TMI Blog2018 (4) TMI 1803X X X X Extracts X X X X X X X X Extracts X X X X ..... t expenses, consultancy expenses and denial of deduction claimed under Section 80C/80D are not based on any reference to the incriminating material found and seized as a result of search. - Decided in favour of assessee. - ITA No. 5371/M/15, 5372/M/15, 5379/M/15, 5378/M/15, 5377/M/15, 5724/M/15, 5719/M/15, 5716/M/15, 5720/M/15, 5717/M/15 - - - Dated:- 25-4-2018 - Shri C.N. Prasad (JUDICIAL MEMBER) And Shri G Manjunatha (ACCOUNTANT MEMBER) Assessee by: Shri Mitesh Shah Revenue by: Shri Parag Vyas ORDER Per Bench : This bunch of 10 appeals filed by two different assessees as well as the revenue are directed against separate, but identical orders of the CIT(A)-51, Mumbai dated 10-09-2015 and they pertain to AY 2005-06, 2006-07 2007-08. Since facts are identical and issues also common, for the sake of convenience, these appeals were heard together and are disposed of by this common order. 2. The assessee, as well as the revenue have taken more or less common grounds of appeal in all the appeals. For the sake of brevity, grounds of appeal raised by the assessee as well as the revenue for AY2005-06 are extracted below:- Revenue ITA 5720 /M/2015 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elspun India Ltd) The ground or grounds of appeal are without prejudice to one another. 1.a) On the facts and in the circumstanees of the case and in law, the Id. C1T(A) erred in not appreciating that:-(i) the order passed u/s.143(3) r.w.s.!53A by the AO is without jurisdiction and bad in law as the jurisdiction u/s. 153A is vitiated; and (ii) the additions made by the AO are beyond the scope of provisions of section 153A. 2.a) On the facts and in the circumstances of the case and in law, the Id. CIT(A) erred in confirming the addition to the extent of ? 1,00,000/-made by the AO to the income of the Appellant by way of disallowing certain expenditure claimed to have been incurred relating to exempt income invoking the provisions of section 14A. b) The Id. CIT(A) failed to appreciate that:- (i) having regard to the accounts there is no reason and basis in reaching to dis-satisfaction with the correctness of the claim of the Appellant that no expenditure was incurred in relation to dividend income which does not form part of the total income; and (ii) the investment in shares was made out of business strategy and there was no major change in such investment. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt considerations and factors. 3. On the facts and in the circumstances of the case and in law, the Id. CIT(A) erred in confirming the addition to the extent of ? 50,GOO/- made by the AO to the book profit of the Appellant by way of adding back disallowance made u/s.!4A and thereby erred in enhancing the book profit artificially. 4. The Id. CIT(A) erred in holding that levy of interest u/s. 234B, 234C, 234D and 220(2) of the Income Tax Act, 1961 is consequential. The Appellant denies its liability for such interest. 5 . The Id. CIT(A) erred in holding that ground raised disputing initiation of the penalty proceedings u/s.271(l)(c) of the Income Tax Act, 1961 is premature. The Appellant denies its liability for such penalty. Assessee ITA 5379/Mum/2015 (M/s Welspun India Ltd) The ground or grounds of appeal are without prejudice to one another. 1.a) On the facts and in the circumstances of the case and in law, the Id. CIT(A) erred in not appreciating that:- (i) the order passed u/s. 143(3) r.w.s.!53A by the AC is without jurisdiction and bad in law as the jurisdiction u/s. 153A is vitiated; and (ii) the additions made by the AC arc beyond the scope of provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment years. The revenue, from their grounds of appeal has challenged the action of the Ld.CIT(A) in deleting various additions made by the AO for all assessment years. 4. The brief facts of the case extracted from ITA No.5379/Mum/2015 for AY 2005-06 are that a search seizure action u/s 132 of the Incometax Act, 1961 was carried out on 13-10-2010 at the business / residential premises of Welspun group of concerns, in which the assessee was also covered. In this case, the assessee has filed its return of income for AY 2005-06 u/s 139(1) of the Income-tax Act, 1961. The assessment was originally completed u/s 143(3) on 24-12-2007 wherein certain additions were made in respect of depreciation and interest. The assessee carried the matter in appeal before the first appellate authority and the CIT(A)-7, Mumbai, vide his order dated 16-05-2008 deleted all additions made by the AO. In further appeal before ITAT by the department, the ITAT, vide its order dated 30-04-2010 upheld the order of CIT(A). Subsequently, the CIT(A)-7, Mumbai, vide order u/s 263 dated 24-03-2010 set aside the assessment order passed u/s 143(3) dated 24-12-2007. On appeal before the ITAT, the ITAT, vide order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e basis of regular books of account and incriminating material found as a result of search. In this case, the AO has made various additions which are not supported by any seized material found as a result of search. Therefore, the assessment order passed without reference to any seized material is bad in law and liable to be quashed. 