TMI Blog2018 (5) TMI 1820X X X X Extracts X X X X X X X X Extracts X X X X ..... ht on record the near about comparable prices of those material with reasonable evidences. These facts could have been proved either by the availability of the material in the market or also by the production cost of the supplier. Revenue has not brought on record any such material. Most of the part of the order justifying the addition in absence of this merely remains allegations without evidences. Additions in such a manner cannot be sustained. As none of the documents seized during the course of search are shown to us pertaining to the Assessment Year 2005-06 to 2009-10, we are of opinion that all the additions made by the ld Assessing Officer are not based on incriminating documents found during the course of search, hence they are not sustainable. There is no incriminating material found during the course of search relevant to Assessment Year 2005-06 to AY 2009- 10, which are concluded Assessment Year, and could have been disturbed only on the basis of any incriminating material showing escapement of income found during the course of search relevant to that assessment year only. Hence, we do not have any other option but to allow ground No. 1 of the appeal of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... criminating material based on which additions are made by the ld AO. We agreed to the request of both the parties. Accordingly, we proceed to decide the ground No. 1 of the appeal of the assessee. Brief Facts 3. Firstly, we state the facts for Assessment Year 2005-06. The assessee is a company engaged in the business of manufacturing and trading in Pan Masala, Gutkha, Jarda, perfumery compounds, herbs, mouth fresheners, snack foods, water, composite canes and processing of silver etc. The assessee filed its return of income on 31.10.2005 showing total income of ₹ 151516608/-. The assessee claimed deduction u/s 80IC of the Act. Further, assessee being a company it was also subjected to tax over and above normal computation of tax, on the book profit tax u/s 115JB of the Act. The appellant was assessed to book profit at ₹ 733688144/-. Subsequently, assessment u/s 143(3) of the Act was made on 30.03.2007 after making certain disallowances. The assessee challenged the disallowances before the ld First appellate authority that passed an order upholding certain disallowances and directing the ld Assessing Officer for re-computation. 4. Meanwhile search and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rence of search and jurisdiction of assessment was merged with section 143A. Secondly for all AYs there are additions on account of bogus purchase of sandalwood oil on the basis of seized document and various evidences gathered during search and post search inquiry. Therefore, the Assessing Officer has the jurisdiction to assess the total income irrespective of the seized material as there was one addition on account of evidence gathered during the search. This view is supported by the decision of Hon ble Delhi High Court in the case of Anil Kumar Bhatia (2012) 24 taxmann.com 98 Delhi, where Hon ble High Court has given the jurisdiction to to the Assessing Officer to assess total income for given the jurisdiction to the Assessing Officer to assess total income for all AYs except in the case where there was no incriminating material for any of the year covered u/s 151A. In the present case, definitively there is incriminating material which would be discussed in subsequent paragraph when I will deal with bogus purchase of sandalwood oil. Therefore, the instant case is not covered by para 23 of the order of the Hon'ble High Court of Delhi in the case of Anil Kumar Bhatia ci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... while dealing with provision of the section 147 of the act that there is no tangible or incriminating material available for reopening the concluded assessment in case of that year. That decision of Coordinate bench has been upheld by the hon High court. According to him, the facts of the case in all those years are similar. 9. The ld Authorised Representative further submitted a detailed synopsis of his argument which is as under:- 1. The original assessment u/s 143(3) was completed vide order dated 30/03/2007 at an income of ₹ 84,61,29,420/-. 2. Search and seizure operation in terms of provision of sec. 132 of the Act was carried out at the premises of the appellant company and other group companies/ individuals on 21/10/2011. 3. Consequent to search, the assessing officer issued notice u/s 153 A of the Act on 09/01/2012. In response to the notice, assessee offered its original ROI on 22/02/2012 which was filed u/s 139(1), to be treated as Return of income u/s 153A, declaring income of ₹ 15,15,16,608/-. 4. That AO made no reference to any incriminating material but recomputed income on the basis of same material which was in existence at th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a 23 of the order of Hon ble H.C. of Delhi in the case of Anil Kumar Bhatia cited supra, where the Hon ble H.C.(Delhi) has not given his decision when there is no evidence for even our AY found during the search and seizure operation. Accordingly, these jurisdictional grounds are dismissed. I would not discuss the jurisdictional argument on various substantive grounds to avoid repetition. 