TMI Blog2016 (7) TMI 911X X X X Extracts X X X X X X X X Extracts X X X X ..... the particular assessment year. - Decided in favour of assessee. - Tax Appeal No. 24 of 2016 - - - Dated:- 14-3-2016 - Harsha Devani And G. R. Udhwani, JJ. For the Appellant Mr Nitin K Mehta, Advocate For the Respondent : Ms SN Soparkar, Sr. Advocate with Mr B S Soparkar, Caveator JUDGMENT ( Per : Honourable Ms. Justice Harsha Devani ) 1. The appellant revenue in this appeal under section 260A of the Income Tax Act, 1961 (hereinafter referred to as the Act ) has called in question the order dated 21st August, 2015 passed by the Income Tax Appellate Tribunal, Ahmedabad, Bench D (hereinafter referred to as the Tribunal ) in ITA No.3/Ahd/2014, by proposing the following three questions: [A] Whether the order of Tribunal is right in law and on facts in deleting the addition made in assessment made u/s 153A of the Act? [B] Whether the Tribunal is right in law in holding that the addition should be based on the incriminating material found during the course of search under new procedure of assessment u/s 153A which is different from earlier procedure u/s 158BC r.w.s. 158BB of the Act and by reading into the section, the words the incriminating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 01.06.2006. The assessee carried the matter in further appeal before the Tribunal, which, placing reliance upon its earlier decision in the case of Sanjay Aggarwal v. DCIT, (2014) 47 Taxmann.com 210 (Delhi), held that the addition is not based on any incriminating material found during the search operations on the assessee and hence, such addition could not be made under section 153A of the Act. 3. Mr. Nitin Mehta, learned senior standing counsel for the appellant, submitted that the Tribunal has grossly erred in holding that addition can be made under section 153A only if incriminating material is found during the course of the search, that too, in relation to each of the six assessment years and that in respect of any assessment year, if no incriminating material is found, addition cannot be made under section 153A of the Act. It was argued that there is no condition in section 153A that additions should be made strictly on the basis of the evidence found during the course of search or other post search material or information available with the Assessing Officer, related to the evidence found. It was submitted that section 153A of the Act has two trigger points after w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that even in case where the assessment order is passed, it stands reopened. In the eyes of law, there is no order of assessment. Re-opened means to deal with or begin with again. It means the Assessing Officer shall assess or reassess the total income of six assessment years. Once the assessment is reopened, the assessing authority can take note of the income disclosed in the earlier return, any undisclosed income found during search and also any other income which is not disclosed in the earlier return or which is not unearthed during the search, in order to find out what is the total income of each year and then pass the assessment order. It was submitted that the shift which the legislature wanted from section 158BA by introducing section 153A of the Act is clear, inasmuch as, while section 158BA provided for assessment of only undisclosed income, in contrast, section 153A clearly specifies what is to be taxed is the total income of each of the six preceding assessment years. Thus, there is a clear contrast between the previous and the new regimes. It was submitted that assuming for the sake of argument that additions or disallowances can be made only on the basis of incrimin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me-tax-1 v. Jayaben Ratilal Sorathia, rendered on 02.07.2013 in Tax Appeal No.914 of 2012, wherein it has been held that while it cannot be disputed that considering section 153A of the Act, the Assessing Officer can reopen and/or assess the return with respect to six preceding years; however, there must be some incriminating material available with the Assessing Officer with respect to the sale transactions in the particular assessment year. It was submitted that the impugned order passed by the Tribunal being in consonance with the view taken by the jurisdictional High Court, does not give rise to any question of law, warranting interference. 4.1 Referring to the decision of the Delhi High Court in the case of Commissioner of Income Tax v. Anil Kumar Bhatia (supra), it was pointed out that in paragraph 23 thereof, the court has specifically observed that it is not concerned with a case where no incriminating material was found during the search conducted under section 132 of the Act and therefore, did not express any opinion as to whether section 153A can be invoked even in such a situation and left the question open. Reference was made to the decision of the Rajasthan High Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions. Prior to, the introduction of these three sections, there was Chapter XIV-B of the Act which took care of the assessment to be made in cases of search and seizure. Such an assessment was popularly known as block assessment because the Chapter provided for a single assessment to be made in respect of a period of a block of ten assessment years prior to the assessment year in which the search was made. In addition to these ten assessment years, the broken period up to the date on which the search was conducted was also included in what was known as block period . Though a single assessment order was to be passed, the undisclosed income was to be assessed in the different assessment years to which it related. But all this had to be made in a single assessment order. The block assessment so made was independent of and in addition to the normal assessment proceedings as clarified by the Explanation below Section 158BA(2). After the introduction of the group of Sections namely, 153A to 153C, the single block assessment concept was given a go-by. Under the new Section 153A, in a case where a search is initiated under Section 132 or requisition of books of account, documents or ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... strict procedure to assume jurisdiction to reopen the assessment