TMI Blog2020 (10) TMI 1018X X X X Extracts X X X X X X X X Extracts X X X X ..... rder of the Addl. CIT it can be seen that the claim of the assessee was accepted after examining the relevant documents, invoices etc., by making an observation that the claim made by the assessee with regard to allowance for renovation of interior work and furniture and fittings is acceptable based on these directions of the Addl. CIT u/s. 153D/144A the Assessing Officer completed the assessment u/s.143(3)/153A of the Act accepting the claim of the assessee. When once the Assessing Officer passed Assessment Order based on the directions of the Addl. CIT who has examined the issue with reference to the documents and evidences furnished by the assessee such Assessment Order cannot be held to be erroneous. The commissioner while passing the order u/s. 263 of the Act in fact made an observation that it can be inferred that the Range Head had failed to cause any enquiry in this regard blaming the Range Head for not conducting proper enquiry. CIT is inferring that Addl. CIT has not conducted proper enquiry. This is only an inference. The order passed by the Ld. Addl. CIT u/s. 153D clearly states that he has looked into the documents and annexures thereon and on satisfying him ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner erred in confirming the order of the Assessing Officer, wherein, an addition of ₹ 94,52,296/- is made merely on a difference of opinion as there is no fresh evidence found during the course of search or in post search enquiries. 5. The learned Commissioner ought to have appreciated that the order u/s 143(3) r.w.s 153A r.w.s 263 of the IT Act is bad in law as the time limit for completing the assessment as per the directions of CIT expired on 31.03.2014 and in respect of addition of ₹ 94,52,295/- no seized material was found during the course of search, therefore, ought to have held that the original assessment made u/s 143(3) is a valid assessment and not to be disturbed. 6. The appellant craves leave to add to, amend or modify the above grounds of appeal either before or at the time of hearing of the appeal, if it is considered necessary. 4. Assessee has also raised additional grounds of appeal which is as under: - The original order u/s 143(3), dt: 31.12.2009, is inconsequence of search u/s 132 of the IT Act on 06.11.2007, where, no incriminating material was found, therefore, the order passed accepting the income returned stands legall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riod relevant to assessment year 2008-09, the assessee along with her husband Shri Shyam Prasad Reddy sold a property at 7th floor bearing Flat No. 17/7, Mantri Altius, Bangalore, admeasuring 4318 Sq feet for a consideration of ₹.7 crores. While admitting short term capital gains, the assessee claimed 50% of maintenance deposit of ₹.7,69,956/-, renovation and interior works expenses at ₹.1,01,97,894/- and furniture, electrical and other fittings at ₹.1,89,04,590/- aggregating to ₹.2,98,72,440/-. The claim of deduction relating to furniture, electrical and fittings was proposed to be disallowed by Assessing Officer in which assessee's share was of ₹.1,49,36,220/-. The Assessing Officer in the Draft Assessment Order while computing the short term capital gains in the case of assessee proposed to disallow this amount, on the ground that the sale deed does not mention about the interior works, renovation, furniture and fittings, as was claimed by the assessee in the agreement of sale. However, when the matter was referred to Addl. Commissioner of Income Tax, Central Range-2, u/s 153D for the approval of the assessment, the learned Addl. Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions made by the learned Commissioner of Income Tax (Central) in the proceedings u/s. 263 of the Act dated 30.03.2012. Aggrieved by the order of the Assessing Officer an appeal was filed before the Learned Commissioner of Income Tax (Appeals)-12, Hyderabad, and the Ld.CIT(A) sustained the order of the Assessing Officer. 11. Before us, Learned Counsel for the assessee submitted that originally a search and seizure operation was taken place in the premises of assessee on 06.11.2007, consequent to search the case was notified to DCIT, Central Circle-3, Hyderabad, the assessee filed her return of income u/s 139(1) of the IT Act on 29.07.2008, admitting an income of ₹.60,13,760/-. The Assessing Officer proposed to disallow the expenditure claimed towards furniture and fittings, while making computation of capital gains. However, the learned Addl. Commissioner issued directions u/s 144A of the Act after examining the material submitted including copy of the agreement of sale dated 03.11.2007 and also considering the bills for items of furniture and electrical fittings which were filed before the Assessing Officer, directed the Assessing Officer to allow the claim of expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce of opinion on the same set of facts which were originally existing, without bringing any material on record as per the observations of the CIT(Central) to disprove the claim, thus it is submitted that the disallowance made by the Assessing Officer is to be struck down. 13. Learned Counsel for the assessee submitted that the order u/s.263 was passed on 30.03.2012, further, consequent to reopening of the assessment u/s 263, the Assessing Officer, Central Circle-3 issued notice u/s 143(2) on 30.03.2012, and same is served on the assessee on 31.03.2012, therefore, as per the 4th proviso under subsection (2A) of section 153 of the IT Act, the assessment consequent to order u/s.263 should have been made within two years from 31.03.2012, however, the reassessment u/s 263 is made on 27.02.2015, therefore, no reassessment can be made in consequent to order u/s 263 after 31.03.2014, therefore, the order made on 27.02.2015, u/s 143(3) r.w.s 263 is barred by limitation. Therefore, the same is to be held as null and void. 14. Learned Counsel for the assessee further submitted that the Central Board of Direct Taxes in the circular No.7 of 2003, dated 05.09.2003, in the explanatory note ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de on a difference of opinion, surmises and conjectures, suspicion deserves to be deleted. 