TMI Blog2017 (10) TMI 1612X X X X Extracts X X X X X X X X Extracts X X X X ..... ay act in accordance with the law. Validity of Order passed under section 143(3) r.w.s. 153A - HELD THAT:- We find that undisputedly assessment u/s. 143(3) was completed before the search took place upon the assessee. Nothing has been demonstrated before us that any incriminating material was found during the course of search which was used for completing the assessment u/s. 143(3) r.w.s. 153A - Therefore there is no incriminating material found during the course of search on the basis of which concluded assessment can be reopened and fresh assessment can be framed u/s. 143(3) r.w.s. 153A of the Act. The question that arises in this case is whether the AO can reframe the assessment u/s. 153A on the basis of search conducted upon the assessee wherein no incriminating material is found? This question was examined by this Bench of the Tribunal in which one of the Members was a party to it and the Tribunal having examined both the judgments of the Hon'ble jurisdictional High Court passed in the cases of Lancy Constructions [ 2016 (2) TMI 797 - KARNATAKA HIGH COURT] and Canara Housing Development Company [ 2014 (8) TMI 642 - KARNATAKA HIGH COURT] has concluded that in the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... however, prefer to adjudicate them one after the other. ITA 592, 593, 594/Bang/2017 2. These are appeals are preferred by the revenue against the respective orders of CIT(Appeals) on common grounds which are as under:- 1. Whether the CIT(A) was right while holding that assessee has not earned any dividend income on investment made which earn exempted income though the CBDT has clarified that the expenses which are relatable to earning of exempt income have to be considered for disallowance, irrespective of the fact whether any such income has been earned during the financial year or not. 2. Any other ground that may be urged at the time of appeal. 3. During the course of hearing, the ld. counsel for the assessee has invited our attention that during the impugned assessment year, the assessee has not earned any exempt income, therefore no disallowance u/s. 14A can be made. In support of his contentions, he placed reliance upon various judgments. 4. The ld. DR placed reliance upon the order of the AO. The ld. DR, however, has disputed the receipt of exempt income and further submitted that the matter may be sent back to the AO for verifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) has erred in not considering that having regard to the second proviso to section 153A, the completed assessment cannot be disturbed except only in the case where there is any undisclosed income found in the course of search or any incriminating documents pointing towards such undisclosed income is found in the course of search or in the course of assessment proceedings under section 153A of the Income-tax Act. 4. The Appellant therefore prays that the order passed by the Assessing Officer is contrary to the provisions of law and liable to be quashed since no undisclosed income is found in the course of search or in the course of proceedings under section 153A. 7. The brief facts borne out from the record are that a search action u/s. 132 was conducted upon the assessee on 11.10.2012. Consequent to the search, notice u/s 153A was issued and assessment was completed u/s. 153A r.w.s. 143(3) of the Act. Before the search, assessment was completed u/s. 143(3) for the AY 2008-09 on 24.12.2010, for AY 2009-10 on 16.12.2011, and for AY 2010-11 on 24.04.2012 in the case of Delhi International Airport Pvt. Ltd. and assessment u/s. 143(3) was completed in the case of GMR Hy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined by this Bench of the Tribunal in which one of the Members was a party to it and the Tribunal having examined both the judgments of the Hon'ble jurisdictional High Court passed in the cases of Lancy Constructions (supra) and Canara Housing Development Company (supra) has concluded that in the absence of any incriminating material, proceedings u/s. 153A cannot be initiated and concluded assessment cannot be reopened. The relevant observations of the Tribunal are extracted hereunder:- 14. Having carefully examined the orders of lower authorities in the light of rival submissions and the judgment referred to by the parties, we find that in the case of Canara Housing Development Company, the question of law raised before the Hon'ble High Court was with regard to scope of revision under section 263 of the Act with respect to assessment completed under section 143(3) of the Act in the light of the fact that proceedings under section 153A was initiated. For the sake of reference, we extract the question of law referred to Hon'ble High Court as under: When once the proceedings under section 153A of the Act is initiated, whether the Commissioner of Income Tax c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The fetters imposed upon the Assessing Officer by the strict procedure to assume jurisdiction to reopen the assessment under Sections 147 and 148, have been removed by the non obstante clause with which sub section (1) of Section 153A opens. The time-limit within which the notice under Section 148 can be issued, as provided in Section 149 has also been made inapplicable by the non obstante clause. Section 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 time-limit 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 reas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d income found during search or and also any other income which is not disclosed in the earlier return or which is not unearthed during the search, in order to find out what is the total income of each year and then pass the assessment order. Therefore, the Commissioner by virtue of the power conferred