TMI Blog2010 (7) TMI 1046X X X X Extracts X X X X X X X X Extracts X X X X ..... arch operation. In the case before us, according to the learned Representative the incriminating material was found only in respect of asst. yr. 2005-06 and the AO on the basis of presumption that there was unaccounted sales for other years also computed the undisclosed income in the absence of any material. Referring to the CIT(A)'s order in the case of Vijaya Anand Fabrics (P) Ltd. the learned Representative for the assessee submitted that the very same CIT found that there was no material for other years in respect of suppression of sales in the textile business. Accordingly, he deleted the addition made in respect of other years. However, while coming to the income from job work the very same CIT adopted a different yardstick. The material found during the course of search operation is relatable only to asst. yr. 2005-06, the assessee by way of statement clearly indicates that this practice of unaccounted job work has been in practice for the last 1-1/2 year. Therefore at the best the income can be assessed for the asst. yrs. 2004-05 and 2005-06 and it cannot be said that there was unaccounted income from job work for rest of the assessment years under consideration. 3. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cording to the learned Representative since CIT(A) himself found that in respect of suppression of sales in textile business there cannot be any undisclosed income for other assessment years the very same decision ought to have been followed in respect of income from job work. The CIT(A) ought not to have taken different view when it comes to job work business. 4. On the contrary, Shri T. Venkat Reddy, learned Departmental Representative submitted that admittedly there was a search in the premises of the assessee on 14th Oct., 2004. The assessee was engaged in the business of textiles. During the course of search operation it was found that the assessee was getting job work done from Vijay Anand Fabrics (P) Ltd. and paid cash which was not recorded in the books of account. Learned Departmental Representative very fairly submitted that this material found during the course of search operation is relatable to asst. yr. 2005-06. Based on the material found for the asst. yr. 2005-06 income was estimated at ₹ 57,97,327 for the asst. yr. 2005-06. During the course of post-search enquiries one of the partners viz., Mahesh Agarwal admitted that assessee was following this practice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purpose of computing the income under s. 153A of the IT Act. We have carefully gone through the provisions of s. 153A of the Act which reads as follows : (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. 132A after the 31st day of May, 2003, the AO 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 cl. (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, apply accordingly as if such return were a return 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 158BB(1) which falls in Chapter XIV-B is not applicable to the facts of this case. 8. Now coming to the contention of the assessee that the income under s. 153A has to be computed only on the basis of the search material, in our opinion, this contention of the assessee is misconstrued. Sec. 158BB in Chapter XIV-B provides procedure for computation of undisclosed income in respect of searches carried out till 31st May, 2003. For the purpose of convenience we reproduce provisions of s. 158BB(1). 158BB. (1) The undisclosed income of the block period shall be the aggregate of the total income of the previous year falling within the block period computed, in accordance with the provisions of this Act, on the basis of evidence found as a result of search or requisition of books of account or other documents and such other materials or information as are available with the AO and relatable to such evidence, as reduced by the aggregate of the total income, or as the case may be, as increased by the aggregate of the losses of such previous years, determined. 9. In view of this specific provision in s. 158BB(1) the undisclosed income of the block period shall be computed on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition and therefore, the CIT(A) has rightly deleted the addition made by the AO. This decision of the Ahmedabad Bench of the Tribunal does not say that the AO has to confine himself only to the material found during the course of search operation. It is a case of no evidence for the asst. yrs. 2000-01, 2001-02, 2002-03 and 2003-04. Therefore, this decision of the Ahmedabad Bench of this Tribunal has not laid down any proposition that the AO has to conform only to materials found during search operation. 11. We have also carefully gone through the decision of the Calcutta Bench of this Tribunal in the case of LMJ International Ltd. (supra). The Calcutta Bench of this Tribunal found that the income under s. 153A has to be computed on the basis of the material found during the course of search operation and the same has to be added with regular income assessed under s. 143(3) or under s. 143(1) of the Act for six present assessment years. The Tribunal further found that where tax was paid earlier, the same is required to be given credit for computing the income. In fact, the Calcutta Bench of this Tribunal observed as follows in para 13 of its order : 13. In view of the abov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 53A, 153B and 153C have been inserted in the IT Act to provide for assessment in case of search or making requisition. 