TMI Blog2017 (10) TMI 167X X X X Extracts X X X X X X X X Extracts X X X X ..... For The Department : Ms. Arju Garodia ORDER PER C.N. PRASAD (JM) 1. These three appeals are filed by different assessee s of the same group against different orders of the learned Commissioner of Income Tax (Appeals) for the Assessment Years 2008-09 and 2005-06. 2. In all these appeals the assessee raised ground on validity of the order passed by the Assessing Officer u/s. 153C r.w.s. 143(3) and 153A r.w.s. 143(3) of the Act and also grounds on merits. 3. At the outset, the Learned Counsel for the assessee before us submits that in all these three cases the assessments are not abated and there is no incriminating material found based on which the additions were made and in view of the decisions of the Hon'ble Jurisdictional High Court in the case of CIT v. Continental Warehousing Corporation (Nhava Sheva) Ltd. [374 ITR 645] and in the case of CIT v. Gurinder Singh Bawa [386 ITR 483], he submits that the assessments made without any incriminating materials are bad in law. The Learned Counsel for the assessee further submits that the additions were not made based on any seized material and there is no any reference to seized material by the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s we did not find any specific document which is seized in the course of search is referred to by the Assessing Officer which was seized and based on which the addition was made. The Assessing Officer failed to bring on record any seized document on which he is relying on for making the additions in all these three Assessment Orders. Further we also find that identical issue has come up before the group company of the assessee in the case of the M/s. Bermaco Energy Systems Ltd. v. DCIT (supra) where the joint warrant issued for search and the Coordinate Bench following the decisions of the Hon'ble Jurisdictional High Court in the case of CIT v. Continental Warehousing Corporation (Nhava Sheva) Ltd. (supra) and also other decisions of Coordinate Benches deleted the addition in the absence of any incriminating material found and also since the assessments were not abated observing as under:- 20. We have considered rival contentions, carefully gone through the orders of authorities below and also the paper book filed by the ld. AR, particularly, the pages to which our attention was invited during the course of hearing. We had also deliberated on the judicial pronounceme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion that in respect of the years for which assessment was not pending on the date of search and when no incriminating material was found during the course of search, the addition so made in the A.Y.2004-05 2005-06 were not justified. Hon'ble Bombay High Court in the case of Continental Warehousing Corporation (Nhava Sheva) Ltd. [2015] 58 taxmann.com 78 held as under: Whether in a case where pursuant to issue of notice under section 153A assessments are abated, Assessing Officer retains original jurisdiction as well as jurisdiction conferred on him under section 153A for which assessments shall be made for each of six assessment years separately - Held, yes - Whether no addition can be made in respect of unabated assessments which have become final if no incriminating material is found during search. Held, yes. 21. In the instant case, the CIT(A) has dismissed the legal ground raised by the assessee by relying on the decision of Hon'ble Delhi High Court in the case of Anil Kumar Bhatia. The ITAT Delhi Bench in the case of Jakson Enterprises vs. ACIT dated 27-05-2015 being ITA No. 383/Del/2013, has dealt with the decision of Delhi HC in the case of CIT vs. Anil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and a notice of assessment in such cases is then issued. That is mandated by sub-section (1) of section 153A. It is not 8 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. ■ There 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, 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 assessment years referred to in sub-section (1) of section 153A 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 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 153 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent under sec. 153A, no such requirement is there and the only requirement is that search has been conducted under sec. 132 of the Act. 10. Having gone through the decisions cited by the learned AR including the decision of Special Bench of the ITAT in the case of AL Cargo Global Logestic Ltd. vs. CIT (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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose 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 reopen those proceedings and reassess the total income, taking note of the undisclosed income, if any, unearthed during the search. 9. The above extracted observations of the Hon'ble High Court, which are though obiter dicta, make the point clear 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting material found during the course of search an addition u/s 153A of the Act cannot be made in the assessment framed thereunder. The decisions relied upon by the 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... certain observations made and findings given by the Hon ble Court therein. Thereafter in para no. 4 of the judgment, the Hon ble High Court has held as under: The first question, we notice was not raised by the appellant before the AO, CIT(A) and before the Tribunal. The appellant claims that the contention being legal can be raised at any stage. We have examined sec. 153A of the Act and find that the submission/contention has no merit . 