TMI Blog2016 (10) TMI 970X X X X Extracts X X X X X X X X Extracts X X X X ..... gift received during the year under consideration. 3. It was contended by learned AR that original return of income was filed u/s 139 on 30/10/2007 and the time limit for issue of notice under Section 143(2) of the Act was expired on 31/10/2008. However, there was a search under seizure action u/s. 132 on 10/01/2011, wherein no incriminating material was found. Addition was made in respect of the gift received by assessee which was already recorded in the regular books of accounts. 4. Learned AR placed on record the order of the co-ordinate Bench in case of other family members, wherein similar issue was dealt by Tribunal and the addition so made was deleted on the plea that no incriminating material was found during course of search in respect of the additions so made and that time limit for issue of notice u/s 143(2) have already been expired. 5. The precise observation of the Tribunal in case of Mangal Prabhat Lodha in I.T.A.No.3456,3457 3458/M/2015 order dated 24/08/2016 was as under:- ITA No.3456,3457 3458/Mum/2015 2. In ITA No.3456 assessee is aggrieved for addition made u/s 153A r.w.s. 143(3) when there was no incriminating material found during the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ddition was warranted u/s.153A r.w.s.143(3) of I.T.Act. 5. The issue under consideration is squarely covered by order of tribunal in assessee s own case in ITA No.3454/Mum/2015 order dated 30.10.2015, wherein tribunal observed as under: 5. As the aforesaid discussion shows that the pertinent point raised by the assessee before me is that the impugned addition has been made in the absence of requisite jurisdiction. 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 the assessment year relevant to the previous year in which search was conducted. The second proviso to section 153A{1} of the Act also prescribes that assessment or re-assessment, if any, relating to any assessment year falling within the period of six years referred to in subsection(1) of section 153A of the Act, which is pending on the date of initiation of search or making of requisition as the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al 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 decisions, the legal position that emerges is as under: i. Once a search takes place under Section 132 of the Act, notice under Section 153A{1} will have to be mandatorily issued to the person searched requiring him to file returns for six A Ys immediately preceding the previous year relevant to the A Y in which the search takes places. 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. 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 153A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. iii. The AO will exercise normal assessment powers in respect of the six years previous to the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 Chawla (supra), the impugned addition could not have been made in respect of an unabatable assessment which had otherwise become final, in the absence of any incriminating material having been found in the course of search, qua the impugned addition. Accordingly, I set aside the order of the CIT(A) and direct the Assessing Officer to delete the addition of ₹ 75,600/- as the same IS purported to be beyond the scope and ambit of assessment envisaged under section 153A of the Act. Thus, on this aspect, the assessee succeeds. 6. In the result, the appeal of the assessee is allowed as above. 6. The jurisdictional High Court in the case of Continental Warehousing Corporation (Nhava Sheva) 374 ITR 645, vide order dated 21-4-2015 have considered the decision of Special Bench in the case of All Cargo and also the decision of Delhi High Court in the case of Anil Bhatia (supra), on which CIT(A) has relied for dismiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bling assessment in case of search or requisition making specific reference to the provisions which enable carrying out of search or exercise of power of requisition that the assessment in furtherance thereof is contemplated. ■ Assessee's reliance upon the Division Bench judgment of this Court rendered in CIT v. Murli Agro Products Ltd. [2014] 49 taxmann.com 172 in that context is, therefore, well placed. ■ The Division Bench outlined the ambit and scope of the powers conferred by section 153A and observed that on a plain reading of section 153A, it becomes clear that on initiation of the proceedings under section 153A, it is only the assessment/reassessment proceedings that are pending on the date of conducting search under section 132 or making requisition under section 132A stand abated and not the assessments/reassessments already finalised for those assessment years covered under section 153A. By a Circular No. 8 of 2003, dated 18-9-2003 (See 263 ITR(St) 61 at 107) the CBDT has clarified that on initiation of proceedings under section 153A, the proceedings pending in appeal, revision or rectification proceedings against finalised assessment/reassess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 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 , then, each of the above conclusions rendered by the Division Bench would bind the instant Court. ■ Even otherwise, Court is in agreement with the Division Bench when it observes as above with regard to the ambit and scope of the powers conferred under section 153A . Even if the exercise of power under section 153A is permissible still the provision cannot be read in the manner suggested by the revenue. 