16. Coming to the addition made without any seized material, Learned Counsel for the assessee submitted that, originally during the course of proceedings u/s 143(3) r.w.s. 153A consequent to search on 06.11.2007, assessment was completed by accepting the income returned, no additions were made as no incriminating material was seized in the case of assessee. However, during the course of proceedings u/s 143(3) r.w.s 153A r.w.s 263 of the Act, an addition of ₹.94,52,295/- was made based only on the observations of the Ld. CIT in the proceedings u/s. 263 of the Act. It is submitted that original assessment u/s 143(3) dated 31.12.2009, had been completed without making any addition attained finality. Learned Counsel for the assessee submitted that, subsequent to search action on 18.07.2012, a fresh assessment order was passed by the Assessing Officer u/s. 143(3) r.w.s. 153A r.w.s. 263 of the Act, in this order the Assessing Officer has made addition of ₹.94,52,295/- following the observations of the Ld.CIT in the proceedings u/s. 263 of the Act. Learned Counsel for the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... el for the assessee submitted that due to circumstances prevailing after the search on 18.07.2012, the assessee opined that the assessment made u/s.143(3)/153A will abate even though no incriminating material was found, therefore, the appeal before the ITAT was withdrawn. However, considering the legal position developed over a period that no addition can be made in the proceedings consequent to search without any seized material, the order u/s 143(3)/153A dated 31.12.2009, is legally correct since to disallow the cost of fittings and furnishings while computing capital gains no incriminating material was found during the search. Therefore, the Ld. CIT (Central) should not have disturbed the order merely on suspicion and to make further enquiries. Therefore, the order u/s.263 of the Act is an invalid order without any fresh material brought on record. The subsequent addition germinated through an invalid order is also invalid and has no legs to stand. 19. Learned Counsel for the assessee further submitted that, can the assessee question the validity of order u/s. 263 of the Act in the Appellate Proceedings either without filing or by withdrawing the appeal before the Appellat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmits that assessee is a Director in number of companies and the goods were transported in vehicle belonging to the assessee companies and therefore the transportation of furniture to Bangalore cannot be doubted. 21. We have heard the rival submissions, perused the orders of the authorities below. In this case the search and seizure operations were initially taken place in the premises of assessee on 06.11.2007 and the assessment u/s. 143(3) r.w.s. 153A was completed on 31.12.2009 accepting the income of ₹.60,13,760/- returned by the assessee. In the course of the assessment proceedings the Assessing Officer proposed to disallow the expenditure incurred by the assessee towards furniture and fittings as an improvement for the property at Bangalore while computing the capital gains on account of sale of such property on the ground that the furniture and fittings were not shown in the sale deed submitted by the assessee. In fact, the Assessing Officer referred the matter to Addl. CIT u/s. 153D for approval of Draft Assessment Order proposing the disallowance before completion of assessment. The Addl. Commissioner of Income-tax by order dated 31.12.2009 after examining the evi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st be prejudicial to the interests of revenue. In absence of any one of the two conditions, the power conferred u/s 263 cannot be exercised. On a perusal of the assessment order as a whole, specifically, para 17, it is very much evident that Assessing Officer was conscious about the fact that Barium Division was having outstanding liability of the advance given by Chrome Division at the time of demerger. He was also aware of the fact that outstanding liability was converted as advance given to assessee against which shares of newly formed company i.e. VBCPL were allotted to assessee and his associates. Therefore, it is clear from the assessment order that Assessing Officer has examined the issue of conversion of the outstanding liability of Barium Division to advance in the name of assessee through journal entries as well as allotment of shares against such advance to assessee and his family members. Furthermore, from para 2.3 of impugned order of learned CIT, it becomes clear that Assessing Officer while forwarding the draft assessment order for approval, after considering appraisal report has proposed to treat the conversion of outstanding liability of Barium Division as advance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... having passed the order in terms with the directions of the Range Head as per the statutory provisions contained u/s 153D, the assessment order cannot be held to be erroneous. In fact ld. CIT has blamed the range head for the directions given by him while approving the draft assessment order. Therefore, if at all, there is any error, it is in the order of the range head and not in the assessment order. Without revising the directions of addl. CIT, assessment order could not be revised. 