TMI Blog2019 (5) TMI 406X X X X Extracts X X X X X X X X Extracts X X X X ..... 131 the assessee apart from specific amounts has also surrendered ₹ 93,00,000/- on account of sundry/ miscellaneous items of unaccounted expenses or irregularity in the books of accounts if any. The said amount of ₹ 93,00,000/- was surrendered by the assessee to cover any irregularity in the claim in the books of accounts. Disallowance made by the AO which are restricted by the CIT(A) is very well covered by the said amount of ₹ 93,00,000/- when the AO has not pointed out any other irregularity or discrepancy in respect of any other year cover under the search to consume or utilize the said sundry amount of ₹ 93,00,000/- surrendered by the assessee. Accordingly, the addition restricted by the CIT(A) is not sustainable when the assessee has already surrendered extra amount of ₹ 93,00,000/- to cover such irregularity. Addition on account of receipt recorded treating as unaccounted receipt of the assessee - addition restricted by the CIT(A) by applying N.P. rate of 13.28% on the said amount which comes - HELD THAT:- Though the assessee has explained that this amount of ₹ 2,00,000/- is nothing but representing the imprest account maintained by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on sale of shares claimed exempt u/s 10(38) as bogus and thereby confirming the action of ₹ 11,31,564/- 1.1 The ld. CIT(A) has erred on facts and in law in confirming the above addition in the assessment framed u/s 153A even when the assessment proceedings for the year under consideration has not abated and no incriminating material relating to the same was found in search. 2. The assessee craves to amend, alter and modify any of the grounds of appeal. 3. The appropriate cost be awarded to be assessee. 2. The assessee has raised issue of validity of addition made by the AO in the assessment framed U/s 153A of the Act. Since, this issue goes to the route of the matter therefore, we first take up the issue of validity/sustainability of the addition made by the AO in the assessment framed U/s 153A of the Act. There was a search and seizure action carried out at the residential and business premises of the assessee group on 10.10.2014. Subsequently the AO issued noticed U/s 153A of the Act on 22.12.2014. In response to the notice U/s 153A of the Act the assessee filed his return of income on 29.09.201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he AO to issue notice to a person who is searched u/s 132 to file return in respect of 6 A.Y. s preceding the assessment year in which search is conducted and to assess or reassess the total income of these years notwithstanding anything contained in section 139, 147 and other related sections. Thus, the assessment u/s 153A are not de novo assessments since the purpose of making the reassessments under section 153A is subject to tax, hitherto undisclosed income unearthed during the course of the search. It is for this reason that the second proviso to section 153A(1) provides only for the abatement of the pending assessments. This is done to ensure that the regular assessment proceedings under the normal provisions and the assessment proceedings under section 153A are not conducted simultaneously since that would result in redundancy. Therefore, already completed assessments do not abate and they shall hold the field. It can be interfered by the AO while making the assessment u/s 153A only if some incriminating material is unearthed during the course of search or requisition of documents or undisclosed income or property is declared in the course of search which were not produced o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear 20111-12 subjected to scrutiny assessment year U/s 143(3) of the Act vide order dated 25.03.2014. There was a search U/s 132 of the Act on 10.10.2014 in the case of the assessee. There is no dispute that as on the date of search the proceeding for the assessment years 2010-11 2011-12 were not pending and therefore, the assessment for these two years were not got abated by virtue of search and seizure action U/s 132 of the IT Act. It is also not in dispute that in the return of income filed U/s 139(1) of the Act the assessee declared the long term capital gain of ₹ 11,31,564/- and ₹ 8,53,677/- for the assessment years 2010-11 2011-12 respectively though the same was claimed as exempt U/s 10(38) of the Act. Thus, the facts emerged from the record clearly manifest that the assessee declared these transactions of purchase and sale of shares and consequential long term capital gain in the original return of income filed U/s 139(1) of the Act for these two assessment years. Since, the assessment years 2010-11 2011-12 were not pending as on the date of search on 10.10.2014 therefore a question arises whether the addition can be made by the AO in the proceedings U/s 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igh Court wherein the decision in case of Kabul Chawla was followed. There are series of decisions on this point by various Hon ble High Courts including the