8. In this regard, we may submit that it is an established position that in respect of completed assessments, whether u/s 143(1) or u/s 143(3), jurisdiction u/s 153A can be assumed for making addition/disallowance only if some incriminating material is unearthed during the course of search in respect of such years. Any addition/ disallowance made de-hors any incriminating material found during the course of search is outside the scope of assessment u/s 153A of the Act and as such is without any legal basis. Accordingly, the proceedings which have been completed and are not pending, there can be no case of abatement in terms of proviso to section 153A and as such the AO has no jurisdiction to review such completed assessments. Accordingly, the issues decided in completed assessment can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of completed assessments is confined to incriminating material. 12. That in the absence of any material to be considered as incriminating in terms of the definition provided by the Hon ble Mumbai ITAT, the said additions and disallowances made by the Assessing Officer merely depict change of opinion and reappraisal of facts examined during original proceedings. 13. Further, it is not open to the department to disregard issues which have attained finality vide the original assessment and as such the Ld. CIT(A) in the present case has erred in upholding the validity of jurisdiction u/s 153A of the I.T. Act,1961 and consequential assessment even though the same is not based on any incriminating material seized during the course of search. It is relevant to submit that CIT(A) has only made general observation regarding alleged incriminating material and no specific reference was made to any such material. 14. It may be further submitted that on similar facts Hon ble Delhi ITAT in assessee s own case quashed the reassessment proceedings u/s 147 for AY 2004-05 vide its order dated 8/01/2016. The Hon ble ITAT has dealt with the matter in detail, considering the pith and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of income should be on the basis of facts and evidence and not on the basis of inference. 17. After appreciating the finding and conclusion of ITAT, the Hon ble Jurisdictional High Court vide its order dated 21/08/2017concurred with the decision of ITAT and thereby held that in the present case material seized in the course of search did not constitute tangible/incriminating material. The relevant extract of the said judgment is produced hereunder: Pr. CIT v. Dharampal Satyapal Ltd (Delhi H.C.) (1TA 544/2016) ( 21.08.2017) 4. Indeed today by a separate order in the appeals filed by the Revenue against the order of the ITAT in the cases of the sister concern, this Court has concurred with the decision of the ITAT in holding that the material seized in the course of search did not constitute incriminating material even for FY 2010-11, i.e.. the year of search. In that view' of the matter the very fundamental basis for reopening is rendered non-existent. 5. In view of the above finding, this Court does not consider it necessary to consider the further question whether there was a justification for reopening the assessment qua the Assessee for the AY ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndings of the ITAT, the further question as to whether the said material was sufficient to reopen the assessments for the other AYs, with which these appeals are concerned, does not really arise. 14. Nevertheless, the Court is of the view that the decision of this Court in Commissioner of Income Tax v. Kabul Chawla (supra), which has been reiterated in Principal Commissioner of Income Tax v. Meeta Gutgutia Prop. M/s Ferns N Petals (supra), is still good law as far as this Court is concerned. As explained in Principal Commissioner of Income Tax v. Meeta Gutgutia Prop. M/s Ferns ‗n Petals (supra), the decision of this Court in Smt. Dayawanti Gupta v. CIT (supra) is not contrary to the ratio of the decision of this Court in Commissioner of Income Tax v. Kabul Chawla (supra). This Court has, in Principal Commissioner of Income Tax v. Meeta Gutgutia Prop. M/s Ferns ‗n Petals (supra), explained the factual background and circumstances under which the decision in Smt. Dayawanti Gupta v. CIT (supra) was rendered and how in the peculiar facts of that case that it was held that the material seized for one particular AY could lead to an inference regarding the modus op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect of the six years previous to the relevant assessment year in which the search takes place. The Assessing Officer has the power to assess and reassess the total income of the 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 assessment years 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 Assessing Officer 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 the seized material, (v) In the 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 153A 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 ..... is Court in CIT v. Kabul Chawla [2016] 380 ITR 573 (Delhi), the Court is of the view that the impugned order of the ITAT suffers from no legal infirmity and no substantial question of law arises for determination. d. Pr. CIT v. Smt. Anita Rani r2017I 392 ITR 501 (Delhi) SEARCH AND SEIZURE - ASSESSMENT IN SEARCH CASES - NOTICE UNDER SECTION 153A - VALUATION OF PROPERTY - SALE CONSIDERATION - DISCLOSED BY ASSESSEE IN RETURN - ABSENCE OF SEIZURE OF ANY NEW MATERIAL DURING SEARCH FRESH EXAMINATION UNJUSTIFIED- INCOME TAX ACT, 1961. e. CIT v. Pinaki Misra [2017] 392 ITR 347 (Delhi) SEARCH AND SEIZER - BLOCK ASSESSMENT - UNDISCLOSED INCOME TO BE DETERMINED ON BASIS OF MATERIAL FOUND DURING COURSE OF SEARCH - NO INCRIMINATING MATERIAL FOUND DURING SEARCH - ADDITIONS MADE ON BASIS OF EVIDENCE GATHERED FROM EXTRANEOUS SOURCE AND ON BASIS OF STATEMENT OR DOCUMENT RECEIVED SUBSEQUENT TO SEARCH - NOT FORMING PART OF UNDISCLOSED INCOME FOR BLOCK PERIOD - ASSESSING OFFICER HAS NO JURISDICTION TO MAKE ADDITIONS UNDER SECTION 158BC. f. CIT v.Shri. Deepak Kumar Agarwal 12017] 86 taxmann.com 3 (Bombay) Section 153A, read with sections 132 and 143, of the I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Income-tax Act, 1961 - Search and seizure - Assessment in case of - Proceedings under section 153A were without jurisdiction where no assessments were pending at that time and no incriminating evidence was found during search [Assessment year 2005-06] [In favour of assessee] Where no assessments were pending at time of the initiation of proceedings under section 153 A and no incriminating material was found during course of the search, entire proceedings under section 153A were without jurisdiction. 