under Sections 147 and 148, have been removed by the non obstante clause with which sub section (1) of Section 153A opens. The time-limit within which the notice under Section 148 can be issued, as provided in Section 149 has also been made inapplicable by the non obstante clause. Section 151 which requires sanction to be obtained by the Assessing Officer by issue of notice to reopen the assessment under Section 148 has also been excluded in a case covered by Section 153A. The time-limit prescribed for completion of an assessment or reassessment by Section 153 has also been done away with in a case covered by Section 153A. With all the stops having been pulled out, the Assessing Officer under Section 153A has been entrusted with the duty of bringing to tax the total income of an assessee whose case is covered by Section 153A, by even making reassessments without any fetters, if need be. 21. Now there can be cases where at the time when the search is initiated or requisition is made, the assessment or reassessment proceedings relating to any assessment year falling within the period of the six assessment years me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h determination in the orders passed under section 153A would be similar to the orders passed in any reassessment, where the total income determined in the original assessment order and the income that escaped assessment are clubbed together and assessed as the total income. In such a case, to reiterate, there is no question of any abatement of the earlier proceedings for the simple reason that no proceedings for assessment or reassessment were pending since they had already culminated in assessment or reassessment orders when the search was initiated or the requisition was made. 6. In Filatex India Ltd. v. Commissioner of Income Tax- IV (supra), the Delhi High Court has held thus : 2. On the first question, we note that the Assessing Officer, in the proceedings under Section 153A of the Act, had made several additions, relying upon the incriminating material found in the course of search, which was conducted on 18th January, 2006 and subsequent dates. A perusal of the impugned order by the Tribunal would disclose that incriminating material including statement of Sanjay Agrawal, GM(Marketing) have resulted in additions, which have been upheld. It is not the case of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... XIVB of the Act took care of the assessments to be made in cases of search and seizure, which were called 'block assessment', whereby, a single assessment was required to be in respect of a period of block of ten years prior to the assessment year, in which, the search was made. After the introduction of Sections 153A to 153C, a single block assessment concept has been given a go bye and now the AO has been given the power to assess or reassess the 'total income' of the six years in question in separate assessment orders. 18. To consider the rival submissions made at the Bar in the context of the present case and the substantial question of law framed, the scope of 'assessment and reassessment of total income' under Section 153A(1)(b) and the first and second proviso have to be considered. Further, for answering the above issues, guidance will have to be sought from Section 132(1) of the Act, as Section 153A of the Act cannot be read in isolation, inasmuch as, the same is triggered only on account of any search/requisition under Sections 132 or 132A of the Act. If any books of accounts or other documents relevant to the assessment had not been produced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3A of the Act is issued, the assessments for six years are at large both for the AO and assessee has no warrant in law. 22. In the firm opinion of this Court from a plain reading of the provision along with the purpose and purport of the said provision, which is intricately linked with search and requisition under Sections 132 and 132A of the Act, it is apparent that: (a) the assessments or reassessments, which stand abated in terms of II proviso to Section 153A of the Act, the AO acts under his original jurisdiction, for which, assessments have to be made; (b) regarding other cases, the addition to the income that has already been assessed, the assessment will be made on the basis of incriminating material and (c) in absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. Though such a claim by the assessee for the first time under Section 153A of the Act is not completed, the case in hand, has to be considered at best similar to a case where in spite of a search and/or requisition, nothing incriminating is found. In such a case though Section 153A of the Act would be tri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng 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 proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. vii. Completed assessments can be interfered with by the AO 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. 9. Section 153A of the Act reads thus : 153A. Assessment in case of search or requisition.- (1) Notwithstanding anything contained in section 139, section 147, s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax shall be chargeable at the rate or rates as applicable to such assessment year. 10. Since the assessment under section 153A is required to be made after a search under section 132 or requisition under section 132A, it may be germane to refer to the provisions of sections 132 and 132A of the Act. Section 132 of the Act provides for search and seizure, and to the extent the same is relevant for the present purpose, reads thus: 132. Search and seizure. - (1) Where the Director General or Director or the Chief Commissioner or Commissioner or any such Deputy Director or Deputy Commissioner as may be empowered in this behalf by the Board, in consequence of information in his possession, has reason to believe that- (a) any person to whom a summons under sub- section (1) of section 37 of the Indian Income- tax Act, 1922 (11 of 1922 ) or under subsection (1) of section 131 of this Act, or a notice under sub- section (4) of section 22 of the Indian Income- tax Act, 1922 (11 of 1922 ), or under sub- section (1) of section 142 of this Act was issued to produce, or cause to be produced, any books of account