jurisdictional High Court and therefore, the decisions which have not been reversed by the Hon ble Supreme Court are binding precedent for this Tribunal as well as for the ld. CIT(A). Though the Assessing Officer can make the addition to keep the issue alive as the Revenue has challenged the same of the decisions before the Hon ble Supreme Court. The Coordinate Bench of this Tribunal in case of DCIT vs. M/s A.M. Exports (supra) while considering an identical issue has held in para 8 as under:- 8. We have considered the rival submissions as well as relevant material on record. The first aspect involved in the matter is sustainability of the addition made by the Assessing Officer without any incriminating material found or seized during the course of search and seizure action. There is no dispute that the original return of income filed by the assessee U/s 139(1) of the Act on 11/10/2010 was not pending assessment as on the date of search on 03/4/2013. Therefore, the assessment was completed U/s 143(1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee and answered to them are to be read conjointly. Hence, we quote question No. 34 to 36 and question No. 39 of assessee s statement recorded U/s 132(4) dated 04/4/2013 and question No. 77 of statement recorded U/s 132(4) on 05/4/2013 and question No. 12 and reply of the statement of the assessee recorded U/s 131 of the Act in post search investigation by the ADIT as under:- ( i) Interlink saving finance Pvt. Ltd. 57 Adarsh Nagar, Rishikesh, dehradun, Uttranchal. ( ii) Parmatma Developers Pvt. Ltd., 101, Balaram Dey Street, Gr Floor, Kolkata ( iii) Rameshwar Finvest Pvt. Ltd., 101 Balaram Dey Street, Kolkata ( iv) Sri Ram Tie Up Pvt. Ltd., 2, Banarashi Ghosh, 2nd Bye Lane, Kolkata ( v) ________________________do _________________________ ( vi) Tara Vinimay Pvt. Ltd., 101, Balaram Dey Street, G. Floor, Kolkata ( vii) Victor Project Pvt. Ltd., 2 Mullick Street, Ist Floor, Kolkata ( viii) Yatan Traders Pvt. Ltd., 62/1, Hriday Krishna Banerjee Lane ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... finally statement recorded in post search inquiry we are of the view that the assessee finally clarified the issue in the statement recorded U/s 131 of the Act and therefore, there was no admission on the part of the assessee. Except the statement of partner of the assessee, there was nothing incriminating found or seized during the course of search and seizure action, therefore, the statement of the assessee recorded during the search and post search enquiry has to be read together and the outcome of the said statement is that the assessee has never admitted any bogus transaction except the misunderstanding due to continuous grilling by the Investigation Wing and due to mentally exhausted, the assessee given some inconsistent reply to question No. 77 which was subsequently clarified in question No. 12 of the statement recorded by the investigation Wing in the post search enquiry U/s 131 of the Act. Even otherwise, all these statements are only regarding one transaction of loan that cannot be applied to the entire transactions of loan taken from 12 parties. Therefore, except the statement of the assessee to question No. 77, which was subsequently clarified in question No. 12, there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the 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. Conclusion 38. The present appeals concern AYs, 2002-03, 2005-06 and 2006- 07 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rial or Information available with the Assessing Officer which can be related to the evidence found. This, however, does not mean that the assessment under Section 153A can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material. 58. In Kabul Chawla (supra), the Court discussed the decision in Filatex India Ltd. (supra) as well as the above two decisions and observed as under: 31. What distinguishes the decisions both in CIT v. Chetan Das Lachman Das (supra), and Filatex India Ltd. v. CIT-IV (supra) in their application to the present case is that in both the said cases there was some material unearthed during the search, whereas in the present case there admittedly was none. Secondly, it is plain from a careful reading of the said two . decisions that they do not hold that additions can be validly made to income forming the subject matter of completed assessments prior to the search even if no incriminating material whatsoever was unearthed during the search. 