21. As regarding AY 2010-11, even if it is presumed that assessment has abated, the AO cannot initiate proceedings u/s 153A and as such assessment order passed u/s 153A is illegal and without jurisdiction. In any case, as observed by Hon ble High Court, there is no incriminating material even for FY 2010-11 (AY 2011-12) and as such there is thus no jurisdiction for any additions even on merits. 22. In the light of facts and circumstances clarified above the action of the lower authorities is illegal and bad in law. 10. The ld Authorised Representative further drew our attention to the decision of the coordinate bench in case of Assessee for Assessment Year 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd submitted explanation for them. He stated that they are the average cost of material purchased, suppliers list, stock register, excise returns, quantitative details etc. he stated that all these documents does not have any element of escapement cont of income as they are statutory records as well as part of the regular books of account. He further submitted that addition is not made on these documents at all. 12. He further stated that the statement recorded by the search party of various person also do not show that there is any incriminating material. The statements recorded pertain to the various supervisor and other persons, which shows the regular business activity of the assessee. Even otherwise, he submitted that those statements do not have any thing incriminating material or revelations there in. Even otherwise, he submitted that mere statement could not be said to be an incriminating material. 13. He further stated that none of the documents pertains to the years involved in the impugned assessment years involved in the appeal. He further referred to all the seized documents and took us to the assessment order to show that various addition made do not have any re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the statements recorded during the course of the search. * Tabulation of Incriminating material seized used for making addition by AO Sr No Reference to seized Material Reference in AO order 1. Annexure A-l/page 52 Para 98/Page 43/AO. Scanned copy on Page 61/AO 2. Annexure A-ll/Page 61-71 Para 107/Page 48/AO Para 143/page 71/AO 3. Annexure A-16/Page 7 to 12 Para 107/Page 48/AO 4. Annexure A-16/Page 2 to 6 Para 107/Page 49/AO 5. Annexure 14/Page 72 Para 107/Page 49/AO Page 72/AO Sr No Annexure A-ll/page 87-90 Para 107/Page 49/AO Page 72/AO 7. Annexure A-ll/page 87 to 90 Para 107/Page 49/AO 8. Annexure A-ll/page 83-86 Para 107/Page 49/AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... com 98 where Delhi High Court has given the jurisdiction to the AO to assess total income for all AYs Accordingly, these jurisdictional grounds are dismissed. I would not discuss the jurisdictional argument on various substantive grounds to avoid repetition. [ B] On Law Several High court judgments have held that statement u/s 132(4) or u/s 131 is good evidence. It has been categorically held by the Jurisdictional High Court that addition made on the basis of statements recorded during course of search cannot be deleted without proving statements to be incorrect. In fact, Supreme Court has also dismissed SLP challenging the judgment of the High Court where the High court has held that statement made under section 133A could be relied upon for purpose of assessment. 1. Kishore Kumar Vs CIT (62 taxmann.com 215, 234 Taxman 771) ( Copy Enclosed) where Hon'bie Supreme Court; dismissed SLP against High Court's order where it was held that since assessee himself had stated in sworn statement during search and seizure about his undisclosed income, tax was to be levied on basis of admission without scrutinizing documents. B Kishore Kumar Vs CIT (52 ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atements of its partner had been recorded in the course of the search by using coercion, threat or inducement. Hence, the contentions advanced by the appellant in that regard were dismissed and the conclusion of the Tribunal on that count was affirmed. [Para 9] 6. Raj Hans Towers TP.) Ltd. Vs CIT (56 taxmann.com 67, 230 Taxman 567, 373 ITR 9) (Copy Enclosed) where Hon'ble Delhi High Court held that where assessee had not offered any satisfactory explanation regarding surrendered amount being not bona fide and it was also not borne out in any contentions raised before lower authorities, additions so made after adjusting expenditure were justified (SURVEY CASE) 7. PCIT Vs Avinash Kumar Setia 2017 81 taxmann.com 476 (Delhi) (Copy Enclosed) where Hon'ble Delhi High Court held that Where assessee surrendered certain income by way of declaration and withdraw same after two years without any satisfactory explanation, it could not be treated as bona fide and, hence, addition would sustain (SURVEY CASE). * Supreme Court had held, in P.R. Metiani v. Commissioner of Income-tax(2006) 287 ITR 209 (SC) that: 18. Section 132 is a Code in itself. It pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aled that the assessee was manufacturing chewing tobacco, Zarda under brand names like 'Rainiqandha' at the Noida factory premises. However, in order to claim deduction u/s 8QIB/IC the assessee concern