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2016 (8) TMI 764 - ITAT MUMBAI

2016 (8) TMI 764 - ITAT MUMBAI - TMI - Assessment under section 153A - disallowance made u/s 14A - Held that:- No disallowance made u/s 14A by the Assessing Officer was bad in law in absence of any incriminating material having been found in the course of search qua the said disallowance - Decided in favour of assessee - I.T.A. No. 3343 & 3344/Mum/2015 - Dated:- 19-8-2016 - Shri Joginder Singh (Judicial Member) And Shri Ashwani Taneja (Accountant Member) Appellant by Shri Mayur Kisnadwala Revenu .....

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ed in this appeal is with regard to disallowance u/s 14A. The main argument of the Ld. Counsel is that in this case, the impugned assessments have been framed u/s 153C, as a result of search operation u/s 132 carried out on Patel Engg group of companies on 11-04- 2007. It was submitted that in this case original returns were filed u/s 139(1) which were accepted by the revenue and attained finality before receipt of notice 153C. Thus, the assessment for these two years did not abate. Under these .....

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ore us wherein the Tribunal had deleted the disallowance on identical facts and circumstances. 4. During the course of hearing Ld. DR relied upon the orders of the lower authorities. 5. We have gone through the orders of lower authorities and also the copy of order of the Tribunal placed before us by the Ld. Counsel. It is noted that undisputedly, no incriminating material was found with regard to the impugned disallowance made u/s 14A. It is further noted that in the identical facts & circu .....

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Section 153C of the Act, which prescribes that the assessment is to be made "in the manner provided in Section 153A of the Act. In order to appreciate the controversy, it is pertinent to observe that Section 153A of the Act postulates the assessment in cases of search or requisition under section 132 or under section 132A of the Act respectively. The said section envisages that the Assessing Officer shall assess or reassess the total income for six assessment years immediately preceding th .....

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mpetence of the Assessing Officer to make the original assessment converges with the assessment to be made u/s.153A of the Act, i.e. only one assessment shall be made for such assessment years based on the findings of the search as well as any other material existing or brought on record by the Assessing Officer. Notably, there would assessments in the period of the six assessment years identified in section 153A(1) of the Act, which would have become final (i.e. which are not pending on the dat .....

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9;ble High Court was whether the scope of assessment under section 153A of the Act envisages additions, which are otherwise not based on any incriminating material found during the course of search. As per Hon'ble High Court, no addition could be made in respect of the assessment that had become final in the event no incriminating material was found during the course of search. The Hon'ble High Court also noticed its earlier judgment in the case of Murali Agro-products Ltd. (supra) and e .....

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lowance of ₹ 56,912/- made by the Assessing Officer by invoking section 14A of the Act. 9.1 1 Moreover, the Hon' ble Delhi High Court in the case of CIT(Central)-ill vs. Kabul Chawla in ITA 707/2014 dated 28/08/2015 has extensively considered the legal position and summarized it in the following words:- "Summary of the legal position 37. On a conspectus of Section 153A(1) of the Act, read with the proviso thereto, and in the light of the law explained in the aforementioned decisio .....

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iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search take place. The AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six A Ys "in which both the disclosed and the undisclosed income would be brought to tax". iv. Although Secti .....

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ial, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153A 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 .....

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original assessment." 9.2 Factually speaking, in the present case the assessment on the date of search stood completed in as much as the date for issuance of notice under section 143(2) of the Act in relation to return originally filed under section 139(1) on 30/09/2008 had lapsed. I have perused the assessment order and find that there is nothing brought on record to suggest that any material was found during course of search which would trigger the invoking of section 14A of the Act. Rath .....

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er to make the ii*.ned addition in an assessment finalized under section 153A of the Act in the absence of any incriminating material having been found during the course of search, qua the impugned disallowance u/s. 14A of the Act. 9.3 In conclusion, I, therefore, hold that following the ratio of the judgment of the Hon'ble Bombay High Court in the case of Continental Warehousing Corporation (Nhava-Sheva) (supra) as also the judgment of the Hon'ble Delhi High Court in the case of Kabul C .....

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