TMI Blog2016 (4) TMI 1376X X X X Extracts X X X X X X X X Extracts X X X X ..... addition could be made only on the basis of incriminating material found during search. The gift deeds and the copies of return of income of the donors that were found at the time of search could not be considered to be incriminating material for the purpose of addition in view of the fact that these very documents were the basis of the gifts that were considered by the assessee while crediting the capital account. In view of the aforesaid facts, we are of the view that these assessments framed u/s.153A need to be quashed. - Decided in favour of assessee. - IT(SS)A Nos.153, 154, 155 & 156/Ahd/2012, 160, 161, 162 & 163, 167, 168, 169 & 170, 174, 175 & 176, 180, 181, 182 & 183, 187, 188, 189 & 190, 194 & 195/Ahd/2012 - - - Dated:- 29-4-2016 - Shri Anil Chaturvedi, Accountant Member And Shri S.S. Godara, Judicial Member Appellant by: Shri S.N. Soparkar with Shri P.M. Mehta Respondent by: Shri Jagdish, CIT (D.R.) ORDER PER BENCH All these appeals filed by the different assesses are against the consolidated order of learned CIT(A)-III, Ahmedabad dated 25.01.2012 for the assessment years 2003-04 to 2006-07. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. In law and in the facts and circumstances of the appellant s case, the learned CIT(A) has grossly erred in rejecting Grounds No.1 and 2 of the appellant s appeal before him challenging the validity of the assessment order passed u/s. 153A read with Section 143(3) of the Income Tax Act, 1961. 2. In law and in the facts and circumstances of the appellant s case, the learned CIT(A) has erred in confirming addition in respect of gifts received by assessee for ₹ 7,50,000/- by considering the same as unexplained gifts u/s. 68 of the Act. The same may kindly be deleted. 3. The Assessing Officer has erred on facts and in law charging interest u/s 234A, 234B and 234C when no such interest is leviable. The appellant denies its liability to pay interest. IT(SS)A No.154/Ahd/2012 for A.Y. 2004-05 1. In law and in the facts and circumstances of the appellant s case, the learned CIT(A) has grossly erred in rejecting Grounds No.1 and 2 of the appellant s appeal before him challenging the validity of the assessment order passed u/s. 153A read with Section 143(3) of the Income Tax Act, 1961. 2. In law and in the facts and circumst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he short legal ground, namely that the assessments framed earlier cannot be disturbed in the course of proceedings under section 153A. He submitted that if the aforesaid plea of the assessee is upheld, then all other issues raised in the appeal on merits would be rendered academic. He therefore urged that the validity of assessment framed under section 153A be taken up first. The Learned Departmental Representative did not object to the aforesaid plea of the Learned Authorised Representative. We therefore proceed to decide this legal question of validity of section 153A proceedings accordingly. 5. Before us, Learned Authorised Representative reiterated the submissions made before Ld. CIT(A) and further submitted that the impugned assessment framed under section 153A of the Act is not valid in view of the fact that no incriminating material indicating the unaccounted income was found at the time of search and therefore, the Assessing Officer was not justified in issuing notice under section 153A of the Act and passing the order. His second argument was that as per the mandate of s.153A, the completed assessments can be interfered only on the basis of some incriminating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jaykumar D Agrawal 1 153/Ahd/2012 2003-04 30/09/2003 143(1) 30/09/2004 2 154/Ahd/2012 2004-05 31/07/2005 143(1) 31/07/2006 3 155/Ahd/2012 2005-06 27/03/2006 143(1) 31/03/2007 4 156/Ahd/2012 2006-07 30/03/2007 143(1) 31/03/2008 Vishal V Agrawal 5 160/Ahd/2012 2003-04 27/09/2003 143(1) 30/09/2004 6 161/Ahd/2012 2004-05 01/11/2004 143(1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 182/Ahd/2012 2005-06 27/03/2006 143(1) 31/03/2007 19 183/Ahd/2012 2006-07 24/03/2007 143(1) 31/03/2008 Vanita V Agrawal 20 187/Ahd/2012 2003-04 27/09/2003 143(1) 30/09/2004 21 188/Ahd/2012 2004-05 01/11/2004 143(1) 30/11/2005 22 189/Ahd/2012 2005-06 27/03/2006 143(1) 31/03/2007 23 190/Ahd/2012 2006-07 24/03/2006 143(1) 31/03/2007 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... family members had received gifts from 289 persons, the individual gifts received by the assessee and his family members are in the range of ₹ 75,000/- to ₹ 1,00,000/- in all cases; aggregate to ₹ 2.66 crores during the assessment years 2004-05 to 2008-09. He further submitted that the gift deeds coupled with post search enquiries conducted by ADIT(Inv) revealed that at the given address either the donors were not found or donors did not confirm having given any gift to the assessee, the assessee did not produce the donors for examination before the ADIT(I). He further submitted that on a combined reading of the material found at the time of search namely the gift deeds and the return of income of the donors revealed that the donors had given the gift of