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TMI Blog2022 (10) TMI 216X X X X Extracts X X X X X X X X Extracts X X X X ..... to be deleted. 2. FOR THAT the Commissioner of Income Tax (Appeal) erred in holding that the addition made by the Assessing Officer in respect of sums of Rs.4,52,40,074/- and Rs. 20,80,685/- in respect of Bank Accounts with HSBC Bank, Geneva in the name of Gingest Marketing Limited and Masonic Limited respectively was correct and such finding has been arised at without considering the facts and law and various judgements of the jurisdictional High Court and other High Court as well as orders of various benches of Tribunals. 3. a) FOR THAT no incriminating material of any nature whatsoever was found in course of search conducted under section 132 of the Act on 22 September 2011 and as such no addition of any nature whatsoever could be made in the income of the Appellant. b) FOR THAT the Commissioner of Income Tax (Appeal) should have held that as no incriminating material or document of any nature whatsoever relating to any of the additions made in the impugned assessment was found in the search and the original assessment under section 143(3) of the Act did not abate in as much as no proceedings was pending on the date of the search, the additions made by the Assessing Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... March, 2006 and 31st December, 2005 respectively in the aforesaid two bank accounts when admittedly there is no material and/or evidence of any sum having been deposited by the Appellant in the said account on any date during the relevant previous year or at any time whatsoever. g) The Assessing Officer grossly erred in making the addition of the said amounts lying deposited in the aforesaid bank accounts with HSBC, Geneva by applying the concept of cumulative accumulation of deposit during the year which concept is alien to the provisions of Income Tax Act, 1961. h) The assessment order is time barred & is required to be cancelled. 5. FOR THAT the Commissioner of Income Tax (Appeal) erred in confirming a sum of Rs. 587/- dis-allowed under section 14A of the Act when admittedly Rule 8D was not in force in the relevant Assessment Year. 3. Briefly stated, the facts as culled out from the records are that the assessment year involved is 2006-07. The original assessment was made under section 143(3) of the Act on 27.08.2008. Subsequently a search and seizure operation under section 132 of the Act was carried out by the Investigation Wing of Kolkata on 22.09.2011. In course of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onic Ltd., the two companies incorporated in British Virgin Island. The copy of the Memorandum and Articles of the said two companies and the financial statements and the assets holding statements of the companies were also furnished. Such documents which were filed before the DDIT(Inv.) proved beyond doubt that the said bank accounts belonged to Gingest Marketing Ltd. and Masonic Ltd. companies incorporated in British Virgin Island and that the Appellant had no interest of any kind whatsoever in the said bank accounts. In spite of this, the assessing officer repeated the allegations and the appellant again stated that the alleged bank accounts with HSBC Bank, Geneva, belonged to Gingest Marketing Ltd. and Masonic Ltd. the two companies incorporated in British Virgin Island wherein the appellant was neither a director nor a shareholder. In support of these contentions, the appellant further furnished a confirmatory letter from HSBC, Geneva clarifying that the aforesaid two bank accounts belonged to Gingest Marketing Ltd. and Masonic Ltd. respectively, the two companies incorporated in British Virgin Island and that the director of those companies was First Corporate Director Inc. a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a fact that no addition has been made with reference to any seized materials pursuant to Section 153A of the Act. The CIT(A), however, did not agree with any of the submissions made by the Appellant and confirmed the assessment in totality. The findings of the CIT(A) in respect of the addition starts from page 47 till 51 of his order. 7. Further aggrieved, the assessee is now in appeal before this Tribunal raising various grounds as above. The Ld. Counsel for the assessee reiterating the submissions made before the lower authorities, stated that the Appellant fully co-operated in course of the assessment proceedings and even gave his consent to obtain information from HSBC Bank to the A.O. It was submitted that the addition made in the hands of the Appellant in respect of the alleged bank accounts with HSBC Bank, Geneva belonging to Gingest Marketing Limited and Masonic Limited wherein the Appellant was neither a Director nor a shareholder was erroneous. A confirmatory letter from HSBC Bank was filed clarifying that the aforesaid bank accounts are belonging to the Companies and the Director of those Companies are first Corporate Director Inc and that those two companies were owne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments found in course of the search which would warrant such disallowance. (ii) Only other addition in the assessment is the sum of Rs. 4,73,20,709 being the bank balance of the said two companies. For Gingest Marketing Ltd it amounts to Rs. 4,52,40,074 and Masonic Limited amounts