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TMI Blog2022 (12) TMI 675X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment under section 143(3) was completed on 12th December 2011 at a total income of Rs 42,18,260. However, as a result of search operations having been carried out by the income tax department on the assessee and its associated persons and group enterprises, the assessee was called upon to file a fresh return under section 153A, which was filed by the assessee on 3rd February 2017. During the course of ensuing assessment proceedings, the Assessing Officer noticed that the assessee had issued 4,75,000 equity shares and 9,04,762 preferences shares to one Mauritius-based company by the name of Access Investment India, and 1,45,712 and 50,000 preference shares, in two different lots, to another Mauritius based entity by the name of Aanya Properties (2) Limited. Some of these shares were issued at par, and others at different rates of premium. It was in this backdrop that the Assessing Officer required the assessee to furnish the details in support of the "credibility of the said subscribers of the shares, and genuineness of the transaction". The necessary details were furnished by the assessee, though, for the reasons we will set out in a short while, it is not really necessary to go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1096/Mum/2020, has observed as follows: 5. After considering the detailed submissions of the assessee Ld.CIT(A) disposed off the appeal filed by the assessee by adjudicating only Ground No. 2 raised by the assessee on the issue of incriminating material and other grounds raised by the assessee were dismissed as it becomes academic in nature. For the sake of clarity, the finding of the Ld.CIT(A) with regard to Ground No. 2 are reproduced below: - "5.2 Ground No.2: This ground of appeal relates to addition of Rs. 3,09,16,129/-, which is reduced from Work-in-progress. This issue is discussed in para 6, 61.1 and 6.2 of the assessment order. In this regard, assessee, in the written submission (para 4 above), has - stated that the assessment u/s. 143(3) of the year under consideration was already passed prior to search and the AO did not make any addition on account of brokerage, sales & marketing, finance cost and legal & professional fees. Therefore, the AO cannot revisit the order without any incriminating material. AO has not brought out anything in the assessment order to establish, that certain new facts or new insights/revelations or any incriminating document or any admission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... akumar v. CIT[2016] 75 taxmann.com 215 (Kerala) 3. M/s. Canara Housing Development .v. Dy.CIT (Karnataka High Court) on 25 July, 2014 ITA No. 38/2014 [B] List of few cases wherein the SLP filed by the Revenue, against the orders of High Courts given in favour of the assessee on the issue of addition being made in Search Assessments even in the absence of Incriminating Material, are admitted 1 Pr.CIT v. Gahoi Foods (P.) Ltd [2020] 117 taxmann.com 118 (SC) 2 Pr.CIT v. Param Dairy Ltd. [2021] 133 taxmann.com 148 (SC) 3 Pr.CIT v. Gaurav Arora [2021] 133 taxmann.com 293 (SC) 4 CIT v. Continental Warehousing Corporation (Nhava Sheva) Ltd. [2015] 64 taxmann.com 34 (SC) In addition to the case laws relied Ld. DR further relied on the decision rendered by the Hon'ble Kerala High Court in the case of CIT vs K.P. Ummer dated 19/02/2019, ITA No. 174 of 2013 for the contention that there is no bar on making any addition to the income of the assessee even in case of completed assessments irrespective of the fact that no incriminating material was found during the course of search proceedings." 9. On the other hand, Ld. AR of the assessee submitted written submissions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... search notice u/s. 153C of the Act was issued and served on the assessee. We observed from the notice u/s.153C of the Act that the issues raised in the notice and the additions made by the Assessing Officer in assessment order are not the same, in the Assessment Order Assessing Officer analysed the financial statements and disallowed certain expenditures which according to the Assessing Officer should have been charged to work-in-progress accordingly, he made addition. After careful consideration of the order passed by the Ld.CIT(A) and Ld.CIT(A) gave a finding that the addition made by the Assessing Officer in the Assessment Order are not based on any incriminating material found during the search it is in line with the decision of the Hon'ble Jurisdictional High Court in the case of CIT v. Continental Warehousing & All Cargo Global logistics (supra). Further we observe that revenue has raised Ground No. 2 with the submission that revenue has not accepted the decision of the Hon'ble Jurisdictional High Court in the case of CIT v. Continental Warehousing & All Cargo Global logistics (supra). However, the above decision is binding on this jurisdiction and we do not find any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ief already claimed and allowed by AO prior to search, whether under section 143(1)or 143(3). 4. There are contradictory decisions of the courts on this issue, with the Jurisdictional Bombay High Court deciding the issue in favour of the assessee in its oft quoted judgement rendered in the case of Continental Warehousing. However, there are a few High Courts which having taken cognizance of the Bombay High Court , referred above , have held that there is no requirement of existence of incriminating material either for invoking provision of section 153A or for revisiting the assessments which stood completed as on the date of search either u/s 143(1) or 143(3). As directed by the Hon'ble Bench , kindly find below a summary of the decisions relied upon by the undersigned to counter the assessee"s contention A) Commissioner of Income-tax, Central, Kanpur v. Raj Kumar Arora [2014] 52 taxmann.com 172 (Allahabad), dated 11 July, 2014 wherein after analysing the provisions of section 153A and the CBDT Circular dated 05.09.2003 explaining these provisions , the Hon'ble Court held as under : " 9. Under Section 153A of the Act, the Assessing Officer is bound to issue notice to the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the search operation but also with regard to the material that was available at the time of the original assessment." B) M/s Canara Housing Development Company vs The Deputy Commissioner Of Income (Karnataka High Court) dated 25 July, 2014 ITA No. 38/2014 Though the substantial question of law that arose for consideration in this case was with reference to the powers of the CIT to invoke the provisions of section 263, viz, "When once the proceedings under Section 153A of the Act is initiated, whether the Commissioner of Income Tax can invoke the power under