7. The Ld.CIT(A), after considering relevant submissions of the assessee and also relying upon the case law cited by the assessee including the decision of ITAT, Mumbai Special Bench in the case of All Cargo Global Logistics Ltd vs DCIT 137 ITD 287, observed that there is no merit in the arguments of the assessee that the AO cannot make any addition in respect of unabated assessments in the absence of any incriminating material as the provisions of section 153A is very clear inasmuch as where the search has taken place u/s 132, the AO is empowered to assess / re-assess the total income which includes disclosed and undisclosed income of six years immediately preceding the year in which search took place. The power to re-assess is very obviously and not based on seized materials. If a harmonised interpretation is given to the provisions which will follow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pleted assessment to another fresh assessment. As regards decision of the special Bench in the case of M/s. All Cargo Global Logistics Ltd. (Mum) approved by the Bombay High Court, it is seen that the said decision went in error and has not been accepted by the Income Department and the Department has preferred appeal against the said order before the Supreme Court. In my view, consequent upon the initiation of search all the aspects of the return are open for investigation and that is no adverse material found during the search, addition can still be made if the facts and circumstances so warrant. There is no express or implied requirement u/s,153A for any addition to be confirmed to incriminating material found in the search. The requirement of any incriminating material before an addition is made U/S.153A cannot be assumed when unambiguously it is not there and such an attempt will amount to reforming the legislation. In this context useful reference can be made to the State of Kerala V/s. Mathai Verghese 4 SCO 746 (P.749) where is has been observed that the courts cannot reframe the legislation for the very good reasons that it has no power to legislate. 6.5 In view of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cluded from making any addition in the absence of any incriminating materials found as a result of search for the assessment years which are unabated as on the date of search. In this regard, he relied upon the decision of Hon ble Bombay High Court in the case of CIT vs Continental Warehousing Corporation (Nava Sheva) Ltd (2015) 374 ITR 645 (Bom) and Division Bench of the Hon ble Bombay High Court in the case of CIT vs Murli Agro Products Ltd (2014) 49 Taxman.172. The Ld.AR also relied upon the decision of ITAT, Mumbai Special Bench in the case of All Cargo Global Logistics td vs DCIT (2012) 137 ITD 287 (Mum)(SB). 10. The Ld.Senior Counsel appearing for the revenue submitted that once a search is taken place, the assessment for six assessment years gets reopened and the AO will get jurisdiction to assessee / re-assess total income of those six assessment years, whether or not any incriminating material is found during search. The Ld.Senior Counsel further argued that the provisions of section 153A of the Act shall be applicable upon initiation of search proceedings u/s 132 of the Act, in which case, the concluded assessments will be reopened as per the provisions of section 153A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue notice u/s 148, then all that can be done u/s 147 can be done u/s 153A. The Ld.Senior Counsel referring to the provisions of section 153A and the decision of Hon ble Supreme Court in the case of CIT vs Hindustan Bulk Carriers 259 ITR 449 (SC) submitted that the provisions of one section of the statute cannot be used to defeat those of another unless it is impossible to effect resilient between them. Thus, a construction that reduces one of the provisions to a useless lumber or dead letter is not a harmonised construction. To harmonise is not to destroy. The Ld.Senior Counsel filed elaborate written submissions on the issue which is reproduced hereunder:- These submissions are in addition to the contentions of the Department on Merits Section 153 A of the Act reads as under: Assessment in case of search or requisition. 