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2015 (12) TMI 559 - ITAT PUNE

2015 (12) TMI 559 - ITAT PUNE - TMI - Assessment order passed under section 153C r.w.s. 143(3) - Held that:- It is not the case of assessee that the jurisdiction invoked under section 153C of the Act by the Assessing Officer is not correctly invoked. The assessee has not challenged the addition made in its hands for the captioned assessment year on the basis of incriminating documents found from his possession. In view thereof, the assessment order passed under section 153C r.w.s. 143(3) of the .....

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assessment order passed under section 153C r.w.s. 143(3) of the Act has been correctly made.

Coming to the merits of addition in the case of assesseee we find that though the information has been received by the Assessing Officer from the return of income filed by the assessee itself, in the original assessment order passed under section 143(3), the said amount was added as income of the assessee where the said assessment order is still in force as the said assessment has not been ab .....

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Hitendra Ninave ORDER Per Sushma Chowla, JM This bunch of three appeals filed by the assessee are against the consolidated order of CIT(A)-Central, Pune dated 23.09.2013 relating to different assessment years 2007-08, 2008-09 and 2009-10 against respective orders passed under section 143(3) r.w.s. 153C of the Income Tax Act, 1961 (in short "the Act"). 2. This bunch of appeals relating to the same assessee on similar issues were heard together and are being disposed of by this consolid .....

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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 incrimina .....

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ee were found and seized. In view of this, notice under section 153C of the Act was issued for recording satisfaction. In response to notice under section 153C of the Act, the assessee furnished return of income declaring total income at Rs.Nil. The original assessment in the case was completed under section 143(3) of the Act vide order dated 29.12.2009. The Assessing Officer noted that during the course of search and seizure action under section 132 of the Act, certain papers relating to expens .....

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77; 1,81,180/- consisting of ₹ 1,25,000/- paid to Advocate towards legal & professional fees. Since the expenditure related to formation of the company, the same was disallowed and an addition of ₹ 1,25,000/- was made. Another addition was made on account of interest paid and disallowed and capitalized to work in progress at ₹ 98,13,699/-. 6. The CIT(A) upheld the disallowance of travelling expenses of ₹ 14,80,366/-. Another issue raised before the CIT(A) was that the .....

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uch less incriminating documents, were seized during the course of search action. The CIT(A) noted that the items pertaining to the assessee, which were seized during the course of search conducted at the premises of Shri Ajay Bafna have been reproduced in the satisfaction note by the Assessing Officer. In view thereof, the CIT(A) considered that the nature of documents impounded i.e. pen drive containing back-up of data found in the laptop of Mr. Bafna, which pertained to the transaction of the .....

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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 ₹ 98,13,699/- was deleted by the CIT(A) vide paras 11 to 11.4 of the appellate order. 7. Now, .....

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ce of legal expenses when no incriminating documents were found during the course of search. The learned Authorized Representative for the assessee pointed out that original assessment under section 143(3) of the Act was completed on 29.12.2009. After that, search on the premises of Shri Ajay Bafna was carried out on 06.02.2010. The learned Authorized Representative for the assessee drew our attention to the assessment order passed under section 153C r.w.s 143(3) of the Act in t he case of asses .....

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ced reliance on the ratio of the decisions laid down by the Hon'ble Bombay High Court in the case of CIT vs. Continental Warehousing Corporation in Income Tax Appeal No.523 of 2013 and CIT vs. All Cargo Global Logistics Ltd. in Income Tax Appeal No.1969/2013, judgment dated 21.04.2015 and CIT vs. Murli Agro Products Ltd. in Income Tax Appeal No.36 of 2009 judgment dated 29.10.2010. The case of the learned AR for the assessee before us was that where original assessment had been completed, th .....

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be applied. In the original assessment made under section 143(3) of the Act, addition of ₹ 1,25,000/- 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, whi .....

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he 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 be added in the hands of the assessee. 10. In this regard, in the rejoinder, the learned Authorized Representative for the assessee pointed out that the issue of additional ground of appeal is cov .....

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8 to 5022 and 5059/Mum/2010 relating to A.Ys 2004-05 to 2009-2010 , the issue of assessment completed under section 153A r.w.s. 143(3) of the Act was raised by way of additional grounds of appeal. The perusal of the order of Special Bench of Tribunal in M/s. All Cargo Global Logistics Ltd. (supra) vide para 7.2, the Special Bench considered whether the issue raised by the assessee as an additional ground could be admitted, where no such ground was taken before the CIT(A) or the Assessing Officer .....

