TMI Blog2020 (3) TMI 1257X X X X Extracts X X X X X X X X Extracts X X X X ..... osed income was seized because in none of the assessment order, any addition is made by the AO on the basis of any seized material. Judgment in the case of PCIT vs. Meeta Gutgutia [ 2017 (5) TMI 1224 - DELHI HIGH COURT] duly approved by Hon ble apex court should be followed [ 2018 (7) TMI 569 - SC ORDER] None of various additions in these five years has any connection with any incriminating material found in course of search and even if these incomes escaped assessment, action could have been taken u/s 147 or 263 as per law but in the absence of any incriminating material having been found in course of search for any year out of relevant six years, addition u/s 153A is not justified and we delete the same. - Decided in favour of assessee. - ITA Nos.126 to 130/Bang/2013 - - - Dated:- 20-3-2020 - Shri N. V. Vasudevan, Vice President And Shri A. K. Garodia, Accountant Member Assessee by: Shri. S. Ramasubramanian, CA Revenue by: Shri. Dilip, Junior Standing Counsel ORDER Per Bench All these five appeals are filed by the assessee and the same are directed against a combined order of learned CIT(A)-VI, Bengaluru dated 24.12.2012 for the Assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r our attention was drawn to para No.45 of this Tribunal order available on 318 of the Paper Book and it was pointed out that in this case, the search has taken place on 17.02.2005 and time was available to the AO for issuing notice under section 143(2) of the IT Act, 1961 for Assessment Year 2004-05 up to 31.10.2005 but such notice was not issued up to the date of search i.e., 17.02.2005 and under these facts, it was held by the Tribunal that the assessment for Assessment Year 2004-05 was completed and finalized on the date of search. He submitted that in the present case, up to Assessment Year 2006-07, the assessment was already completed before the date of search and he pointed out that the Assessment Order for Assessment Year 2003-04 is dated 20.03.2006, copy available on pages 41 to 42 of the Paper Book and similarly, the Assessment Order for Assessment Year 2004-05 is dated 14.06.2006, copy available on pages 61 and 62 of the Paper Book. He further pointed out that in Assessment Year 2005-06, the intimation was issued by the AO under section 143(1) of the IT Act, 1961 on 18.07.2000 and against this intimation, the assessee filed an application for rectification under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judgment of Hon ble Karnataka High Court rendered in the case of Lancy Construction (Supra). He submitted that when the judgment of Hon ble Karnataka High Court rendered in the case of Canara Housing Development Company vs CIT (Supra) is available, the judgments of Hon ble Delhi High Court, of Hon ble Gujarat High Court and of Hon ble Bombay High Court cannot be followed and the issue should be decided against the assessee by following this judgment of Hon ble Karnataka High Court rendered in the case of Canara Housing Development Company vs CIT (Supra). In the rejoinder, Learned AR of the assessee submitted that the judgment of Hon ble Karnataka High Court rendered in the case of Canara Housing Development Company Vs. DCIT 274 CTR 122 (Kar) is not applicable in the present case because of two reasons. First reason is this that in the case of Canara Housing (supra), it is noted in para 2 of the judgment that in the course of search, incriminating material leading to undisclosed income was seized whereas in the present case, no such incriminating material leading to undisclosed income was found and seized in the course of search. The second reason for which this judgment of Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case, no incriminating material leading to undisclosed income was seized. Moreover, the issue in dispute before Hon ble Karnataka High Court in the case of Canara Housing Development Company vs CIT (Supra) was this as to whether section 263 can be invoked against the original assessment order passed by the AO if section 153A is invoked later but before invocation of section 263 by CIT and this was not an issue in dispute in that case as to whether in the absence of any addition on the basis of incriminating material having been found in course of search, some other addition can be made in the assessment order passed u/s 153A of I T Act. In the present case before us, the issue in dispute is not about invocation of section 263 after search against the original assessment order passed by the AO prior to search as in that case and that too in a case where, incriminating material leading to undisclosed income was seized and in the present case, no such incriminating material leading to undisclosed income was seized because in none of the assessment order, any addition is made by the AO on the basis of any seized material. 