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2016 (12) TMI 109 - ITAT MUMBAI

2016 (12) TMI 109 - ITAT MUMBAI - TMI - Addition on disbelieving gift received - assessment u/s 143(3) r.w.s. 153A - Held that:- Addition made qua the gift received by the assessee de hors any material found during the course of search, cannot be roped in the assessment made under section 143(3) r.w.s. 153A of the Act by the AO. - Accordingly, the addition of ₹ 2.25 crores made by the AO u/s 68 is to be deleted as the AO has no jurisdiction u/s 153A of the Act and the additional groun .....

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is an appeal by the assessee against order dated 13/11/2009 of Ld. CIT(Appeals)-41 Mumbai for the assessment year 2001-02 passed against the assessment framed by the AO u/s 143(3) r.w.s. 153A of the Income Tax Act (hereinafter called the Act). 2. The grounds raised by the assessee are as under:- On the facts and in the circumstances of the case he ld. CIT(A) has erred in law in confirming the addition of ₹ 2,25,00,000/- made by the AO on disbelieving gift received by the appellant 3. The a .....

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the circumstances of the case, and in law, the initiation as well as completion of the assessment proceedings were bad, illegal and void. 4. At the outset, the ld.AR for the assessee drew our attention to the application dated 18.11.2011 filed by the assessee requesting therein to admit additional ground which was not raised earlier. The ld. AR submitted that the ground proposed to be raised in the said application was arising out of the facts available on record before the lower authorities, t .....

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o Ltd Vs CIT(1998) 229 ITR 383(SC); and B) All Cargo Global Logistics Ltd Vs Dy. CIT (2012)137 ITD26 (Mum)(SB). 5. We have heard the rival contentions and perused the material placed before us including the orders of authorities below and the case laws relied upon by the assessee. We find that the issue proposed to be raised challenging the jurisdiction to make additions while framing assessment u/s 143(3) r.w.s. 153A of the Act by way of filing of additional ground vide application dated 18.11. .....

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dictional high court. 6. The issue raised in the additional ground by the assessee is qua jurisdiction of the AO to make addition under section 68 by treating the gift received from Shri N K Rajgharia as unexplained income which was already reflected in the return of income filed u/s 139 of the Act on 31.7.2001 and was not based on any incriminating materials and documents found during the course of search. 7. Facts of the case in brief are that the assessee filed its return of income on 31.7.20 .....

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search including the year under consideration which was complied by the assessee by filing return on 27.11.2007 declaring a total income of ₹ 7,17,610/- the same income as filed in the original return of income. During the course of assessment in search proceedings, the AO, on perusal of the capital of the assessee for the financial year 2000-01 found that the assessee had received a sum of ₹ 2,25,00,000/- from Mr N. K. Rajgharia and asked the assessee to prove the identity and credi .....

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f gift received was sustained. 8. At the outset, the ld. AR submitted before us that the addition by the AO qua gift received by the assessee ₹ 2.25 crores under section 68 of the Act as income from other sources was without jurisdiction as the same was based upon any incriminating materials seized during the course of search proceedings. The ld. AR submitted that the assessee had duly disclosed said gift in the original return of income filed on 31.7.2001 by crediting the same in the capi .....

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us the original return of income filed by the assessee u/s 139 of the Act has attained finality and was not pending on the date of search. The ld. AR prayed that in view of the provisions of section 153A of the Act the addition as made by the AO qua gift received and credited in the capital account was without jurisdiction and be deleted as the addition could be made on the basis incriminating materials seized during the search action. In defence of his argument the ld.AR heavily relied on the d .....

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assessee. 9. On the other hand, the ld. DR strongly opposed the arguments advanced by the ld.AR by submitting that it was only in the proceedings under section 153A that the assessee was found to have received a gift of ₹ 2.25 lakhs from Shri N. K. Rajgharia on 6.6.2000 which the assessee could not prove to be genuine and identity of the creditor could not be proved and genuineness of the transaction could not be established and therefore the AO rightly added the same u/s 68 of the Act and .....

