TMI Blog2019 (10) TMI 304X X X X Extracts X X X X X X X X Extracts X X X X ..... ble High Court in the said decision was not called upon to decide or adjudicate the scope and ambit of the assessment to be framed u/s 153A of the Act in the case of the person searched. In the case before the Hon ble High Court the assessee had admittedly offered additional income with reference to incriminating material found in the course of search and therefore the Hon ble High Court did not have occasion to go into the question as to whether the income was assessed with reference to incriminating material found in the course of search or not. We therefore find that certain observations in the said decision which are sought to be used by the ld. CIT, DR to buttress his argument is flawed. We find that the specific issue in the present appeal is squarely answered in the favour of the assessee in the M/s Loyalka Farms Pvt Ltd decision [ 2018 (11) TMI 1001 - ITAT KOLKATA] of this Tribunal. Applying the proposition of law laid down in the above decision to the facts of the case on hand, we find that the only addition made by the AO u/s 68 of the Act in the relevant unabated assessment year was not based on any incriminating material found during the course of search. Appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -11 on 29.10.2010 declaring total income of ₹ 2,13,99,938/-. The return was originally processed u/s 143(1) of the Income Tax Act, 1961 (herein after referred to as the Act ). The time limit for issue of notice u/s 142(1) expired on 30.09.2011. A search and seizure operation u/s 132 of the Act was conducted at the business and residential premises of Naredi Group at Calcutta on 20.03.2015. Pursuant thereto, the AO issued notice u/s 153A dated 23.09.2015 for the relevant AY 2010-11 which was served upon the assessee on 28.09.2015. In response to the notice, the assessee filed return of income declaring total income of ₹ 2,13,43,940/-. In the course of assessment, the AO issued notice u/s 143(2) and 142(1) inter alia calling for the details of share capital of ₹ 6,00,00,000/- issued by the assessee during the year. The AO deputed his inspector to verify the source of funds to the share subscribers. Based on the information gathered by the inspector, the AO observed that there were cash deposits to the tune of ₹ 81,60,000/- in the bank accounts of two share subscribers namely M/s. Vasundhara Merchants Pvt. Ltd. and M/s. Sunlight Tradelink Pvt. Ltd. The AO acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ann.com 234 and E.N. Gopa Kumar vs CIT (Central) (2016) 390 ITR 131, he argued that search assessments could be framed even without the existence of incriminating materials found in the course of search. 5. According to ld. CIT, DR, the basic foundation for conducting the search is governed by the provisions of section 132 of the Act which has to be read harmoniously with section 153A of the Act. There are three conditions based on which a search action could be initiated u/s 132 of the Act on an assessee. According to him, if the concerned authority in consequence of information in his possession, has reason to believe that : i. where a person fails to produce the books of accounts and other documents in response to notice u/s 142(1) or summons issued u/s 131(1) of the Act; or ii. where a person fails to comply with the requirements of summons issued u/s 131(1) of the Act; or iii. where a person is in possession of any money, bullion, jewelry or other valuable article or thing and such assets represents either wholly or partly income of property which has not been, or would not be, disclosed for the purposes of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment years, as if, such returns are required to be furnished u/s 139; and such returns are furnished then the AO is competent to assess or reassess the total income for the six assessment years. 7. The ld. CIT, DR further pointed out that the provision of section 153A are non obstante provision which do not contain any condition of existence of seized incriminating material for making of assessment u/s 153A. Wherever the search has been conducted under Section 153A, the notices have to be issued indiscriminately without any seized incriminating material and assessment of those returns are to be made. Referring to the decisions of the Hon ble Apex Court in the case of CST vs Modi Sugar Mills Ltd. (1961) 12 STC 182 (SC); AIR 1961 SC 1047 and CIT vs Calcutta Knitwears (2014) 362 ITR 673, the ld. CIT, DR argued that in interpreting the taxing statute, the Court must not add or substitute the word in the provision. He therefore urged that the matter may be decided in favour of revenue. 