32. Recently by its order dated 6th Ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ejected by the Court on the ground that it was not borne out from the scheme of the said provision which was in the context of search and/or requisition. The Court also explained the purport of the words assess and reassess , which have been found at more than one place in Section 153A of the Act as under: 26. The plea raised on behalf of the assessee that as the first proviso provides for assessment or reassessment of the total income in respect of each assessment year falling within the six assessment years, is merely reading the said provision in isolation and not in the context of the entire section. The words 'assess' or 'reassess'-have been used at more than one place in the Section and a harmonious construction of the entire provision would lead to an irresistible conclusion that the word assess has been used in the context of an abated proceedings and reassess has been used for completed assessment proceedings, which would not abate as they are not pending on the date of initiation of the search or making of requisition and which would also necessarily support the interpretation that for the completed assessments, the same c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the 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. 61. It appears that a number of High Courts have concurred with the decision of this Court in Kabul Chawl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 132 or requisition under section 132A, as the case may be, shall abate. Sub-section (2) of section 153A of the Act provides that if any proceeding or any order of assessment or reassessment made under sub-section (1) is annulled in appeal or any other legal provision, then the assessment or reassessment relating to any assessment year which had abated under the second proviso would stand revived. The proviso thereto says that such revival shall cease to have effect if such order of annulment is set aside. Thus, any proceeding of assessment or reassessment falling within the six assessment years prior to the search or requisition stands abated and the total income of the assessee is required to be determined under section 153A of the Act. Similarly, sub-section (2) provides for revival of any assessment or reassessment which stood abated, if any proceeding or any order of assessment or reassessment made under section 153A of the Act is annulled in appeal or any other proceeding. 16. Section 153A bears the heading Assessment in case of search or requisition . It is well settled as held by the Supreme Court in a catena of decisions that the heading ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... permissible to make additions and disallowance in respect of an the six assessment years. In the opinion of this court, the said contention does not merit acceptance, inasmuch as. the assessment in respect of each of the six assessment years is a separate and distinct assessment. Under section 153A of the Act, assessment has to be made in relation to the search or requisition, namely, in relation to material disclosed during the search or requisition. If in relation to any assessment year, no incriminating material is found, no addition or disallowance can be made in relation to that assessment year in exercise of powers under section 153A of the Act and the earlier assessment shall have to be reiterated. In this regard, this court is in complete agreement with the view adopted by the Rajasthan High Court in the case of Jai Steel (India) v. Asst. CIT (supra). Besides, as rightly pointed out by the learned counsel for the respondent, the controversy involved in the present case stands concluded by the decision of this court In the case of CIT v. Jayaben Ratilal Sorathia (supra) wherein it has been held that while it cannot be disputed that considering section 153A of the Act, the As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of distinction. In the first place, it was stated that the statement recorded was under Section 132(4) and not under Section 133A. It was a statement by the Assessee himself. In response to question no. 7 whether all the purchases made by the family firms, were entered in the regular books of account, the answer was: We and our family firms namely M/s. Assam Supari Traders and M/s. Balaji Perfumes generally try to record the transactions made in respect of purchase, manufacturing and sales in our regular books of accounts but it is also fact that some time due to some factors like inability of accountant, our busy schedule and some family problems, various purchases and sales of Supari, Gutka and other items dealt by our firms is not entered and shown in the regular books of accounts maintained by our firms. 65. Therefore, there was a clear admission by the Assessees in Smt. Dayawanti Gupta (supra) there that they were not maintaining regular books of accounts and the transactions were not recorded therein. 66. Further, in answer to Question No. 11, the Assessee in Smt. Dayawanti Gupta (supra) was confronted with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expected to maintain meticulous books or records for long and in all probability be anxious to do away with such evidence at the shortest possibility) the element of guess work is to have some reasonable nexus with the statements recorded and documents seized. In tills case, the differences of opinion between the CIT (A) on the one hand and the AO and ITAT on the other cannot be the sole basis for disagreeing with what is essentially a factual surmise that is logical and plausible. These findings do not call for interference. The second question of law is answered again in favour of the revenue and against the assessee. 