TaxTMI 
TaxTMI 
TaxTMI 
2014 (2) TMI 937
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.... by him and read out the relevant contents of the same which read as under: "i)...... ii) Shri Nand Kishor Katwankar is office assistant working in my office since 1985. He is usually assigned the work of submitting and collecting documents from the Income Tax Department of various clients. He collected the grounds of appeal of Ms. Nikki Agarwal for the AY 2003-2004. iii) Usually, the documents collected from Income Tax Department are placed before me for reviews. However, as I was out of town, he kept the grounds of appeal in relevant file but inadvertently, did not bring it to my notice for further action. iv) As soon as the file was put up for before me for preparation of written submission, I noticed that the Cross Objection against the Revenue's appeal were not prepared and filed before the Hon'ble Tribunal. v) I reiterate that the above mistake was a bona fide mistake and an inadvertent lapse on our part and assessee should not be allowed to suffer because of it." 2.1. In this regard, Ld Counsel for the assessee relied on the judgment of the Hon'ble Supreme Court in the case of Collector, Land ....
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.... shares of Database Finance Ltd', which are otherwise accounted in the books of accounts, towards unexplained expenditure relating to the long term capital gains on sale of the same shares. Matter travelled to the first appellate authority. 5. During the proceedings before the, after considering the submissions made by the assessee, CIT (A) confirmed the above additions made by the AO. Aggrieved with the above decision of the CIT (A), the assessee is in appeal before the Tribunal by raising the above mentioned grounds. 6. During the proceedings before us, Shri Devendra Mehta, ld Counsel for the assessee raised the above mentioned grounds and questioning the additions and the validity of the assessment u/s 153A of the Act. In this regard, Ld Counsel for the assessee submitted various arguments before us, which are common to the ones already mentioned in detail and adjudicated by us in connection with the appeals filed in the case of Shri Govind Agarwal vs. ACIT vide ITA Nos.3389/M/2011 (AY: 2002-2003) and ITA No. 3390/M/2011 (AY: 2004-2005) vide order dated 10.01.2014. For the sake of completeness of this order, relevant port ions of the said order of the Tribunal (supra) are ....
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....case of CIT vs. Anil Kumar 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 Ally....
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....the District Valuation Officer is not per se information for the purpose of reopening an assessment under section 147 of 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 cases. Referring to the facts of the present case, Ld Counsel mentioned that the assessee disclosed investment of Rs. ....
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....tion that the notice issued u/s 153A calling upon assessee to file the returns for earlier 6 AYs cannot be challenged on the ground that it would cause certain degree of hardship to assessee. Ld DR has brought our attention to para 7 of the said judgment 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....
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....n house duly disclosed in the balance sheet of the assessee Rs. 31,33,070/-; and (ii) disallowance u/s 14A: Rs. 23,31,469/-. Admittedly, there is no incriminating material before the AO to 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 relevan....
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....used in the context of an abated proceedings and reassess has been used for completed assessment proceedings, which would not abate as they are not pending on the date of initiation of the search or making of requisition and which would also necessarily support the interpretation 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 initi....
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....form in advocating against making additions in routine manner in the assessments made u/s 153A of the Act when there is no incriminating material gathered in the search action. Statutory notice u/s 153A of the Act can also be issued to reiterate the returned income 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)....
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....ttached annexures. Such documents cannot be said to be books of accounts or documents belonging to the assessee. (b) The Revenue has not produced the record of the searched person to demonstrate that satisfaction was recorded during the course of assessment proceedings 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 sh....
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....ng incriminating is found on account of search or requisition, then the question of reassessment of the concluded assessments does not arise, which would more reiteration.............". Thus, the judgment of Hon'ble High court in the case of Jai Steel Ltd, supra and above decisions of the Tribunal are categorical in concluding that, in case of the concluded assessments like the present one, the additions are made only based on the incriminating material discovered during the search action. The facts of the Jai Steel Ltd (supra) are identical to the present one i.e. AO made additions by reassessing u/s 153A on the completed assessment u/s 143(1) of the Act. Thus, considering the judgment in the case of the Jai Steel Ltd (supra), the arguments on the legal issue raised before us stands covered. Therefore, considering the Rajasthan High Court's judgment in the case of Jai Steels Ltd, supra, we have no difficulty in (i) upholding the issue of notice u/s 153A of the Act and (2) in disapproving the making of the impugned additions u/s 68 and 14A of the Act, which are not backed by the incriminating materials. In the absence of incriminating material, the role of the AO is only to....
