TaxTMI 
TaxTMI 
2014 (2) TMI 810
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....the AO in the assessment order passed u/s 143(3) r.w. section 153A of the Act is both bad in law and bad in facts. Addition on accont of artificially inflated investment in house duly disclosed in the balance sheet of the assessee Rs. 31,33,07/-. 2. The CIT (A) erred in confirming the addition of Rs. 31,33,007/- made by the AAO on account of artificially inflated investment in house which was duly disclosed in the assessee‟s balance sheet. Disallowance u/s 14A: Rs. 23,31,469/- 3. The Ld CIT (A) erred in directing the AO to recomputed the disallowance u/s 14A of the Act without appreciating the fact that (a) the personal books of accounts of the assessee were separately maintained from the books of accounts of his business; (b) no expenditure whatsoever was incurred by the assessee and (c) no deduction was claimed by him while computing the total income." 3. During the proceedings before us and at the outset, Shri Devendra Mehta, Ld Counsel for the assessee mentioned that the appeals of the for the AY 2003-04, 2005-06, 2006-07 and 2007-08 are dismissed for want of prosecution. Further, Ld Counsel me....
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....other addition u/s 14A of the Act, AO invoked the provisions of Rule 8D to the AY 2003-04 which is against the settled legal propositions on this issue. Further also, it is evident from the orders of the revenue authorities that the assessee has not raised the question of validity of the notice u/s 153A of the Act during the assessment proceedings. Aggrieved with the above additions as well as the validity of the notice u/s 153A of the Act, assessee filed an appeal before the CIT (A) raising both the legal issue as well as the merits of the above said additions. 5. Validity of the notice u/s 153A of the Act is the legal issue before the CIT(A).In this regard,assessee submitted that the notice is not valid for the reasons i.e., (i) there is no incriminating material to suggest the concealment or undisclosure of any income beyond what is disclosed in the original return which is duly assessed in the completed assessment; and (2) the additions referred above should have been made u/s 68 and 14A are to be done in the regular as well as reopened assessments, if any and certainly not in the assessment made u/s 153A of the Act. Considering the expiry of the time, the Revenue could not ha....
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.... While commenting that the facts of the present case are distinguishable from the cases relied upon by the assessee, the CIT (A) commented that "in the present case, loose papers seized are relating to the shares purchased of 3 unlisted companies, trial balance and papers relating to the purchase of immovable properties were found and seized. Thus, the argument of the assessee that no papers were seized is wrong and without any basis. Undisclosed income was declared of Rs. 11 Crs on the basis of these papers. The decisions relied on by the appellant are totally distinguishable to the facts of the present case because in those cases no documents were found and seized during the course of search. Therefore, in the present case, the AO has rightly assessed the income on the basis of seized material and other facts on record". CIT (A) dismissed the arguments of the assessee on the legal issue relating to the validity of the notice u/s 153A of the Act. As per the Ld CIT (A), once the notice is validly issued, addition can be made with or without the presence of incriminating material. Aggrieved with the above decision of the CIT (A), assessee filed an appeal before the Tribunal by raisi....
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....umar Bhatia vide ITA No.1626/2010, dated 7.8.2012 (Del.), Ld Counsel mentioned that this issue regarding the addition to be made in a completed assessment where no incriminating material was found, was left open. Para 23 of the said judgment is relevant in this regard. Further, relying on the order of the ITAT, Jodhpur in the case of Dinesh Tabacco Industries vs. DCIT vide ITA No.184 & 185/JU/2011 dated 22.2.2013, Ld Counsel reiterated that the notice becomes invalid when there is no incriminating material. Similar view was repeated by the Ld Counsel by relying on the decision of the ITAT, Kolkata in the case of LMJ International Ltd vs. DCIT, 119 TTJ 214 (Kol). The said decision of the of ITAT Kolkata (supra) is relevant for the proposition that where noting incriminating was found in course of search relating to assessments, assessment for such years cannot be disturbed. He culled out many other decisions which are as under. a) Anil P Khimani vs. DCIT [2010 TIOL-177-ITAT-MUM] b) Meghmani Organics Ltd vs. DCIT [2010] 36 DTR 187 (Ahd) c) Suncity Allys Pvt. Ltd. vs. ACIT [2009] 124 TTJ 674 (Jodh) &n....
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....f the Income-tax Act, 1961". AO has to apply his mind and form a belief there from. The Department was not entitled to reopen the concluded assessment based on such DVO‟s report. Such reports are mere an opinion of the valuer, the third party and never can be equated to the opinion of the AO and relied on the Guwahati High Court judgment in the case of Bhola Nath Majumdar v. Income- tax Officer 221 ITR 608 and the judgment of Hon‟ble Rajasthan High Court in the case of Brig. B. Lall v. Wealth-tax Officer 127 ITR 308. In these cases, the concealment proceedings were quashed on this basis. Referring to the another judgment of Hon‟ble Delhi High Court in the case of CIT vs. Suraj Devi, 328 ITR 604 and in the case of CIT vs. Naveen Gera [2011] 328 ITR 516, Ld Counsel mentioned that the additions cannot be made on the basis of the valuation report of the DVO in the absence of any incriminating material. The burden vests on the Revenue in such caes. Referring to the facts of the present case, Ld Counsel mentioned that the assessee disclosed investment of Rs. 46,13,007/- on the house as on 31.3.2002 whereas the AO came to the conclusion that the land value of Rs. 14.8 la....