25. In the assessee s case the Assessing Officer proposed to disallow the expenditure claimed by the assessee towards furniture and fittings and the Addl. CIT by order dated 31.12.2009 u/s. 153D accepted the claim of the assessee with the following observations: - In the case of Sri I. Syam Prasad REDDY and Sundari for the A.Y. 2008-09: The AO in the draft assessment order proposed for the A.Y. 2008-09 in the case of Sri I.Syam Prasad Reddy and Smt. Sundari did not accept the plea that the assessee's flat sold at Bangalore in 'MANTRI ALTIUS'. Accordingly, the expenditure claimed for such renovation and electrical. fittings was not permitted as deduction. Since it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... when the view taken by the Addl. CIT and the Assessing Officer can be accepted as one of the possible views, Assessment Order cannot be treated as erroneous even though some prejudice caused to the revenue. In such circumstances, if at all if there is any error it is in the order passed by the Range Head i.e., the Addl. CIT, and not in the Assessment Order passed by the Assessing Officer on the directions of the Addl. CIT. Therefore, when the assessment order passed by the Assessing Officer u/s. 143(3)/153A is not erroneous, the findings of the Ld.CIT(Central) in his order passed u/s. 263 has no relevance and such order of the Ld.CIT is not sustainable in law. In that scenario one has to look at what is the incriminating material found in the course of search leading to the disallowance/addition. Admittedly no incriminating material was found in search proceedings leading to disallowance of expenditure incurred on furniture and fittings. The only basis on which the disallowance was made is the findings of the Ld.CIT in the proceedings u/s. 263 of the Act. Since the Assessment Order in this case was passed by the Assessing Officer u/s. 143(3)/153A of the Act after granting ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aterials. 30. In the case of CIT v. M/s. Murali Agro Products Ltd., in Income Tax Appeal No. 36 of 2009 dated 29.10.2010, the Hon'ble Bombay High Court held as under: - 12) Once it is held that the assessment finalised on 29.12.2000 has attained finality, then the deduction allowed under section 80 HHC of the Income-tax Act as well as the loss computed under the assessment dated 29-12-2000 would attain finality. In such a case, the A.O. while passing the independent assessment order under Section 153A read with Section 143 (3) of the I.T. Act could not have disturbed the assessment/ reassessment order which has attained finality, unless the materials gathered in the course of the proceedings under Section 153A of the Income-tax Act establish that the reliefs granted under the finalised assessment/reassessment were contrary to the facts unearthed during the course of 153A proceedings. 13) In the present case, there is nothing on record to suggest that any material was unearthed during the search or during the 153A proceedings which would show that the relief under Section 80 HHC was erroneous. In such a case, the A.O. while passing the assessment order under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tice u/s 153A of the Act was issued requiring assessee to file return for 6 assessment years immediately preceding the assessment year in which search is conducted. The assessee filed returns in response to notice u/s 153A of the Act. The A.O. completed the assessment u/s 143(3) r.w.s. 153A of the Act and made additions towards deemed dividend under the provisions of section 2(22)(e) of the Act. The A.O. was of the opinion that transactions between the assessee and his company is coming within the definition of deemed dividend under the provisions of section 2(22)(e) of the Act. It is the contention of the assessee that the assessment order passed by the A.O. u/s 143(3) r.w.s. 153A of the Act, for the assessment years 2005-06 to 2009-10 is null and void as the A.O. has made additions towards deemed dividend u/s 2(22)(e) of the Act without any incriminating materials. The assessee further contended that as per section 153A of the Act, de-novo assessment can be made only in respect of assessment year for which the assessment proceedings has been abated and that in respect of assessment years for which the assessment had already been completed, no additions can be made u/s 153A of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessment year in which search was conducted. The assessee has filed revised returns in response to notice u/s 153A of the Act and admitted the additional income disclosed during the course of search. The case has been selected for scrutiny. During the course of assessment proceedings, the assessee was asked to produce books of accounts and relevant bills vouchers in support of expenditure claimed. In response, the assessee filed written submission and stated that the books of accounts are not available and hence cannot be