dec 2014 wherein it has been held as under: 6.3.1 We have heard the rival submi .....

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uisitioned under section 132A after the 31st day of May, 2003, the Assessing Officer shall- (a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be .....

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ny, relating to any assessment year falling within the period of six assessment years referred to in this sub-section pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate." 6.3.2 A perusal of section 153A of the Act 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 of the Act in respect of searches carrie .....

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A of the Act, was made. As has been held by the Hon'ble Delhi High Court in the case of Anil Kumar Bhatia (supra), there is no dispute to the proposition that where a search is carried out under section 132 or a requisition under section 132A of the Act, the Assessing Officer shall issue notice requiring the person searched to furnish his return of income in respect of each assessment year relevant to the previous year in which such search is conducted or requisition is made. Therefore, the .....

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ries Ltd. (supra) wherein it has been observed that when we examine the provisions of section 153A(1)(b) of the Act, the 2ndproviso thereto and the judicial decisions cited before us, three possible circumstances emerge on the date of the initiation of search under section 132(1) of the Act. i)assessment proceedings are pending; ii)proceedings are not pending but some incriminating material is found in the course of search, indicating some income and / or assets not disclosed in the return of in .....

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he Department is found in the course of search, then there is no dispute as to the jurisdiction as well as the scope of assessment where an assessment proceedings for any Assessment Year is pending on the date of search, then proceedings relating to that assessment will abate andthe scope of assessment will be wide enough to include issues emerging from abated proceedings as well as issues emerging from seized incriminating material. 6.3.5 The circumstance laid out at (ii) above, has been answer .....

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atement since no proceedings are pending. In this latter situation,the Assessing Officer will reopen the assessments or reassessments already made (without having the need to follow 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 .....

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s relating to any assessment year, then the scope of assessment will depend on whether the original assessment is pending or completed. Where the original assessment in any assessment year is pending on the date of search, then the proceedings relating to the pending assessment shall abate and the proceedings initiated as a result of search will be continued. The scope of this assessment would cover issues arising from the pending assessment and the freshly initiated proceedings will cover issue .....

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ction 143(1)(a) or 143(3) of the Act prior to the initiation of search, the Assessing Officer is still empowered to reopen those proceedings under section 153A of the Act without any fetters and reassess the total income taking note of undisclosed income, if any, unearthed during the search. It is clear that the Hon'ble Court dealt with a situation in which some incriminating material was found in respect of a non-pending assessment. It was in this background that the Hon'ble Court held .....

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. We, therefore, express no opinion as to whether section 153A can be invoked even in such a situation. That question is therefore left open." The above observation appears to indicate a doubt in the mind of the Hon'ble High Court as to whether the proceedings under section 153A of the Act can still be initiated if no incriminating material is found in the course of search. To our minds, had it been an open and shut case, i.e. acquiring of jurisdiction under section 153A of the Act does .....

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hat 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 and seizure. Such an assessment was popula .....

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t assessment years 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 clarified by the Explanation below Section 158BA(2). After the introduction of the group of Sections namely, 153A to 153C, the single block assessment concept was given a go-by. Under the new Section 153A, in a case where a search is initiated under Section 132 or requisition of books of account, .....

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with the date of search/requisition. Under Section 153A and the new scheme provided for, the AO is required to exercise the normal assessment powers in respect of the previous year in which the search took place. 19. Under the provisions of Section 153A, as we have already noticed, the Assessing Officer is bound to issue notice to the assessee to furnish returns for each assessment year falling within the six assessment years immediately preceding the assessment year relevant to the previous ye .....

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given the power to assess or reassess the "total income" of the six assessment years in question in separate assessment orders. This means that there can be only one assessment order in respect of each of the six assessment years, in which both the disclosed and the undisclosed income would be brought to tax. 20. A question may arise as to how this is sought to be achieved where an assessment order had already been passed in respect of all or any of those six assessment years, either u .....

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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 .....

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the strict procedure to assume jurisdiction to reopen the assessment under Sections 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 149has 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 bee .....

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n assessment order is passed under Section 143(1) or 143(3) of the Act, 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. After such reopening of the assessment, the Assessing Officer is empowered to assess or reassess the total income of the aforesaid years. The condition precedent for application of Section 153A is there should be a search under Section 132. Initiation of proc .....

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ng shall abate. If such proceedings are already concluded by the assessing officer by initiation of proceedings under Section 153A, the legal effect is the assessment gets reopened. The block assessment roped in only the undisclosed income and the regular assessment proceedings were preserved, resulting in multiple assessments. Under Section 153A, however, the Assessing Officer has been given the power to assess or reassess the "total income" of the six assessment years in question in .....