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....ould cause certain degree of hardship to assessee. Ld DR has brought our attention to para 7 of the said judgme nt of the Delhi High Court and mentioned that " the section couched in mandatory language which implies that once there is a search, the AO has no option but to call upon the assessee to file the returns of the income for the earlier six assessment years. It is not merely the undisclosed income that will be brought to tax in such assessments, but the total income of the assessee, including both the income earlier disclosed and income found consequent to the search, would be brought to tax. The normal provisions relating to inquiry, affording opportunity etc., which are provided for in sections 142, 143 etc are to be followed by the assessing officer". Of course, the above explanation of the provisions does not refer to the present debate relating to the "Incriminating material" based additions in the cases of completed assessments. Decision of the Tribunal: 9. We have heard both the parties on the legal issue relating to the sustainability or validity of the additions made in the assessments madeu/s 153 A read with section 143(3) of the Act in respect of completed asse....
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....support the above additions. The valuation report, which is garnered by the authorities constitutes mere estimates and the provisions of section 132 is not required to obtain such report from the DVO. As such, for making aforesaid additions of Rs. 31,33,070/-, AO has not used even the said valuation report and the AO disallowed what is reported in the books. Similar is the case with the additions u/s 14A of the Act. Therefore, undisputedly, the impugned quantum additions are made merely based on the entries in the accounted books and certainly not based on either the unaccounted books of accounts of the assessee or books not produced to the AO earlier or the incriminating material gathered by the investigation wing of the revenue. Considering the legal propositions place before us by the assessee‟s counsel, we are of the opinion, such assessments or additions are unsustainable in law. 13. For the sake completeness of the assessee, we insert here some of the extracts from relevant judgments and they are: A. [2013 36 taxmann.com 523 (Rajasthan) in the case of Jai Steel (India) vs. ACIT- From Held portion: ....The requirement ....
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....sarily support the in terpretation that for the completed assessments, the same can be tinkered only based on the incriminating material found during the course of search or requisition of documents. B. [2012] 28 Taxmann.com 328 (Mumbai-Trib.) in the case of Gurinder Singh Bava vs. DCIT .... Whether since assessment under section 153A was passed by Assessing Officer on basis of material available in return of income and there was no reference to any incriminating material found during search and since no assessment was abated, assessment under section 153A was to be quashed being made without jurisdiction available under section 153A- Held, yes [Para 6.2] [In favour of assessee]Para 6.1 of the Order: The Special bench in the case of Alcargo Global Logistics Ltd.(supra), has held that provisions of section 153A come into operation if a search or requisition is initiated after 31.5.2003 and on satisfaction of this condition, the AO is under obligation to issue notice to the person requiring him to furnish the return of income for six years immediately preceding the year of search. The Special Bench further ....
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....ome or for making additions based on the incriminating material or unproduced books of account. Otherwise, additions made in routine matter as in the present appeal are not sustainable. Further,for the sake completeness of the order, we have perused the orders/judgments relied upon by Ld DR for the revenue and found they are distinguishable on facts for one reason or other. To start with, we have perused the judgment of Honble Hon‟ble Delhi High Court in the case of Madugula Venu (supra) and find that, though explained the provisions in plain language, it does not dealt with the relevance or factum of incriminating material. Further, the judgment of Andhra Pradesh High Court in the case of Gopal Lal Bhadruka (supra) is not on the notices issued u/s 153A of the Act and the same is pronounced in the context of the notice u/s 153C of the Act. Further, also, the Coordinate Bench decision in the case of Scope (P) Ltd (supra) has granted relief to the assessee though the notice issued u/s 153A of the Act was upheld. However, this order has not considered the then existing decision of the Coordinate Bench decision in the case of Pratibha Industries Ltd (supra) which is relevant for ....
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....ngs in the case of M/s. Global Reality Ventures P. Ltd. On the date of recording of satisfaction, first notice u/s 153(c) was issued. There is no indication whatsoever, that the assessment proceedings in the case of Global Reality Ventures P. Ltd were in progress or not, at the point of time and that the AO during the course of that proceedings recorded this satisfaction. The procedure contemplated under the Act was not followed. (c) The satisfaction is recorded on 23rd July, 2010. The relevant AY would be 2011-12. The six preceding AYs relevant to this AY would be 2005-06 / 2006-07 / 2007-08 / 2008-09 / 2010-11. Thus, the notice issued u/s 153‟C‟ for the AY 2004-05 is clearly barred by limitation. (d) Even otherwise, as there is no incriminating material found during the course of search, the AO should have dropped the proceedings initiated u/s 153‟C‟ of the Act. (e) As there is no dispute that no assessment or reassessment has abated in this case for the reason, that the date of search, the date of search which in the case on hand would be 25.3.2010, by virtue of First Proviso to....