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TMI Blog2022 (1) TMI 75X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 1 that proceedings under section 153A of the Income Tax Act 1961 and addition made pursuant thereto are bad in law. Other grounds raised by the assessee are alternate remedies sought by the assessee against the order passed by CIT(A). Since Ld. AR raised the jurisdictional issue and not argued on merits, we deem it fit and proper to adjudicate only the jurisdictional issue. All other issues are kept open as of now. 3. The brief facts of the case relating to ground No. 1 are, a search under section 132 of the Act was conducted in Universal Medicare Group along with other group concerns and individual entities on 16.9.2011. The assessee is a director in Universal Group and was covered under the search and seizure action under section 132 (1) of the Act. Accordingly, notice under section 153A of the Act was issued and served on the assessee. In response, assessee filed return of income on 22.2.2013 declaring total income at Rs. 5,68,36,580/- and exempt income of Rs. 5 34, 51, 653/-. The assessing officer observed that the assessee filed original return of income under section 139 (1) of the Act which was revised on 30.8.2007 declaring total income at Rs. 5 61,29,695/-. Notices u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 143 (3) read with section 153A of the Act. The addition made by the assessing officer is wholly based on the information on Base Note to the extent of Rs. 88, 39, 424/-. 5. Aggrieved the assessee preferred an appeal before Commissioner of Income Tax (Appeals) - 51, Mumbai and raised several grounds objecting to completion of assessment which includes the information in base note and it is utilised to complete the assessment under section 153A. The assessee also filed additional grounds of appeal on the addition made in the absence of any incriminating material found in the course of search, no addition could be made and proceedings under section 153A of the Act cannot be initiated. The assessee submitted a detailed submissions and after considering the assessee's submission, Ld CIT(A) rejected the plea of the assessee with the following observations: "8.3.2 I have carefully considered the assessment order as well as the contentions of the assessee. I have perused the copy of the Warrant of Authorization and the Panchnama. It is undisputed fact that the Warrant of Authorization contains the name of the assessee. It:is also undisputed that the Warrant of Authorizatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Hon'ble Special Bench, while using the phrase 'in course of search' in Para 53 of the decision, made it clear that the intention of the lawmakers is to make the assessment based on the search and not to touch upon all the other issues. For argument sake, had the assessee accepted the ownership of the impugned bank account, the assessment u/s 153A would have become valid even if no incriminating material was found during the search. Therefore, denial of the ownership of the bank account itself won't make the proceedings us. 153A invalid. It is another issue as to whether the said addition would stand the test of judicial scrutiny or not. Coming to the case of Manish Sadhwani, NRI gifts were added in 153A assessment though the said gifts were already reflected in the original return. In the instant case, it is not the claim of the assessee that the above account is reflected in the books/returns and the sources thereof are explained. 8.3.3 In the above background, let us now examine in detail the ratio laid down by the Hon'ble jurisdictional High court as well as Hon 'ble special bench in the case of Continental ware housing/ All cargo. Pursuant to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring the search or during the 153A proceedings which would show that the relief under Section 80HHC was erroneous. In such a case, the A. O. while passing the assessment order under Section 153A read with Section 143(3) could not have disturbed the assessment order finalised on 29.12.2000 relating to Section 80HHC deduction and consequently the C.I.T. could not have invoked jurisdiction under Section 263 of the Act. (Emphasis supplied) 8.3.4 From the above observations of HC it is clear that in the non-abated assessments additions cannot be made if there is nothing on record to suggest that any material was gathered during search or during 153A proceedings. In the case on hand, information was received that assessee holds foreign accounts. Search was conducted with the sole intention of verifying whether these accounts/ amounts are disclosed in the books and during search it was gathered that no such account was reflected in the books of the assessee. As it was found to the contrary, the said amount is assessed as undisclosed income in the relevant year U/$ 153A. In the light of the specific facts of the case, the words used by Honble court which are the material gathered durin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... original assessment, and (ii) undisclosed Income or property discovered in the course of search. (Emphasis supplied) 8.3.6 Hon'"ble SB, being aware of narrow interpretations with regard to the phrase incriminating material, tacitly sounded a word of caution in this regard. Commenting on the search proceedings the Hon'ble SB held as under 50. The provision contained in section 132 (I) empowers the officer to issue a warrant of search of the premises of a person where any one or more of conditions mentioned therein is or are satisfied, i.e. - a) summons or notice has been issued to produce books of account or other documents but such books of account or documents have not been produced, b) summons or notice has been hitp://www.itatonline.org ITA Nos. 5018 to 5022 & 5059/M/2010 58 or might be issued, he will not produce the books of account or other documents mentioned therein, or c) he is in possession of any money or bullion etc. which represents wholly or partly the income or property which has not been and which would not be disclosed for the purpose of assessment, called as undisclosed income or property. We find that the provision in section 132 (I) does not use the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... various Ld. Counsels for the intervening parties have listed or stated various scenarios regarding what constitutes pending assessment and what constitutes completed assessment. We find-that second proviso to section 153A uses the words "pending on the date of initiation of search" and provides that assessment so pending shall, abate. The provision does not use the words "completed assessment". Further, the question which has been referred to us is in respect of scope of assessment u/s 153A and whether it encompasses additions, not based on incriminating material found in the course of search. The question uses the words "incriminating material" which again find no mention either in section 132/1) or 153A. Thus, analysis of various scenarios regarding completed assessments does not fall within the ambit of the question posed to us. Therefore, this question may have to decided by the Division Benches in the respective cases depending on the facts of the case. We may however consider the cases cited by other Ld. Counsels in the aforesaid matter 58. Thus, question No. I before us is answered as under : (a) In assessments that are abated, the AO retains the original jurisdiction as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n by the assessee would be of any help as the facts of the present case are entirely different as compared to the factual matrix of the cases relied upon. Therefore, I hold that the proceedings u/s. 153A have been validly initiated and the assessment made is legally valid." 6. Aggrieved, assessee preferred an appeal before us and Ld. AR of the assessee submitted as under: 2.1 A search and seizure operation us 132(1) of the Act was carried out on the Appellant and his related entities on September 16, 2011. During the search action, the search party was carrying one computer printout of some purported foreign account. The Appellant denied its ownership completely. No incriminating material or any corroborative evidence whatsoever, was found during the search. The impugned addition is made in absence of any incriminating material found during search from the Appellant. 2.2 The Return of income was filed by the Appellant on August 30, 2007. [See Pg 1 of the Paper Book ("PB")] Originally, the intimation w/ 143(1) was received upon the Appellant for the captioned year on March 28, 2009 [See Pg 7 of the Paper Book ("PB")]. 2.3 The time limit for issue of notice under section 143(2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision are reproduced below:- "58. Thus, question No. I before us is answered as under: (a) In assessments that are abated, the AO retains the original jurisdiction as well as jurisdiction conferred on him ws 153A for which assessments shall be made for each of the six assessment years separately; (b) In other cases, in addition to the income that has already been assessed, the assessment us 153A will be made on the basis of incriminating material, which in the context of relevant provisions means - (i) books of account, other documents, found in the course of search but not produced in the course of original assessment, and (ii) undisclosed income or property discovered in the course of search. The above view has since been upheld by the Hon'"ble High Court of Bombay in the case of CIT v. Continental Warehousing Corporation (58 Taxmann.com 78) wherein it has been held that if there is nothing on record to suggest that any material was unearthed during the search or during the 153A proceedings, the AO while passing order under Section 153A read with Section 143(3) cannot disturb the assessment order. 2.9 Similar view was also taken by the Bombay High Court in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the completed assessments, the same can be tinkered only based on the incriminating material found during the course of search or requisition of documents." 2.12 Reference may also be made to the decision of the Hon'ble Karnataka High Court in the case of CIT v. Manish Sadhwani (41 Taxmann 495) wherein the High Court has clearly held that conditions for exercising power under Chapter XIV-B are as under:- i) A search under Sec. 132 of the Act where incriminating evidence of undisclosed income is seized; ii) The said income, which was found in such search and is not reflected in the return filed under Sec. 139(1) or 139(4) before the date of search. The High Court categorically held that the existence of both these conditions is sine qua non for initiation of proceedings and passing of block assessment order under Chapter XIV-B of the Act. 2.13 Indeed, various High Courts and Tribunal Benches all over the country have been unanimously taking the view that in the absence of incriminating material found in the course of search addition cannot be made in the order passed under Sec. 153A of the Act. For ready reference citations of some of the decisions on this issue are as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . This legal proposition is supported by the decision of the jurisdictional High Court of Bombay in the case of Continental Warehousing Corporation (Nhava Sheva) Ltd vs CIT (supra), where the court held that no additions can be made in respect of assessments which have become final if no incriminating material is found during the course of search. This legal proposition is further supported by the decision of division