TMI Blog2017 (9) TMI 459X X X X Extracts X X X X X X X X Extracts X X X X ..... based on the incriminating material found during the course of search or requisition of documents. Therefore, the assessment in the case, where the assessment has been completed or not pending on the date of search. The Assessing Officer can frame assessment only on the basis of the incriminating material gathered during the course of search. The Revenue has not placed any material on record suggesting that the impugned assessment was framed on the basis of incriminating material. - Decided in favour of assessee. - ITA No. 174/JP/2017 - - - Dated:- 24-8-2017 - SHRI KUL BHARAT, JM AND SHRI VIKRAM SINGH YADAV, AM For The Assessee : Shri Manish Agarwal (C.A) For The Revenue : Smt. Rolly Agarwal (CIT) ORDER PER SHRI KUL BHARAT, JM. This Appeal by the Assessee is directed against the order of Ld. CIT(Appeals)- 4, Jaipur dated 30.11.2016 pertaining to Assessment Year 2006-07. The Assessee has raised the following grounds of appeal :- 1. On the facts and in the circumstances of the case the Ld. CIT(A) has grossly erred in upholding the assessment completed u/s 153A of the Income Tax Act, 1961 by the Ld. AO when no incriminating paper was found as a resu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7; 16,37,320/- and disallowance of other cash unverifiable expenses of ₹ 1,00,000/-. Against this, the assessee preferred an appeal before Ld. CIT(A), who after considering the submissions partly allowed the appeal. While partly allowing the appeal, Ld. CIT(A) deleted the addition made on account of unverifiable cash expenses of ₹ 1,00,000/- and reduced the addition made on account of undisclosed investment in house construction to ₹ 2,60,713/-. 3. Against this, the assessee is in present appeal. 4. Ground no. 1, is against legality of the assessment u/s 153A. 4.1 Ld. Counsel for the assessee reiterated the submissions as made in the written brief. The submissions of the assessee are reproduced as under:- The ground of appeal as taken reads as under: 1. On the facts and in the circumstances of the case the Ld. CIT (A) has grossly erred in upholding the assessment completed u/s 153A of the Income Tax Act, 1961 by the Ld.AO when no incriminating paper was found as a result of search pertaining to the year under appeal, thus the additions sustained in the consequent order passed deserves to be deleted. At the outset, your honour s kind a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arch, and therefore, the Ld. AO s jurisdiction was merely limited to the material found during the course of search and he could not have completed the assessment u/s 153A without referring to any material found / seized during the course of search. Therefore, it was not permissible for the Ld. AO to make regular scrutiny assessment under the garb of assessment u/s 153A in view of the fact that the returned income was accepted and the case was not selected for scrutiny. Legally viewing the matter, it can be said that it is a settled proposition of law based on numerous judgments of Hon ble High Courts of the Nation (including Jurisdictional High Court) and a catena of ITAT judgments that, no additions could be made in the assessment u/s 153A for a particular assessment year if there is no incriminating material found as a result of search, and assessment u/s 153A cannot be employed as a substitute for regular assessment. Thus, it is submitted that the additions made vide impugned assessment could not have been made at all in assessment made u/s 153A on income which already stands accepted especially when no incriminating material in this regard was found as a result of search ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the six years previous to the relevant 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 153 A 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 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leted assessment proceedings, which would not abate as they are not pending on the date of initiation of the search or making of requisition and which would also necessarily support the interpretation that for the completed assessments, the same can be tinkered only based on the incriminating material found during the course of search or requisition of documents. After considering inter alia above judicial pronouncements, Hon ble ITAT Mumbai Bench in the case of Ideal Appliances Co. Pvt. Ltd vs DCIT has decided the issue in favour of assessee holding as under: 9. From the above settled legal position of the issue that in the absence of any incriminating material found during search, additions made on the assessed income are unsustainable in law, we are of the considered opinion that the additions made in the instant case are not sustainable and accordingly, we delete the same. Considering our decision on the legal issue in favour of the assessee, the other grounds demand no specific adjudication. Thus, on the legal ground the assessee succeeds and rest of the grounds are dismissed as academic. 9.1. Further, regarding the non-abated nature of the assessments relati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 153 A (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 abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant 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 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ound and seized during the course of search u/s 132(1) of the Act and nothing is available in record to reassess the income of assessee. In view of the above, this is not a fit case for making the addition in the year under consideration, the same are deleted ( iii) In the case of M/s Ideal Appliance Company Pvt. Ltd. V. DCIT Central Circle-44, Mumbai, the following legal issues were raised before the Hon'ble ITAT, I Bench, Mumbai: 1. The Ld. CIT (A) failed to appreciate the fact that no incriminating documents/evidences were found during the course of search of third party, and hence, re-computing the income u/s 153A is bad in law and liable to be quashed. 2. The Ld. CIT (A) failed to appreciate the fact that original assessment was made u/s 143 (3) vide order 31st August 2007 after considering all the documents and materials on record and due application ff mind and hence recomputing the income by merely changing head of income for the said under the grab of section 153A based on same documents and materials, is bad in law and order is liable to be quashed, 3. The Ld. CIT (A) erred in confirming the action of the AO reassessing the income u/s 143 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of CIT v. Kabul Chawla in ITA no. 707/2014 dated 22.08.2015. Here it is pertinent to mention that the Department has not accepted the decisions of Hon'ble Mumbai High Court in the case of M/s All Cargo Global Logistics as well as Continental Warehousing (Nhava Sheva) Ltd. and SLP has been filed before the Hon'ble Seprme Court. The Hon'ble Supreme Court has granted leave vide order dated 12.10.2015 as reported in 64 taxmann.com 34 (SC). Similarly, in the case of Kabul Chawla SLP has also been filed. In view of facts circumstances mentioned above and also taking note of SLP admitted by Hon'ble Apex Court in case of (i) All Cargo Global Logistics (ii) Continental Warehousing (Nhava Sheva) Ltd. (iii) Kabul Chawla, assessee's appeal in Gr. No. 1 is hereby dismissed. 5.1 From the above, it is evident that Ld. CIT(A) did not accept the submissions of the assessee, on the ground that the Revenue had filed special leave petition before the Hon ble Supreme court. It is brought to our notice that special leave petition filed by the Revenue in the case of CIT vs. Kabul Chawla has been dismissed by the Hon ble Supreme Court. Under these facts, we are of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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