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 31-3- 2003. There is a mandate to issue notices under section 153(1)(a) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... :- (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 year 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, which in the context of relevant provisions means (i) books of account, other documents, found in the course of search but not produced in the course of original 8 assessment, and (ii) undisclosed income or property discovered in the course of search. 11. The issue raised before the Special Bench was as to whether scope of assessment u/s 153A encompasses additions not based on any incriminating material found during the course of search? 12. In the case of Kusum Gupta (supra) also the return was processed u/s 143(1) of the Act and time limit for issuance of notice u/s 143(2) had expired on the date of search and it was held that no assessment was pending in that case and thus there was no question of abatement of assessment. Therefore, the addition in the assessment u/s 153A would be made only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that where an assessment order has already been passed for a year(s) within the relevant six assessment years, then also the A.O is duty bound to reopen those proceedings and reassess the total income but by 'taking note of the undisclosed income if any, unearthed during the search'. The expression 'unearthed during the search' is quite significant to denote that in respect of completed or non-pending assessments, the Assessing Officer is albeit duty bound to assess or reassess the total income but there is a cap on the scope of additions in such assessment, being the items of income 'unearthed during the search'. In other words, the determination of 'total income' in respect of the assessment years for which the assessments are already completed on the date of search, shall not be influenced by the items of income other than those based on the material unearthed during the course of search. There is not and cannot be any quarrel over the proposition that the Assessing Officer has no option but to determine the total income of the assessee in respect of the relevant six assessment years. However, the scope of such determination of total income is dif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty of provisions u/s 153A was that whether the Tribunal erred on facts and in law in not holding that re-computation of book profit, de-hors any material found during the course of search in the order passed u/s 153A of the Act was without jurisdiction, being outside the scope of proceedings under that section? The other question was, whether on the facts and circumstances of the case, the Tribunal erred in law in upholding the action of the AO in denying set off, of book loss unabsorbed depreciation relatable to earlier assessment year in terms of clause (III) of Explanation 1 to section 115JB of the Act? The relevant facts of that case noted in para no. 2 of the decision are that the AO in the proceedings u/s 153A of the Act, had made several additions, relying upon the incriminating material found in the course of search, which was conducted on 18.1.2006 and subsequent dates. In this paragraph of the decision it has been perused from the impugned order of the Tribunal that incriminating material including statement of Sanjay Agarwal, GM (Marketing) have resulted in additions, which have been upheld. The Hon ble High Court has been pleased to note in this paragraph as it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Filatax India Ltd. and the question raised therein it comes out that in that case admittedly during the course of search incriminating material including statements were found and resulted in additions and the addition made u/s 115JB of the Act was not based upon any incriminating material. Thus, the question raised before the Hon ble High Court was as to whether the Tribunal has erred in law in not upholding that recomputation of book profit, de-hors any material found during the course of search in the order based u/s 153A of the Act was without jurisdiction, being outside the scope of proceedings under that section. The Hon ble High Court after discussing the issue in detail has been pleased to decide the question against the assessee and has upheld the addition made u/s 115JB of the Act. Thus, having distinguishable facts this cited the decision in the case of Filatax India Ltd. (supra) is not helpful to the revenue. 16. So far as, the decision of Hon ble Karnataka High Court in the case of Canara Housing Development Company (supra) relied upon by the ld. CIT DR is concerned, the issue raised before the Hon ble High Court was regarding validity of revisional order passed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were found during the search carried out in the premises of Puri Group of Companies. 