TMI Blog2018 (4) TMI 1602X X X X Extracts X X X X X X X X Extracts X X X X ..... trict his exercise of completing assessments u/s 153A only to the amount of income/loss determined originally. It was not open to him to venture to re-examine the details in respect of expenses in assessment proceedings u/s 153A read with section 143(3) of the Act for the patent reason that, admittedly, no incriminating material in respect of such expenses was found during the course of search. CIT(A) was not justified in upholding the additions made by the AO for the years of completed assessments, which were not based on any incriminating material found during the course of search relating to such years and consequently denying the benefit of carry forward and set off of the resultant loss in subsequent year. - ITA No.1393 to 1395/Del/2013 - - - Dated:- 25-4-2018 - SHRI R.S. SYAL, VICE PRESIDENT For The Assessee : Shri Sunil Arora, CA And Shri Akash Chugh, CA For The Department : Shri A.K. Saroha, CIT, DR ORDER The Hon ble President has nominated me u/s 255(4) of the Income Tax Act, 1961 (hereinafter also called as the Act ) to render opinion on the difference between the Members who initially heard the present appeals but differed in their resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the additions made by the AO for the years of completed assessments, which were not based on any incriminating material found during the course of search relating to such years and consequently denying the benefit of carry forward and set off of the resultant loss in subsequent year? 5. Briefly stated, the facts of the case are that a search and seizure operation u/s 132 of the Act was carried out in HBN group on 20.11.2009. This group is engaged in diverse businesses ranging from dairy development and marketing of dairy products; real estate development; home loan finance and running a broadcast channel, namely, CNEB through various companies. Notice was issued u/s 153A of the Act to the assessee, inter alia, for the three years under consideration. In response, the assessee filed returns of income u/s 139 read with section 153A of the Act on 10.02.2011 declaring Nil income for such years. In the computation of income, the assessee declared loss of ₹ 23,05,880/- for the assessment year 2004-05; loss of ₹ 23,59,200 for the assessment year 2005-06; and as against some positive business income for the assessment year 2006-07, it claimed set off of the amount of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee in its returns u/s 153A of the Act for the assessment years 2004-05 and 2005-06 at ₹ 23,05,880/- and ₹ 23,59,200/- respectively be carried forward and set off against the positive income for the assessment year 2006-07. The ld. AM has specifically recorded on page 15 of his proposed order that: though no incriminating material relevant for assessment years 2004-05, 2005-06 and 2006-07 against the assessee, were unearthed during the course of search u/s 132 of the IT Act; but incriminating material relevant for other years referred to in clause (b) of section 153A(1) of the IT Act were indeed unearthed. He considered the judgments of the Hon'ble Delhi High Court in the case of Kabul Chawla vs. CIT (2016) 380 ITR 573 (Delhi) and Smt. Dayawanti through Smt. Sunita Gupta Anr. VS. CIT Anr. (2017) 390 ITR 0496 (Delhi) and thus observed on pages 19 and 20 of his proposed order that when two precedents of equal strength from higher courts are available, the precedent which is closer to the facts of the case should be preferred. Ex consequenti , he applied the judgment in the case of Smt. Dayawanti (supra) to hold that : even in respect of those asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing tax u/s 115JB on book profit of ₹ 10,90,440/-. Thus, it is evident that the assessments for the assessment years 2004-05 to 2006-07 stood completed on the date of search on 20.11.2009. 8. At this juncture, it is significant to note that when a search is conducted, there can be two types of assessment years, namely, completed assessments and non-completed or pending assessments. Assessment years having completed assessments mean the years for which either the assessments stood completed by the AO u/s 143(3) or section 144 before the date of search or the years for which the regular assessments were not taken up after the filing of the returns by the assessee and further that the time limit for issuing notice u/s 143(2) stood expired on the date of search. 9. As per the scheme under the Act, a return filed by the assessee is first processed by the A.O. u/s 143(1)(a) of the Act in which total income is computed after making the specified adjustments. As per clause (b), tax and interest, if any, is computed on the basis of the total income computed under clause (a). Clauses (d) and (e) of section 143(1) provide that an Intimation shall be sent to the assessee specifying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut u/s 132 on 15.11.2007 on BPTP Ltd., a leading real estate developer operating all over India and some of its group companies including the premises of the assessee, who owned and controlled the group. No assessment proceedings were pending for the assessment years 2002-03, 2005-06 and 2006-07 as on the date of the search. The assessments for such assessments years had already been made u/s 143(1) of the Act. The assessee filed returns for the three assessment years declaring certain income. The assessments were completed u/s 153A for the concerned assessment years making additions, inter alia , on account of low household withdrawals and deemed deduction u/s 2(22)(e) of the Act. It was submitted before the ld. CIT(A) that no evidence was found during the course of search so as to warrant an addition u/s 2(22)(e) of the Act. The ld. CIT(A) held that the additions need not be restricted only to the seized material. The Tribunal concluded that: If some incriminating material is found in respect of such assessment years for which the assessment is not pending, then, the total income would be determined by considering the originally determined income plus income emanating from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment 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 153 A 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 known in the course of original assessment. 12. It is evident from the above judgment that once a search takes place u/s 132 of the Act, the assessee is obliged to file returns for the six assessment years immediately preceding the previous year relevant to the assessment year in which the search took place. In so far as the completed assessments as on the date of the search are concerned, the same are to be repeated as increased by certain additions based on incriminating material found during the course of search. In other words, if no incriminating material is f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in Kabul Chawla (supra) clearly lays down that in the absence of any incriminating material found during the course of search, no fresh addition can be made in respect of completed assessments, the judgment in the case of Smt. Dayawanti (supra) is peculiar to its facts inasmuch as the addition in that case was based on the assessee s statement made at the time of search admitting : additional income in respect of business carried on outside the books of account in connection with production and sale of gutka . It was not a case in which no incriminating material was found. Rather the assessee s statement given at the time of search confirming the carrying on of business outside the books of account was extrapolated to the earlier years as well. 15. Turning to the facts of the instant case, it is seen that the Assessing Officer has not disallowed any specific amount of expenses on account of any incriminating material found at the time of search. It is pertinent to note that the assessee incurred expenses of ₹ 95.21 lac for the assessment year 2004-05. What the Assessing Officer has done is to disallow loss of ₹ 23.05 lac simply on the ground that the expen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss determined originally. It was not open to him to venture to re-examine the details in respect of expenses in assessment proceedings u/s 153A read with section 143(3) of the Act for the patent reason that, admittedly, no incriminating material in respect of such expenses was found during the course of search. 17. The contention of the ld. DR that there was some incriminating material for subsequent years and the same should be considered to have bearing on the disallowance of loss for the two years under consideration, is incapable of acceptance for more than one reason. Firstly, the existence of an incriminating material for the relevant year is sine qua non for making any disallowance of expenses in respect of the completed assessments. The Hon ble Supreme Court in CIT VS. Sinhgad Technical Education Society (2017) 397 ITR 344 (SC) has accentuated the relevance of the incriminating material pertaining to the relevant year alone, though in the context of section 153C of the Act. In that case, it has been held that where the incriminating material was found to be pertaining to a particular year, there was no valid satisfaction for the other years. Secondly, it is not even ..... X X X X Extracts X X X X X X X X Extracts X X X X
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