8. Per contra the ld. AR for the assessee opposed the contentions put forth by the ld. CIT DR and argued that the issue in question is covered in favour of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied six assessment years. To this extent, there is no quarrel. However we find that Section 153A itself creates the differentiation amongst specified six assessment years depending whether the proceedings have abated or not. We also note that the provision also clarifies that where an assessment was already completed against an assessee and any appeals or further proceedings are pending then such appeals or other proceedings do not abate. We therefore find that merely because an assessee is subjected to search u/s 132, such fact by itself does not give carte blanche to the Department to subject such an assessee to the rigors of the assessment afresh. As noted, provisions of Section 132 as also Section 153A are special provisions given to the income-tax authorities conferring on them extraordinary powers to make assessments in special cases where search and seizure operations are conducted. In the circumstances merely because an assessee is subjected to search, he cannot be placed on a different pedestal than an assessee who is not subjected to search unless in the course of search some incriminating documents or evidence or information is gathered by the Investigating authorities s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unable to controvert the aforesaid factual position. On these given facts the legal position which is to be decided in the first instance is whether an addition can justifiably be made in an assessment u/s 153A r.w.s. 143(3) of the Act for an unabated assessment year, which is not based on any incriminating material found during the course of search and seizure. We note that on identical facts circumstances as involved in the present case, the coordinate Bench of this Tribunal in the case of M/s Loyalka Farms Pvt Ltd in IT(SS) No. 67/Kol/2018 dated 14.11.2018 answered the question is favour of the assessee. In this decision the coordinate Bench of this Tribunal had taken due note of the decisions of the Hon ble Karnataka High Court and Kerala High Court (supra) relied upon by the ld. CIT, DR. The relevant facts of the case and the findings of this Tribunal are as follows: 2. It is noticed at the outset that both these two appeals arise from the very search in question carried out in M/s. Patni Group of cases dated 08.03.2016. We have heard these two appeals together. The same are disposed of by the instant common adjudication. 3. A combin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in M/s. Patni Group of cases led to the department finding these two assessees to have bogus share capital entries added as unexplained cash credit in issue. Hon ble apex court s decision in CIT vs. S. Ajit Kumar in Civil Appeal No.10164 of 2010 upholding block assessment in light of section 158BB of the Act on the basis of evidence found in search or other documents and such materials available to Assessing Officer relatable thereto, as sustainable as well as E.N. Gopa Kumar vs. CIT [2016] 75 taxmann.com 215(Kerala), PCIT Delhi-2 vs. Best Infrastructure India Pvt. Ltd. (2018) 94 taxmann.com 115(SC) and M/s. Priyanka Chopra vs. DCIT (2018) 89 taxmann.com 288 (Mum. Trib.) are quoted in support. Mr. Shrihari accordingly seeks to validate the impugned assessment in these two assessees case. 6. We find that all these arguments already stand declined in the coordinate bench order in M/s. Bhansali Fincom (supra) as follows: 3. The brief facts of this issue is that the assessee is a company carrying on business of dealing in shares and loan transactions. The assessee filed its return of income for the Asst Year 2010-11 on 23.9.2010 declaring tot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s Aakansha Advisory Services P Ltd - ₹ 40,00,000/- M/s Lucky Dealers P Ltd - ₹ 10,00,000/- M/s RNG Finlease P Ltd - ₹ 25,00,000/- M/s Rose Securities P Ltd - ₹ 25,00,000/- M/s Amazing Vinimay P Ltd - ₹ 50,00,000/- ---------------------- ₹ 3,50,00,000/- 3.2. It was argued that admittedly no incriminating materials were found for Asst year 2010-11 in the course of search with regard to share capital and accordingly pleaded not to disturb the originally assessed income, which is same as the returned income. The ld AO however did not heed to the contentions of the assessee and proceeded to frame the assessments u/s 153A of the Act by making an addition towards share capital u/s 68 of the Act in the sum of ₹ 3,50,00,000/- on the plea that the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the Directors of the Companies with which the assessee-company had transactions during the relevant assessment year. The Ld. AO has also afforded adequate chance to the appellant to cross-examine these persons. I am not inclined to give any credence to the retraction of the statements by the parties, as these have been made by a well thought out strategy, so that the proceedings can be nullified. It is to be observed that these statements were given voluntarily and had been recorded independently before the Officers of the Wing. In my considered view, mere retraction before any Magistrate would not be binding on the Taxing Authority. Hon ble Courts have held that any addition based on the statement or admission by the assessee / related party