153A. (1) 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 is initiated under section 132or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003, the Assessing Officer shall- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 143(2) in relation to assessment under section 143(3) is required or a notice under section 148 is required for assessment/reassessment under section 147 for the assessment /reassessment to be considered pending? or Does it mean that it includes all cases where a notice for assessment/reassessment can be validly given under the provisions of the Act? If it is interpreted that the term pending assessment/reassessment includes cases where considering the provisions of section 149 there is still time to issue notice under section 148 then all that can be done under section 147 can be done under section 153A. If it is interpreted that the term pending assessment/ reassessment does not include cases where 148 notice can still be issued than it would necessarily follow that within the period provided under section 149 notice for the said Assessment Year under section 148 can still be issued and assessment under section 147 can be carried out. This is so because merely because a search is carried out the independent right of assessment/reassessment under section 147 does not abate unless the assessment/reassessment (not treated as pending ) itself abates. This would in tur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT AT on the subject do not deal with the issue as to what can be regarded as pending assessments/reassessments the Hon'ble Tribunal may consider and decide. Completed assessments/reassessments do not abate and in respect of these completed assessments if any expenditure/deduction is allowed or receipt is not taxed after proper examination then for such assessments action under section 153 A in respect of the same issue can be taken only based upon fresh material available before the Assessing Officer based upon search for example proof of bogus claims. However the right of the Assessing Officer to consider issues which he can consider while assessing/reassessing under section 147 remain and can be gone into under section 153A even for periods relevant to Assessment Years where 143(3) assessments may or may not have taken place. 12. We have heard both the parties, perused material available on record and gone through the orders of authorities below. In this case, search seizure action u/s 132 of the Act was conducted on 13-102010. The facts borne out from the record reveals that the AO has made various additions for AY 2005-06 to 2007-08 without reference to any in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct. 13. Having heard both the sides, we find merit in the arguments of the assessee for the reason that the issue is no longer res integra. The Hon ble Bombay High Court in the case of CIT vs Continental Warehousing Corporation (Nava Sheva) Ltd (supra) has held that in the absence of any seized material found as a result of search, no addition can be made in respect of unabated / concluded assessments which have become final as on the date of search in the absence of any incriminating materials. This legal proposition is further supported by the decision of Division Bench of the Hon ble Bombay High Court in the case of CIT vs Murli Agro Products Ltd (supra), wherein it was held that no addition can be made in respect of unabated assessments which have become final if no incriminating material is found during search. The ITAT, Mumbai Special Bench in the case of All Cargo Global Logistics td vs DCIT (supra) has taken a similar view wherein it was categorically held that the AO is not empowered to make any addition in the absence of any incriminating material in respect of assessments that have been unabated / concluded as on the date of search. The coordinate bench of ITAT in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... found as a result of search. The assessee further contended that in the assessment framed under Section 153A, AO is not empowered to make any addition in the absence of seized material in respect of assessments that have been unabated or already completed as on the date of search. 2. Having heard both the sides and considering the material on record, we find that the additions made by the AO towards unsecured loans under Section 68 of the Act, cessation of liability under Section 41(1)(a), unexplained credit card expenditure under Section 69C, disallowance of interest expenses, consultancy expenses and denial of deduction claimed under Section 80C/80D are not based on any reference to the incriminating material found and seized as a result of search. We further observes that the Hon'ble Bombay High Court, in the case of Continental Warehousing Corporation (Nava Sheva) Ltd. (supra) has held that in the absence of any seized material found during the search no addition can be made in respect of unabated assessments which have become final as on the date of search. This legal proposition is further supported by the decision of the Division Bench of the Hon'ble Bombay High ..... X X X X Extracts X X X X X X X X Extracts X X X X
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