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M/s Times Finvest & Commerce Ltd. Versus The D.C.I.T. And Vice-Versa

2015 (12) TMI 702 - ITAT CHANDIGARH

Assessment u/s 153A - disallowance u/s 14A - Held that:- In the absence of any incriminating material found during the course of search and the assessment proceedings having not been abated at the time of search, the Assessing Officer has no jurisdiction to make the addition under sect ion 153A of the Act . - Decided in favour of assessee. - ITA No.541 /Chd/2014 - Dated:- 8-12-2015 - SHRI H.L.KARWA, VICE PRESIDENT AND MS. RANO JAIN, ACCOUNTANT MEMBER For the Petitioner : Shri Ashok Goyal For the .....

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had filed return under sect ion 139(1) of the Income Tax Act , 1961 ( in shot the Act ) as on 30.6.2008 showing total income of ₹ 2,14,810/- . In response to notice under sect ion 153A of the Act after the search, the same income was returned by the assessee. After making addition amounting to ₹ 14,95,764/- invoking the provisions of sect ion 14A of the Act read with Rule 8D of the income Tax Rules, the assessment under section 153A of the Act was completed at an income of ₹ 1 .....

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81, whereby i t has been held that in the absence of any incriminating material found during the course of search, the cases where no proceedings are abated because of the search conducted, no addition can be made, which is not on the basis of any material found during the course of search. Detailed submissions were also made against the act ion of the Assessing Officer making disallowance under sect ion 14A of the Act . The learned CIT (Appeals) rejected the content ions of the assessee. Howeve .....

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ng Officer is bound to issue notice to the assessee for each assessment years falling within six assessment years before the date of search. 4. Aggrieved by the said order , the Department has come up in appeal challenging the action of the learned CIT (Appeals) in deleting the disallowance made by the Assessing Officer under sect ion 14A of the Act , while the assessee has filed Cross Object ion challenging the act ion of the learned CIT (Appeals) in dismissing the ground relating to 153A. Sinc .....

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earch under sect ion 132 of the Act , shall abate. The meaning of phrase pending on the date of initiation of search under sect ion 132 of the Act has to be assigned simple and plain meaning. Where the assessment or re-assessment is finalized, there are no pending proceedings to be abated and restored to the file of the Assessing Officer . Since in the present case, the assessment has been completed and no proceedings has been abated, the additions or disallowances made by the Assessing Officer .....

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ment passed under sect ion 153A of the Act , the Assessing Officer has to restrict himself in making disallowance or addition on the basis of material unearthed at the time of search. The judgments relied upon by the learned counsel for the assessee are : ( i ) Mumbai High Court in the case of CIT Vs. M/s Murli Agro Products Ltd. , ITA No.36 of 2009 dated 29.10.2010 (Mum) ( i i ) Delhi High Court in the case of CIT Vs. Kabul Chawla, ITA No.707/2014 ( i i i ) Another order of I .T.A.T. , Mumbai B .....

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t the assessments have been finalized before the date of search though the same has not been made under sect ion 143(3) of the Act . The time limit for the same has expired. This is also an undisputed fact that during the course of search no material leading to a disallowance under sect ion 14A of the Act was found. These facts have not been controverted by both the parties before us. Now, the quest ion to be decided by us is that in such a scenario whether the disallowance can be sustained or n .....

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for six assessment years preceding the assessment year in which the search was conducted. The provision of sect ion also provides that the assessment or re-assessment relating to any assessment year falling within this period of six years, if are pending on the date of search, they get abated. This issue was there before the Special Bench of the I .T.A.T. in the case of Al l Cargo Global Logistics Ltd. Vs. DCIT (2012) 23 Taxmann.com 103(Mum) (SB) , whereby the Bench observed as under : "53 .....

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ll 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) Insofar 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 .....

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8 (Bom) , whereby it has been held in very clear terms that in assessments that are abated, the Assessing Officer retains the original jurisdiction as well as jurisdiction confer red on him under sect ion 153A of the Act for which assessments shall be made for each of the six assessment years separately. However , In other cases, where assessments are not abated in addition to the income that has already been assessed, the assessment under sect ion 153A of the Act will be made only on the basis .....

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i) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: i. Once a search takes place under Section 132 of the Act, notice under Section 153 A (i) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date o .....

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s "in which both the disclosed and the undisclosed income would be brought to tax". iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment "can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to .....

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