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2016 (8) TMI 1132 - ITAT MUMBAI

2016 (8) TMI 1132 - ITAT MUMBAI - TMI - Assessment u/s 153A - Held that:- As 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 intere .....

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para at ₹ 3,000/- per month. As the value has been taken by AO in the AY 2009-10 at ₹ 3,000 per month, it would be reasonable to take value at 10% higher in the A.Y.2010-2011. Accordingly we direct the AO to make addition on account of estimated value of shop at Nalashopara by taking the value at ₹ 3,300/- per month. We direct accordingly. - I.T.A. No. 3456,3457&3458/Mum/2015, I.T.A. No. 3465 &3466 /Mum/2015 - Dated:- 24-8-2016 - SHRI R.C. SHARMA, AM AND SHRI SANDEEP GOSAIN, JM .....

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e was no incriminating material found during the course of search and the assessment order has already been passed u/s 143(3) of the Act. In respect of AY 2008-09 we found that original return of income was filed u/s 139(1)of the Act on 26.12.08. Scrutiny assessment order u/s 143(3) was passed on 29.12.10. Search was conducted on 10.01.2011. It was contention of ld. AR that assessment for the year was not abated and no incriminating material was found during course of search so as to make additi .....

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come can be made in an assessment made u/s.153A/1153C of the Act unless some incriminating material found during the course of the search. 1. All Cargo Global Logistics [374 ITR 645 (Bom)] 2. CIT v. Kabul Chawla [380 ITR 573 (Del)] 3. Suncity Alloys (P) Ltd. v. ACIT [124 TTJ 674 (Jod)]. 4. Atithi N. Patel [ITA NO: 43/Mum/2010 Order dated 22.08.2012] 5. Saf Yeast Co. Pvt. Ltd. v ACIT [ITA nO.1074/PN/2007 Order dated 03.10.2012] 6. B.R. Machine Tools P. Ltd. v ACIT [ITA no.4174 to 4177/Mum/2013 Or .....

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onsidered by AO while framing assessment u/s 143(3). No incrementing material was found during search so as to empower the AO to make addition in respect of completed assessments. We also found that no incriminating materials were found during course of search with respect to salary received by assessee. Since assessment was already completed and not pending as on the date of search, no addition was warranted u/s.153A r.w.s.143(3) of I.T.Act. 5. The issue under consideration is squarely covered .....

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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 sub- section(1) of section 153A of the Act, which is .....

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, 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 date of search); such assessments do not abate in terms of the second proviso to sec.153A(1) of the Act. The scope and ambit of such an assessment is the controversy before me. In this context, it would be pertinent to refer to the judgment of the Hon'ble Bombay High Court in the case of CIT vs. Continental Warehousing .....

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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 elaborately culled out the scope and ambit of the assessment and reassessment of total income under section 153A(1) of the Act read with the proviso thereof. The Hon'ble Bombay High Court in Continental Warehousing corporation (supra) has ruled that an unabated assessment under section 153A(1) would not encompass an ad .....

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d 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 relevan .....

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sess' to completed assessment proceedings. 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 AYs "in which both the disclosed and the undisclosed income woul .....

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al. 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 A Y on the basis of the findings of the search and any other material existing or brought on the record of the Assessing Officer. vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153A only on the basis of some incriminating material un .....

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se of search in relation to the impugned addition. The entire discussion on this point in para-3 of the assessment order does not refer to any material found during the course of search leave alone any incriminating material. Therefore, in this factual background, I do not find any justification for the Assessing Officer to make the impugned addition in an assessment finalized under section 153A of the Act in the absence of incriminating material having not been found during the course of search .....

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e 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 IT .....

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ction 132 or books of account, other documents or any assets are requisitioned under section 132A after 31-5- 2003, that the Assessing Officer is in a position to and mandated to issue notice within the meaning of sub-section (1) of section 153A. That is because, Chapter XIII within which the powers of search and seizure and powers to requisition books of account are spelt out enable the revenue to take care of cases where it effects a search and seizure. That search and seizure is effected and .....

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uired to be summoned or taken into custody. It, therefore, issues a summons in that regard. It may also requisition the books of account or other documents for that might be useful and or any assets representing withholding or part income or property which has not been or would not have been disclosed for the purpose of the Indian Income-tax Act, 1922 or the Income-tax Act of 1961 by any person from whose possession or control they have been taken into custody. This is when the authorities have .....

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ere is much substance in the contentions of the assessee that the provisions such as section 153A enabling 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, w .....

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ection 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/reassessment shall not abate. It is only because, the finalised assessments/reassessments do not abate, the appeal revision or rectification pending against finalised assessment/reassessments would not abate. Therefore, the argument of .....

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rder under section 153A read with section 143 (3) could not have disturbed the assessment/reassessment order which has attained finality, unless the materials gathered in the course of the proceedings under section 153A establish that the reliefs granted under the finalised assessment/reassessment were contrary to the facts unearthed during the course of 153A proceedings. If there is nothing on record to suggest that any material was unearthed during the search or during the 153A proceedings, th .....

