TaxTMI 
TaxTMI 
2017 (5) TMI 420
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....#39;the Act'). A search and seizure operation u/s 132 of the Act, was conducted in the group cases of Bhashyam Group, Guntur on 10.2.2009. During the course of search & seizure proceedings, certain incriminating documents relating to the assessee were found and seized. Consequent to search, the case has been centralized to Central Circle, Vijayawada vide notification no.F.No.CIT/GNT/Centralisation/2009-10 dated 31.7.2009. A notice u/s 153A of the Act, dated 30.11.2009 was issued, calling for return of income for the assessment year 2003-04 to 2008-09. In response to notices, the assessee has filed his return of income for the assessment year 2003-04 to 2008-09 on 18.1.2010 declaring income admitted during the course of search & seizure operation. The assessee also filed return of income for the assessment year 2009-10 on 2.2.2010. 3. Subsequently, the cases have been selected for scrutiny and accordingly, notices u/s 143(2) & 142(1) of the Act, along with detailed questionnaire were issued. In response to notices, the authorized representative of the assessee appeared from time to time and filed information as called for. The assessments for the assessment years 2003-04 to 200....
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....nancial statements filed by the assessee along with original return of income without there being any incriminating materials and hence, additions made by the A.O. towards disallowance of interest and deemed dividend cannot sustained in the eyes of law. With these observations, deleted additions made by the A.O. for the assessment year 2003-04, 2005-06, 2006-07 & 2008-09. In so far as additions made towards inflation of expenditure, unexplained deposit in the bank account in the name of employees, unexplained investment in purchase of site and suppression of receipts, the CIT(A) for the detailed discussion in his order, confirmed additions made by the A.O. As regards deemed dividend u/s 2(22)(e) of the Act for the assessment year 2009-10, the CIT(A) observed that the A.O. has made additions towards deemed dividend on the sound footing, as the assessee has borrowed loan from the company which attracts the deeming provisions provided u/s 2(22)(e) of the Act. Aggrieved by the CIT(A) order, the assessee as well as the revenue are in appeal before us. 6. The revenue has raised common grounds of appeal for the assessment years 2003-04, 2005-06, 2006-07 & 2008-09. For the sake of brevity....
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.... and the A.O. will get jurisdiction to assess/re-assess total income of those 6 assessment years, whether or not any incriminating material found during the course of search. The D.R. further argued that the provisions of section 153A of the Act, shall be attracted by the initiation of search proceedings u/s 132 of the Act, in which case, the concluded assessments will be re-opened as per the provisions of section 153A of the Act, and such re-opening is not depending upon existence or otherwise of undisclosed income. The D.R. further submitted that the provisions of section 153A of the Act, gets powers to the assessing officer to re-assess the total income of the 6 assessment years in question in separate assessment orders. The A.O. is empowered to re-open those proceedings and re-assess the total income taking note of the undisclosed income, if any unearthed during the search and any other income which comes to the knowledge of the A.O. at the time of assessment proceedings. Thus, the legal proposition is that once the proceedings are initiated u/s 153A of the Act, even in the cases where the assessment order is passed, it stands re-opened and the A.O. assumes jurisdiction to asse....
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.... of the Act without any incriminating materials. The assessee further contended that as per section 153A of the Act, de-novo assessment can be made only in respect of assessment year for which the assessment proceedings has been abated and that in respect of assessment years for which the assessment had already been completed, no additions can be made u/s 153A of the Act unless there was incriminating material found during the course of search. 13. The A.O. has passed assessment orders u/s 153A of the Act, for all the six assessment years, immediately preceding the year in which the search was conducted. According to the A.O., as per the provisions of section 153A of the Act, there is no limitation or restriction provided in the new procedure of search assessment on the powers of the A.O. for making assessment/reassessment and the A.O. is not required to confine his assessments on the materials found during the course of search as was the case in the old procedure of block assessments. It is the contention of the assessee that the A.O. cannot disturb the completed assessment unless there was a seized material. The assessee further contended that where assessments are not pending ....
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....be tinkered with, as there was no incriminating material found during the course of search for the above assessment years and as such no additions can be made to the returned income. It is further submitted that as per sec. 153A of the Act, de-novo assessment can be made only in respect of the assessment year for which the assessment proceedings had been abated and that in respect of assessment years for which the assessment had already been reached a finality, such assessment could not be made u/s 153A of the Act unless there was seized materials. 20. The A.O. has passed reassessment orders u/s 153A/153C of the Act for all the six assessment years immediately preceding the year in which search was conducted. According to the A.O., as per the provisions of section 153A of the Act, there is no limitation or restriction provided in the new procedure of search assessments on the powers of A.O. for making assessment/reassessment and the A.O. is not required to confine his assessments on the material found during the course of search as was the case in the old procedure of block assessments. The new procedure of block assessment was explained by way of provisions of section 153A of th....