sent the final product for packing to Guwahati and Aqartala factory premises. This is reported in the report of the Investigation Wing and is discussed at length in the order of the AO. * Statements were recorded during the course of search at the premises of the assessee concern and search/survey operations at the premises of the associate concerns. These in corroboration with the seized material proved beyond an iota of doubt that purchases of sandalwood were being inflated, thus affecting the profits generated. * As a result of the blatant attempt to reduce profits by inflation of purchases and redirecting finished goods to Guwahati Agartala to claim benefit of 80IB/80IC, certain complexity was found as a result of which reference u/s 142(2A) was made to the Special Auditor. The Special Auditor pointed out several inconsistencies/falsities in the Accounts which were taken cognizance of while finalizing the assessment order. * The assessee is placing rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O is empowered by the Income Tax Act and its provisions under section 153A to assess the 'total income' of the assessee which includes undisclosed income. [ B] Principles of Interpretation of a Taxation Statute mandate that it is not permissible to construe any provision of a statute, much less a taxing provision, by reading into it more words than its contains. With regard to interpretation of Section 153A/153C, the Revenue also submits that a taxing statute is to be strictly construed and there is no equity in a taxing statute. The Income Tax Act is a self-contained code, and provides machinery for imposing and collecting tax, obtaining reliefs and appeals against improper orders etc. While tax law is a part of the general law, it has got its own distinct features. There are some special provisions which are attracted while interpreting tax laws. The need of interpretation arises only when the words used in the statute are on their own term, ambivalent and do not manifest the intention of legislature. [Keshavji Ravji Co. v/s. CIT - [(1990) 183 ITR 1 (SC)]. Similarly rule of interpretation would come into play only if there is doubt with re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision Lakshmi Bai v/s. CIT - [(1994) 206 ITR 688, 691 (SC)]. The subject is not to be taxed without clear words' for that purpose CIT vs. Provident Inv. Co. Ltd. (1954) 32 ITR 190 (SC) J.K. Steel Ltd. vs. UOI AIR 1970 SC 1173 CIT vs. Indo Oceanic Shipping Co. Ltd. (2001) 247 ITR 247 (Bom) Hansraj Sons vs. State of J K (2002) 6 SCC 227, 237-39 In A.V. Fernandez: v/s. State if Kerala, [AIR 1957 SC 657] His Lordship Bhagwati 3. has stated the principle of taxing laws as follows : In construing fiscal statutes and in determining the liability of a subject to tax one must have regard to the strict letter of law. If the Revenue satisfies the court that the case falls strictly within the provisions of the law, the subject can be taxed. If, on the other hand, the case is not covered within the four corners of the provisions of the taxing statute, no tax can be imposed by inference or by analogy or by trying to probe into the intentions of the legislature and by considering what was the substance of the matter. [ C] The following judgments of various High Courts, including jurisdictional High Court clearly hold that assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the first day of April of the financial year in which the search took place or the requisition was made and ending with the date of search/requisition. Under Section 153A and the new scheme provided for, the AO is required to exercise the normal assessment powers in respect of the previous year in which the search took place. (Para 18) Assessing Officer is bound to issue notices to the Assessee to furnish returns for 6 Assessment years. Assessing Officer is empowered to assess or re-assess the total income including undisclosed income of the Assessee Under the provisions of Section 153A, as we have already noticed, the Assessing Officer is bound to issue notice to the Assessee to furnish returns for each assessment year falling within the six assessment years immediately preceding the assessment year relevant to the previous year in which the search or requisition was made. Another significant feature of this Section is that the Assessing Officer is empowered to assess or reassess the total income of the aforesaid years. This is a significant departure from the earlier block assessment scheme in which the block assessment roped in only the undisclosed inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... * The Assessing Officer has to determine not merely the undisclosed income of the Assessee, but also the 'Total Income' of the Assessee in whose case a search or requisition has been initiated Now there can be cases where at the time when the search is initiated or requisition is made, the assessment or reassessment proceedings relating to any assessment year falling within the period of the six assessment years mentioned above, may be pending. In such a case, the second proviso to sub section (1) of Section 153A says that such proceedings shall abate . The reason is not far to seek. Under Section 153A, there is no room for multiple assessment orders in respect of any of the six assessment years under consideration. That is because the Assessing Officer has to determine not merely the undisclosed income of the Assessee, but also the 'total income' of the Assessee in whose case a search or requisition has been initiated. Obviously there cannot be several orders for the same assessment year determining the total income of the Assessee. In order to ensure this state of affairs namely, that in respect of the six assessment years preceding the assessment