more than the income shown in the return of income. On a sample basis he pointed to page nos.3 4 of the paper book and pointed out that Shri Mahavir Prasad Agrawal is stated to have given gift of ₹ 1,00,000/- whereas his total income as per copy of the return of income was ₹ 60,250/- only. He therefore submitted that on the basis of the material found during the course of search coupled with the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment u/s 153A (ii) the material that was found during the search (namely the gift deeds and copies of return of income of the donors) was not in the nature of incriminating material (iii) the assessment years for which the assessments have been framed u/s 153A had already attained finality and therefore could not be disturbed in the absence of any incriminating material. 11. It is an undisputed fact that in the present case search u/s 132 of the Act was carried out in the case of assessee on 15.10.2008 and during the course of search, material in the form of gift deeds and the copy of return of income of the persons giving the gift (i.e. donors) to the assessee were found. It is on the basis of these documents that were found at the time of search and post search inquiries made by ADIT (Inv) which led to the discovery of the fact that the quantum of gifts, donors being not related to the assessee, no occasion necessitating transactions of gifts and therefore it was concluded by the AO that the gifts received by the assessee and his family members were bogus gifts and therefore the AO proceeded to make additions in respect of the gifts received in the assessment fram ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 03, the Assessing Officer shall- (a) 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; (b) 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: Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this [sub-section] pending on the date of initiation of the search under section 132 or making of requisition under se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eassessment proceedings which are pending on the date of search/requisition. Section 153A(2) provides that when the assessment made under Section 153(A)(1)is annulled, the assessment or reassessment that stood abated shall stand revived. Thus on a plain reading of Section 153A of the Incometax Act, it becomes clear that on initiation of the proceedings under Section 153A, it is only the assessment / reassessment proceedings that are pending on the date of conducting search under Section 132 or making requisition under Section 132A of the Act stand abated and not the assessments/reassessments already finalised for those assessment years covered under Section 153A of the Act. 14. Hon ble Delhi High Court in the case of Kabul Chawla (2016) 380 ITR 573 (Del) after considering the various decisions cited therein has summarised the legal position with respect to s. 153A as under: 37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions the legal position that emerges is as under: i. Once a search takes place under Section 132 of the Act, notice under Section 15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l assessment. 15. When the facts of the present case are seen in the light of the observations made by Hon ble Delhi High Court, the returns of income for the assessment years which were processed u/s 143(1) and the time limit for issuing notice u/s 143(2) for the respective assessment years has elapsed, those assessments have to be considered as completed assessments as on the date of search and in terms of the provisions of s. 153A, the completed assessments could be interfered by the AO while making assessment u/s 153A only on the basis of 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. 16. In the present case, as already noted above, the AO had proceeded on the basis of gift deeds and copies of return of income of the donors and the post search inquiries to conclude that the gifts received by the assessee are bogus gifts. Before us, Revenue has not placed any material on record to demonstrate that the gifts deeds and copies of return of income of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 that in Chapter XIV-B of the Act, special provisions for assessment in search cases have been given and if any amount of income has not been taxed and during the course of search, if some undisclosed income is found on the basis of the material seized, that should be treated as undisclosed income. As per the scheme of special assessment under Chapter XIV-B, the assessment has to be based on incriminating material found in the course of the search. In the present case, all that was found were the gift deeds and the affidavits and there was no incriminating material found in the course of search to suggest that the gifts were bogus. In Vishal Agarwal s case (supra) the Tribunal in a similar situation had returned the finding that there was nothing in the assessment order to show that any evidence was found during the search to suggest that the gifts were bogus. The gifts having been declared in the returns of income, fell outside the purview of Chapter XIV-B of the Income-tax Act, 1961. In such