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TMI Blog2015 (12) TMI 559X X X X Extracts X X X X X X X X Extracts X X X X ..... s erred in law and in facts not appreciating that the appellant ought to have been granted allowances of expenses towards professional fees of Rs. 1,25,000/-. 3. The appellant craves leave of Your Honor to add to alter, ame nd and/or delete all or any of the foregoing grounds of appeal." 4. During the course of hearing, the assessee moved an application for raising additional grounds of appeal which read as under:- 1. The Ld. Commissioner of Income-tax (Appeals) erred in not appreciating that the assessment order u/s. 153C of the Act can be completed and the additions in the assessment order can be made only on the basis of incriminating materials found as a result of search. 2. The Ld. Commissioner of Income-tax (Appeals) ought to have deleted the additions made as the same were not based on any incriminating materials. 5. Briefly, in the facts of the present case, search and seizure action under section 132(1) of the Act was undertaken at the premises of Shri Ajay Bafna on 16.02.2010. During the course of search and seizure action under section 132(1)/133A of the Act certain incriminating documents belonging to the assessee were found and seized. In view of this, notice u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee for the period August, 2006 to March, 2008, cheque of the assessee on Abhyudaya Co-op. Bank, invoice issued by Swajas Air Charter (P) Ltd. in the name of assessee and another pen drive containing details of various transactions of the assessee. The CIT(A) observed vide para 9.1.2 at page 12 of the appellate order that it was not clear as to how the assessee can contend that no documents incriminating or otherwise, were found pursuant to search action. Another contention of the assessee that in the light of decision of Mumbai Bench of Tribunal in All Cargo Global Logistics Ltd. Vs. DCIT, where the assessment had abated, the Assessing Officer would make amendment only on the basis of incriminating material, was considered by the CIT(A) in para 9.1.5 and this objection of the assessee was dismissed by the CIT(A). The addition made on account of disallowance of interest expenses of Rs. 98,13,699/- was deleted by the CIT(A) vide paras 11 to 11.4 of the appellate order. 7. Now, coming to the last addition of disallowance of Rs. 1,25,000/-, the same was upheld by the CIT(A) since the expenditure was incurred in relation to formation of the company, which is capital in nat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0/- was made. The expenses were claimed in the original return of income and in the absence of any incriminating evidence found in this regard, where the proceedings have not abated, no addition could be made in the absence of incriminating documents. The learned Authorized Representative for the assessee further stressed that the additional ground of appeal raised by it was a legal issue, which did not involve any investigation of facts, hence, the same may be admitted. 9. The learned Departmental Representative for the Revenue pointed out that the issue of invoking of jurisdiction under section 153C of the Act is raised by the assessee by way of additional ground and the same could not be raised at this stage. It was further pointed out by the learned Departmental Representative for the Revenue that reliance placed upon the case of Murli Agro Products Ltd (supra) was misplaced as the order in the said case was passed u/s. 263 of the Act, which had no relevance to the provisions of section 153A / 153C of the Act. The learned DR further relied on the order of the CIT(A) and pointed out that when assessment was made under section 143(3) of the Act, addition was made, the same is to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of any incriminating material found during the course of search whether any addition could be made in the hands of the assessee on account of disallowance of expenses in the assessment order passed u/s. 153C of the Act. In the final order of the Special Bench dated 06.07.2012, while addressing the issue of effect of provisions of section 153A of the Act, it was held as under: "58. 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 documents, found in the course of search but not produced in the course of original assessment, and (ii) undisclosed income or property discovered in the course of search." 13. Interpreting the provisions of section 153A of the Act, it was held that in cases which have already been assessed to tax then, while co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The question now is - what is the scope of assessment or reassessment of total income u/s 153A (1) (b) and the first proviso? We are of the view that for answering this question, guidance will have to be sought from section 132(1). If any books of account or other documents relevant to the assessment had not been produced in the course of original assessment and found in the course of search in our humble opinion such books of account or other documents have to be taken into account while making assessment or reassessment of total income under the aforesaid provision. Similar position will obtain in a case where undisclosed income or undisclosed property has been found as a consequence of search. In other words, harmonious interpretation will produce the following results:- a) In so far as pending assessments are concerned, the jurisdiction to make original assessment and assessment u/s 153A merge into one and only one assessment for each assessment year shall be made separately on the basis of the findings of the search and any other material existing or brought on the record of the AO, (b) in respect of non-abated assessments, the assessment will be made on the basis of book ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing the order under section 153C r.w.s. 143(3) of the Act. Accordingly, we delete the said addition and allow the grounds of appeal raised by the assessee on merit. The additional grounds of appeal raised by the assessee are dismissed. ITA No.2022/PN/2013 16. In ITA No.2022/PN/ 2013, the learned Authorized Representative for the assessee has raised the initial grounds of appeal against disallowance of expenses for business activities at Rs. 6,48,397/-. The assessee has also raised the additional grounds of appeal as in the earlier year i.e. where the assessment has not abated, then the addition, if any, to be made under section 153C r.w.s. 143(3) of the Act is to be limited to the incriminating documents found during the course of search. 17. Briefly, in the facts of the case the original return of income was furnished by the assessee, which was processed under section 143(1) of the Act. Thereafter, pursuant to search action under section 132 of the Act at the residential and office premises of Shri Ajay Bafna on 16.02.2010, certain incriminating papers belonging to the assessee were found and consequently, satisfaction was recorded under section 153C of the Act. Thereafter, no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l jurisdiction of the Assessing Officer on the premises that since the assessment for the year had not abated then, no addition could be made in its hands, in the absence of any incriminating documents found during the course of search. 20. The learned Departmental Representative for the Revenue on the other hand, pointed out that there was no assessment order passed under section 143(3) of the Act and the processing of return of income under section 143(1) of the Act could not be treated as an order of assessment in view of the ratio laid down by the Hon'ble Supreme Court in ACIT Vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd. (2007) 161 TAXMAN 316 (SC). 21. We have heard the rival contentions and perused the record. After the filing of return of income by the assessee, the return was processed under section 143(1) of the Act. Thereafter, the case of the assessee was not picked up for scrutiny and no assessment order was passed under section 143(3) of the Act. Pursuant to search action on the premises of Shri Ajay Bafna on 16.02.2010 since certain incriminating documents were found from his possession, which in turn belonged to the assessee, satisfaction was recorded under sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oration (supra) has also used the term 'finalized assessment' and where no assessment has been finalized in the hands of assessee and where only processing of return had taken place under section 143(1)(a) of the Act, there is no merit in the plea of the assessee in this regard . Even in the absence of any incriminating documents found in the hands of assessee, where no assessment has been completed under section 143(3) of the Act, it cannot be said that it had non-abated. In view thereof, even in the absence of incriminating documents found, where no assessment had been completed under section 143(3) of the Act, the Assessing Officer is competent to invoke the jurisdiction under section 153A / 153C of the Act and complete the assessment following the procedure laid down under section 143(3) of the Act. Hence, the additional ground of appeal raised in this regard is dismissed. 23. Now, coming to the merits of addition made in the case of assessee. The explanation of the assessee before the CIT(A) was that the expenses were incurred in connection with business activity carried on by the assessee. However, the assessee had failed to establish the business exigency for incurr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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