y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... returns of income filed by the Assessee for all the six years under consideration before the search took place were processed under Section 143(l)(a) of the Act, the provisions of Section 153A cannot be invoked. The Assessing Officer has the power under Section 153A to make assessment for all the six years and compute the total income of the Assessee, including the undisclosed income, notwithstanding that the Assessee filed returns before the date of search which stood processed under Section 143(1) (a). (Para 22) Highlights of the case of Fiiatex India Ltd., ITA No. 269/2014 and CM No. 10077/2014 dated 14.07.2014 of Hon'bie Delhi High Court The decision of Hon'ble Delhi High Court in the case of Anil Kumar Bhatia has been followed recently in another case of Fiiatex India Ltd. (269/2014 and CM No. 10077/2014) by Hon'ble Delhi High Court vide order dated 14-07-2014, The Question of law referred before Hon'bie Delhi High Court in this case is as under: Whether the Tribunal erred on facts and in law in not holding that recomputation of book profit, de-hors any material found during the course of search, in the order passed under section 153A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vation to the effect that the assessment under Section 153A should not be arbitrary or made without any relevance or nexus with the seized material, is basically clarificatory that the assessment under section 153A emanates and starts on the foundation of the search, which is the jurisdiction precondition. After that Hon'ble Delhi High Court has discussed the case of Anil Kumar Bhatia decided by Hon'ble Delhi High Court earlier and quoted from Para 18 22 of this order (mentioned supra) and finely decided in Para 4 of this order that after examination of section 153A the submission/contention of the appellant has no merit. * Highlights of the case of Raj Kumar Arora, ITA No. 56/2011 dated 11.07.2014 of Hon'ble Allahabad High Court The decision of Hon'ble Delhi High Court in the case of Anil Kumar Bhatia has been followed recently in another case of Raj Kumar Arora, ITA No. 56/2011 by Hon'ble Allahabad High Court vide order dated 11- 07-2014. The Question of law referred before Hon'ble Allahabad High Court in this case is as under: Whether ITAT has erred in law in dismissing the appeal of the department and holding that no additio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, set aside the order of the Tribunal and remit the matter back to the Tribunal to reconsider the appeal of the Department afresh on merit. The question of law is answered accordingly. Highlights of the case of Canara Housing Development Company, ITA No. 38/2014 dated 25.07.2014 of Hon'bie Karnataka High Court The decision of Hon'ble Delhi High Court in the case of Anil Kumar Bhatia has been followed recently in another case of Canara Housing Development Company, ITA No. 38/2014 by Hon'ble Karnataka High Court vide order dated 25-07-2014. In this case the Hon'ble Court has also observed that the decision of Hon'ble special bench in the case of All Cargo Global Logistic Ltd. dated 06/07/2012 is not correct. The Question of law referred before Hon'ble Karnataka High Court in this case is as under: When once the proceedings under Section 153A of the Act is initiated, whether the Commissioner of Income Tax can invoke the power under Section 263 of the Act to review the order of assessment passed by the Assessing Authority? At the end the Hon'ble Court has decided in Para 11 that the Tribunal has of proceeded on the assump ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and issue such other person in accordance with the provisions of section 153A . 6. A bare perusal of the above provision indicates that where the AO is satisfied that any books of account or document apart from money, bullion or jewellery etc., seized from the person searched belong to a person other than the person searched u/s 153A, then such books of account or documents etc. shall be handed over to the AO having jurisdiction over such other person and the AO of such other person shall proceed to assess or reassess income of such other person in accordance with the provisions of section 153A. thus, the effect of sub-section (1) of section 153C is that where all the necessary ingredients of this sub-section are satisfied, the matter of making assessment or reassessment goes back to section 153A. Since the assessment or reassessment of such other person has to be done in accordance with the provisions of section 153A, let us examine the prescription of the relevant parts of section 153A(1), which is as under :- Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view of section 153C adopting the provisions of section 153A, there can be no question of restricting the jurisdiction of the AO to any lesser number of years for which the incriminating material is found. When we read section 153C in a holistic manner, it becomes evident that the triggering point for assuming jurisdiction on the person other than the person searched u/s 153C is the finding of any money, bullion, jewellery or books of account or document from the person searched. Once any money, bullion, jewellery or books of account or document seized or requisitioned from the person searched are found to be belonging to the other person, then, the assessment or reassessment of such other person is to be necessarily completed in terms of section 153A, which in no uncertain terms refers to six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made. Further, the use of the word 'shall' in section 153A immediately before clause fa) has left nothing to doubt that the assessment is required to be made for all the six assessment years immediately preceding the assessment