or other documents has omitted or failed to produce, or cause to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ake a note or an inventory of any such money, bullion, jewellery or other valuable article or thing: Provided that where any building, place, vessel, vehicle or aircraft referred to in clause (i) is within the are of jurisdiction of any Chief Commissioner or Commissioner], but such Chief Commissioner or Commissioner] has no jurisdiction over the person referred to in clause (a) or clause (b) or clause (c), then notwithstanding anything contained in section 120], it shall be competent for him to exercise the powers under this sub- section in all cases where he has reason to believe that any delay in getting the authorisation for the Chief Commissioner or Commissioner] having jurisdiction over such person may be prejudicial to the interest of the revenue:] Provided further that where it is not possible or practicable to take physical possession of any valuable article or thing and remove it to a safe place due to its volume, weight or other physical characteristics or due to its being of a dangerous nature, the authorised officer may serve an order on the owner or the person who is in immediate possession or control on the owner or the person who is in immediate possession or control ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missioner, Assistant Director [Assistant Commissioner or Income-tax Officer] (hereafter in this section and in sub-section (2) of section 278D referred to as the requisitioning officer) to require the officer or authority referred to in clause (a) or clause (b) or clause (c), as the case may be, to deliver such books of account, other documents or assets to the requisitioning officer. 12. Section 132 of the Act makes provision for search and seizure. The powers of search and seizure can be exercised thereunder provided the requirements of sub-section (1) thereof are satisfied. For exercise of powers thereunder, the Commissioner would have to record satisfaction that despite issuance of notice under section 142(1) of the Act, the assessee has omitted or failed to produce or cause to produce books of account or other documents; or if such notice is issued, the assessee would fail to produce the books of account or other documents; or the assessee possesses money, bullion, jewellery, or other valuable article or thing which represents income which is not wholly or partly income or property, which has not been or would not be disclosed by the assessee. Thus, it appears that the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch or requisition. However, instead of the earlier regime of block assessment whereby, it was only the undisclosed income of the block period that was assessed, section 153A of the Act seeks to assess the total income for the assessment year, which is clear from the first proviso thereto which provides that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years. The second proviso makes the intention of the legislature clear as the same provides that assessment or reassessment, if any, relating to the six assessment years referred to in the sub-section pending on the date of initiation of search under section 132 or requisition under section 132A, as the case may be, shall abate. Sub-section (2) of section 153A of the Act provides that if any proceeding or any order of assessment or reassessment made under sub-section (1) is annulled in appeal or any other legal provision, then the assessment or reassessment relating to any assessment year which had abated under the second proviso would stand revived. The proviso thereto says that such revival shall cease to have effect if such order of annulment i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , unearthed during the search or requisition. In case where a pending reassessment under section 147 of the Act has abated, needless to state that the scope and ambit of the assessment would include any order which the Assessing Officer could have passed under section 147 of the Act as well as under section 153A of the Act. 17. In the facts of the present case, a search came to be conducted on 07.10.2009 and the notice was issued to the assessee under section 153A of the Act for assessment year 2006-07 on 04.08.2010. In response to the notice, the assessee filed return of income on 18.11.2010. In terms of section 153B, the assessment was required to be completed within a period of two years from the end of the financial year in which the search came to be carried out, namely, on or before 31st March, 2012. Here, insofar as the impugned addition is concerned, the notice in respect thereof came to be issued on 19.12.2011 seeking an explanation from the assessee. The assessee gave its response by reply dated 21.12.2011 calling upon the Assessing Officer to provide copies of statements recorded on oath of Shri Rohit P. Modi and Smt. Pareshaben K. Modi during the search as well as th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d be permissible to make additions and disallowance in respect of all the six assessment years. In the opinion of this court, the said contention does not merit acceptance, inasmuch as, the assessment in respect of each of the six assessment years is a separate and distinct assessment. Under section 153A of the Act, an assessment has to be made in relation to the search or requisition, namely, in relation to material disclosed during the search or requisition. If in relation to any assessment year, no incriminating material is found, no addition or disallowance can be made in relation to that assessment year in exercise of powers under section 153A of the Act and the earlier assessment shall have to be reiterated. In this regard, this court is in complete agreement with the view adopted by the Rajasthan High Court in the case of Jai Steel (India), Jodhpur v. Assistant Commissioner of Income Tax (supra). Besides, as rightly pointed out by the learned counsel for the respondent, the controversy involved in the present case stands concluded by the decision of this court in the case of Commissioner of Income-tax-1 v. Jayaben Ratilal Sorathia (supra) wherein it has been held that while ..... X X X X Extracts X X X X X X X X Extracts X X X X
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