furnished. Therefore, the A.O. issued a show cause notice and asked to explain why the net profit from the business shall not be estimated. In response to show cause notice, the assessee has filed a written reply and contended that the income for the assessment year 2004-05, 2005-06 and 2007-08 cannot be tinkered with, as there was no incriminating material found during the course of search for the above assessment years and as such no additions can be made to the returned income. It is further submitted that as per sec. 153A of the Act, de-novo assessment can be made only in respect of the assessment year for which the assessment proceedings had been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... explained the procedure of assessments, abated assessments and the manner in which the assessment should be framed, which was further supported by circular no.7 of 2003 issued by the CBDT. When the law has explained the position of abated assessments, then the same way the completed assessment should be treated so as to understand that those assessments are reached finality and which cannot be tinkered with unless there was a seized document. Therefore, we are of the considered opinion that where search is initiated, all pending assessments are merge into one and only one assessment for each assessment year shall be made separately on the basis of findings of search and other material existing or brought on record by the A.O. In respect of non abated or completed assessments, the assessment will be made on the basis of books of accounts or other relevant documents found during the course of search, but not produced in the course of original assessment. 22. In the present case on hand, on perusal of the document available on record, we find that the assessment for the assessment year 2004-05 to 2007-08 were not pending as on the date of search. The fact that the assessment has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... completed and subsisting. We therefore do not find any element of law to be decided in this appeal. Hence, the appeal is dismissed. There will be no order as to costs. 25. The assessee has relied upon the coordinate bench decision of ITAT, Visakhapatnam in the case of A.T. Rayudu in ITA No.373 to 379/Vizag/2014. The coordinate bench, under similar circumstances held the issue in favour of the assessee. The relevant portion is reproduced hereunder: 22. In this regard, it is also pertinent to refer to the following observations made by the Special bench in the case of All Cargo Global logistics Ltd (supra):- 57 (f) In the case of Parashuram Pottery works co. Ltd Vs. ITO (106 JTR 57)(SC), it has been mentioned in the last paragraph of the judgment that the court has to bear in mind that the policy of law is that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi judicial controversies as it must in other spheres of human activity. Our decision is in consonance with this observation . The decision rend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... found during the course of search proceeding. Even otherwise, it is settled proposition of law that the assessee is entitled to take support of the decision in his favour, when two contradictory views have been expressed by the High Courts. In the instant case the Hon ble jurisdictional High Court comes to the support of the assessee in respect of the legal proposition in addition to the decision rendered by the Hon'ble Bombay High Court. Accordingly, we find merit in the contentions 26. Considering the facts and circumstances of the case and also respectfully following the coordinate bench decision in the case of All Cargo Logistics Pvt. Ltd. (supra), we are of the opinion that the A.O. has made reassessment u/s 153A/153C of the Act on the basis of information/material available in the return of income, without referring to any seized material. Therefore, following the special bench decision (supra) we hold that the A.O. had no jurisdiction to make additions u/s 153A of the Act for the assessments which are not pending as on the date of search. In this case, the search was conducted on 14.7.2009. The assessment for the assessment years 2004-05 to 2007-08, were not p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lly following the decision of coordinate bench of ITAT, Visakhapatnam in the case of Sri Hari Prasad Bhararia Vs. DCIT (supra), we are of the view that the A.O. has no jurisdiction to make additions in respect of concluded assessments in the absence of any incriminating materials found during the course of search. In this case, undoubtedly the A.O. has made additions towards deemed dividend on the basis of financial statements filed by the assessee along with regular return of income without any material found during the course of search. Therefore, we direct the A.O. to delete additions made towards deemed dividend u/s 2(22)(e) of the Act for the assessment years 2004-05 2005-06. 33. As could be seen from the above, the Tribunal observed that the Hon'ble Jurisdictional High Court has upheld the orders of the Tribunal following the decision of the All-Cargo Global Logistics Ltd., v. DCIT in following Judgments: - a. Sree Lalitha Constructions (ITTA No. 368 of 2014) b. M/s. Hyderabad House Pvt. Ltd., (ITTA No. 266 of 2013) c. M/s. AMR India Ltd (ITTA No. 357 of 2014) It was also observed by the Tribunal that the decision rendered by the Hon'ble Juris ..... X X X X Extracts X X X X X X X X Extracts X X X X
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