TaxTMI 
TaxTMI 
2016 (10) TMI 970
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....r family members, wherein similar issue was dealt by Tribunal and the addition so made was deleted on the plea that no incriminating material was found during course of search in respect of the additions so made and that time limit for issue of notice u/s 143(2) have already been expired. 5. The precise observation of the Tribunal in case of Mangal Prabhat Lodha in I.T.A.No.3456,3457 & 3458/M/2015 order dated 24/08/2016 was as under:- ITA No.3456,3457 & 3458/Mum/2015 2. In ITA No.3456 assessee is aggrieved for addition made u/s 153A r.w.s. 143(3) when there was no incriminating material found during the course of search and the assessment order has already been passed u/s 143(3) of the Act. In respect of AY 2008-09 we found that original return of income was filed u/s 139(1)of the Act on 26.12.08. Scrutiny assessment order u/s 143(3) was passed on 29.12.10. Search was conducted on 10.01.2011. It was contention of ld. AR that assessment for the year was not abated and no incriminating material was found during course of search so as to make addition while framing assessment u/s 153A r.w.s. 143(3) of the Act. 3. Thus for both assessments years the assessments were not pending a....
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....he Act respectively. The said section envisages that the Assessing Officer shall assess or reassess the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which search was conducted. The second proviso to section 153A{1} of the Act also prescribes that assessment or re-assessment, if any, relating to any assessment year falling within the period of six years referred to in subsection(1) of section 153A of the Act, which is pending on the date of initiation of search or making of requisition as the case may be , shall abate. In other words, in so far as the pending assessments are concerned, the competence of the Assessing Officer to make the original assessment converges with the assessment to be made u/s.153A of the Act, i.e. only one assessment shall be made for such assessment years based on the findings of the search as well as any other material existing or brought on record by the Assessing Officer. Notably, there would assessments in the period of the six assessment years identified in section 153A(1) of the Act, which would have become final (i.e. which are not pending on the date of search); such assessments do ....
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....e search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search take place. The AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs "in which both the disclosed and the undisclosed income would be brought to tax". iv. Although Section 153A does net say that additions should be strictly made on the basis of evidence found in the course of the search, or other postsearch material or information available with the AO which can be related to the evidence found, it does not mean that the assess....
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.... the scope and ambit of assessment envisaged under section 153A of the Act. Thus, on this aspect, the assessee succeeds. 6. In the result, the appeal of the assessee is allowed as above." 6. The jurisdictional High Court in the case of Continental Warehousing Corporation (Nhava Sheva) 374 ITR 645, vide order dated 21-4-2015 have considered the decision of Special Bench in the case of All Cargo and also the decision of Delhi High Court in the case of Anil Bhatia (supra), on which CIT(A) has relied for dismissing legal ground raised by assessee. After elaborate discussion the Hon'ble High Court held, Head Note, reads as under :- A bare perusal of section 153A would indicate as to how a non-obstante clause has been inserted and with a defined intent. Where search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after 31-5- 2003, that the Assessing Officer is in a position to and mandated to issue notice within the meaning of sub-section (1) of section 153A. That is because, Chapter XIII within which the powers of search and seizure and powers to requisition books of account are spelt out enable the revenue t....
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.... proceedings that are pending on the date of conducting search under section 132 or making requisition under section 132A stand abated and not the assessments/reassessments already finalised for those assessment years covered under section 153A. By a Circular No. 8 of 2003, dated 18-9-2003 (See 263 ITR(St) 61 at 107) the CBDT has clarified that on initiation of proceedings under section 153A, the proceedings pending in appeal, revision or rectification proceedings against finalised assessment/reassessment shall not abate. It is only because, the finalised assessments/reassessments do not abate, the appeal revision or rectification pending against finalised assessment/reassessments would not abate. Therefore, the argument of the revenue, that on initiation of proceedings under section 153A, the assessments/reassessments finalised for the assessment years covered under section 153A stand abated cannot be accepted. Similarly on annulment of assessment made under section 153A (1) what stands revived is the pending assessment/reassessment proceedings which stood abated as per section 153A(1). ■ Once it is held that the assessment has attained finality, then the Assessing Office....
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....153A . Even if the exercise of power under section 153A is permissible still the provision cannot be read in the manner suggested by the revenue. Not only the finalised assessment cannot be touched by resorting to those provisions, but even while exercising the power can be exercised where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after 31-3- 2003. There is a mandate to issue notices under section 153(1)(a) and 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. Thus, the crucial words 'search' and 'requisition' appear in the substantive provision and the provisos. That would throw light on the issue of applicability of the provision. It being enacted to a search or requisition that its construction would have to be accordingly. That is the conclusion reached by the Division Bench in Murli Agro (supra). These are the conclusions which can be reached and upon reading of the legal provisions in question. ■ Therefore, the Special Bench'....