to Rs. 20,80,685. Admittedly the said addition has been made without reference to any incriminating material or documents found as a result of the search. The said documents relating to the alleged bank account at HSBC Switzerland were in the possession of the Department prior to the search and the appellant was confronted with them in the course of search proceedings. (iii) AO has alleged that during the Search & Seizure operations, assessee accepted the existence of a/c but stated it was in the name of M/s Masonic Ltd., in which his NRI son, Mr. Amitabh Himatsingka held 600 class-B nonvoting equity shares. In the same statement, the Assessee had clarified and subsequently asserted, through filing of affidavits, that he was neither a director nor a shareholder in the said companies. (iv) As no incriminating material or documents whatsoever was found during the course of search under section 132 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty 397 ITR 344 in the context of section 153C of the Act has held as under: "18) In this behalf, it was noted by the ITAT that as per the provisions of Section 153C of the Act, incriminating material which was seized had to pertain to the Assessment Years in question and it is an undisputed fact that the documents which were seized did not establish any co-relation, document-wise, with these four Assessment Years. Since this requirement under Section 153C of the Act is essential for assessment under that provision, it becomes a jurisdictional fact. We find this reasoning to be logical and valid, having regard to the provisions of Section 153C of the Act." b) Similar view was taken by the Hon'ble Calcutta High Court in the case of Veerprabhu Marketing Ltd, ITA No. 661/2008 dated 04108/2016. In this case the question of law was framed as follows: "1. Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal is justified in not holding that all assessments were made under section 143(1) of the I. T. Act; therefore, disallowance as per law were not earlier made. As per Section 153(c) of the I. T. Act assessment is to be made afresh and Incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. The learned Tribunal was of the opinion that the Assessing Officer had no jurisdiction under section 153A of the Income Tax Act to reopen the concluded cases when the search and seizure did not disclose any incriminating material. In taking the aforesaid view, the learned Tribunal relied upon a judgement of Delhi High Court in the case of Kabul Chawla in ITA No. 78.7/2014 dated 28th August, 2014. The aggrieved Revenue has come up in appeal. Mr. Bagaria, learned Advocate appearing for the assessee, submitted that more or less an identical view was taken by this Bench in ITA 66112008, [CIT vs. Veerprabhu Marketing Ltd] wherein the following views were expressed "We are in* agreement with the views expressed by the Karnataka High Court that incriminating material is a pre-requisite before power could have been exercised under section153C read with section 153A. In the case before us, the assessing. officer has made disallowances of the expenditure, which were already disclosed, for one reason or the other. But such disallowances were not contemplated by the provisions contained under section 153C read with section 153A. The disallowances made by the assessing officer were uph ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re operations conducted u/s 132 of the IT Act, 1961, incriminating documents/papers were not seized. At least addition made by AO in the assessment order passed u/s 153A1143(3) are not based of any incriminating documents/papers seized during the search operation. It would also not to be out of context to mention here that in this case, on the date of search, no assessment for this year was pending. Therefore, keeping in view the ratio decided by the jurisdictional bench of Kolkata tribunal in case referred above and the ratio decided by the Hon'ble Calcutta High Court in the case of Veer Prabhu Marketing Ltd. (Supra) in the light of CBDT's decision of not filing SLP in this 'case in the Supreme Court and keeping in view the Apex Court's decision to dismiss SLP on the similar issue in the case of Pr CIT vs Kurele Paper Mills Pvt. Ltd: SLP (C) No. 34554 of 2015 dt. 07.12.2015, I am of this view that in order to maintain judicial continuity on this issue and respectfully following the ratio decided by the Hon'ble Calcutta High Court in the case of Veer Prabhu Marketing Ltd (Supra), assessee's appeal on ground no 1 is allowed and as such I am not inclined to ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessee's case was not selected for scrutiny, as notice u/s 143(2) of the Act was not issued to the assessee on or before 30.09.2009. Search was conducted on 29.1.2014. Impugned addition at Rs.2,24,326/- is purely based on information called during the course of search proceedings. In this situation the assessment for Assessment Year 2008-09 is to be treated as non-abated assessments for which additions could be made only on the basis of incriminating material found during the course of search. Therefore, in the given facts and circumstances of the case and respectfully following the decision of the coordinate bench referred above, we direct the Ld. A.O to delete the disallowance of Rs.2,24,326/- and accordingly allow Ground No.1 and consequentially Ground No. 2 of the assessee's appeal for 2008-09 raised in IT(SS)No.245/Ind/2017. f) In the case of Sreedeb Commodities Pvt. Ltd., 158, Lenin Sarani, Kolkata 700013 - vs- DCIT, Central Circle-2(1), Kolkata in I.T.