year relevant to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessing Officer gan take note of the income disclosed in the earlier return, any undisclosed income found during the course of search and also any other income which is not disclosed in the earlier return of income OR which is not unearthed in the course of j search under section 132 of the Act, in order to find out and determine what is the 'total income' of each year and then pass the order of assessment. The grounds of appeal raised by the Assessee at S. Nos. 2 to 5 are accordingly dismissed for all four assessment years 2005-06 to 2008-09. * Same view is also expressed by Hon'ble High Court of Andhra Pradesh in the case of Gopal Lai Bhadruka vs. DCIT 346 ITR 106 dated 15.12.2011, where Hon'ble High court has held as under (page no.17 to 21 of Paper Book no. 3): The question of law agitated before the Tribunal was whether, for the purpose of computing income under section 153A/153C, the Assessing Officer was required to confine himself only to the material found during the course of search operations. The Tribunal held against the Assessees. Held that by virtue of section 158B-I the various provisions of Chapter XIV-B are made inapplica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or undisclosed income found during search operation but also with regard to material available at time of original assessment 3. CIT Vs St. Francis Clay Decor Tiles f385 ITR 624) (Copy Enclosed) where Hon'ble Delhi Kerala Court held that notice issued under section 153A -return must be filed even if no incriminating documents discovered during search 4. Smt Davawanti Vs CIT (2016) 75 taxmann.com 308 ( Delhi)/r20171 245 Taxman 293 (Delhi)/r20171 390 ITR 496 Delhi)/r20161 290 CTR 361 (Delhi) (Copy Enclosed) where Hon'ble Delhi High Court held that Where inferences drawn in respect of undeclared income of assessee were premised on materials found as well as statements recorded by assessee's son in course of search operations and assessee had not been able to show as to how estimation made by Assessing Officer was arbitrary or unreasonable, additions so made by Assessing Officer by rejecting books of account was justified. 16. The ld CIT DR submitted a chart showing various seized papers where in 11 set of papers were mentioned and submitted that it is the tabulation of incriminating material seized and used for making addition by ld AO. She h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ferred to page No. 292 to 301 of the order of the ld CIT (A) where complete statements of the quantity purchased of sandalwood oil from Surya Vinayak Industries and Allied perfumer Ltd for each of the year has been tabulated. Therefore, she submitted that from the seized material it is apparent that the bogus purchase of sandalwood oil has been made from Surya Vinayak Industries and Allied perfumers Pvt. Ltd. Therefore, she submitted that there is enough incriminating material found during the course of search. She further relied upon the several decision mentioned in her written submission. She further stated that the decision relied upon by the ld AR in case of CIT Vs. Kabul Chawla and Meeta Gutgutia (supra) do not apply to the facts of the case for the simple reason that incriminating material were found during the course of the search. She further stated that the search at the premises of the assessee revealed that the assessee was manufacturing the Pan Masala at the Noida factory, however, only packing etc was made at Eligible Units in Guwahati and Agartala. She referred that this the report of the investigation wing and discussed at length in the order of the ld AO. She furth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly. In the present case, if the paper is to be believed as it is, assessee has received the money, and not that assessee has to pay the money, that assessee has received higher sum high compared to the purchases. Therefore, this paper does not prove the overbilling of the material. c. He further submitted that assessee is producing goods in eligible units, which are eligible for tax holidays, why the assessee will purchase goods, which are showing higher purchase prices then the actual price when its full income is exempt. This issue is not answered by revenue or ld CT DR. d. The assessee as well as the supplier has denied the alleged fact of over invoicing. e. On the over invoiced bill the duty element and VAT element is chargeable, there is no allegation that those goods are over invoiced. f. Further as the unit of the assessee manufacturing are free from excise duty, the amount of duty paid on procurement of goods which is on the higher price than the actual sale price as alleged than there is over invoicing of the purchase of material, it will put assessee is great financial loss as the duty paid by the assessee on over invoiced amount shall become the cost of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment order wherein, the ld AO has stated that there is no product by the name of sandalwood oil or sandalwood oil SU being supplied by Surya Vinayak Industries to the assessee. He further referred to para No. 109 and 110 of the assessment order. He further referred to para No. 120 wherein, the additions with respect to the bogus purchases have been made. His argument was that there is no evidence of inflation in the rate or bogus purchase of the material from Surya Vinayak Industries and APPL by the assessee. In nutshell he submitted that there is no evidence found during the course of search of nature of incriminating evidence based on which the ld Assessing Officer has made the addition. Decision and reasons 26. We have carefully considered the rival contentions and perused the orders of the lower authorities. Admittedly, the