65.4 The new s. 153A provides the procedure for completion of assessment where a search is initiated under s. 132 or books of account, or other documents or any assets are requisitioned under s. 132A after 31st May, 2003. In such cases, the AO shall issue notice to such person requiring him to furnish, within such period as may be specified in the notice, return of income in respect of six assessment years immediately preceding the assessment year relevant to the previous year in which the search was conducted under s. 132 or requisition was made under s. 132A. 65.5 The AO shall assess or reassess the total income of each of these six assessment years. Assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years pending on the date of initiation of the search under s. 132 or requisition under s. 132A, as the case may be, shall abate. It is clarified that the appeal, revision or rectification proceedings pending on the date of initiation of search under s. 132 or requisition shall not abate. Save as othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O for making an order of assessment or reassessment, as the case may be, is less than sixty days, such remaining period shall be extended to sixty days and the period of limitation shall be deemed to be extended accordingly. 65.9 The new s. 153C provides that where an AO is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belong or belongs to a person other than the person referred to in s. 153A, then the books of account, or documents or assets seized or requisitioned shall be handed over to the AO having jurisdiction over such other person and that AO shall proceed against such other person and issue such other person notice and assess or reassess income of such other person in accordance with the provisions of s. 153A. 65.10 An appeal against the order of assessment or reassessment under s. 153A shall lie with the CIT(A). 65.11 Consequential amendments have also been made in ss. 132, 132B, 140A, 234A, 234B, 246A and 276CC to give reference to s. 153A in these sections. 65.12 These amendments will take effect from 1st June, 2003. 13. In view of the above circular it is very cle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 210 CTR (Jharkhand) 602: (2007) 290 ITR 114(Jharkhand) after referring to the circular issued by the CBDT. 14. We have also carefully gone through the decision of the Vizag Bench of this Tribunal in the case of KGR Export (supra). The Vizag Bench of this Tribunal after referring to the judgment of Rajasthan High Court in CIT vs. Shiv Ratan Soni (2008) 217 CTR (Raj) 222: (2008) 8 DTR (Raj) 17 found that the AO has to confine himself only to the incriminating material found during the course of search operation. In the absence of any incriminating material found during the course of search operation it was held that the AO cannot make any addition while computing income under s. 153A. As discussed in para 13 of this order, the procedure prescribed in s. 158BB(1) is omitted by the Parliament in respect of searches conducted on and after 1st June, 2003. Therefore, in our opinion, the discussion of the Vizag Bench in KGR Exports (supra) also may not be of any assistance to the assessee. This issue was considered elaborately by the Chennai Bench of this Tribunal in Harvey Heart Hospital Ltd. (supra). The Chennai Bench of this Tribunal after considering the decision of the Calcutta Be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erefore, at best the AO had material only for the asst. yrs. 2004-05 and 2005-06. In respect of other years, the AO has no material to show that the assessee has suppressed any income from job work. The question now arises for consideration is, can there be an addition while computing the income under s. 153A in the absence of any material for other assessment year except to the asst. yrs. 2004-05 and 2005-06 ? In the absence of any material for the asst. yrs. 1999-2000, 2000-01, 2001-02, 2002-03 and 2003-04, for the purpose of completing the assessment the AO certainly has to place reliance on some material. For the purpose of making addition the AO has to necessarily consider the materials available on record to show that the assessee has earned income which is taxable under the IT Act. In the absence of any material in our opinion the AO cannot make any addition. The AO has to accept the income returned by the assessee. However, for the asst. yrs. 2004-05 and 2005-06 the assessee categorically admitted that the job work receipts were not recorded in the books of account. Therefore, it is a clear case of suppression of job work receipt for the asst. yrs. 2004-05 and 2005-06. In t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ances, in our opinion, the computation of profit at 5 per cent may not be justified. For the purpose of estimation of profit, the AO has to take into consideration the comparative cases of the similarly placed traders, the demand in the market and the assessee's own profit admitted by the Department for the earlier assessment years. etc., the lower authorities estimated the profit at 5 per cent without taking into consideration any of the factors. Therefore, in our opinion, estimation of profit at 5 per cent is not' justified at all. In the absence of any material before the AO to show that the assessee has practiced the suppression of job work for the asst. yrs. 1999-2000 to 2003-04, in our opinion, the AO has to either accept the book result or restrict the addition only to the extent to which the investment was found during the asst. yrs. 1999-2000 to 2003-04. In other words, the AO can make addition only to the extent to which the assessee made the investment or accept the income returned by the assessee for the asst. yrs. 1999-2000 to 2003-04. However, for the asst. yrs. 2004-05 and 2005-06, the AO is justified in estimating the profit in view of our discussion in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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