is quite justified (Hara Singh Co. vs CIT (HP) 230 ITR 169) . It has to be mentioned herein that where a petitioner enters into a voluntary settlement with any Government Agency and the liability to pay tax arises from such settlement, he cannot question the settlement unless and until he can establish that his consent was improperly procured. (Dewan Bahadur Seth Gopal Das Mohta vs The Union of India Ors (SC) 26 ITR 722). Similarly, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... closed income or property) ; then the officer , so authorized could conduct a search and proceed as per the requirements laid down in the said section. He argued that the aforesaid three primary conditions for invoking search proceedings cannot be given a go by while framing section 153A assessments and the instant case falls under section 132(1)(c ) of the Act. The provisions of section 153A of the Act use the expression assess or reassess total income and hence the search assessment could be framed u/s 153A of the Act irrespective of any incriminating materials. 6.1. Apart from the above, the ld DR vehemently argued that the Hon ble Supreme Court had admitted the Special Leave Petition filed by the revenue in the case of Dayawanthi Gupta against the decision rendered by the Hon ble Delhi High Court in the case of Dayawanthi Gupta reported in 390 ITR 486 (Del). He also submitted that SLP is admitted by the Hon ble Supreme Court against the decision rendered by the Hon ble Bombay High Court in the case of Continental Warehousing. Both these SLPs were admitted on the main question as to whether the existence of an incriminating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /2003-IT(Inv) dated 10.3.2003 would be relevant to be looked into wherein it is mentioned that while recording statement during the course of search and seizure and survey operations, no attempt should be made to obtain confession as to the undisclosed income. For the sake of convenience and clarity, the relevant instructions dated 10.3.2003 issued by CBDT is reproduced hereunder:- To All Chief Commissioners of Income tax (Cadre Contra) All Directors General of Income Tax Inv. Sir, Sub:- Confession of additional Income during the course of search seizure and survey operation regarding Instances have come to the notice of the Board where assessees have claimed that they have been forced to confess the undisclosed income during the course of the search seizure and survey operations. Such confessions, if not based upon credible evidence, are later retracted by the concerned assessees while filing returns of income. In these circumstances, on confessions during the course of search seizure and survey operations do not serve any useful purpose. It is, therefore, advised t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003, the Assessing Officer shall- issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139; assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made : Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years: 8.1. We find that the Co-ordinate Bench of Delhi Tribunal in the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment years where assessments are already completed u/s. 143(3) of the Act ; unless they are reopened u/s. 147 of the Act for some other purpose in both the scenarios stated above. 6.4.2 The scheme of assessment proceedings contemplated u/s. 153A of the Act are totally different and distinct from the proceedings contemplated u/s. 147 of the Act and these procedures of assessment operate in different fields and have different purposes to be fulfilled altogether. 6.4.3 The expression 'assess or reassess' stated in section 153A(1)(b) has to be understood as below:- 'assess' means assessments to be framed in respect of abated assessment years irrespective of the fact whether there are any incriminating materials found during the course of search with respect to relevant assessment years ; 'reassess' means assessments to be framed in respect of concluded assessment years where incriminating materials were found during the course of search in respect of the relevant assessment year. 8.3. We also find that recently the Hon ble Delhi High Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ught on the record of the Ld AO. Completed assessments can be interfered with by the Ld AO while making the assessment under section 153A 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. 38. The present appeals concern AYs 2002-03, 2005-06 and 2006-07, on the date of the search the said assessments already stood completed. Since no incriminating material was unearthed during the search, no additions could have been made to the income already assessed. 