assessee is a company, which was subjected to search on 21.01.2011. Therefore, on the date of search the Assessment Year up to 2009-10 were completed assessment year. Therefore, for disturbing the already assessed income/ returned income for all those years there has to be a recovery of any incriminating evidence during the course of search. Any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e average rate of perfumes as on 31.03.2010. That document contains the description of various raw materials, various rates are mentioned. Page No. 18 is the list of some batch of the production. It does not have any date or reference of any transaction. Page No. 19 is also similar to page NO. 18. Page No. 20 to 30 of the paper book is the purchase quantity of the raw material for FY 2006-07, 2007-08 and for eight months of 2008-09. It is the quantitative details of purchase of various materials. Page No. 31 is the title for Annexure A-14 and page No. 32 is a quantitative reconciliation of perfume as on 31.12.2010. This statement shows the reconciliation of the receipt as per MD and receipt as per account. Each of the difference of excess or shortage have been reconciled and given in the remarks column. Page No. 33 is the title of annexure A-15 and page No. 35 to 44 is the annual financial statement under the Central Excise Rules. These are the copies of returns filed submitted by the assessee to the Superintendent Central Excise, Range -27, Division-VI, Nehru Palace, New Delhi vide letter dated 24.11.2009 of the perfumery division of the assessee. These are extracted from the regu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Less Bill NO 121 for 110 KG @ 7000/- (81850-74850) RATE DIFF 770000 Less Bill NO. 137 for 175 Kg 3000 (83000-80000) rate difference 525000 Add 30% of 56% i.e. 22.4% on 285 Kgs on 2,22,33,500/- 498030 Add. 40% of 56% i.e. 22.4% on 650 Kgs on 46400000 1039360 Amount to pay (20414575) Paid by us 105000000 Amount excess paid 125414575 Details of cash paid 02.11.2010 5000000 04.11.10 10000000 08.11.10 10000000 11.11.10 7000000 12.11.10 3000000 15.11.10 5000000 16.11.10 5000000 18.11.10 10000000 19.11.10 5000000 20.11.10 5000000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions of the first proviso to s. 153A of the Act and not otherwise. It was further held as under in para no 13 that :- 13. From the above, it is evident that the where nothing assessment year and assessee specific incriminating money, jewellery or other valuable article or thing or books of account or documents , the assessments for assessment years cannot be disturbed. Further, the concluded assessments should not be disturbed merely for making routine additions, which could have been otherwise done in the regular assessment and of course, the pending assessments fall under exceptions. As stated by the learned counsel point No. 9 of his note reproduced above, nothing is seized pertaining to asst. yrs. 2000-01 to 2003-04 obviously there is no question of recording satisfaction note . On this reasoning itself, we find that the assessee has to succeed. Therefore, we do not examine the other arguments of the counsel. Otherwise, the counsel argued that the reopening of the assessment for the asst. yrs. 2000- 01 to 2001-02 is impermissible in view of the judgment of Ahmedabad Bench in the case of Vijay M. Vimawal (supra). Further, he also argued that the assessment of as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judgment. 16. In these appeals, qua the aforesaid four Assessment Years, the assessment is quashed by the ITAT (which order is upheld by the High Court) on the sole ground that notice under Section 153C of the Act was legally unsustainable. The events recorded above further disclose that the issue pertaining to validity of notice under Section 153C of the Act was raised for the first time before the Tribunal and the Tribunal permitted the assessee to raise this additional ground and while dealing with the same on merits, accepted the contention of the assessee. 17. First objection of the learned Solicitor General was that it was improper on the part of the ITAT to allow this ground to be raised, when the assessee had not objected to the jurisdiction under Section 153C of the Act before the AO. Therefore, in the first instance, it needs to be determined as to whether ITAT was right in permitting the assessee to raise this ground for the first time before it, as an additional ground. 18. The ITAT permitted this additional ground by giving a reason that it was a jurisdictional issue taken up on the basis of facts already on the record and, therefore, cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Gujarat High Court in the said case went in favour of the Revenue when it was found on facts that the documents seized, in fact, pertain to third party, i.e. the assessee, and, therefore, the said condition precedent for taking action under Section 153C of the Act had been satisfied. 21. Likewise, the Delhi High Court also decided the case on altogether different facts which will have no bearing once the matter is examined in the aforesaid hue on the facts of this case. The Bombay High Court has rightly distinguished the said judgment as not applicable giving the following reasons: 8. Reliance on the judgment of the Division Bench of the High Court of Delhi reported in case of SSP Aviation Ltd. v. Deputy Commissioner of Income Tax [2012] 346 ITR 177 is misplaced. There, search was carried out in the case of P group of companies. It was found that the assessee before the Hon'ble Delhi High Court had acquired certain development rights from P group of companies. Based thereon, the satisfaction was recorded by the Assessing Officer and he issued notice in terms of Section 153C. Thereupon the proceedings were initiated under section 153A and the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erial purchased by the assessee from this party is not at the market rate prevailing on those days. Mere assertion that assessee has purchased material from this party in these years and therefore there has to be over invoicing of the purchases is a mere assertion without any material. Therefore, we do not have any hesitation to hold that In the present case the impugned seized paper does not belong to the Assessment Years involved in the impugned appeals. 