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....relevant documents found during the course of search, but not produced in the course of original assessment. 22. In the present case on hand, on perusal of the document available on record, we find that the assessment for the assessment year 2004-05 to 2007-08 were not pending as on the date of search. The fact that the assessment has been completed u/s 143(1) & 143(3) of the Act are not material. The time limit for issue of notice u/s 143(2) of the Act has been expired. On further verification of the documents available on record, we find that there was no incriminating documents found during the course of search in respect of assessment year 2004-05 to 2007-08. Therefore, we are of the opinion that the A.O. was not correct in reassessing the total income of the assessment year 2004-05 to 2007-08 in the absence of any seized materials. Accordingly, we direct the A.O. to delete the additions made for the assessment year 2004-05, 2005-06 & 2007-08. 23. It is pertinent to discuss herein the case laws relied upon by the assessee. The assessee has relied upon the ITAT, special bench decision in the case of All Cargo Global Logistics Ltd. Vs. DCIT (2012) 137 ITD 287. The coordinate ....
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....ngs, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi judicial controversies as it must in other spheres of human activity. Our decision is in consonance with this observation". The decision rendered by the Special bench that the assessing officer can make additions in the case of concluded assessments on the basis of incriminating materials is also based upon the decision rendered by Honble supreme Court in the case of Parashuram Pottery works Co. Ltd (supra). 23. We have earlier noticed that the Hon'ble jurisdictional Andhra Pradesh High Court has also upheld by the orders passed by the Tribunal by following the decision rendered by the Special bench in the case of All Cargo Global logistics Ltd (supra) in the following cases:- (a) Sree Lalitha Constructions (J1TA No 368 of 2014) (b) M/s. Hyderabad House Pvt Ltd (ITTA No.266 of 2013) (c)M/s. AMR India ltd (FITA No.357 /v/2014) Further we agree with the contentions of the assessee that the decision rendered by the jurisdictional High Court in the case of Gopal Das Bhadruka (supra) have been rendered on the facts pre....
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....the special bench decision (supra) we hold that the A.O. had no jurisdiction to make additions u/s 153A of the Act for the assessments which are not pending as on the date of search. In this case, the search was conducted on 14.7.2009. The assessment for the assessment years 2004-05 to 2007-08, were not pending as on the date of search. The time limit for issue of notice under sec. 143(2) has been expired. Therefore, the A.O. has no jurisdiction to reassess the income for the assessment year 2004-05 to 2007-08 in the absence of any incriminating materials. Hence, we delete the additions made by the A.O. for the assessment year 2004-05, 2005-06 & 2007-08. Accordingly, the ground raised by the assessee is allowed. 14. In this view of the matter and considering facts and circumstances of this case and also respectfully following the decision of co-ordinate bench of Visakhapatnam, in the case of L. Suryakantham Vs. ACIT, in ITA Nos.300 to 305/Vizag/2012, we are of the view that the A.O. has made reassessment u/s 153A/153C of the Act, on the basis of information/material available in the return of income, without referring to any seized material. Therefore, following the special bench....
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.... we are of the considered view that the A.O. has no jurisdiction to make additions in the absence of seized materials for the assessment years which are concluded as on the date of search. The CIT(A) after considering relevant facts has rightly directed the A.O. to delete additions made towards disallowance of interest and deemed dividend u/s 2(22)(e) of the Act. We do not find any error or infirmity in the order of the CIT(A), hence, we inclined to uphold the CIT(A) order and dismiss appeal filed by the revenue for the assessment years 2003-04, 2005-06, 2006-07 & 2008-09. ITA No.437 for A.Y. 2005-06 (Assessee): 12. The only issue came up for our consideration from assessee's appeal for the assessment year 2005-06 is additions towards inflation of expenditure. The A.O. made disallowance of a sum of ` 7,50,000/- towards inflation of expenditure on the ground that the assessee has inflated hostel expenditure mainly with regard to purchase of vegetables and other provisions and also the said expenditure are supported by self-made vouchers. The A.O. further observed that the assessee has admitted inflation of expenditure during the course of search proceedings in the statement recor....
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....A.O. ought to have telescoped the additions made towards unexplained deposits in the bank account in the name of the employees. The assessee further contended that in addition to inflation of expenditure, the assessee also admitted an additional undisclosed income for the relevant assessment years, the source of which is available to explain the cash deposits in the bank account of the employees, therefore, telescoping should be done for the additions made on account of unexplained cash deposits. 14. Having heard both the sides, we find force in the arguments of the assessee for the reason that the assessee has admitted additional income towards inflation of expenditure for the relevant assessment years, which is more than the cash deposits found in the name of the employees. The assessee explained the cash deposits found in the name of the employees out of the sources available in the form of undisclosed income offered towards inflation of expenditure. Therefore, we are of the view that the A.O. was erred in not allowing the benefit of telescoping towards additions made on account of cash deposits in the name of the employees out of additions made towards inflation of expenditure....