15. When we peruse the facts of the case in the case of 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 bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 belonging to it 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Memorandum explaining the provisions in the Finance Bill 2003 was that under the existing provisions relating to search cases, often disputes were raised on the question, as to whether a particular income could be treated as 'undisclosed income' or whether a particular income could be said to be relatable to the material found during the course of search, etc. which led to prolonged litigation. To overcome that difficulty, the legislature 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ginal assessment order relating to section 80HHC deduction and consequently the Commissioner could not have invoked jurisdiction under section 263 of the Act. 26. 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- -vis assessment made under section 143(3) is concerned, it may further be observed that after processing of return under section 143(1) the same can be assessed undersection 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 sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion is that one additional or different fact may make a world of difference between conclusions in two cases. There is no doubt about the above said proposition of law laid down by the Supreme Court. The Court must observe the facts and circumstances of the case under which a certain proposition of law is laid 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/original assessments which have acquired finality are to be reiterated. 27. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch 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 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 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 asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would assume jurisdiction to reassess provided that the assets/documents received by the AO represent or indicate any undisclosed income or possibility of any income that may be remained undisclosed in the relevant assessment years. This Court in Commissioner of Income Tax (Central)-III v. Kabul Chawla : ITA 707/2014, decided on 28 the August, 2015 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. 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 with respect to share capital and unsecured loans. The disallowance made by the AO on account of personal use of vehicles was on estimate basis, no incriminating material was found to indicate that directors of the company have used the vehicles for their personal purpose. Accordingly, disallowance made by estimating personal elements in respect of expenditure on vehicle is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Corporation (Nhava Sheva) Ltd. (supra). In the appeal before us, the Revenue has made no grievance with regard to the impugned order of the Tribunal holding. that in law the proceedings under. Section 153A of the Act are without jurisdiction. This in view of the fact that no assessment were pending, so as to abate nor any incriminating evidence was found. The grievance of the Revenue is only with regard to finding in the impugned order on the merits of the individual claim regarding gifts and deemed dividend. However, once it is not disputed by the Revenue that the decision of this court in Continental Warehousing Corporation (Nhava Sheva) Ltd. (supra) would apply to the present facts and also that there are no assessments pending on the time of the initiation of proceedings under section 153A of the Act. The occasion to consider the issues raised on the merits in the proposed questions becomes academic. 8. In the case of M/s. Flamingo (DFS) Private Limited assessee filed return of income for Assessment Year 2008-09 on 06.10.2008 declaring its total income at ₹.1,60,89,620/-. With the return of income, the assessee had enclosed its Audited Balance Sheet and Profit Lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Reports, Computation of Total income and other details. Copy of the return of income, and Audited balance sheet of the assessee were placed at Page Nos.1-6 of the Paper Book. The return was processed u/s. 143(1) but no notice u/s. 143(2) was issued for scrutiny assessment. For Assessment Year 2005-06, notice u/s. 143(2) of the Act was to be issued before expiry of 6 months from the end of the Financial Year in which the return is furnished. Accordingly, in this case Assessing Officer should have issued notice by 30.09.2006, but no such notice was issued. Thereby the assessment was treated to be completed since on the date of search i.e. on 31.10.2009, time limit for issuing notice u/s. 143(2) was already expired much before date of search. Further, in this case no notice u/s. 148 was issued for reopening of the assessment. 11. Therefore, in all the three cases, assessments have become final and there were no pending proceedings, therefore the assessments are unabated as no incriminating material was found. In such cases no addition could be made legally u/s.153A/153C of the Act unless there was some incriminating material found during the course of search. 12. As observed by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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