bench of the Hon'ble Bombay High Court in the case of Murali Agro Products Ltd vs CIT (2014) 49 taxman.com 72, wherein it was held that no additions can be made in respect of unabated assessment which have become final, if no incriminating material is found during the course of search. This legal proposition is further reiterated by various High Courts, including the jurisdictional High Court in the case of CIT vs Gurinder Singh Bawa 386 ITR 483(Bom), where it was held that once an assessment has attained finality for a particular year i.e. it is not pending, then the same cannot be subject to tax in proceedings u/s 153A of the Act. 2.17 On identical facts, the Hon'ble ITAT in Bishwanath Garodia v.DCIT (76 taxmann.com 81) (Kolkata - Trib.) held as under: " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the plea of the learned counsel for the Assessee that the impugned additions made by the Assessing Officer could not have been made in the impugned assessment proceedings as they are not based on any material seized or found during the course of search at the business premises of the assessee. 24. We are of the view that the proposition canvassed by the learned counsel for the Assessee finds support from the various decisions cited by him. The proposition IT(SS)A.Nos.97&98/Kol/2015 Smt. Yamini Agarwal A.Yr.2006- 07 & 2007-08 canvassed by the learned DR is supported by the decision of the Hon'ble Karnataka High Court in the case of Canara Housing (supra) in which the ruling of the Special Bench in the case of Alcargo logistics (supra) has not been accepted. The Hon'ble Bombay High Court in the case of CIT Vs. Continental Warehousing Corporation ITA No.523/2013 judgment dated 21.4.2015 after referring to the decision of the Hon'ble Delhi High Court in the case of Anil Kumar Bhatia (supra) and of the Hon'ble Karnataka High Court in the case of Canara Housing (supra) has taken the view that the decision rendered by the Special Bench is to be followed. In the subsequ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bate in terms of the Second Proviso to section 153A(1) of the Act. The decision of the ITAT Kolkata Bench rendered in the case of Shri Bishwanath Garodia (supra) on identical facts of the case as that of the Assessee in the present case, clearly supports our conclusions as above. 26. In the light of the discussion above, our conclusion is that in the present case, the issue dealt with by the AO in the assessment order u/s.153A of the Act, could not and ought not to have been examined by the AO in the assessment proceedings u/s.153A of the Act as the said issue stood concluded with the assessee's return of income being accepted prior to the date of search and no notice having been issued u/s.143(2) of the Act within the time limit laid down in that section. Such assessment did not abate on the date of search which took place on 28.3.2008. In respect of assessments completed prior to the date of search that have not abated, the scope of proceedings u/s.153A of the Act has to be confined only to material found in the course of search. Since no material whatsoever was found in the course of search, the additions made by the AO in the order of assessment for both the Assessment ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submissions of the assessee that he is not accounted in his books or unaware. Therefore, the information in base note is proper accordingly the assessment completed under section 153 A is valid. Further he submitted that assessee has refused to sign the consent waiver form, which is relevant to collect the information from the foreign bank by the Department. He prayed that the submissions of the Ld AR be set aside. 8. Considered the rival submissions and material placed on record. We observe from the record that a search and seizure operation under section 132 (1) of the Act was conducted on the assessee and his related entities. Accordingly notice under section 153A of the Act was issued and served on the assessee and in response assessee filed his return of income. We observe from the record that the addition was made by the assessing officer during this assessment year pertains to a bank account in HSBC, Geneva. The relevant information on the bank account was not found during search proceedings nor found in the possession of the assessee. However, during search proceedings, the assessee was confronted with the Base Note which the Income Tax Department obtained under exchange ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... There two aspects are completely different and gives different connotation. The information found during search alone can be considered for making addition u/s 153A of the Act. Therefore, we are inclined to accept the submissions of the Ld. AR and accordingly the ground No. 1 raised by the assessee is allowed. The other grounds raised by the assessee are kept open and not adjudicated at this point of time since we have allowed the jurisdictional ground raised by the assessee. Accordingly, appeal filed by the assessee for this assessment year is allowed. 8.2 With regard to other appeals filed by both Department as well as assessee on penalty levied under section 271 (1) (c) of the Act, the relevant facts are, the penalty levied wholly based on the assessment completed under section 143 (3) read with section 153A of the Act. The assessing officer levied the penalty 300% of the tax sought to be evaded and levied to the extent of Rs. 96,67,680/-. In appeal, Ld. CIT(A) reduced the penalty to hundred percent of the tax sought to be evaded. Aggrieved both revenue as well as assessee are in appeal before us. Since we already held the assessment made under section 143 (3) read with secti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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