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PR. COMMISSIONER OF INCOME-TAX Versus DESAI CONSTRUCTION PVT. LTD

Claim of deduction u/s 80IA in the reassessment u/s 153A as there was no incriminating document found during the search - The assessee contested such claim mainly on the ground that no incriminating material was found during the search which would enable the Assessing Officer to reexamine assessee's claim for deduction under section 80IA, which was part of the original assessment proceedings and such assessments had abated. The Tribunal upheld the assessee's contention referring to the decision .....

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THE APPELLANT : MR SUDHIR M MEHTA, ADVOCATE FOR THE OPPONENT : MR TEJ SHAH, ADVOCATE COMMON ORAL ORDER (PER : HONOURABLE MR.JUSTICE AKIL KURESHI) 1. In these appeals, Revenue has framed following questions for our consideration. [A] Whether on the fact and circumstances of the case and in law the ITAT is justified in holding that the action of the AO to disallow deduction claimed u/s 80IA in the proceeding u/s 153A is bad in law as there was no incriminating document found during the search ? [B .....

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claimed u/s 80IA( 4) in view of the Explanation to section 80IA inserted in 2009 retrospectively w.e.f. 01.04.2000 ? [D] Whether on the fact and circumstances of the case and in law the ITAT erred in not appreciating the ratio laid down by High Court of Karnataka at Banglore in the case of M/s Canara Housing Development Company (ITA No 38/2014), Delhi High Court in the case of Anil Bhatia (2012)24Taxmann.com 98(Delhi) ? 2. Though as many as four questions are framed, it would be necessary for us .....

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ff) for the assessment years 200405 and 200506 respectively, in respect to the assessee's claim of deduction under section 80IA of the Act. The assessee contested such claim mainly on the ground that no incriminating material was found during the search which would enable the Assessing Officer to reexamine assessee's claim for deduction under section 80IA, which was part of the original assessment proceedings and such assessments had abated. The Tribunal upheld the assessee's content .....

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tion 153A and observed thus : "8) We find it difficult to accept the above contention raised on behalf of the revenue. The object of inserting Sections 153A, 153B and 153C by Finance Act, 2003 by discarding the existing provisions relating to search cases contained in Chapter XIV B of the Incometax Act, as stated in the Memorandum explaining the provisions in the Finance Bill 2003 (see 260 ITR (St) 191 at 219) was that under the existing provisions relating to search cases, often disputes w .....

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visions for assessment/reassessment contained in the IT Act, where search is conducted under Section 132 or requisition is made under Section 132A on or after 31/5/2003 in the case of any person, the Assessing Officer shall issue notice to such person requiring him to furnish return of income within the time stipulated therein, in respect of six assessment years immediately preceding the assessment year relevant to the previous year in which the search is conducted or requisition is made and the .....

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dings under Section 153A, it is only the SRP 25/61 ::: Downloaded on 0705/2015 20:55:36 ::: ITXA523.13.doc assessment / reassessment proceedings that are pending on the date of conducting search under Section 132 or making requisition under Section 132A of the Act stand abated and not the assessments/reassessments already finalised for those assessment years covered under Section 153A of the Act. By a circular No. 8 of 2003 dated 1892003 (See 263 ITR (St) 61 at 107) the CBDT has clarified that o .....

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assessment years covered under Section 153A of the Incometax Act stand abated cannot be accepted. Similarly on annulment of assessment made under Section 153A (1) what stands revived is the pending assessment / reassessment proceedings which stood abated as per section 153A(1). 11) In the present case, as contended by Shri Mani, learned counsel for the assessee, the assessment for assessment year 199899 was finalised on the 2912 2000 and search was conducted thereafter on 3122003. Therefore, in .....

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I.T. Act could not have disturbed the assessment / SRP 26/61 ::: Downloaded on 07/ 05/2015 20:55:36 ::: ITXA523.13.doc reassessment order which has attained finality, unless the materials gathered in the course of the proceedings under Section 153A of the Incometax Act establish that the reliefs granted under the finalised assessment/ reassessment were contrary to the facts unearthed during the course of 153 A proceedings. 13) In the present case, there is nothing on record to suggest that any m .....

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ns are made in passing or that they are not binding on us because the essential controversy before the Bench was somewhat different. He urges that was only in relation to the legality and validity of the order of the Commissioner under section 263 of the IT Act. Had that been the case, the Division Bench was not required to trace out the history of section 153A of the IT Act and the power that is conferred thereunder. When the Revenue argued before the Division Bench that the power under section .....

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of the initiation of the search under section 132 or making of requisition under section 132A, as the case may be, they abate. It is only pending proceedings that would abate and not where there are orders made of assessment or reassessment and which are in force on the date of initiation of the search or making of the requisition. As that specific argument was canvassed and dealt with by the Division Bench and that is how it was called upon to interpret section 153A of the IT Act, then, each o .....

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ise of power under section 153A is permissible still the provision cannot be read in the manner suggested by Mr. Pinto. Not only the finalised assessment cannot be touched by resorting to those provisions, but even while exercising the power can be exercised where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after 31st March, 2003. There is a mandate to issue notices under section 153(1)(a) and assess or reassess .....

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Division Bench in Murli Agro (supra) with which we respectfully agree. These are the conclusions which can be reached and upon reading of the legal provisions in question. 5. We are informed that against this judgment of Bombay High Court, the Revenue has preferred SLP, which is pending. We would have considered waiting for the outcome of such appeal. However, it was brought to our notice that this Court in case of Pr. Commissioner of Incometax4 v. Saumya Construction Pvt. Ltd. in Tax Appeal No .....

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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 which there is a mandate on the Assessing Officer to issue noti .....

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ion 153A of the Act, it is evident that the trigger point for exercise of powers thereunder is a search under section 132 or a requisition under section 132A of the Act. Once a search or requisition is made, a mandate is cast upon the Assessing Officer to issue notice under section 153A of the Act to the person, requiring him to furnish the return of income in respect of each assessment year falling within six assessment years immediately preceding the assessment year relevant to the previous ye .....

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ck 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 .....

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h revival shall cease to have effect if such order of annulment is set aside. Thus, any proceeding of assessment or reassessment falling within the six assessment years prior to the search or requisition stands abated and the total income of the assessee is required to be determined under section 153A of the Act. Similarly, subsection (2) provides for revival of any assessment or reassessment which stood abated, if any proceeding or any order of assessment or reassessment made under section 153A .....

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the intention of the legislature is clear viz., to provide for assessment in case of search and requisition. When the very purpose of the provision is to make assessment in case of search or requisition, it goes without saying that the assessment has to have relation to the search or requisition. In other words, the assessment should be connected with something found during the search or requisition, viz., incriminating material which reveals undisclosed income. Thus, while in view of the manda .....

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the Rajasthan High Court in the case of Jai Steel (India), Jodhpur v. Assistant Commissioner of Income Tax (supra), the earlier assessment would have to be reiterated. In case where pending assessments have abated, the Assessing Officer can pass assessment orders for each of the six years determining the total income of the assessee which would include income declared in the returns, if any, furnished by the assessee as well as undisclosed income, if any, unearthed during the search or requisit .....

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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 up .....

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