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M/s Alliance Mall Developers Co. Pvt. Ltd., DCIT, Mumbai Versus ACIT, Mumbai, M/s Alliance Mall Developers Co. Pvt. Ltd.

2015 (11) TMI 1439 - ITAT MUMBAI

Assessment under section 153C - Disallowance on account of administrative & other overheads - plea of the assessee was that for the year under consideration the return filed by the assessee having been deemed to be processed under section 143(1) of the Act, in the absence of any notice issued under section 148 of the Act it attained finality - Held that:- The return of income having been filed in 2011, proceedings have reached finality by 2013 on which date the officer, to whom the matters were .....

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oceedings initiated under section 153C are not valid and therefore the assessments made thereon were quashed. Consistent with the view taken by the ITAT in the aforecited cases I hold that the proceedings initiated under section 153C and the assessment made in the instant case is also not valid in as much as there is no incriminating material found during the course of search, pertaining to A.Y. 2011-12. Since the notice issued under section 153C is held to be invalid, the assessment made thereo .....

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ther on facts and circumstances of the case the learned CIT(A) was justified in deleting the disallowance of ₹ 16,05,200/- on account of administrative & other overheads without appreciating the fact that the assessee had not commenced its business as construction of Mall was not started upto A.Y. 2012-13, therefore, the expenditure incurred by it should have been capitalized under the head 'Capital work-in-progress' as against revenue expenditure claimed by the assessee?" .....

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otice under section 153C of the Act the other issues can be taken up for consideration. Accordingly I proceed to dispose of the appeals filed by the Assessee as well as the Department. 3. Search and seizure action was carried out on 20.01.2012 at the office of Provogue (India) Ltd. and residence of the Directors and it was concluded on 17.03.2012. Prior to the search action assessee filed its regular return on 03.09.2011 declaring total loss of ₹ 10,62,071/-. No notice was issued under sec .....

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n seized in the search action, satisfaction note for initiating proceedings under section 153C has been recorded and notice under section 153A r.w.s. 153C was issued on 13.08.2013 in response to which assessee declared total loss of ₹ 10,62,071/-, as was declared in the original return of income. Subsequently notice under section 143(2) was issued and thereafter the AO completed the assessment on a total income of ₹ 5,43,130/- wherein he has disallowed a sum of ₹ 16,05,200/- re .....

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s that for the year under consideration the return filed by the assessee having been deemed to be processed under section 143(1) of the Act, in the absence of any notice issued under section 148 of the Act it attained finality. In other words, no assessment or reassessment was pending on the date of initiation of search. In such an event an assessment can be made only if incriminating documents, etc. are found. In the instant case no incriminating material was found which was the basis for initi .....

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g assessment or reassessment on the date of initiation of search or making a requisition under section 153A shall abate. The effect of second proviso is that any pending assessment or reassessment will abate. Fresh determination of total income would be required only when there is incriminating material. The case law relied upon by the AO, i.e. Shri Anil Kumar Bhatia (352 ITR 493) was distinguished on the ground that it was examined by the Special Bench of ITAT in the case of All Cargo Global Lo .....

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time limit for issuance of notice under section 143(2) would be expiring after the date of search. He also admitted that it is not clear as to whether any notice under section 143(2) was issued which got abated. In his opinion there is no purpose in making two assessments in the same assessment year, once a notice is issued under section 153C of the Act. He also admitted that there is no incriminating material found during the search but, according to him, processing of return under section 143 .....

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Tribunal. The learned CIT-DR filed detailed written submissions wherein it was contended that the case of the assessee was centralised by the order dated 09.10.2012 but prior to this the Income Tax Officer-8(1)(1), having erstwhile jurisdiction over the case, had issued a notice under section 143(2) of the act which was served upon the assessee on 28.09.2012. Further, the time limit for completion of the assessment was 31.03.2014. Proceedings under section 153C were initiated on 13.08.2013. Pre .....

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Cartons Pvt. Ltd. as well as the Coordinate Bench decision in the case of Hagwood Commercial Developers Pvt. Ltd. (ITA No. 1305/Mum/2015 dated 22.05.2015) are distinguishable on facts, whereas the decision of the Hon'ble Kerala High Court in the case of Dr. K.M. Mehaboob vs. DICT 26 taxmann.com 54 has direct bearing on the issue on hand. According to him there is no need to examine whether evidence/material seized represents undisclosed income of another person; all that is required is to c .....

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uld also be satisfied that such valuable articles or documents belong to the other person and it reflects any undisclosed income. 11. On the other hand, the learned counsel for the assessee submitted that an assessment completed can be reopened by the AO only on the basis of some incriminating material unearthed during the course of search proceedings. In the instant case the AO having jurisdiction over the other persons acted mechanically, without any verification of facts, and as such the proc .....

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in, more or less under identical circumstances, the Bench agreed that initiation of proceedings under section 153C are bad in law. He also referred to the decision of the Hon'ble Delhi High Court in the case of SSP Aviation Ltd. 346 ITR 177 (Del) to submit that the decision was rendered in the context of the powers of the AO who was required to hand over the file to the AO who has jurisdiction over the third party but even in that context the court observed that in the case of the other pers .....

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satisfied that such valuable articles or books, etc., belonging to other person, reflect undisclosed income of the third party because under section 153C it enables the Revenue authorities to investigate the contents of the documents seized which belongs to a person other than searched so as to ensure that income does not escape assessment in the hands of any other person merely because he has not been searched. It is only a first step of the enquiry. The AO who has reached the satisfaction tha .....

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have to be closed. The learned counsel highlights this portion of the judgement to submit that even after initiating proceedings if there is no incriminating material for a particular year the assessment has to be closed and the AO cannot proceed under section 153C of the Act. Thus, looking at from any angle the proceedings under section 153C of the Act, in the peculiar facts of the case, are not validly initiated and the additions are not in accordance with law in the light of the fact that the .....

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i) Trishul Hi-Tech Industries vs. DCIT -(2014-TIOL-862-ITAT-KOL) ii) DCIT vs. Royal Cartons Pvt. Ltd. (ITA 472/Coch/2013) It was submitted that in the instant case no incriminating material was found in respect of the assessment years under consideration and in fact no addition was made based on the so called incriminating material. Thus initiation of proceedings under section 153C of the Act and the assessments for the years under consideration are bad in law in the light of the binding decisi .....

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