Section 263 of the Act to review the order of assessment passed by the Assessing Authority?", the Karnataka High Court also provided indepth analysis of the provisions of section 153A of the Act and held as under: When once the proceedings are initiated under Section 153A of the Act, the legal effect is even in case where the assessment order is passed it stands reopened. In the eye of law there is no order of assessment. Re-opened means to deal with or begin with again. It means the Assessing Officer shall assess or reassess the total income of six assessment years. Once the assessment is reopened, the assessing author ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act, on the basis of which the notice is sought to be issued, should have resulted in unearthing incriminating material against the assessee? (ii) While concluding the assessment following the notice issued under Section 153A(1)(a) of the Act, is it necessary that incriminating materials were unearthed as against the assessee in the search under Section 132 of the Act? Is it legally sustainable to conclude an assessment of such a nature in the absence of any incriminating material having been unearthed in the search? Is it necessary that any incriminating material ought to have been unearthed in the search under Section 132 of the Act to make any additions to the returns filed by the assessee following notice under Section 153A(1) (a)? Answering the above two questions, the Court held as under: 7. In so far as the issue as to whether it is necessary that incriminating materials should be unearthed in a search under Section 132 of the Act to sustain a notice issued under Section 153A(1)(a) is concerned, the issue stands covered in favour of the Department as per the judgment of this Court in St. Francis Clay Becor Tiles's case (supra) and Promy Kuriakose's ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt to mention that the judgment of the Bombay High Court in CIT v. Continental Warehousing Corporation (Nhava Sheva) Ltd. [2015] 374 ITR 645 was also brought to the notice of the Kerala High Court by the appellant. D) CIT vs Shri K P Ummer, Kerala High Court's order dated 19 February, 2019 in ITA No. 174 of 2013 One of the Questions of Law framed by the Court, as mentioned in para 8 of its order is as under: "Whether the Tribunal was correct in having found that in those years prior to 2005-06, where the due date for issue of notice under Section 143(2) had expired, as on the date of search, there could be no re-assessment made by virtue of the provisions under Section 153A; of such matters as available in the returns filed, which stands concluded by sheer efflux of time?" The court relying upon two of its earlier decisions reported in CIT v. St. Francis Clay Decor Tiles [2016]385 ITR 624(Ker)] and CIT v. Dr P Sasikumar[2016(387)ITR 8(Ker)]held that the question is no longer res integra. After reproducing the relevant extract from St. Francis Clay Décor, the Kerala High Court held that "10. Hence, when a notice under Section 153A is issued, it enables the depart ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same, if the proceedings under 153A(1) are eventually set aside; was to provide for a separate procedure for the years in which the notice period under Section 143(2) has expired. In fact, the second proviso is intended at keeping in abeyance any pending proceeding for assessment in a particular year; in which there is a proceeding initiated under Section 153A, pursuant to a search under Section 132. Otherwise, there would be parallel proceedings continued for the same assessment year. Hence, when a notice is issued pursuant to a search under Section 132, for assessment under Section 153A, all pending proceedings with respect to a regularly initiated assessment or re-assessment would stand abated. For the said years, the proceedings under Section 153A would be continued and the assessments concluded on that basis. However, when and if the said assessment proceeded with and concluded under Section 153A, is said aside by the statutory authorities or by this Court, then necessarily the original proceedings which stood abated would revive, which is the enabling provision under sub-section (2) of Section 153A. There can be no corollary inferred from the above provisions to find cert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. Ltd. in assessment year 2013-14 in appeal of revenue ITA No.1096/Mum/2020 before Hon'ble ITAT Mumbai, A-Bench. The appeal of Revenue came to be dismissed by Hon'ble ITAT Mumbai, A-Bench in the case of associate concern of assessee M/s. Luxora Realtors Pvt. Ltd. vide order dated 08/02/2022 copy of which is enclosed. The Hon'ble ITAT has considered the judgment relied upon by CIT(DR) and after considering the same has followed the judgment of Hon'ble Jurisdictional High Court relied upon by the assessee and held that no addition can be made in the completed assessment in the absence of incriminating material found in the course of search. The decision of co-ordinate bench in the case of associate concern of assessee M/s. Luxora Realtors Pvt. Ltd. is binding precedent. Relying upon the same it is humbly prayed that addition made in respect to share capital contribution in the absence of any incriminating material is unjustified and unsustainable. 4. It is worthwhile to note that Hon'ble Delhi High Court in recent decision in the case of Mamta Agarwal in ITA No.191/2022 vide judgment dated 14/07/2022 has held that no addition could be made in the absence of in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icial precedent, can dilute, curtail or otherwise narrow down the binding nature of such judicial precedent. As for the first question, i.e. binding nature of decisions from the Hon'ble jurisdictional High Court and decisions from the Hon'ble non-jurisdictional High Court, the legal position is clear and unambiguous. As observed by the Hon'ble Supreme Court in the case of Mumbai Kamgar Sabha v. Abdulbahi Faizullbhai AIR 1976 SC 1455, "It is trite, going by anglophonic principles that a ruling of a superior Court is binding law". While dealing with judicial precedents from non-jurisdictional High Courts, we may usefully take of observations of Hon'ble jurisdictional High Court in the case of CIT vs. Thana Electricity Supply Ltd. [(1994) 206 ITR 727 (Bom)], to the effect "The decision of one High Court is neither binding precedent for another High Court nor for the Courts or the Tribunals outside its own territorial jurisdiction. It is well-settled that the decision of a High Court will have the force of binding precedent only in the State or territories on which the Court has jurisdiction. In other States or outside the territorial jurisdiction of that High Court it may, at ..... X X X X Extracts X X X X X X X X Extracts X X X X
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