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osed and the undisclosed Income would be brought to tax. When once the proceedings are initiated under Section 15 3A of the Act, the legal effect is even in case where the assessment order is passed it stands reopened. In the eye of law there is no order of assessment. Re-opened means to deal with or begin with again. It means the Assessing Officer shall assess or reassess the total income of six assessment years. Once the assessment is reopened, the assessing authority can take note of the inco .....

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initiating proceedings under Section 263 is any order passed under the Act by the Assessing officer is erroneous insofar as it is prejudicial to the interest of the revenue. Once the order passed by the Assessing officer gets reopened, there is no order which can be said to be erroneous insofar as it is prejudicial to the interest of the revenue which confers jurisdiction on the Commissioner to exercise the power of the jurisdiction. 11. The Tribunal has proceeded on the assumption by virtue of .....

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it is expressly provided under Section 153A of the Act the Assessing Officer shall assess or reassess the "total income" of six assessment years which means the said total income includes income which was returned in the earlier return, the income which was unearthed during search and income which is not the subject matter of aforesaid two income. If the commissioner has come across any income that the assessing authority has not taken note of while passing the earlier order, the said .....

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Officer can take note of the income disclosed in the earlier return, any undisclosed income found during the course of search and also any other income which is not disclosed in the earlier return of income or which is not unearthed in the course of search under section 132 of the Act, in order to find out and determine what is the total income' of each year and then pass the order of assessment. The grounds of appeal raised by the assessee at S.Nos. 2 to 5 are accordingly dismissed for all .....

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6. Now, coming to the revenue's appeal, it is with regard to deletion of addition made by the AO. 7. The first issue relates to deletion of addition of Rs. one lakh received from K. V. Nelson. 7.1 The assessee received the following loans from Mr. K. V. Nelson: i) ₹ 50,000/- on 18.8.2004 vide cheque no. 43422 of Nedubassssery Panchayat Service Co-op Bank. ii) ₹ 50,000/- received on 15.12.2004 vide cheque no.43428 of Nedubasserry Panchayat Service Co-op Bank; and iii) ₹ 1 l .....

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e ld DR is not having merit. It was clarified that it was written in the pass book as CD 417 and the beneficiary of the account CD 417 is the respondent i.e. Royale Cartons P Ltd. The assessee also filed a copy of the bank pass book which is placed at paper book pgs. 106 & 107. 9. I have carefully gone through the records and the submissions made by both the parties. I find that before the AO the assessee has not filed any details. The assessee first time produced the above documents before .....

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nson Abraham advanced ₹ 5 lakhs on 22.3.2005 on the date immediately before the issue of cheque of ₹ 5 lakhs; there is a similar credit in the bank account of the creditors, which remains un-clarified. According to the ld DR, the assessee failed to prove the genuineness of the transaction and hence the addition has to be confirmed. 10.2 On the other hand, the ld AR of the assessee submitted that the amount of ₹ 5 lakhs advanced to the assessee vide cheque No.2968863 on 22.2.200 .....

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should be remitted back to the file of the AO. Accordingly, this issue is remitted back to the AO with a direction to examine the details produced by the assessee before the CIT(A) and decide the issue afresh in accordance with law. 12. Next issue is with regard to the deletion of addition of ₹ 25,000/- out of ₹ 3,25,000/- advanced by Mrs. Iby Jonshon. 12.1 The assessee received Rs ₹ 50,000/- from Mrs. Iby Johnson during the assessment year under consideration. According to th .....

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d the submissions made by both the parties. I find that before the AO the assessee has not filed any details. The assessee first time produced the above documents before the CIT(A). Therefore, in my opinion, the issue should be remitted back to the file of the AO. Accordingly, this issue is remitted back to the AO with a direction to examine the details produced by the assessee before the CIT(A) and decide the issue afresh in accordance with law. 14. Next issue is with regard to the deletion of .....

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rkey has the main source of income as rent from Hotel and Allied Traders Pvt Ltd. He also placed on record the proof, which is placed at pg. 125 of the paper book. 15. I have carefully gone through the records and the submissions made by both the parties. I find that before the AO the assessee has not filed any details. The assessee first time produced the above documents before the CIT(A). Therefore, in my opinion, the issue should be remitted back to the file of the AO. Accordingly, this issue .....

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0,000/- was advanced by Mr. Paulson P Varkey vide cheque no.97611 of SBI, Angamaly Branch on 19.8.2004, which was advanced by Mr. Paulson P Varkey after receiving an amount of ₹ 2.50 lakhs transferred from the SB account of his wife Mrs. Meena Paulson on 31.7.2004, a copy of which is placed on record at pages 128 to 130 of the paper book. 17. I have carefully gone through the records and the submissions made by both the parties. I find that before the AO the assessee has not filed any deta .....

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