18. We, thus, find that the ratio laid down by the Hon ble Delhi High Court and Hon ble Rajasthan High Court in the above cited and discussed decisions supports the case of the assessee that in absence of incriminating material found during the course of search no addition can be made u/s 153A of the Act where the original assessment was already framed on the date of search. The Hon ble Karnataka High Court in the case of Canara Housing Development Company (supra) has, however, been pleased to express different view, however, as per the established proposition of law, we are bound to follow the decision of Hon ble Jurisdictional Delhi High Court and since, the Hon ble Karnataka High Court and the Hon ble Rajasthan High Court have expressed different views on the issue, the view favourable to the assessee is to be followed. We, thus, reiterate that in absence of incriminating material found during the course of search no addition can be made in a case where original assessment was already framed on the date when search took place. 19. In absence of rebuttal of this material fact by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions and introduce sections 153A, 153B and 153C in the Act. What section 153A contemplates is that, notwithstanding the regular provisions for assessment/reassessment contained in the 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 thereafter assess or reassess the total income for those assessment years. The second proviso to section 153A provides for abatement of assessment/reassessment proceedings which are pending on the date of search/requisition. Section 153A(2) provides that when the assessment made under section 153(A)(1) is annulled, the assessment or reassessment that stood abated shall stand revived. Thus, on a plain reading of section 153A, it becomes clear that on initiation of proceedings under section 153A, it is only the assessment/reassessment proceedings that a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same can be assessed under section 143(3) by issue of notice under section 143(2) subject to its issuance within the limitation period of 12 months from the end of the month in which return is furnished as per the proviso to clause (ii) of section 143(2) [as was existing at the time of relevant assessment year]. Once the limitation period as prescribed vide proviso to clause (ii) of sub-section (2) of section 143 is expired, it is not open to the Assessing Officer to assess the income under section 143(3) and the return filed by the assessee under section 139 is deemed to be accepted, which however, can be re-opened under section 147 subject to the fulfilment of ingredients of section 147 and within the time period as prescribed under section 149. So under such circumstances if the return is processed under section 143(1) and not under section 143(3) after the prescribed period of limitation, the same cannot be assessed under section 143(3) though it may be interpreted as mere intimation assessment or otherwise, but the same shall be deemed to be accepted by the Assessing Officer and it will not have any different colour other than the return which is processed under section 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... help to the revenue but to the assessee only. In view of above, it is accordingly held that the reassessments made by Assessing Officer under section 153A, without any incriminating material being found during the search action are not in accordance with law and consequential result is that the return/original assessments which have acquired finality are to be reiterated. 11. Similar view has been taken by ITAT Jodhpur Bench in the case of IOC Builders and Developers, 50 taxmann.com 396, Pune Tribunal in the case of SRJ Peety Steels (P) Ltd., 20 taxmann.com 101, Mumbai Tribunal in the case of Nikki Agarwal, ITA No.879/Mum/2011, order dated 22-1-2014, Mumbai Tribunal in the case of Shri Parag M. Sanghvi, ITA No.8027/Mum/2010, order dated 30-9-2015, Jaipur Tribunal in the case of M/s Jadau Jewellers Manufacturers Pvt. Ltd., ITA No.686/JP/2014, order dated 14-12-2015, ITAT Delhi Bench in the case of M/s Rakam Money Matters Pvt. Ltd., ITA No.2821/Del/2011, order dated 10-16-2014. Our view is also supported by following decisions :- i) ITAT Mumbai Bench in the case of Shri Gurinder Singh Bawa vs. DCIT - 28 taxmann.com 328 ii) ITAT Mumbai Bench in the case of An ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t AY in which the search takes 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 AYs in which both the disclosed and the undisclosed income would be brought to tax . iv. Although Section 153A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. In absence of any incriminating material, the AO does not have any jurisdiction to interfere in concluded assessments. 14. Respectfully following the proposition of law discussed in the above judicial pronouncements, we do not find any merit for the addition made by the AO 15. Similarly in AY 2009-10 original return u/s 139(1) was filed on 30.09.2009 time limit for issue of notice u/s.143(2) was expired 30.09.2010. Search took place on 10.01.2011. It is clear from the above dates that assessment for AY 2009-10 was not pending as on the date of search. Furthermore no incrementing material was found during the course of search warranting the addition of ₹ 75,600/- made on account of notional interest. Following the propositions discussed herein above we do not find any merit in the action of AO for making addition in respect of completed assessments, without any incrementing material found during course of search. 16. In the net result, the appeal filed by the assessee for A.Y.2008-09 2009-2010 are allowed. ITA No. 3458/Mum/2015(AY: 2010-2011) 17. In this year the assessment was pending as on the date of search, therefore, proposition with ..... X X X X Extracts X X X X X X X X Extracts X X X X
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