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....urchase and sale of the said shares is not confirmed by the broker or any other party and these very documents were admitted to be created for the purpose of the "managed capital gain" by the assessee / asessee's representative u/s 131 and 132(4) of the Act. c. The assessee had purchased the said shares on price before split even after the split of the shares had taken place. d. The sale price of shares were manipulated and the activity of the company and its balance sheet does not show that the share of face value of Rs. 1 should be sold at an average price of Rs. 85.06". iii) Whether the Ld CIT (A) has erred in relying on the decision of Hon'ble Jodhpur Tribunal in the case of ACIT vs. Chandresh Kumar Maheswari 120 TTJ 132 Jdh as the facts are distinguishable? iv) Whether on the facts and in the circumstances of the case the Ld CIT (A) was justified in deleting the addition of Rs. 1,74,375/- made on account of unexplained expenses incurred by the assesse for arranging the bogus long term capital gain. v) whether on the facts and in the circumstances of the....
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.... 15. Ground No.1 raised in this appeal is identical to that of the ground raised by the assessee vide CO No. 204/M/2013 for the assessment year 2003-2004, which is adjudicated by us in the above paragraphs of this order. While adjudicating the said appeal, we have already decided the issue in favour of the assessee. Considering the same and following the principles of consistency, ground no.1 of the instant appeal should also be decided in favour of the assessee. Accordingly, the legal issue involved in ground no.1 is allowed in favour of the assessee. 16. Ground no.2 relates to the addition u/s 68 on account of 'unexplained gifts received by the asessee'. In this regard, Ld Counsel for the assessee relied on the order of the Tribunal in the case of M/s. Govind Agarwal (HUF) vs. DCIT vide ITA No.8917/M/2010, dated 16.5.2013, for the AY 2005-06 and read out the relevant paras 6 & 7 of the said order of the Tribunal dated 16.5.2013 (supra) which read as under: "6. We have heard the rival contentions on the preliminary issue as to whether the addition can be made in the present case once the assessment for the assessment year 2005-06 has attained finality ....
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....tion made by AO under section 153A of the Act. Under the provisions of section 153A, in all cases, where search is conducted under section 132 of the Act, AO is empowered to assess or reassess total income of six assessment years preceding the assessment year in which search was conducted. The section also provides that assessment or reassessment relating to any assessment year falling within period of six assessment year if pending on the date of initiation of search shall abate. There have been divergent views regarding scope of application of section 153A in cases where no incriminating material was found indicating any undisclosed income. Some of the Tribunal Benches had taken the view that in case no incriminating material was found AO had no jurisdiction to make assessment or reassessment under section 153A while some other Benches held that jurisdiction under section 153A was automatic to reassess six immediate preceding assessment years irrespective of the fact whether any incriminating material was found or not. Another aspect on which there had been divergent views was whether even if AO had jurisdiction under section 153A, addition can be made in assessment / reassessmen....
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....de u/s 68 is uncalled for as the same is beyond the scope of section 153A / 153C of the Act. No incriminating material in support of the additions made u/s 68 of the Act was brought to our notice by the Revenue. Therefore, the addition made u/s 68 of the Act is deleted and the ground no.2 raised by the assessee is allowed. 18. In the result, appeal of the assessee is allowed. I.T.A. No.8916/M/2010 (AY: 2005-2006) (By assessee) 19. This appeal filed by the assessee on 21.12.2010 is against the order of the CIT (A)-41, Mumbai dated 25.11.2010 for the assessment year 2005-2006. 20. In this appeal, assessee raised the following grounds which read as under: "1.0. The order passed by the Ld CIT (A) confirming the assessment order u/s 143(3) r.w.s. 153A of the Income Tax Act, 1961, is both bad-in-law and bad-in-facts. 1.1 In doing so, he did not appreciate that no addition could have been made while completing assessment u/s 153A of the Act in case of completed assessments if no undisclosed income was determinable from the material found as a result of search. 2.0 The Ld CIT (A) erred in law as well as in facts, in confirming the addition u/s ....
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....search. On a perusal of the records and the findings of the Assessing Officer and the learned Commissioner (Appeals), we find that there is no reference to any seized material or any incriminating documents so as to suggest that addition made in the assessment order are based on any incriminating material found at the time of search. Once that is so and also that the assessment for the assessment year 2005- 06 has attained finality before the date of search, then no addition can be made under section 153A. The Mumbai Special Bench decision of the Tribunal in All Cargo Global Logistic Ltd. (supra), after analyzing the relevant provisions of the Act, came to the following conclusion and ratio:- "(a) In assessment that are abated, the Assessing Officer retains the original jurisdiction as well as jurisdiction conferred on him under section 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 under section 153A will be made on the basis of incriminating material which in the context ....
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....hese aspects had been referred to the Special Bench of the Tribunal in case of Alcargo Global Logistics Ltd. and order of Special Bench dated 6.7.2012 has been referred. 6.1 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 held that in case assessment has abated, the AO retains the original jurisdiction as well as jurisdiction under section 153A for which assessment shall be made for each assessment year separately. Thus in case where assessment has abated the AO can make additions in the assessment, even if no incriminating material has been found. But in other cases the Special Bench held that the assessment under section 153A can be made on the basis of incriminating material which in the context of relevant provisions means books of account and other documents found in the course of ....