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2015 (12) TMI 1539 - ITAT MUMBAI

2015 (12) TMI 1539 - ITAT MUMBAI - TMI - Assessment u/s 153A - Held that:- In the absence of any incriminating material found during search, additions made on the assessed income are unsustainable in law, we are of the considered opinion that the additions made in the instant case are not sustainable and accordingly, we delete the same - Decided in favour of assessee. - I.T.A. No. 173/M/2015, I.T.A. No. 174/M/2015, I.T.A. No. 175/M/2015, I.T.A. No. 176/M/2015, I.T.A. No. 177/M/2015 - Dated:- 31- .....

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ing paras of this order. 2. The legal issue raised in all these appeals is similar and the adjudication of the same will decide the fate of the instant appeals. Considering the same, we shall proceed to adjudicate the legal issue and the relevant grounds raised in these appeals read as under: 1. The Ld CIT (A) failed to appreciate the fact that no incriminating documents / evidences were found during the course of search of third party, and hence, recomputing the income u/s 153A is bad in law an .....

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sessing the income u/s 143(3) r.w.s 153A, without appreciating the fact that only pending assessment abet and not the completed assessments and hence the order u/s 143(3) r.w.s 153A is bad in law and liable to be quashed. 4. The Ld CIT (A) erred in not allowing the decision of jurisdictional High Court wherein it was held that no addition can be made u/s 153A if no incriminating material / documents are found during search. Therefore, the order of the CIT (A) is bad in law. 3. Briefly stated rel .....

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ai. Subsequently, assessee was issued notice u/s 153A of the Act. In response to the said notice u/s 153A of the Act, assessee filed the revised return of income declaring the total income of ₹ 26,93,886/- on 11.2.2013. In the process, AO issued notice u/s 142(1) of the Act on 14.1.2013. After considering the assessee‟s submissions and relevant documents, AO passed the order u/s 143 (3) r.w.s 153A of the Act and the assessed income is determined at ₹ 45,41,618/-. Aggrieved with .....

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/ material on record and with due application of mind, re-computing the income u/s 153A basing on the same documents is bad in law and liable to be quashed. Assessee further submitted that since, no incriminating material / evidences were found during the course of search, therefore, no addition can be made u/s 153A of the Act. In this regard, assessee also placed reliance on the decision of the ITAT, Special Bench in the case of All Cargo Global Logistics Ltd vs. DCIT [2012] 137 ITD (Mum.)(SB) .....

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eration have a legal issue and the same is summarized as and when the assessments involved are non-abated assessment (either regular assessments are completed u/s 143(3) and the quantum proceedings are not pending or the due date for issue of notice us 143(2) has expired, the additions, if any, in the search assessment can be made basing on any incriminating material seized u/s 132 of the Act and forwarded to the concerned AO as per the procedure laid down in the Act. Drawing our attention to ea .....

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on, Ld Counsel for the assessee filed voluminous papers books and demonstrated that the additions made by the AO are unsustainable in law and no incriminating material was found during the search. Ld Counsel for the assessee relied on various decisions of the Tribunal viz., the decision of the Tribunal in the case of Shri Govind Agarwal v. ACIT being ITA No: 3389/Mum/2011 dated 10.01.2014 (copy already on record) wherein the Hon'ble Tribunal held that in case of non-abated years, addition ca .....

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ional interest and deemed dividend since no incriminating material has been found during the course of search. In view of the above, it is the submission of the Ld AR that on the basis of the legal propositions, the additions made by the Assessing Officer are bad in law and hence are to be deleted. 6. On the other hand, Ld DR relied on the order of the AO and the CIT (A). Further, on the legal propositions, Ld DR has nothing to controvert except relying on the decisions of the Revenue Authoritie .....

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pies of which are placed on record. On perusal of the said decisions, we find they are relevant for the proposition that when no assessment has abated, the question of making any addition or making disallowance which are not based on only material found during the search is bad in law . In this regard, we find it relevant to extract the relevant paras from the decision of the Tribunal in the case of Shri Govind Agarwal (supra) and the same is as follows: 12. We have heard the parties and their d .....

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the AO made (i) Addition u/s 68 on account of artificially inflated investment in house duly disclosed in the balance sheet of the assessee ₹ 31,33,070/-; and (ii) disallowance u/s 14A: ₹ 23,31,469/-. Admittedly, there is no incriminating material before the AO to support the above additions. The valuation report, which is garnered by the authorities constitutes mere estimates and the provisions of section 132 is not required to obtain such report from the DVO. As such, for making a .....