31. Furthermore, with respect to the same paper it is also important to note that it is evident from that paper that Surya Vinayak Industries have over paid the assessee than what it should have allegedly paid for over invoicing. This evident facts also runs contrary to the other finding that Surya Vinayak industries is company of not having capacity to supply so much material in para no 145 of the order. If it is so then how it could have paid the assessee over and above what is required to be paid if the goods are over invoiced. The sum over paid by that company to the appellant is not small compared to the purchases. Even circular route stated by ld AO in various para of assessment order 143 onwards also proves contrary if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mention of Sandalwood oil [C] and Sandalwood Oil [SU]. At S. No. 121, there is mention of ‗SANDALWOOD OIL as ‗raw material . Their suppliers are mentioned in the next column with party name and yearly quantity purchased from them. In this column there is no classification of any sandalwood oil [C] or sandalwood oil [SU]. Just one item is mentioned and that is sandal wood oil. SVIL and Kamakhya Oil Co and other concerns are shown as their suppliers. This proves that only sandalwood oil is being supplied by SVIL. Page No.7 to 12 of Annexure A-16 of Perfumery Division is the statement of raw materials taken from the I.A.S. software which is used in the perfumery division. This statement shows the opening balance, total receipts, total consumption, closing balances, physical balance along with short/excess for the period 1.4.09 to 31.03.10. This statement is showing the date in respect of more than 150 raw materials being purchased by Perfumery Division. In this statement there is mention of only sandalwood oil and not any [C] or [ SU]. In the same way page No.2 to 6 of this annexure are the statement of physical stock as on 23.03.2010 prepared by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at ₹ 142^92,20,822/-. It is surprising to see that out of Rs.l 42.00 crores of sale, the most expensive ingredient is sandalwood oil and value thereof is ₹ 118.00 crores 34. On reading of the above paragraph the main contention of the ld Assessing Officer is that there is no product by the name of sandalwood oil (C) or Sandalwood Oil (U) being supplied by Surya Vinayak Industries ltd to M/s. Dharampal Stayapal Ltd (assessee). The page NO. 226 of Annexure 11, which is also the statement of physical stock as on 23.03.2011, does not fall into the assessment years in the above appeal. Further page NO. 72 of Annexure A-14 also pertain financial year 01.04.2010 to 31.12.2010. The central Excise Return Filed in Form NO. ER-1 cannot be said to be incriminating material, as it does not show any escapement of income involved in those papers. Hon'ble Supreme Court Sinhgad Technical Education society ( supra) in the para No. 18 has endorsed the reasoning given by the coordinate bench stating it to be logical and valid that incriminating material, which was seized, had to pertain to the Assessment Years in question and the documents seized must established any correlatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment year, hence, the above order of the coordinate bench has merely a persuasive value. Each year assessed u/s 153A of the Act is required to be tested as per the principle laid down by the Hon'ble Supreme Court in case of Sinhghad Technical Education Society (supra). 36. The ld CIT DR heavily relied on the seized page 52 Annexure A1. We have already dealt with the above paper in earlier paragraphs and noted that it does not pertain to the impugned assessment years involved in these appeals. Therefore, no cognizance of the same can be taken for sustaining any addition in these years. No such material or evidences have been placed before us pointing out such inferences. Therefore, we are afraid, we cannot subscribe to the view canvassed that this paper applies to all the years involved in these appeals. Such an argument is contrary to the decision of Hon'ble Supreme Court as stated above. 37. The revenue further argued that the surrounding circumstances of the case coupled with the statement of the employees, the facts pertaining to the affairs of M/s. Surya Vinayak Industries must be looked into, and these surrounding circumstances are relevant for making the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A(3) 5135817 3. Bogus purchases of sandalwood oil 349002066 4. Disallowance u/s 40A(3) 115024 5. TDS is neither deducted nor deposited 430429 6. Diversion of funds to group entities not backed by business expediency and amount of interest to be disallowed u/s 36(1)(iii) of the Income Tax Act, 1961 5496058 7. Details of amount charged at lesser to group concerns rate than rate charged to others 4271539 8. Disallowance u/s 14A interest paid on investment made out of borrowed funds in equity 4911624 9. Additions made u/s 143(3) in order dated 30.03.2007 10. Disallowance u/s 14A interest paid on investment made out of borrowed funds in equity 500000 11 Disallowance for foreign travelling ..... X X X X Extracts X X X X X X X X Extracts X X X X
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