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red to trace out the history of section 153A and the power that is conferred thereunder. When the revenue argued before the Division Bench that the power under section 153A can be invoked and exercised even in cases where the second proviso to sub- section (1) is not applicable that the Division Bench was required to express a specific opinion. The provision deals with those cases where assessment or reassessment, if any, relating to the assessment years falling within the period of six assessme .....

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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 final .....

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ed or requisition is made. Thus, the crucial words 'search' and 'requisition' appear in the substantive provision and the provisos. That would throw light on the issue of applicability of the provision. It being enacted to a search or requisition that its construction would have to be accordingly. That is the conclusion reached by the Division Bench in Murli Agro (supra). These are the conclusions which can be reached and upon reading of the legal provisions in question. Therefor .....

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not possible to agree with revenue that the High Court of Delhi reached a conclusion different than the view taken by the Division Bench. 7. ITAT Delhi Bench in the case of Jakson Enterprises, ITA No.383/Del/2013, order dated 27-5-2015, held as under :- 9. Having gone through the orders of the authorities below, we find that the Learned CIT(Appeals) has rejected the contentions of the assessee on the issue of validity of assessment framed under sec. 153A read with sec. 143(3) of the Income- tax .....

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(supra), we find that the ratio laid down therein, supports the contentions of the assessee on the issue. It reads as under: 58. 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 year separately : (b) In other cases, in addition to the income that has already been assessed, the assessment u/s 153A wi .....

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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 on the basis of incriminating material found during the search. The Delhi Bench of the Tribunal in its recent decision on the issue in the case .....

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to be taken on same pedestal, then there was no need to enshrine second proviso to sec. 153A( 1) providing that the pending assessments within the period of six assessment years shall abate. The Hon'ble Delhi High Court in the case of Anil Kumar Bhatia (supra) dealt with a situation in which some incriminating material was found in respect of a non- pending assessment. It was in that background that the Hon'ble High Court held that sec. 153A applies if incriminating material is found eve .....

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rse of search. This can be seen from the following observations of the Hon'ble High Court :- "20. A question may arise as to how this is sought to be achieved where an assessment order had already been passed in respect of all or any of those six assessment years, either under Section 143(1)(a) or Section 143(3) of the Act. If such an order is already in existence, having obviously been passed prior to the initiation of the search/requisition, the Assessing Officer is empowered to reope .....

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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 th .....

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nts are pending vis-a-vis the years for which assessments are non-pending. In respect to the assessment years for which the original assessments have already been completed on the date of search, the total income shall be determined by restricting additions only to those which flow from incriminating material found during the course of search. If no incriminating material is found in respect of such completed assessment, then the total income in the proceedings u/s 153A shall be computed by cons .....

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e shall be computed afresh uninfluenced by the fact whether or not there is any incriminating material. In fact, this is the position which follows when we read the judgment of the Hon'ble Delhi High Court in Anil Kumar Bhatia (supra) in juxtaposition to the special bench order in the case of All Cargo Global Logistics Ltd. (supra). The other judgment relied by the Ld. DR in the case of Madugulu Venu (supra) also talks about the need for making fresh assessment in respect of the assessment y .....

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ld. CIT, DR in the cases of Canara Housing Development Company vs. DCIT (supra) of Hon ble Karnataka High Court and Filatex India P. Ltd. vs. CIT (supra) of Hon ble Delhi High Court having distinguishable facts are not applicable in the present case. In the case of Filatex India Pvt. 12 Ltd. (supra), the question raised on the applicability 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 .....

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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 .....

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as rejected this contention of the assessee with this finding that u/s 153A of the Act, the additions need not to be restricted or limited to the incriminating material, which was found during the course of search. Thus, it is clear from the facts of this case before the Hon ble High Court that several additions relying upon the incriminating material found in the course of search were made by the AO in the assessment proceedings u/s 153A of the Act and addition u/s 115JB was made by the AO in a .....

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ix assessment years immediately preceding the assessment year relevant to the previous year in which search was conducted or requisition was made. 14. In para no. 3 of the judgment the Hon ble Delhi High Court while discussing the cited decisions in the cases CIT vs. Chetan Das (2012), 254 CTR (Del) 292 and CIT vs. Anil Kr. Bhatia (2012), 2010-11 Taxman 453 (Del) cited by the ld. AR of the assessee appellant, has noted certain observations made and findings given by the Hon ble Court therein. Th .....

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se 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 outsi .....

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DR is concerned, the issue raised before the Hon ble High Court was regarding validity of revisional order passed u/s 263 of the Act by the ld. CIT partly upheld by the Tribunal and during that course the Hon ble High Court has also been pleased to discuss the decision in the cases of Anil Kumar Bhatia (supra) and the decision of Special Bench of the Tribunal in the case of All Cargo Global Logistic Ltd. (supra). It has been observed by the Hon ble High Court that the condition precedent for ap .....

