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TMI Blog2018 (10) TMI 420X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee, Shri Leelesh Hirji Mamniya, who has admitted that the CIT(A)'s order dated 09.01.2014 was received on 21.01.2014 and last date for filing of appeal before Tribunal was 22.03.2014 but actually the appeal was filed on 02.06.2014. According to the learned Counsel, there was delay of 72 days in filing of this appeal. The reason stated in the affidavit was that on receipt of the appellate order of CIT(A) dated 09.01.2014, which was received on 21.01.2014, was forwarded to the tax consultant of the assessee company in the second week of February for further action. According to the affidavit, the tax consultant finalized the appeal and forwarded the same for signing in the last week but the Managing Director Shri Leelesh Hirji Mamniya, who was looking after the finance and tax related matters, was out of the town and returned back to Mumbai on last week of May 2014 and after signing the same, the appeal was filed before the Tribunal on 02.06.2014 and therefore, the appeal was delayed by 72 days. The learned Counsel for the assessee pointed out the relevant clauses i.e. clause 1 to 7 as under: - "1. That, the appellant order dated 09.01.2014 passed by the Ld. CIT(A)-37, Mumbai was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... um/2014 reads as under: - "2. Order passed under section 153A r.w.s. 143(3) of the Income Tax Act 1961 is bad in law a. The Ld. CIT(A) erred in upholding the assessment order passed by Ld. AO under section 153A r.w.s. 143(3) of the Act on the basis of show cause notice issued by excise department. The Appellant, therefore, prays that the order passed under section 153A r.w.s. 143(3) of the Act is abinitio-void and the same may be quashed. b. The Ld. CIT(A) failed to appreciate that no incriminating material was found during the course of search action conducted on 10.03.2011 under section 132(1) of the Act. The Appellant, therefore, prays that the order passed under section 153A r.w.s. 143(3) is without any basis and the same may be quashed." 6. Brief facts relating to the above issue are that a search action u/s. 132(1) of Act was conducted in the case of Shri Arun Mohanlal Joshi on 10.03.2010. The office premises of the assessee firm at Shop no. 2, Suvart Apartments. Tembhi Naka. Thane(W) was also covered under this search. Consequently, notices under section 153A dated 06.04.11 were issued and served on assessee for AYs. 2005-06 to 2008-09. During the course of search as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Department computed the unaccounted sales for the period F.Y. 2004-05 to 2007-08 at Rs. 475.60,41,349/-. Year wise breakup is as follows: FY AY Unaccounted sales 2004-05 2005-06 1056238560 2005-06 2006-07 1194135930 2006-07 2007-08 1246128390 2007-08 2008-09 1176546540 Based on the show cause notice of the Central Excise Department, Vapi, the AO issued a show cause notice dated 05/12/11 to the assessee asking it as to why the income from undisclosed sales should not be added to its taxable income. The assessee submitted that the show cause notice is based on guess work, assumption and projected calculation of sales based on trial and error method as per ratio of raw material consumption for the finished goods produced by the company. There are no corroborating evidences for the same. Various objections were raised assailing the estimation made in the show cause notice issued by the Central Excise Department. The AO however, was not convinced by the arguments of the assessee. The assessee also made the arguments that based on unaccounted purchase of raw material tabulated by the Central Excise Department, the total estimated production is not possible. It was submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re cited in respect of natural justice and the necessity of providing opportunity for cross examination. The additions in the assessment proceedings can be made only on the basis of material evidences found during the search action. In the instant case the A.O. has made addition on the basis of show cause notice issued by the Central Excise Department and not on the basis of material found during the course of search proceedings. Reliance is placed on All Cargo Global Logistics Ltd Vs DCIT. 5.3. During the appellate proceedings. the appellant was asked to furnish the latest status of the proceedings before the Commissioner of Excise Authorities consequent to the show cause notice issued. At the hearing held on 02/09/13 no details were filed regarding the status of the proceedings. In the meanwhile, a remand report was called from the Assessing Officer vide this office letter dated 14/11/12, on the basis of the submissions of the appellant. The AO was also orally asked to ascertain the status of the action taken by Central Excise authorities in respect of the SCN in this case. The AO vide her letter dated 27/12/13 forwarded the copy of order dated 30/05113 of Commissioner of C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hearing given to the appellant. This order clearly shows that all the objections of the appellant have been considered including opportunity for cross examination. Finally on page 198 onwards of this order, the Commissioner of Central Excise has discussed and narrated his findings in respect of show cause notice. He has appraised the evidences and confirmed that MIs. Yogesh Associates procured raw materials and packing material illicitly with the appellate firms with close nexus with MIs. Yogesh for production and clandestine production and sale of GOA 1000 Gutkha. The arguments of the appellant in respect of the objections to the statements recorded and evidence covered has also been dealt with. Since then computation of the clandestine production and removal of Gutkha produced has been confirmed in this order of the Commissioner of Central Excise, the same is accepted as valid basis for the computation of unaccounted income of the appellant by the Assessing Officer. Though the appellant submitted that they have flied appeal to the Customs. Excise & Service Tax Appellate Tribunal (CESTAT). the same is still pending and the order of the Commissioner of Excise currently holds as fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e action of AO is based on SCN of Central Excise department where the proceedings are not concluded fails since an order has been passed. The statements were recorded by the Excise Authorities over a long period of investigation. In the adjudication, the Commissioner has recorded his conclusions on the issue of natural justice. Further, the AO in the remand proceedings has also to a limited extent allowed opportunity of cross examination. Estimation of income based on material found in investigation is not an alien concept in Income Tax assessments (refer Commissioner of Sales Tax vs /Esufali H M Abdulali (SC) 90 ITR 271). In light of the discussion in the earlier paragraphs, I do not find any reason to interfere in the order of the assessing officer and Ground of appeal no 1 is dismissed." 