TaxTMI 
TaxTMI 
2014 (11) TMI 99
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....and no material / evidence was found during the course of search and seizure operation for the relevant assessment year. 2. That on the facts and in the circumstances of the appellant's case, the learned CIT(Appeals) erred both in fact and in law in confirming the order of AO making an ad hoc estimated disallowance of expenses of Rs. 2,10,311/- by holding that failure on the part of the AO to afford the appellant an opportunity of being heard before making addition does not vitiate the assessment proceedings. 3. That on the facts and in the circumstances of the appellant's case, the learned CIT(Appeals) erred both in fact and in law in confirming the order of learned Assessing Officer making an ad hoc estimated disallowance of expenses of Rs. 2,10,311/- by holding that disallowance out of administrative expenses @ ½ % of average investment cannot be said to be ad hoc. " 3. Briefly stated the fact; giving rise to this appeal are that a search and seizure operation u/s 132of the Act 1961, (for short "the Act") was carried out in the assessee's group of cases including the assessee company on 13.05.2010 and subsequently all cases were duly centralised with Central Circ....
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....the relevant assessment year. 7. The ld. AR further contended that the ld. CIT(A) also erred both in fact and in law in confirming the order of the AO by holding that failure on the part of the AO to afford opportunity of being heard before making addition does not vitiate the re-assessment proceedings. 8. The ld. AR vehemently contended that the ld. CIT(A) also erred in confirming the order of the AO making an adhoc estimated disallowance of administrative expenses by holding that the disallowance out of administrative expenses @ 0.5% of average investment cannot be said to be adhoc. The ld. AR has placed his reliance on various decisions and citations including recent judgment of ITAT, Delhi Bench, 'G' in the case of Sanjay Aggarwal, Vs. DCIT (2014) 47 Taxmann.com 210 (Del- Tribunal) & another decision of ITAT, Delhi Bench, 'SMC' in the case of Parivar Properties Pvt. Ltd. Vs. DCIT (2014) 41 Taxmann.com 485 (Delhi-Tribunal). 9. Reply to the above the ld. DR supported the orders of the authorities below and submitted that in view of recent judgment of Hon'ble Jurisdictional High Court of Delhi, in the case of Filatex India Ltd. Vs. CIT 2014-TIOL-1325- HC-DEL submitted tha....
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.... shares during the current year. Total investment has gone down in this scrip from Rs. 2,17,776 to Rs. 1,31526. Similarly, during the year under consideration the appellant has got 400 equity shares of Rs. 10/- of M/s. Videocon Industries Ltd. As against 2000 equity shares held in M/s. Videocon International Ltd. Pursuant to amalgamation of these two companies. Therefore, the appellant company has made certain changes in investment. Hence, these change in portfolio & record keeping needs certain administrative expenditure. Accordingly, in my view, there is some nexus of maintaining the investment & administrative expense. In view of the above the assessing officer disallowance of ½ % of average investment out of total administrative expense claimed for Rs. 7,55,73,544/- appears to be proper. It may be mentioned here that disallowance of administrative expense cannot be said as adhoc. As subsequently w.e.f. 24.03.2008 under Rule 8D, sub rule (iii) for residual expense, i.e. not direct expense disallowance is to be computed @ ½ % of average investment. Through Rule 8D has not been made retrospectively, but this rule gives basis of disallowing indirect expenses in clause....
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....ached by the AO having jurisdiction of the assessed person is that the valuable articles or books of account, etc., seized during the search belong to a person other than the assessed person and there was no requirement in section 153C(1) that the AO should also be satisfied that such valuable articles or books of account, etc., belonging to the other person must conclusively reflect or disclose any undisclosed income. Thus, it is apparent that the issue raised in the case of SSP Aviation Ltd. (supra) was altogether different from the one which is under our focus in the extant appeal. Presently, we are not required to determine as to whether any satisfaction was properly recorded in the case of person other than the person searched. On the contrary, we are dealing with assessment u/s 153A, being the assessment in the case of person searched. In that view of the matter, we find that the reliance of the ld. DR on this judgment is misplaced. 8. Now we turn to the other judgment relied by the ld. DR in the case of Chetan Das Lachman Das (supra). Referring to para 11 of this judgment, the ld. DR contended that the condition precedent for computing undisclosed income on the basis of i....
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....his Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139; (b) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made : Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years: Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this sub-section pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate : ..............' 10. A careful perusal of the above provision brings to light that where a search is initiated u/s 132 of the Act etc., the A.O shall issue a notice requiring the person searched etc. to furnish his return of income in respect of each assessment year falling within six assessment years immediately preceding the assessment year relevant to the previous year in which such searc....
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....erial was found. Our view finds support from para no. 11 of the judgment in Chetan Das Lachman Das (supra),in which it has been held that : "Obviously an assessment has to be made under this section only on the basis of seized material." 11. This brings us to the next contention put forth on behalf of the Revenue that since there is no specific mention of correlating addition with the incriminating material found during the course of search, the tribunal should not venture to make such a provision in the Act. We find this contention as bereft of merits. The major reason for our this decision is that we are not trying to legislate by inserting such a provision in the language of section 153A. In fact, the special bench of the tribunal in holding so has interpreted the provision in its existing form in this way so as to prohibit the making of any addition in the assessment for those years the assessment of which was not pending on the date of search. This view has been followed in several cases including Kabul Chawla vs. Asstt. CIT [IT Appeal No.779 (Delhi) of 2013, dated 23-05-2014], to which one of us, namely, the AM is party, Thus, we do not find any merit in the contention rai....
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....to reopen those proceedings and reassess the total income but by 'taking note of the undisclosed income if any, unearthed during the search'. The expression 'unearthed during the search' is quite significant to denote that in respect of completed or non-pending assessments, the Assessing Officer is albeit duty bound to assess or reassess the total income but there is a cap on the scope of additions in such assessment, being the items of income 'unearthed during the search'. In other words, the determination of 'total income' in respect of the assessment years for which the assessments are already completed on the date of search, shall not be influenced by the items of income other than those based on the material unearthed during the course of search. There is not and cannot be any quarrel over the proposition that the Assessing Officer has no option but to determine the total income of the assessee in respect of the relevant six assessment years. However, the scope of such determination of total income is different in respect of the years for which the assessments are pending vis-a-vis the years for which assessments are non-pending. In respect to t....
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....n can be made for any assessment u/s 153A of the Act, the assessment for which is not pending on the date of search unless any incriminating material found in the course of search. 15. Thus as we have already held and it is also evident that on the basis of facts quoted above the action of the AO assuming jurisdictional u/s 153A of the Act in the instant case was contradictory to the second proviso to section 153A of the Act inasmuch as the assessment for the concern assessment year was not pending. Thus, it is further clear that where none of the assessment was pending on the date of search the AO precluded from the re-agitating issues u/s 153A of the Act, which have attained finality in the original assessment dehors any incriminating material found during the course of search. 16. Under these circumstances and factual matrix of the present case we agree with the submissions and contentions of the ld. AR of the assessee that the only action left for the AO in that respect as no addition was conceived on incriminating material as to drop the proceedings. Hence, we are of the considered opinion that under the provision of the Act only the proceedings which are pending shall g....