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....3A encompasses additions not based on any incriminating material found during the course of search? 12. In the case of Kusum Gupta (supra) also the return was processed u/s 143(1) of the Act and time limit for issuance of notice u/s 143(2) had expired on the date of search and it was held that no assessment was pending in that case and thus there was no question of abatement of assessment. Therefore, the addition in the assessment u/s 153A would be made only on the basis of incriminating material found during the search. The Delhi Bench of the Tribunal in its recent decision on the issue in the case of Shri Kabul Chawla (supra) and others vide order dated 23.5.2014 has expressed the similar view. It has also discussed the decision of Hon'ble Jurisdictional Delhi High Court in the case of CIT vs. Anil Kumar Bhatia (2012) 211 Taxmann 453 (Del.), while deciding the issue. The relevant para No. 8 & 9 in this regard is being reproduced as under :- "8. We are unable to accept the contention advanced on behalf of the Revenue for the reason that if both the pending and completed assessment were to be taken on same pedestal, then there was no need to enshrine second proviso to sec. 15....
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....r 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 the assessment years for which the original assessments have already been completed on the date of search, the total income shall be determined by restricting additions only to those which flow from incriminating material found during the course of search. If no incriminating material is found in respect of such completed assessment, then the total income in the proceedings u/s 153A shall be computed by considering the originally determined income. If some incriminating material is found in respect of 11 such assessment years for which the assessment is not pending, then the 'total income&#....
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....made several additions, relying upon the incriminating material found in the course of search, which was conducted on 18.1.2006 and subsequent dates. In this paragraph of the decision it has been perused from the impugned order of the Tribunal that incriminating material including statement of Sanjay Agarwal, GM (Marketing) have resulted in additions, which have been upheld. The Hon'ble High Court has been pleased to note in this paragraph as "it is not the case of the appellant - assessee that initiation of proceedings u/s 153A was bad or unwarranted in law as no incriminating material was found during the search. The contention raised by the appellant - assessee is that the addition, which is the subject matter of questions no. (II) and (III), was/is not justified in the assessment order u/s 153, as no incriminating material was found concerning the addition u/s 115JB of the Act." The Hon'ble High Court has rejected this contention of the assessee with this finding that u/s 153A of the Act, the additions need not to be restricted or limited to the incriminating material, which was found during the course of search. Thus, it is clear from the facts of this case before the Hon'ble ....
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....has upheld the addition made u/s 115JB of the Act. Thus, having distinguishable facts this cited the decision in the case of Filatax India Ltd. (supra) is not helpful to the revenue. 16. So far as, the decision of Hon'ble Karnataka High Court in the case of Canara Housing Development Company (supra) relied upon by the ld. CIT DR is concerned, the issue raised before the Hon'ble High Court was regarding validity of revisional order passed u/s 263 of the Act by the ld. CIT partly upheld by the Tribunal and during that course the Hon'ble High Court has also been pleased to discuss the decision in the cases of Anil Kumar Bhatia (supra) and the decision of Special Bench of the Tribunal in the case of All Cargo Global Logistic Ltd. (supra). It has been observed by the Hon'ble High Court that the condition precedent for application of sec. 153A is that there should be a search u/s 132 and initiation of proceedings u/s 153A is not dependent on any undisclosed income being unearth during the such search. The Hon'ble Rajasthan High Court in the case of Jai Steel (supra) has been pleased to hold that if any books of accounts or other documents relevant to the assessment had not been produc....
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....Hon'ble Karnataka High Court and the Hon'ble Rajasthan High Court have expressed different views on the issue, the view favourable to the assessee is to be followed. We, thus, reiterate that in absence of incriminating material found during the course of search no addition can be made in a case where original assessment was already framed on the date when search took place. 19. In absence of rebuttal of this material fact by the Revenue in the present case before us that no incriminating material was found during the course of search relating to the assessee for the assessment year under consideration to justify the additions made in the year by the Assessing Officer and assessment based on the original return of income filed under sec. 139 of the Act was not pending as on the date of search, we following the above cited decisions by the learned AR, discussed above, hold that the assessment framed under sec. 153A read with sec. 143(3) of the Income-tax Act, 1961 for the assessment year under consideration is not valid and the same is accordingly held as null and void. The related ground nos. 2 to 6 on the issue is thus allowed. 20. In view of the above findings, whereby the a....