7. Hence, in our humble understanding, Ratio Decidendi of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... note of various judgments of various High Courts. The first such judgment we consider is of Hon ble Gujarat High Court rendered in the case of PCIT vs. Saumya Construction (P) Ltd. (Supra). Paras 18 to 20 of this judgment are reproduced hereinbelow for ready reference:- 18. In this case, it is not the case of the appellant that any incriminating material in respect of the assessment year under consideration was found during the course of search. At the relevant time when the notice came to be issued under section 153A of the Act, the assessee filed its return of income. Much later, at the fag end of the period within which the order under section 153A of the Act was to be made, in other words, when the limit for framing the assessment as provided under section 153 was about to expire, the notice has been issued in the present case seeking to make the proposed addition of ₹ 11,05,51,000/- on the basis of the material which was not found during the course of search, but on the basis of a statement of another person. In the opinion of this court, in a case like the present one, where an assessment has been framed earlier and no assessment or reassessment was pending on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal suffers from any legal infirmity so as to give rise to a question of law, much less, a substantial question of law, warranting interference. The appeal, therefore, fails and is, accordingly, dismissed. 10. We find that in this case, it was held by Hon ble Gujarat High Court that u/s 153A, the AO can reopen and/or assess the return with respect to six preceding years but there must be some incriminating material available with the AO in respect of the relevant year in which addition is being made. 11. Now we take note of the judgment of Hon ble Bombay High Court rendered in the case of CIT vs. Continental Warehousing Corporation (Nhava Sheva) Ltd. (Supra). The following paras of this judgment are reproduced for ready reference because in these paras, Hon ble Bombay High Court has discussed about the judgment of Hon ble Karnataka High Court rendered in the case of Canara Housing (Supra). 36. Similar is the case with the Division Bench judgment of the High Court of Karnataka at Bangalore. There as well a real estate firm was the assessee. A return of income was filed and when an order under section 143(3) of the Act came to be passed on 31st December, 2010, f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 151 which requires sanction to be obtained by the Assessing Officer by issue of notice to reopen the assessment under Section 148 has also been excluded in a case covered by Section 153A. The timelimit 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. Therefore, it is clear even if an assessment order is passed under Section 143(1) or 143(3) of the Act, the Assessing Officer is empowered to reopen those proceedings and reassess the total income taking note of the undisclosed income, if any, unearthed during the search. After such reopening of the assessment, the Assessing Officer is empowered to assess or reassess the total income of the aforesaid years. The condition precedent for application of Section 153A is there should be a search under Section 132. Initiation of proceedings under Section 153A is not dependent on any und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... condition precedent for initiating proceedings under Section 263 is any order passed under the Act by the Assessing Officer is erroneous insofar as it is prejudicial to the interest of the revenue. Once the order passed by the Assessing Officer gets reopened, there is no order which can be said to be erroneous insofar as it is prejudicial to the interest of the revenue which confers jurisdiction on the Commissioner to exercise the power of the jurisdiction. 11. The Tribunal has proceeded on the assumption by virtue of the judgment of the special bench of the Mumbai, the scope of enquiry under Section 153A is to be confined only to the undisclosed income unearthed during search and if there is any other income which is not the subject matter of search, the same cannot be taken into consideration. Therefore, the revisional authority can exercise the power under Section 263. In the entire scheme of 153A of the Act, there is no prohibition for the assessing authority to take note of such income. On the contrary, it is expressly provided under Section 153A of the Act the Assessing Officer shall assess or reassess the total income of six assessment years which means the said total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment u/s 153A, the scope of enquiry is although not confined to as held by Hon ble Karnataka High Court but it essentially revolves around the search or requisition u/s 132A as the case may be. 13. Now at this juncture, we take note of a subsequent judgment of Hon ble Delhi High Court rendered in the case of PCIT vs. Meeta Gutgutia (Supra) against which SLP was filed by the revenue before Hon ble Apex court which is dismissed as per judgment reported in 257 Taxman 441 (SC). In this case, the dispute before Hon ble Delhi High Court was this as to whether the AO was justified in invoking section 153A in relation to A. Ys. 2000 01 to 2003 04 which were quashed by the tribunal in that case by following the judgment of Hon ble Delhi High Court rendered in the case of Kabul Chawla, 380 ITR 573 on the ground that no incriminating material was found in search. Before Hon ble Delhi High Court, reliance was placed on several judicial pronouncements