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ered and distinguished by the decision of the Co-ordinate Bench of the Tribunal in the case of Jignesh P Shah (supra) as referred to and relied upon by the assessee and therefore need not be taken into consideration for adjudicating the issue as the issue is covered by the jurisdictional High Court and by the Hon‟ble Apex Court. 11. We have considered the rival submissions and perused the material placed before us including the orders of authorities below and case laws relied upon by both .....

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was complied by the assessee by filing return of income on 27.11.2007 declaring total income of ₹ 7,17,610/- same as declared in the original return of income and assessment was completed under section 143(3) r.w.s.153A by an order dated 3.10.2008 by making various disallowances including the addition of ₹ 2.25 crores on account of gift received by the assessee from Shri N K Rajgharia on 6.6.2000. We also find from the record that the said gift was duly shown by the assessee in the .....

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e has been decided by the Jurisdictional High Court and the Hon‟ble Apex Court as referred and relied by the AR. In the case of Continental Warehousing Corporation (Nhava Sheva) Ltd. (supra), the Hon‟ble Bombay High Court has held as under : A bare perusal of section 153A would indicate as to how a non-obstante clause has been inserted and with a defined intent. Where search is initiated under section 132 or books of account, other documents or any assets are requisitioned under sect .....

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or other valuable article or thing is found as a result thereof that notwithstanding anything and within the meaning of the above provisions having been concluded, it is open for the revenue to make an assessment. It is also open to the revenue to make a reassessment in cases where it exercises the powers to requisition books of account etc. This is because it is of the view that the books of account are required to be summoned or taken into custody. It, therefore, issues a summons in that regar .....

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are to be found in other provisions are removed and a notice of assessment in such cases is then issued. That is mandated by sub-section (1) of section 153A. It is not only the issuance of the notice but assessment or reassessment of total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition has to be made.[Para 22] There is much substance in the contentions of the assessee that the provisions suc .....

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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 .....

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153A, the assessments/reassessments finalised for the assessment 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). Once it is held that the assessment has attained finality, then the Assessing Officer while passing the independent assessment order under section 153A read with section 143 (3) could not h .....

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ad with section 143(3) cannot disturb the assessment order [Para 28] The stand of revenue that these observations are made in passing or that they are not binding on instant Court is not agreeable because the essential controversy before the Bench was somewhat different. Revenue urged that was only in relation to the legality and validity of the order of the Commissioner under section 263. Had that been the case, the Division Bench was not required to trace out the history of section 153A and th .....

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53A were pending. If they were pending on the date 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 .....

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ng 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) and assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made. Thus, the crucial .....

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nding of the legal provision is not perverse nor does it suffer from any error of law apparent on the face of the record.[Para 31] Further, revenue would submit that the above observations and conclusions of the Special Bench are specifically disapproved in CIT v. Anil Kumar Bhatia [2012] 24 taxmann.com 98/211 Taxman 453 (Delhi). However, this argument is not found to be accurate. Upon reading of the observations of the Delhi High Court as a whole and in entirety, it is not possible to agree wit .....

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structural facility entitled to deduction under sub-section (4) of section 80-IA - Whether Special Leave Petition filed against impugned order was to be granted - Held, yes [In favour of revenue] Section 153A of the Income-tax Act, 1961 - Search and seizure - Assessment in case of (Scope of) - High Court by impugned order held that no addition can be made in respect of assessments which have become final if no incriminating material is found during search or during 153A proceeding - Whether Spec .....

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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 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 .....

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d 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 the assessment year 1998-99 was finalised on 29-12-2000 and search was conducted thereafter on 3-12-2003. Therefore, in the facts of the present case, initiation of proceedings under Section 153A would not affect the assessment finalised on 29-12-2000. 12. Once it is held that the assessment finali .....

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3A of the Income-tax Act establish that the reliefs granted under the finalised assessment/reassessment were contrary to the facts unearthed during the course of 153A proceedings. 13. In the present case, there is nothing on record to suggest that any material was unearthed during the search or during the 153A proceedings which would show that the relief under Section 80HHC was erroneous. In such a case, the A.O. while passing the assessment order under Section 153A read with Section 143(3) coul .....