69. What weighed with the Court in the above decision was the habitual concealing of income and indulging in clandestine operations and that a person indulging in such activities can hardly be accepted to maintain meticulous books or records for long. These factors are absent in the present case. There was no justification at all for the AO to proceed on surmises and estimates without there being any incriminating material qua the AY for which he sought to make additions of franchisee commission. 70. The above distinguis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessments or reassessments, which stand abated in terms of II proviso to Section 153A of the Act, the AO acts under his original jurisdiction, for which, assessments have to be made; ( b) regarding other cases, the addition to the income that has already been assessed, the assessment will be made on the basis of incriminating material and ( c) in absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. Though such a claim by the assessee for the first time under Section 153A of the Act is not completed, the case in hand, has to be considered at best similar to a case where in spite of a search and/or requisition, nothing incriminating is found. In such a case though Section 153A of the Act would be triggered and assessment or reassessment to ascertain the total income of the person is required to be done, however, the same would in that case not result in any addition and the assessments passed earlier may have to be reiterated. 23. The reliance placed by the counsel for the appellant on the case of Anil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 153A. The time-limit prescribed for completion of an assessment or reassessment by Section 153 has also been done away with in a case covered by Section 153A. With all the stops having been pulled out, the Assessing Officer under Section 153A has been entrusted with the duty of bringing to tax the total income of an assessee whose case is covered by Section 153A, by even making reassessments without any fetters, if need be. 21. 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 initiate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied) 24. The said judgment also in no uncertain terms holds that the reassessment of the total income of the completed assessments have to be made taking note of the undisclosed income, if any, unearthed during the search and the income that escaped assessments are required to be clubbed together with the total income determined in the original assessment and assessed as the total income. The observations made in the judgment contrasting the provisions of determination of undisclosed income under Chapter XIVB with determination of total income under Sections 153A to 153C of the Act have to be read in the context of second proviso only, which deals with the pending assessment/reassessment proceedings. The further observations made in the context of de novo assessment proceedings also have to be read in context that irrespective of the fact whether any incriminating material is found during the course of search, the notice and consequential assessment under Section 153A have to be undertaken. 25. The argument of the learned counsel that the AO is also free to disturb income, expenditure or deduction de hors the incriminating material, while mak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of search. The appellant has cited following judgments in support of the contention taken: 1) Jay Steel limited vs. ACIT (88 DTR 1) [Raj HC] 2) Kabul Chawla vs. ACIT 380 ITR 573 (Del HC) 3) Continental warehousing Corporation 374 ITR 645 etc. 7.3 I have perused the order of the AO and submissions made in this regard. Perusal of assessment order passed u/s 143(3)/153A shows that all the additions made by the AO are not relatable to any seized material. I also find that for the A.Yr the assessment stood completed on the date of search. 7.4 The issue of additions made by the AO in the assessment u/s 143(3)/153A without any reference to incriminating seized material was considered by the Hon ble Rajasthan High court in the case of Jai Steel limited vs. ACIT (88 DTR 1). The Hon ble court was of the view in case of completed assessments no addition can be made if no incriminating seized material is found during the course of search. The relevant observation of the judgment is reproduced below: In the firm opinion of this Court from a plain reading of the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment can be arbitrary or made without any relevance or nexus with the seized material. Obviously assessment has to be made under this Section only on the basis of seized material. v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the 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 wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gality in the impugned order of the ld. CIT(A) qua this issue. Therefore, after discussing the issue in light of various decisions on this point the Tribunal has held that in absence of any incriminating material the addition cannot be made by the AO in the proceedings U/s 153A of the Act when the assessment for the year was not pending as on the date of search. Following the decision as relied upon the ld. AR as well as the decision of this Tribunal in case of DCIT vs. M/s A.M. Exports (supra) we deleted the addition made by the AO on account of long term capital gain. 6. Since, we have deleted the addition on the legal ground therefore, we do not propose to go into the merits of the issue regarding the genuineness of the transactions as raised in ground no. 1.1. 