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n wing of the revenue. Considering the legal propositions place before us by the assessee‟s counsel, we are of the opinion, such assessments or additions are unsustainable in law. 13. For the sake completeness of the assessee, we insert here some of the extracts from relevant judgments and they are: A. [2013 36 taxmann.com 523 (Rajasthan) in the case of Jai Steel (India) vs. ACIT - From Held portion: ….The requirement of assessment or reassessment under the said section has to be re .....

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eassessment of the total income in respect of each assessment year falling within the six assessment years, is merely reading the said provision in isolation and not in the context of the entire section. The words 'assess' or 'reassess' have been used at more than one place in the Section and a harmonious construction of the entire provision would lead to an irresistible conclusion that the word 'assess' has been used in the context of an abated proceedings and reassess h .....

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assessment under section 153A was passed by Assessing Officer on basis of material available in return of income and there was no reference to any incriminating material found during search and since no assessment was abated, assessment under section 153A was to be quashed being made without jurisdiction available under section 153A - Held, yes [Para 6.2] [In favour of assessee] Para 6.1 of the Order: The Special bench in the case of Alcargo Global Logistics Ltd. (supra), has held that provision .....

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ar separately. Thus in case where assessment has abated the AO can make additions in the assessment, even if no incriminating material has been found. But in other cases the Special Bench held that the assessment under section 153A can be made on the basis of incriminating material which in the context of relevant provisions means books of account and other documents found in the course of search but not produced in the course of original assessment and undisclosed income or property disclosed d .....

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entral Circle-44 [2012] 23 taxmann.com 103 (Mum.) (SB) Para 58 of SB decisions: 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, .....

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gathered in the search action. Statutory notice u/s 153A of the Act can also be issued to reiterate the returned income or for making additions based on the incriminating material or unproduced books of account. Otherwise, additions made in routine matter as in the present appeal are not sustainable. Further, for the sake completeness of the order, we have perused the orders/judgments relied upon by Ld DR for the revenue and found they are distinguishable on facts for one reason or other. To st .....

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inate Bench decision in the case of Scope (P) Ltd (supra) has granted relief to the assessee though the notice issued u/s 153A of the Act was upheld. However, this order has not considered the then existing decision of the Coordinate Bench decision in the case of Pratibha Industries Ltd (supra) which is relevant for the proposition that the completed assessment may not be disturbed in the absence of any incriminating material specific to the assessee. In fact, all these judgments take spirit fro .....

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re incriminating in nature to back the additions u/s 68 or 14A of the Act made in the assessment made u/s 153A of the Act for the AY under consideration. Regarding the DVO‟s report gathered during the search action, we find that the report suffers from certain deficiencies qua cost of construction of residential property and the land obtained thereto. The said report constitutes an opinion of the third party which cannot be used by the AO for making additions and such additions, if any, ca .....

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ction. It the presumption of the AO that the plots since acquired only by July 2001, the assessee would not have spend ₹ 31,33,007/- by 31.3.2002. This is merely a presumption rather conclusion based on any evidences. Such additions are unsustainable in law in the assessments made u/s 153A r.w.s 143(3) of the Act. 17. Rajasthan High Court judgment in the case of Jai Steel (India) (supra), vide para 18, it is categorically mentioned that the requirement of assessment or reassessment under t .....

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assessments like the present one, the additions are made only based on the incriminating material discovered during the search action. The facts of the Jai Steel Ltd (supra) are identical to the present one ie AO made additions by reassessing u/s 153A on the completed assessment u/s 143(1) of the Act. Thus, considering the judgment in the case of the Jai Steel Ltd (supra), the arguments on the legal issue raised before us stands covered. Therefore, considering the Rajasthan High Court‟s j .....

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h the appeals of the assessee (ITA NO 3389&3390/M/2011) is allowed. 8. Further, in the recent past, similar issue was adjudicated by the Hon‟ble Delhi High Court in the case of CIT vs. Kabul Chawla vide ITA Nos. 707/2014 and others, dated 28.8.2015, wherein the Hon‟ble Delhi High Court has reiterated the above settled legal proposition that since no incriminating material was unearthed during the search, no additions could have been made to the income already assessed. In this re .....

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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 of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has .....

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ion 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 be made under this Section only on the basis of seized material. v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated procee .....

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while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment. Conclusion 38. The present appeals concern AYs, 2002-03, 2005-06 and 2006-07.On the date of the search the said assessments already stood completed. Since no incrimina .....

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