8.4. We find that the decision relied upon by the ld DR in the case of CIT vs Anil Kumar Bhatia reported in (2013) 352 ITR 493 (Del) does not in any manner advance the case of the revenue as admittedly the Hon ble Delhi High Court in para 24 of its order had held as under:- 24. We are not concerned with a case where no incriminating material was found during the search conducted under section 132 of the Act. We, therefore, e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and also placed reliance on its own decision in the case of CIT vs Veerprabhu Marketing Ltd reported in (2016) 73 taxmann.com 149 (Cal HC). Infact the decision rendered by the Hon ble Jurisdictional High Court was in the context of Section 153A assessment and the decision of Veerprabhu Marketing supra was in the context of section 153C proceedings. In view of the decision of the Hon ble Jurisdictional High Court , we are not inclined to accept the argument of the ld DR to keep these appeals in abeyance till the finality is reached from the Hon ble Supreme Court. 8.7. We find that the provisions of section 132 of the Act relied upon by the ld DR would be relevant only for the purpose of conducting the search action and initiating proceedings u/s 153A of the Act. Once the proceedings u/s 153A of the Act are initiated, which are special proceedings, the legislature in its wisdom bifurcates differential treatments for abated assessments and unabated assessments. At the cost of repetition, we state that in respect of abated assessments (i.e pending proceedings on the date of search) , fresh assessments are to be framed by the ld AO u/s 153A of the Act which would have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee is a company carrying on business of dealing in shares and loan transactions. The assessee filed its return of income for the Asst Year 2013-14 on 19.9.2013 declaring total income of ₹ 8,05,764/-. This return was processed u/s 143(1) of the Act on 31.10.2013 determining refund of ₹ 2,38,073/- including interest u/s 244A of the Act to the tune of ₹ 25,500/- . There was a search and seizure operation conducted u/s 132 of the Act at the residential, office premises,bank lockers etc of the Patni Group of cases on 8.3.2016. A search warrant was executed in the name of the assessee. Consequent to the search, notice u/s 153A of the Act was issued on the assessee for the Asst Year 2013-14. In response to the said notice, the assessee filed its return of income on 24.10.2016 declaring total income of ₹ 8,05,764/-. The assessee stated that the time limit for issuance of notice u/s 143(2) of the Act for the Asst Year 2013-14 in respect of the original return filed on 19.9.2013 had expired on 30.9.2014 and hence as on the date of search, the year under consideration (i.e Asst Year 2013-14) would fall under the category of unabated assessment and hence the inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the ld AO was upheld by the ld CITA. Aggrieved, the assessee is in appeal before us for the Asst Year 2013-14. 12. We have heard the rival submissions. At the outset, there is absolutely no incriminating material found during the course of search with regard to the impugned issue of trading loss on sale of shares of M/s Blue Circle Services Ltd. Admittedly, Asst Year 2013-14 was a concluded assessment on the date of search. Hence respectfully following the aforesaid observations given for the Asst Year 2010-11 with regard to disturbing the concluded assessments in the absence of incriminating materials found during search, we hold that the disallowance of trading loss on sale of shares of ₹ 38,45,844/- made by the ld CITA in the assessment framed u/s 153A of the Act cannot be made as per law. Hence the disallowance made thereon in the impugned assessment is hereby directed to be deleted for want of incriminating materials. Since the relief is granted to the assessee on the preliminary ground of want of incriminating materials , we refrain to give our finding on merits of the addition for the Asst Year 2013-14 and hence the adjudication of other grounds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt to be framed u/s 153A of the Act in the case of the person searched. Moreover in the case before the Hon ble High Court the assessee had admittedly offered additional income with reference to incriminating material found in the course of search and therefore the Hon ble High Court did not have occasion to go into the question as to whether the income was assessed with reference to incriminating material found in the course of search or not. We therefore find that certain observations in the said decision which are sought to be used by the ld. CIT, DR to buttress his argument is flawed. It is however settled legal proposition that the observations of the Hon ble High Court must be read in the context of the facts and the issues before the Hon ble High Court for consideration. The Hon ble Supreme Court in the case of CIT Vs Sun Engineering Works (P) Ltd (198 ITR 297) has observed as follows: It is neither desirable nor permissible to pick out a word or a sentence from the judgment of the Court, divorced from the context of the question under consideration and treat it to be the complete 'law' declared by the Court. The judgment must be read as a who ..... X X X X Extracts X X X X X X X X Extracts X X X X
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