8. Similarly, the CIT(A) also confirmed the assumption of jurisdiction by the AO for framing search assessment under section 153A r.w.s 143(3) of the Act by relying on the decision of Hon'ble Delhi High Court in the case of CIT vs. Anil Kumar Bhatia (2013) 352 ITR 493 (Del) and Tribunal's decision in the case of Pratibha Industries in ITA No. 2197 to 2199/Mum/2008, ITA No. 2200 to 2201/Mum/2008 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see under section 139(1) of the Act and returns of income filed in response to notices issued under section 153A of the Act and income assessed as a result of notice under section 153A read with section 143(3) of the Act is summarized as under: - Sr. No. AY Gross Total income u/s 139(1)/ Date of filing of return of income Income declared u/s 153A/Date of filing of return of income 1. 2005-06 47,71,915/ 31.10.2006 47,71,915/ 05.07.2011 2. 2006-07 40,07,185/ 28.10.2007 40,07,185/ 05.07.2011 3. 2007-08 88,26,324 30.09.2008 88,26,324/ 05.07.2011 4. 2008-09 173,779,788 30.09.2008 173,779,788/ 05.07.2011 11. The assessee before the DDIT Investigation filed a letter dated 12.05.2010 explaining the contents of item A-1 of inventory on loose paper folder seized during the course of search on 10.03.2010 which contains show case notice bearing No. Thane/ ADIT (Investigation)-2/0910 dated 31.08.2009 issued by ADIT(Investigation)-2, Thane towards unexplained expenditure and suppression of sales as per show cause notice issued by Central Excise Department, Vapi Commissionerate and the copy of the same was forwarded to the investigation department of the Income Tax, Thane. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ake assessment under section 153A of the Act read with section 143(3) of the Act particularly when all the details were filed in the original return of income under section 139(1) on 31.10.2006 for the AY 2005-06 and no proceedings were pending as on the date of search. The learned Counsel for the assessee stated that at the time of search on 10.03.2010 by the Income Tax Department, the assessment proceedings for none of the above assessment years is in question is pending. The learned Counsel for the assessee stated that the AO's assumption of jurisdiction to issue notice under section 153A of the Act and to frame the assessment under section 143(3) read with section 153A of the Act, the AO can assume jurisdiction only when there is incriminating material found during the course of search conducted by the Income Tax Department under section 132 of the Act. The learned Counsel explained that the entire assessment is based on show cause notice issued by Income Tax Department on 31.08.2010 which was issued before the date of search by the Income Tax Department on 10.03.2010. 13. We have gone through the case law of Hon'ble Bombay High Court in the case of CIT vs. Continental Warehou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as undisclosed income is found in the course of search. On the other hand, it has been argued by the Ld. Standing Counsel that abatement of pending assessment is only for the purpose of avoiding two assessments for the same year, one being regular assessment and the other being assessment u/s 153A. In other words these two assessments coalesce into one assessment. The second proviso does not contain any word or words to the effect that no reassessment shall be made in respect of a completed assessment. The language is clear in this behalf and therefore literal interpretation should be followed. Such interpretation does not produce manifestly absurd or unjust results as section 153A (i)(b) and the first proviso clearly provide for assessment or reassessment of all six years. It may cause hardship to some assesses where one or more of such assessments has or have been completed before the date of initiation of search. This is hardly of any relevance in view of clear and unambiguous words used by the legislature. This interpretation does not cause any absurd etc. results. There is no casus omissus and supplying any would be against the legislative intent and against the very rule in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se the word "incriminating document". Clauses (a) and (b) of section 132(1) employ the words "books of account or other documents". For harmonious interpretation of this provision with provision contained in section 153A, all the three conditions on satisfaction of which a warrant of search can be issued will have to be taken into account. Having held so, an assessment or reassessment u/s 153A arises only when a search has been initiated and conducted. Therefore, such an assessment has a vital link with the initiation and conduct of the search. We have mentioned that a search can be authorised on satisfaction of one of the three conditions enumerated earlier. Therefore, while interpreting the provision contained in section 153A, all these conditions will have to be taken into account. With this, we proceed to literally interpret to provision in 153A as it exists and read it alongside the provision contained in section 132(1). The provision comes into operation if a search or requisition is initiated after 31.5.2003. On satisfaction of this condition, the AO is under obligation to issue notice to the person requiring him to furnish the return of income of six years immediate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the course of original assessment but found in the course of search, and undisclosed income or undisclosed property discovered in the course of search. 4. It may be mentioned here that Ld. Counsel for All Cargo Global Logistics Ltd. was questioned about the scope of pending assessments as it was his contention that all six assessments are to be made, if necessary, on the basis of undisclosed income discovered in the course of search. He was specifically questioned about the jurisdiction of the AO to make original assessment along with assessment u/s 153A, merging into one. However he took an evasive view submitting that this question need not be decided in his case although the question of jurisdiction u/s 153A was vehemently pressed on account of which ground No.1 in the appeal for assessment year 2004-05 was admitted as additional ground. He also wanted the additional ground to be retained in case of any future contingency." 14. Further, we also find from the observations of Hon'ble High Court in the case of Continental Warehousing Corporation (Nhava Sheva) Ltd. (supra) that the assessment can be made on the basis of search material and relevant para reads as under: - "3 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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