under Section 263 of the Act gets no jurisdiction to initiate proceedings under the said provision because the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed herein for the sake of reference: 6. In our view, if assessment is allowed to be reopened on the basis of search, in which no incriminating material had been found, and merely on the basis of further investigating the books of account which had been already submitted by the assessee and accepted by the Assessing Officer at the time of regular assessment, the same would amount to the Revenue getting a second opportunity to reopen the concluded assessment, which is not permissible under the law. Merely because a search is conducted in the premises of the assessee, would not entitle the Revenue to initiate the process of reassessment, for which there is a separate procedure prescribed in the statute. It is only when the conditions prescribed for reassessment are fulfilled that a concluded assessment can be reopened. The very same accounts which were submitted by the assessee, on the basis of which assessment had been concluded, cannot be reappreciated by the Assessing Officer merely because a search had been conducted in the premises of the assessee. 18. This issue was also examined by different High Courts. In the case of CIT Vs. Kabul Chawla, the Delhi High Court h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153A only on the basis of some 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. 19. Gujarat High Court has also examined this issue in the case of Pr. CIT Vs. Saumya Construction Pvt. Ltd., and having relied upon the judgment of the Kabul Chawla, Delhi High Court, the Hon'ble High Court has held that the very purpose of the provisions of section 153A was to make assessment in the case of search or requisition, thereby it goes without saying that the assessment should be connected with something found during the course of search or the requisition i.e., incriminating materials which reveals undisclosed income. In that case, the addition made was not based on incriminating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tification to deal with the other issues raised on merit. Accordingly, the appeals of the assesses stand allowed. ITA Nos.597 to 601/ Bang/2017 13. These appeals are preferred by the revenue against the respective orders of the CIT(Appeals) raising the following common ground:- Whether the CIT(A) was right in allowing the depreciation based on the disallowance of expenses as not eligible for depreciation in AY: 2007-07 2008-09. 14. In this regard, we have examined the facts of the case and we find that the assessee has allocated capital work-in-progress [ CWIP ] of Rs.434,86,82,557 to assets and accordingly had claimed depreciation on assets. The above expenditure has been incurred in relation to construction of the airport. The AO had disallowed the expenditure of Rs.60,11,28,411 by considering the same as not eligible for capitalization since they are not in capital nature in the AY 2008-09 and accordingly has reduced the above amount in working out the closing balance of CWIP. The depreciation of Rs.3,69,75,969 in AY 2013-14 and Rs.7,26,69,385 in AY 2009-10 on the said expenditure relating to current assessment year has been disallowed. 15. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tting fees which is self contradictory to CIT(A) s finding for the earlier years. 21. The facts borne out from the record in this regard are that the assessee has incurred an expenditure of Rs.1 lakh towards sitting fees of Directors for attending audit committee meetings, board meetings, etc. The AO has disallowed this expenses on the ground that TDS has not been deducted on the said expenses. 22. The assessee has preferred an appeal before the CIT(Appeals) with the submission that in the case of group company viz., M/s. Delhi International Airport Pvt. Ltd., in appeal against the order passed u/s. 201(1) and 201(1A) of the Act it was held by the CIT(A) that no tax is deductible on payments made to Directors as sitting fees for attending board meetings. It was further contended that the amendment made in section 194J vide Finance Act, 2012 w.e.f. 1.6.2012 casts an obligation on the person responsible for payment of any commission to director to deduct TDS @ 10% u/s. 194J. He also placed reliance upon clause 71 of the Finance Bill, 2012. 23. The CIT(Appeals) re-examined the same having reproduced clause 71 of the Finance Bill, 2012 in his order and held that sitti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt. 5. For the above grounds and any other grounds that may be raised during the course of appeal proceedings, the orders of the AO may be upheld, since the expenditure are capital in nature. 27. During the course of hearing, the ld. counsel for the assessee has invited our attention that in this case also assessment was completed u/s. 143(3) of the Act vide order dated 24.12.2010, whereas search was conducted thereafter and no incriminating material was found having invoked the provisions of Rule 27 of the ITAT Rules. Therefore assessment order passed u/s. 143(3) r.w.s. 153A without any incriminating material found during the course of search is bad in law. Once the assessment order is quashed, no addition made therein would survive. In the light of these facts, the revenue s appeal becomes infructuous. 28. The ld. DR, however, placed reliance upon the order of the AO. 29. Having carefully examined the orders of authorities below in the light of rival submissions, we find that in the foregoing paras we have categorically held that in the absence of any incriminating material, the action u/s. 143(3) r.w.s. 153A cannot be initiated to reassess the issues con ..... X X X X Extracts X X X X X X X X Extracts X X X X
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