TMI Blog2019 (9) TMI 861X X X X Extracts X X X X X X X X Extracts X X X X ..... ng material found during the course of search and assessment year under consideration is that of completed assessment, and not that of abated assessment. In our considered opinion and respectfully following the above precedents of the Hon ble jurisdictional High Court, we hold that the disallowance in question cannot be sustained because no incriminating material was found on this score. We, therefore, order to delete the above disallowance. Estimation of income at 10% of receipts - number of incriminating documents were found during the course of search, which were seized - HELD THAT:- Section 44AD though the section strictly applied only where the gross receipts did not exceed an amount of ₹ 40.00 lakh, but at any rate, it gave hint about the appropriate percentage of profit in the business of Civil Construction. Even though this section technically does not apply to the assessee because of the amount of gross receipts exceeding ₹ 40.00 lakh, still we can find out a reasonable net profit percentage to be applied in the given circumstances at 8%. We, therefore, hold that a net profit rate of 8% be applied to the Total receipts as against 7.49% declared by the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to the tune of ₹ 1,05,18,217/- towards Transportation receipts. Invoking the provisions of section 40(a)(ia) of the Act, he made disallowance for the said sum, which came to be affirmed in the first appeal. 4. We have both the sides and gone through the relevant material on record. The assessee was subjected to search on 07-02-2008. Prior to that, the assessee furnished its return of income u/s.139(1) of the Act on 31-10-2006 declaring total income of ₹ 6,32,46,374/-. No notice u/s.143(2) was issued within the stipulated period which expired on six months from the end of the relevant assessment year, i.e. on 30-09-2007. Thus, when the search action was taken, the time limit for issuing notice u/s.143(2) had already expired and further no assessment order was passed u/s.143(3) in respect of the year under consideration. 5. 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 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an the years for which the assessments were pending on the date of search which are abated in terms of the express provisions of the second proviso to section 153A. This will also embrace the years in respect of which the time limit for issuing notice u/s 143(2) is still available with the AO as on the date of search. 8. Scope of income under sections u/s.153A/153C is different in both the above types of assessments. In case of non-completed or pending assessments, the entire assessment is thrown open before the AO and the pending assessment gets abated. The AO can make addition in such an assessment whether or not there is any incriminating material found during the course of search. However, in case of completed assessments, the scope of addition u/s.153A gets restricted only qua some incriminating material found during the course of search. In such an assessment, addition can be made only on the basis of incriminating material found during the course of search as has been held by the Hon ble jurisdictional High Court in CIT others Vs. Deepak Kumar Agarwal and others (2017) 398 ITR 586 (Bom.) and CIT vs. Gurinder Singh Baw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 2008-09. The AO found that the assessee had maintained two sets of books of account for the year under consideration, namely, the one which was found recorded in computers at the time of search drawn up to February, 2006 and the other which was produced by the assessee during the course of assessment proceedings. He found difference between several items of profit and loss account and balance sheet recorded in two sets of accounts. The AO has made out a comparative tabulation on page 28 of his order indicating the amount of total receipts including contract receipts along with the direct and indirect expenses, as declared in the return of income and as found in the seized CD. On such analysis, the AO found a percentage of expenses to contract receipts as per the Profit and loss account filed by the assessee with the return of income at ₹ 89.77% as against the similar percentage in the Profit and loss account as found in seized CD at 75.04%. The difference between the two at 14.73% was added to the assessee s declared percentage of profit at 7.49%, which resulted into an addition of ₹ 5,85,75,235/-. When the matter came up before the ld. CIT(A), he obs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion indicates that the Department came across several instances of inflation of expenses and unsubstantiated expenses along with difference in receipts and expenses in the sets of accounts as found in the course of search in the computer of the assessee and the one that was actually produced for the purposes of assessment. This indicates that evidence of the assessee having inflated expenses for the year under consideration was actually found during the course of search. In that view of the matter, the manner in which the disallowance made by the AO u/s 40(a)(ia) has been deleted by us supra , cannot be applied in so far as the instant addition on account of profit rate is concerned. 13. Now we take up the merits of addition. It is seen that the AO simply proceeded to find out the difference between the expenses as recorded in the Profit and loss account filed along with the return of income and the Profit and loss account found in the seized CD at 14.73% and made addition for the same. The ld. CIT(A) found reconciliation between the figures. He, however, restricted the addition to 10%. We have noted above that the discrepancies were actually observed in the reco ..... X X X X Extracts X X X X X X X X Extracts X X X X
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