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ken into consideration while assessing or re- assessing the total income under the provisions of sec. 153A of the Act. Even any undisclosed income or undisclosed property has been found after the conclusions of the search, same would also be taken into consideration. The requirement of assessment or re-assessment under the said section has to be read in the context of sections 132 or 132A of the Act, in much as, in case nothing incriminating is found on account of such search or requisition, the .....

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urse of the search belongs to a person other than the person who was searched, then such assets or books of accounts or documents shall be handed over by him to the AO having jurisdiction over such other person. Once, that is done, the AO having jurisdiction over such other person shall proceed against him for making an assessment or reassessment of his income in accordance with the provisions of sec. 153A. The petitioner therein was not searched u/s 132 of the Act, however, some documents belon .....

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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 d .....

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under sec. 139 of the Act was not pending as on the date of search, we following the above cited decisions by the learned AR, discussed above, hold that the assessment framed under sec. 153A read with sec. 143(3) of the Income-tax Act, 1961 for the assessment year under consideration is not valid and the same is accordingly held as null and void. The related ground nos. 2 to 6 on the issue is thus allowed. 20. In view of the above findings, whereby the assessment itself has been held null and v .....

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return prior to search which has attained finality and no incriminating document was found during the search, gifts already disclosed by the assessee in the return of income which has attained finality, could not be disturbed u/s.153A. 9. The Hon ble jurisdictional High Court in the case of Murli Agro Products Ltd., 49 taxmann.com 172, held as under :- Held : The object of inserting sections 153A, 153B and 153C by Finance Act, 2003 by discarding the existing provisions relating to search cases .....

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lature by Finance Act, 2003, decided to discard Chapter XIV B provisions 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 .....

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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 are pending on the date of conducting search under section 132 or making requisition under section 132A stand abated and not the assessment/reassessments already finalised for those assessment years covered under section 153A. By a circular No. 8, dat .....

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assessments/reassessments finalised for the assessments years covered under section 153A 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). [Para 10] In the instant case, the Assessing Officer while passing the independent assessment order under section 153A read with section 143(3) could not have disturbed the assessment/reassessment or .....

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ing Officer while passing the assessment order under section 153A read with section 143(3) could not have disturbed original assessment order relating to section 80HHC deduction and consequently the Commissioner could not have invoked jurisdiction under section 263 of the Act. 10. The ITAT Mumbai bench in the case of Jayendra P. Jhaveri, 46 taxmann.com 457 observed as under :- Head Note : So far as the question as to the processing of return under section 143(1) vis-à-vis assessment made .....

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) 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 prescrib .....

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end of the month in which the return was filed. Hence, the assessment is deemed to be completed and not pending on the date of search on 14- 8-2008. Admittedly, no incriminating material was found from the premises of the assessee during the search under section 132. Once assessment under section 143(3) had been annulled by higher authorities on the ground of legality of notice under section 143(2), re-opening under section 147 on that very ground would mean nothing else but abuse of process of .....

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h action that itself is the incriminating material against the assessee, has no force of law. Though the revenue may not be satisfied with the explanation of the assessee that the books of account were lost in flood, still the assessment or addition cannot be made on this ground. Such an inference of concealment of income cannot be made just on mere assumptions, presumptions or suspicion. The next limb of argument of the revenue, while relying upon the authority of Supreme Court has been that th .....

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down by the Supreme Court and then to compare the same with the facts and circumstances of the case under adjudication before it. However, this proposition of law, put by the revenue, is of no 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/orig .....

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s & 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 Anil P. Khimani vs. DCIT • No. 2855 to 2860/Mum/2008 dated 23-02-2010 ii) ITAT Jodhpur Bench in the case of Vishal Dembla v .....

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ix) Mumbai Tribunal in the case of Parag M. Sanghvi vs. ACIT in ITA No. 8027/Mum/2010 dated 30-09-2015 x) Mumbai Tribunal in the case of Zeenat P. Sanghvi vs. DCIT in ITA No. 8026/Mum/2010 dated 19-12-2014 xi) Jaipur Tribunal in the case of Jadau Jewellers & Manufacturers (P) Ltd. vs. ACIT in ITA No. 686/JP/2014-[2016] 175 TTJ 344 12. The ITAT Delhi Bench in the case of M/s Suncity Projects Pvt. Ltd., 2016- TIOL-643-ITAT-Del, held as under:- 13. We have carefully considered the arguments of .....

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th the provisos 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 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 abat .....

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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 sei .....

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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 153A 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 know .....

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d by holding In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made . In clause (vii), it is stated Completed assessments can be interfered with by the AO while making the assessment under Section 153A only on the basis of some incriminating material unearthed during the course of search . 13. Hon ble Delhi High Court in the case of RRJ Securities Ltd., 2015-TIOL-2539- HC-DEL-IT, held as under :- In respect of su .....

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, 2015 = 2015-TIOL-2006- HC-DEL-IT has held that completed assessments could only be interfered with by the AO on the basis of any incriminating material unearthed during the course of the search or requisition of the documents. 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 .....

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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 regard to no addition in the absence of incriminating material is not sustainable in this year. In thi .....

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