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Event Dates Dates A.Y. 2002-03 A.Y. 2004-05 Date of filing of return of income u/s 139 31.03.2003 31.3.2005 Time limit for issuance of notice u/s 143(2) under the statute 31.3.2004 31.3.2006 Time limit for completing assessment u/s 143(3) 31.3.2005 31.3.2007 Date of search 19.6.2007 19.6.2007 From the above, it is evident that, prior to the date of search, the assessment for both the assessment years had attained finality as the return income stood assessed before the date of search. Accordingly .....

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the Assessing Officer shall- (a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required t .....

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of six assessment years referred to in this [sub-section] pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate ….. 8. From the perusal of the aforesaid provision, it is evident that, where search has been initiated u/s 132 or requisition has been made under section 132A, it is incumbent upon the assessing officer to issue notices requiring the person searched to file return of income in respect of ea .....

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i.e. emanating not only, from the declared sources but also from any material found during the course of search. However if the assessment has already been made or finalized before the date of search, then the AO can reassess the total income on the basis of material found or gathered during the course of search over and above the income which already stood assessed. However, the second proviso carves out exception/limitation that, pending assessment or reassessment relating to any assessment y .....

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and does not get abated, then they have to be assessed on the same income and cannot include any time of income for which no incriminating material has been found. The reason being that the assessments which are pending and get abated, the entire income has to be determined which includes material already on record and also the material found as a result of search. However, statute has carved out the exception to those assessments which have attained finality, because those assessments does not .....

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e Income-tax Act, 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 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 18-9-2003 (See 263 ITR (St) 61 at 107) the CBDT has clarified that on i .....

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assessment years covered under Section 153A of the Income-tax 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 the assessment year 1998-99 was finalised on 29-12-2000 and search was conducted thereafter on 3-12-2003. Therefore, .....

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f the IT. Act 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 of the Income-tax Act establish that the reliefs granted under the finalised assessment/reassessment were contrary to the facts unearthed during the course of 153A proceedings. 13. In the present case, there is nothing on record to suggest that any material was unearthed during the search or during the 153A procee .....

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icer while passing the assessment order u/s 153A cannot disturb the assessments/reassessment order which had attained finality, unless material gathered in the course of search establishes that the earlier assessment finalized is contrary to the fact. 9. This principle has again been reiterated by the Hon‟ble Rajasthan High Court, wherein Lordships after analyzing the entire provision of section 153A, held and concluded as under:- '22. The underlying purpose of making assessment of tot .....

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refore, the proviso provides for abatement of such pending assessment and reassessment proceedings and it is only the assessment made under s.153A of the Act that would be the assessment for the said year. 23. The necessary corollary of the above second proviso is that the assessment or reassessment proceedings, which have already been 'completed' and assessment orders have been passed determining the assessee's total income and such orders are subsisting at the time when the search .....

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e at large both for the AO and assessee has no warrant in law. 25. 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 ss. 132 and 132A of the Act it is apparent that: . (a) the assessments or reassessments, which stand abated in terms of second proviso lo s. 153A of the Act the AO acts under his original jurisdiction, for which, assessments have to be made. .....

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ly there being no incriminating material found during the course of search relating to the addition made on account of deemed dividend, therefore, such an addition de hors any material found during the course of the search, cannot be roped in the assessment made u/s 153A by the assessing officer. 10. Now, coming to the decision of ITAT Mumbai Bench in the case of Satish L. Babladi, as relied upon Ld. DR, from the perusal of the said decision it is seen that the Tribunal has strongly relied upon .....

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he Hon‟ble jurisdictional High Court in case of Murli Agro Products Ltd. (supra) has categorically clarified that the assessment which had attained finality cannot be disturbed unless incriminating material is found in the course of search. Therefore, the decision of the Tribunal in S.L. Babladi‟s case, cannot be relied upon as they have not considered the ratio and principle laid down by the Hon‟ble jurisdictional High Court. 11. Accordingly, the addition on account of deemed .....

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