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....ssessment proceedings which are pending on the date of search/requisition. Section 153A(2) provides that when the assessment made under section 153(A)(1) is annulled, the assessment or reassessment that stood abated shall stand revived. Thus, on a plain reading of section 153A, it becomes clear that on initiation of proceedings under section 153A, it is only the assessment/reassessment proceedings that are pending on the date of conducting search under section 132 or making requisition under section 132A stand abated and not the assessment/reassessments already finalised for those assessment years covered under section 153A. By a circular No. 8, dated 18-9-2003 the CBDT has clarified that on initiation of proceedings under section 153A, the proceedings pending in appeal, revision or rectification proceedings against finalised assessment/reassessment shall not abate. It is only because, the finalised assessments/reassessments do not abate, the appeal, revision or rectification pending against finalised assessments/reassessments would not abate. Therefore, the argument of the revenue, that on initiation of proceedings under section 153A, the assessments/reassessments finalis....
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....s processed under section 143(1) and not under section 143(3) after the prescribed period of limitation, the same cannot be assessed under section 143(3) though it may be interpreted as mere intimation assessment or otherwise, but the same shall be deemed to be accepted by the Assessing Officer and it will not have any different colour other than the return which is processed under section 143(3). Admittedly, in the case in hand, the return was processed under section 143(1) but the same has attained finality due to the expiry of limitation period of twelve months from the end of the month in which the return was filed. Hence, the assessment is deemed to be completed and not pending on the date of search on 14-8-2008. Admittedly, no incriminating material was found from the premises of the assessee during the search under section 132. Once assessment under section 143(3) had been annulled by higher authorities on the ground of legality of notice under section 143(2), re-opening under section 147 on that very ground would mean nothing else but abuse of process of law. Hence, the contention of the revenue that as the return was processed under section 143(1), it was a mere inti....
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....anufacturers Pvt. Ltd., ITA No.686/JP/2014, order dated 14-12-2015, ITAT Delhi Bench in the case of M/s Rakam Money Matters Pvt. Ltd., ITA No.2821/Del/2011, order dated 10-16-2014. Our view is also supported by following decisions :- i) ITAT Mumbai Bench in the case of Shri Gurinder Singh Bawa vs. DCIT - 28 taxmann.com 328 ii) ITAT Mumbai Bench in the case of Anil P. Khimani vs. DCIT No. 2855 to 2860/Mum/2008 dated 23-02-2010 ii) ITAT Jodhpur Bench in the case of Vishal Dembla vs. DCIT - 157 TTJ 189 iv) High Court of Bombay on the case of CIT v. Murli Agro Products Ltd. [2014] 49 Taxmann.com 172 v) ITAT Mumbai Bench in case of ACIT v. Jayendra P. Jhaveri [2014] 65 SOT 118 vi) Jodhpur ITAT in the case of Ayushi Builders & Developers vs. DCIT [2014] 166 TTJ 25 vii) ITAT Pune Bench in case of ACIT vs. SRJ Peety Steels P. Ltd. [2011] 137 TTJ 627 viii) Mumbai Tribunal in the case of Nikki Agarwal vs. ACIT dated 22-01-2014 being ITA No. 879jMj2011 [20 14-TIOL-75-ITAT-MUM] ix) Mumbai Tribunal in the case of Parag M. Sanghvi vs. ACIT in ITA No. 8027/Mum/2010 dated 30-09-2015 x) Mumbai Tribunal in the case of Zeenat P. Sanghvi vs. DCIT in ITA No. 8026/Mum/2010 ....
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....he completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153A 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 153A 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. Conclusion 38. The present appeals concern AYs 2002-03, 2005-06 and 2006-07. On the date of the search the said assessments already stood completed. Since no incriminating material was unearthed during th....
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....und during course of search. 16. In the net result, the appeal filed by the assessee for A.Y.2008-09 & 2009-2010 are allowed. ITA No. 3458/Mum/2015(AY: 2010-2011) 17. In this year the assessment was pending as on the date of search, therefore, proposition with regard to no addition in the absence of incriminating material is not sustainable in this year. In this appeal assessee is aggrieved for addition of Rs. 1,17,600/- on account of notional rent. 18. We found that in the A.Y. 2009-10 AO has made addition of notional rent by taking estimated rental value of shop at Nalasopara at Rs. 3,000/- per month. As the value has been taken by AO in the AY 2009-10 at Rs. 3,000 per month, it would be reasonable to take value at 10% higher in the A.Y.2010-2011. Accordingly we direct the AO to make addition on account of estimated value of shop at Nalashopara by taking the value at Rs. 3,300/- per month. We direct accordingly. 19. In the result appeal is allowed in part. ITA No.3465 & 3466/Mum/15 ( aY : 2008-09 & 2009-10) 20. In both these appeals assessee is aggrieved for addition made u/s 153A r.w.s. 143(3) without finding any incrementing material during search mere particularl....