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....y supporting evidences. It is the claim of the assessee that the MIS report sent from branch office to head office is on tentative basis, whereas the books shows actual fees collected from the students, according to which the assessee has allowed additional concession of ` 5,72,500/- to few students because of which there is a difference which has been explained before the A.O. with necessary evidences. The assessee further contended that it is not the case of the A.O. that the assessee has collected fees from the students, but failed to record in the books of accounts. The A.O. merely on the basis of MIS report sent from branch office has concluded that the assessee has omitted to consider fees collections of ` 5,72,500/- which is incorrect. 16. Having heard both the sides and considered materials on record, we find that the A.O. has made additions solely on the basis of MIS report sent from branch office to head office which was found and seized during the course of search operations. We further observed that the additions made by the A.O. is not supported by valid evidences, except internal MIS report sent from branch office to head office for their accounting purposes. The ass....
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....en repaid. The assessee further contended that the transaction between the assessee and company is mutually benefitted, because he had allowed his personal properties to be mortgaged with the banks for availing loan for the business purpose of the company. In turn, the company has advanced short term loan, therefore, the transaction cannot be recorded as loans and advances which attracts the deeming fiction provided u/s 2(22)(e) of the Act. We find merits in the arguments of the assessee, for the reason that it is an admitted fact that the assessee had given his personal properties as collateral securities to the banks for availing financial facilities for the company in its business. We further observed that the assessee has given its personal properties on nominal rent to the company for running its schools. We further noticed that the said transaction between the assessee and his company is a short term arrangement, which has been repaid in the normal course of its business. Therefore, we are of the view that the amount drawn by the assessee from his company is not a gratuitous payment which attracts the provisions of section 2(22)(e) of the Act. 19. The assessee has relied upo....
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....ndranagar, Vizag in the name of (a) Hari Prasad Bhararia (b) Shivlal Bhararia (brothers) Renewal State Bank of Hyderabad, Siripuram junction, Vizag M/s. Sampath Vinayak Steels Pvt. Ltd 100 lakhs 4 storyed building on 555 sq.yds situated at Rajendranagar, Vizag in the name of (a) Hari Prasad Bhararia (b) Shivlal Bhararia (brothers) 7.11.2007 The Dhanalakshmi Bank, VIP Road, VizaG M/s. Sampath Vinayak Steels Pvt. Ltd. 150 lakhs (1) 4 storyed building on 555 sq.yds. situated at Rajendranagar, Vizag in the name of (a) Hari Prasad Bhararia (b) Shivlal Bhararia (brothers) (2) VUDA Apartment admeasuring 1485 sq.ft. situated at MMTC colony, Seethammadhara, Vizag in the name of Hari Prasad Bhararia. Renewal The Dhanalakshmi Bank, VIP Road, Vizag M/s. Sampath Vinayak Steels Pvt. Ltd. 150 lakhs (1) 4 storeyed building on 555 sq.yds. situated at Rajendranagar, Vizag in the name of (a) Hari Prasad Bhararia (b) Shivlal Bhararia (brothers) (2) VUDA Apartment admeasuring 1485 sq.ft. situated at MMTC Colony, Seethammadhara, Vizag in the name of Hari Prasad Bhararia. 13.11.2009 Axis Bank Ltd., Ramnagar, Vizag M/s. Sampath Vinayak Steels Pvt. Ltd. 300 lakhs (1) 4 storyed building ....
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....e company interest free deposit up to Rs. 50 lakhs as and when required. During the previous year relevant to the assessment year 1999-2000, the assessee obtained from the company a sum of Rs. 20,75,000 by way of security deposit. Out of the amount, a sum of Rs. 20 lakhs was subsequently returned by the assessee to the company. In the assessment made for 1999¬2000 the Assessing Officer added the sum of Rs. 20,75, 000 as deemed dividend. This was upheld by the Tribunal. On appeal to the High Court Held, allowing the appeal, that for retaining the benefit of loan availed of from the bank, if decision was taken to give advance to the assessee such decision was not to give gratuitous advance to its shareholder but to protect the business interest of the company. The sum of Rs. 20,75,000 could not be treated as deemed dividend," 07.4 Since in the present case also, the appellant has mortgaged his property to various banks and obtained loans for the business of the company. Even though there is a personal element of individual benefit to the appellant, the Company from which the advances were taken also benefited by using the property as collateral security to the bank. Thus, a....