7. For the assessment year 2015-16, the assessee has raised the following grounds:- 1. The Ld. CIT(A) has erred on facts and in law in confirming the addition of ₹ 7,14,920/- by treating the peak of incoming cash noted on Pg 29 to 40 of Annexure A-1 and Pg 15-24 of Annexure A-5 as the profit from unaccounted transactions by not appre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Annexure Page No. Undisclosed Income 2014-15 AS-2 2 ₹ 20,00,000/- 2014-15 AS-2 6 ₹ 17,00,000/- 2014-15 AS-2 30 ₹ 15,00,000/- 2014-15 AS-2 40 ₹ 13,00,000/- 2014-15 AS-2 53 ₹ 70,00,000/- Total ₹ 1,35,00,000/- Further the assessee surrendered ₹ 2,80,00,000/- during the statement recorded u/s 132(4) on the basis of documents found at t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the seized material are not accounted in the books of accounts of the assessee and accordingly, he proposed to make the addition of ₹ 30,09,720/- in respect of Annexure-A-5. On appeal, the ld. CIT(A) has restricted the addition by considering the peak of incoming cash at ₹ 7,14,920/-. 9. Before us, the ld. AR of the assessee has submitted that the assessee has recorded each and every transaction mentioned at Pages 29-40 of Annexure A-1 and Pages 15-24 of Annexure A-5 in the regular books of accounts. In fact, the assessee prepared separate imprest account of these annexures in the regular cash book which records all these transactions. Copy of the imprest account is enclosed at PB 39- 43. In assessment proceedings, assessee filed statement explaining each and every entry of cash and bank and the purpose of the same. The AO accepted the bank transaction but ignored the cash transaction simply by stating that the same is not recorded which is factually incorrect. The Ld. CIT(A) taxed the peak for incoming cash ₹ 7,14,920/- by incorrectly holding that assessee could not identify each and every transaction from these seized papers. While holding s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the seized papers the ld. CIT(A) took the peak of incoming cash at ₹ 7,14,920/- and sustained the addition to that extent. We find that in the statement recorded U/s 132(4) as well as Section 131 of the Act the assessee apart from specific amounts has also surrendered ₹ 93,00,000/- on account of sundry/ miscellaneous items of unaccounted expenses or irregularity in the books of accounts if any. The said amount of ₹ 93,00,000/- was surrendered by the assessee to cover any irregularity in the claim in the books of accounts. Hence, the disallowance made by the AO which are restricted by the ld. CIT(A) is very well covered by the said amount of ₹ 93,00,000/- when the AO has not pointed out any other irregularity or discrepancy in respect of any other year cover under the search to consume or utilize the said sundry amount of ₹ 93,00,000/- surrendered by the assessee. Accordingly, the addition restricted by the ld. CIT(A) is not sustainable when the assessee has already surrendered extra amount of ₹ 93,00,000/- to cover such irregularity. 12. Ground no. 2 is regarding the addition of ₹ 2,00,000/- on account of receipt recorded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmitted that the assessee may point out that the difference of ₹ 6,32,171/- represents payment made for personal expenses/office expenses/site expenses which are duly recorded in the regular books of accounts. In assessment proceeding, the assessee has produced all the vouchers for the same which are rejected simply for the reason that the same were recorded after search. The lower authorities did not found any defect in the books which shows sufficient balance for making the payment as per these annexures. Hence the addition confirmed by Ld. CIT(A) is uncalled for and be deleted. The ld. AR further pointed out that assessee has separately offered a sum of ₹ 1,35,00,000/- on the basis of annexure A-2. The peak of annexure A-2 was only ₹ 90,35,400/-. However, the assessee offered ₹ 1,35,00,000/- to cover the discrepancies in other annexures. The difference as per various papers of in this regard is only ₹ 6,32,171/- which is covered by the extra income offered in respect of annexure A-2. Hence no separate addition in respect of these papers is called for. It is further submitted that assessee has offered an income of ₹ 2,80,00,000/- as per Annexur ..... X X X X Extracts X X X X X X X X Extracts X X X X
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