a similar situation, this Court in Vishal Aggarwal s case (supra), did not interfere with the findings and conclusions returned by the Tribunal and was of the view that no substantial ques ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ced and concluded u/s 143(1) (a). How these are different from the proceedings commenced and concluded u/s 143(3) of the Act. There is no doubt that once the proceedings u/s 143(3) are completed and concluded then there is nothing which will abate as per provisions of section 153A of the Act. 9. In our considered opinion, section 153A referred to pending assessment or reassessment and not assessment orders . The assessment may not be pending even though there is no formal order u/s 143(1)(a). The moment return is filed and acknowledgement or intimation issued, the proceedings initiated by filing the return are closed, unless they are again triggered by issuing notice u/s 143(2) of the IT Act. In the case under consideration, the period for issuing the notice u/s 143(2) elapsed. The process has attained the finality which can only be assailed u/s 148 or 263 of the IT Act. Such proceedings can never be initiated u/s 143(2) when the time period for issuing notice u/s 143(2) has expired. Hon ble ITAT, Mumbai C Bench in the case of ACIT Vs. Pratibha Industrialist Ltd. reported in 23 ITR Tribunal 766 Mumbai has also held as under :- Although by proceedings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e filed details of gift received in the shape of gift deeds, bank statements, confirmations and acknowledgement of income tax return filed by the donor. Thereafter the assessment under section 143(3) was completed and no addition on account of gift received by the assessee was made. It clearly shows that the AO was satisfied in respect to gift received by the assessee. Similarly, for assessment year 2001-02, the assessee has enclosed all the details of the gift along with return and the same was processed under Section 143(1) and thereafter no proceeding was initiated either by issuing notice under Section 143(2) or 148 within the stipulated period of time. Now, during the assessment proceeding under Section 153A, the assessee was required to produce the donor once again, in my considered view, is not justified or tenable in the eyes of law. This very issue has been decided by the Special Bench of the Tribunal in case of ALL Cargo Global Logistics Ltd. (supra). The Special Bench of the Tribunal has answered the question in the following manner :- (a) In assessments that are abated, the AO retains the original jurisdiction as well as jurisdiction conferred on him u/s 153 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vailable u/s 153(1) of the Act. Once search takes place u/s 132(1) of the Act and completion of proceeding is pending on that date then such proceedings abate. Thus, the scope of assessment u/s 153A depends upon whether any assessment or reassessment proceedings were pending or completed on the date of the search. Whenever the abated proceedings are merged with the proceedings u/s 153A then scope of assessment is vide and it will cover all issues arising from the original return and issue arising on the basis of incriminating documents, and assets found and seized during the search. Wherever the proceedings are completed prior to the search then nothing merges with proceding u/s 153A of the Act and nothing abates. In such a situation, the AO has to respect the completeness of the proceedings. Admittedly, in the case of assessee, no incriminating documents were found and seized. The provisions of section 153A give power to assessing officer to assess and reassess the income. The assessing officer is empowered to make addition on account of undisclosed income or income escaped assessment. In the case under consideration, there is no incriminating material found during the course ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncriminating material for the purpose of addition in view of the fact that these very documents were the basis of the gifts that were considered by the assessee while crediting the capital account. 21. In view of the aforesaid facts, we are of the view that these assessments framed u/s.153A need to be quashed. Ordered accordingly. Since the legal issue has been decided in favour of the assessee, we are of the view that the other grounds raised on the merits of addition have been rendered academic and requires no adjudication. 22. Thus, the appeal of the assessee IT(SS)A No.153/Ahd/2012 for the assessment year 2003-04 is allowed. 23. As regards appeals for the assessment years 2004-05, 2005-06 2006-07 it is an agreed position that since all the relevant material facts are the same in these assessment years as well, whatever we decide for the assessment year 2003-04 will apply mutatis mutandis for these three assessment years also. Therefore, following the same view as taken in the case of the assessee Shri Vijaykumar D Agarwal for the A.Y. 2003-04, appeals filed by the assessee for assessment years 2004-05, 2005-06 2006-07 i.e. IT(SS)A Nos.15 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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