(SS).A. Nos. 15/Kol/2022 for Assessment Year : 2007-08 Income Tax Appellate Tribunal "A" Bench, Kolkata by its order dated 26.07.2022 held as follows : "8. We have duly considered rival contentions and gone through the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. (vi) Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 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 153 A 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." ITAT Delhi Bench in the case of DIT Vs. Smt. Shivali Mahajan and others, rendered in ITA No.5585/Del/2015 has considered this aspect in its decision. Thereafter, the Tribunal has specifically held that serial no.(iv) of the above proposition, the Hon& ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome Tax (Appeals) who dismissed it by an order dated 27th November, 2014. A further appeal was filed by the Assessee before the IT AT. The IT AT, inter alia, found substance in the contention of the Assessee that the assessment under Section 153(A) of the Act, in I.T(SS).A. No. 15/Kol/2022 Assessment Year: 2007-08 Sreedeb Commodities Pvt. Ltd. 7 the absence of any incriminating material found during the search on the premises of the Assessee was not sustainable in law. Reliance was placed on the decision of this Court in Commissioner of Income Tax v. Kabul Chawla, [2016] 380ITR 573. 7. A question was posed to the learned counsel for the Revenue whether in the present case anything incriminating has been found when the premises of the Assessee was searched. The answer was in the negative. The entire case against the Assessee was based on what was found during the search of the premises of the AEZ Group. It is thus apparent on the face of it, that the notice to the Assessee under Section 153A of the Act was misconceived since the so- called incriminating material was not found during the search of the Assessee's premises. The Revenue could have proceeded against the Assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... From the heading of section 153, the intention of the legislature is clear viz., to provide for assessment in case of search and requisition. When the very purpose of the provision is to make assessment in case of search or requisition, it goes without saying that the assessment has to have relation to the search or requisition. In other words, the assessment should be connected with something found during the search or requisition, viz., incriminating material which reveals undisclosed income. Thus, while in view of the mandate of sub-section (1) of section 153A of the Act, in every case where there is a search or requisition, the Assessing Officer is obliged to issue notice to such person to furnish returns of income for the six years preceding the assessment year relevant to the previous year in which the search is conducted or requisition is made, any addition or disallowance can be made only on the basis of material collected during the search or requisition. In case no incriminating material is found, as held by the Rajasthan High Court in the case of Jai Steel (India) (supra), the earlier assessment would have to be reiterated. In case where pending assessments have abated, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 Rs.l 1,05,51,000/- 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 date of initiation of search under section 132 or making of requisition under section 132A, while computing the total income of the assessee under section 153A of the Act, additions or disallowances can be made only on the basis of the incriminating material found during the search or requisition. In the present case, it is an admitted position that no incriminating material was found during the course of search, however, it is on the basis of some material collected by the Assessing Officer much subsequent to the search, that the impugned a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 143(1) of the Act was construed by the Hon'ble Delhi Court as completion of assessments and this acceptance of return, according to the Hon'ble Delhi High Court, could be tinkered with if some incriminating material was found at the premises of the assessee. Though, it is not necessary to recite and recapitulate this proposition in other judgments, suffice to say that in the following judgments, unanimous view is taken by Hon'ble High Court as well as ITAT on this point. They concur with the Hon'ble High Court. Just for reference, we note the citations as under:- Sl. No. Particulars 1. CIT vs. Kabul Chawla [2015] 61 taxmann.com 412 (Delhi) 2 . PCIT -vs.- Kurele Paper Mills (P) Ltd. [2017] 81 taxmann.com 82 (Delhi) 3. PCIT -vs.- Rashmi Infrastructure Pvt. Ltd. ITAT 99 of 2019, GA No. 1211 of 2019 (Calcutta HC) 4. CIT -vs.- Veerprabhu Marketing Ltd. [2016] 73 taxmann.com 149 (Calcutta) 5. PCIT -vs.- Salasar Stock Broking Ltd. ITAT No. 264 of 2016, GA No. 1929 of 2016 (Calcutta HC) 6. M/s. Mani Square Ltd. -vs.- ACIT [IT(SS)A Nos. 58/KOL/2019 & others 7. ACIT -vs.- Majestic Commercial (P) Ltd. [2020] 116 taxmann.com 412 (Kolkata Trib.) 8. PCIT -vs.- Anand Kum ..... X X X X Extracts X X X X X X X X Extracts X X X X
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