being judgment of Hon ble Delhi high Court rendered in the case of Kabul Chawla (Supra), of Hon ble Gujrat High Court rendered in the case of PCIT vs. Saumya Construction (P) Ltd. (Supra), of Hon ble Bombay High Court rendered in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t pending at the time of search, addition can be made only on the basis of seized incriminating material leading to undisclosed income. Based on this, the tribunal in that case came to conclusion that since in the assessment proceedings u/s 153A, addition can be made only on the basis of seized incriminating material leading to undisclosed income, on other aspects, the original assessment order survives and CIT can exercise his revisionary powers against that assessment order. Against this tribunal order, the assessee was in appeal before Hon ble Karnataka High Court and under these facts, Hon ble Karnataka High Court held that in the proceedings u/s 153A, the AO can make any addition even if it is not with regard to seized incriminating material leading to undisclosed income. Hence, the decision of the special bench of the tribunal rendered in the case of All Cargo Global Logistics Ltd., Vs. DCIT (Supra) stands disproved and in a case where the assessment has not abated and seized incriminating material leading to undisclosed income is available, addition can be made in respect of such seized material and also in respect of any other issue which comes before the AO in those procee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income which was returned in the earlier return, the income which was unearthed during search and income which is not the subject matter of aforesaid two income. If the commissioner has come across any income that the assessing authority has not taken note of while passing the earlier order, the said material can be furnished to the assessing authority and the assessing authority shall take note of the said income also in determining the total income of the assessee when the earlier proceedings are reopened and that income also shall become the subject matter of said proceedings. In that view of the matter the reasoning given by the Tribunal is not justified. The Commissioner did not have jurisdiction to initiate any proceedings under Section 263 of the Act. 18. As per above para, in our humble understanding, this is the decision that in addition to the incriminating seized material, returned income and additions made by the AO in original assessment proceedings, addition can and should also be made in respect of any other issue which comes before the AO in those proceedings but this entire judgment is under these facts that incriminating material leading to undisclosed income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ling the conditions set out in the substantive part of s. 147. An Explanation to a statutory provision is intended to explain its contents and cannot be construed to override it or render the substance and core nugatory. Sec. 147 has this effect that the AO has to assess or reassess the income ( such income ) which escaped assessment and which was the basis of the formation of belief and if he does so, he can also assess or reassess any other income which has escaped assessment and which, comes to his notice during the course of the proceedings. However, if after issuing a notice under s. 148, he accepted the contention of the assessee and holds that the income which he has initially formed a reason to believe had escaped assessment, has as a matter of fact not escaped assessment, it is not open to him independently to assess some other income. If he intends to do so, a fresh notice under s. 148 would be necessary, the legality of which would be tested in the event of a challenge by the assessee. 20. As per this judgment, it was held that if the AO accepts that the income which escaped assessment as per reasons recorded by the AO for reopening has not in fact escaped assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial found in course of search. In A. Y. 2005 06, four additions are made by the AO being (i) of ₹ 743,070/-, (ii) of ₹ 286,100/-, (iii) of ₹ 10,67,310/- and (iv) of ₹ 202,38,283/-. The first addition is on this basis that this is short declaration of rental income. Second addition is on this basis that commission income is not declared in return of income. Third addition is on this basis that the assessee has received this amount as the reimbursement of property tax paid but not offered it for tax in return of income as income. Fourth addition is on similar basis as per second addition in A. Y. 2003 04 and addition No. (iv) in A. Y. 2004 - 05 but none of these additions is on the basis of incriminating material found in course of search. Similar is the case in A. Y. 2006 07. In this year, three additions are made out of which first two additions are on this basis that rental income and interest income are short declared and third addition is the major addition of ₹ 327,08,605/- made on same basis as per second addition in A. Y. 2003 04, addition No. (iv) in A. Y. 2004 05 and addition No. (iv) in A. Y. 2005 06. Similar is the case in A. Y. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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