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r the assessee. The Tribunal has the jurisdiction to allow or not allow a new ground to be raised, but where the Tribunal is only required to consider a question of law arising from the facts which are on record, then such question can be raised by the parties as an additional ground of appeal and the same is to be adjudicated in order to correctly assess the tax liability of the assessee. Reliance in this regard is placed on the ratio laid down by Apex Court in National Thermal Power Co. Ltd. ( .....

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ssue 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 mater .....

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ments found during the course of search. Applying the above said proposition to the facts of the present case, we find that the original assessment in the case of the assessee u/s. 143(3) of the Act was completed on 29.12.2009. Search under section 132(1) of the Act was undertaken on the premises of Shri Ajay Bafna on 06.02.2010 and hence, where the assessment was already completed, same had not abated and consequently the addition pursuant to the search proceedings could be made in the hands of .....

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the assessee had not furnished any plausible explanation in this regard, addition of ₹ 14,80,366/- was made by the Assessing Officer while passing the order under section 153C r.w.s. 143(3) of the Act. The said addition has been upheld in the hands of the assessee by the CIT(A) vide paras 7 to 7.3 at pages 4 to 6 of the appellate order. The perusal of grounds of appeal originally filed by the assessee shows that no grounds of appeal against the aforesaid addition upheld by the CIT(A), has .....

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ot be invoked. In the absence of any incriminating documents found from possession of searched person, the ratio laid down by the Special Bench of the Tribunal in the case of All Cargo Global Logistics Ltd. (supra) is to be applied to assessment years, where assessments have not abated. The Tribunal held as under:- "53. 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 ques .....

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ound 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 mad .....

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n the case of the assessee, incriminating documents relating to travelling expenses were found and the addition on that basis has been made in the hands of assessee, which has been upheld by the CIT(A), against which assessee is not in appeal. Hence, in cases where incriminating documents are found, the provisions of section153C r.w.s. 143(3) of the Act are attracted. It is not the case of assessee that the jurisdiction invoked under section 153C of the Act by the Assessing Officer is not correc .....

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ted under section 153C r.w.s. 143(3) of the Act. We find no merit in the said stand of the assessee, in view of incriminating documents found from the possession of the assessee in respect of travelling expenses and addition having been made on that account, the assessment order passed under section 153C r.w.s. 143(3) of the Act has been correctly made. 15. Now, coming to the merits of addition in the case of assessee. We find that though the information has been received by the Assessing Office .....

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, 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 ₹ 6,48,397/-. The assessee has also raised the additional grounds of appeal as in the earlier year i.e. where the assessmen .....

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ers belonging to the assessee were found and consequently, satisfaction was recorded under section 153C of the Act. Thereafter, notice under section 153C of the Act was issued. In response to the said notice, the assessee filed return of income declaring loss of ₹ 87,85,821/-. During the scrutiny assessment, the first addition made in the hands of assessee was on account of interest expenditure of ₹ 87,84,868/- since the assessee for the year under consideration was not carrying on a .....

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sed. The preliminary issue raised in all the appeals relating to recording of satisfaction and thereafter, invoking of jurisdiction under section 153C of the Act and initiation of assessment proceedings after search action, were decided against the assessee. The next issue considered by the CIT(A) was whether the assessee was carrying on any business activity. After considering elaborate submissions of the assessee on this account, the CIT(A) vide para 10 held that the assessee was engaged in bu .....

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tive expenses was allowed. Coming to the issue raised on account of disallowance of selling and distribution expenses of ₹ 6,48,397/-, the CIT(A) held that disallowance was made as the business exigency for the expenses was not before the Assessing Officer. Since there was no change in the situation and no facts were brought before him, the addition was confirmed. The CIT(A) upheld the order of Assessing Officer vis-à-vis recording of satisfaction under section 153C of the Act. 19. .....

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on 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 sect .....

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g documents were found, on the basis of which any addition was made for the captioned assessment year, there was no merit in invoking jurisdiction under section 153C of the Act, as the assessment had not abated. The issue arising before us is whether processing under section 143(1) of the Act is to be held as an order of assessment in the case of assessee. We find no merit in the said stand of the learned Authorized Representative for the assessee, in view of the ratio laid down by the Hon'b .....

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to section 143(1)(a) of the Act, no addition was possible since no opportunity was granted to the assessee. The said provisions of section 143(1)(a) of the Act have been substituted by the Finance Act, 2008 w.e.f. 01.04.2008. Under the said substituted section 143(1) of the Act, it is provided that where the return of income has been filed by the assessee under section 139 of the Act or in response to notice under section 142(1) of the Act, such return shall be processed in the following manner .....

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here is no question of abatement or nonabatement of the assessment. 22. The Hon'ble Bombay High Court in CIT vs. Continental Warehousing Corporation (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 ha .....

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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 incurring the said expenses. In the absence of the evidence having been filed before the authorities below, the addition was made in the hands of assessee. Howeve .....

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