TaxTMI 
TaxTMI 
2017 (7) TMI 173
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....e assessment year 2005-06, the assessee filed return of income under section 139 of the Income tax Act 1961 („the Act‟) in the month of October 2005 declaring total income at Rs Nil. Notice under Section 143(2) dated 20 June 2007 was issued by the Assessing Officer (AO). Thereafter assessment scrutiny order dated 29 October 2007 was passed by the AO under section 143(3) of the Act accepting income as returned by the Assessee Company. A search and seizure action under section 132 of the Act was carried out at the residence and business premises of M/s. Flemingo / Bermaco Group managed by Mr. Viren Ahuja on 31.10.2009.Thereafter, notice dated 12.04.2010 was issued under section 153C of the Act to the Assessee Company. During the course of search, statement of Mr. Viren Ahuja, Director of Bermaco Industries Ltd. and other group companies was recorded u/s.132(4) wherein he declared undisclosed income on account of bogus purchases in books of the companies M/s. Bermaco Industries Ltd. and Bermaco Energy Systems Ltd., Mr. Viren Ahuja later on retracted his statement which was recorded u/s. 132(4) by way of Affidavit executed before Notary Public on 24-11-2009 after conclusion....
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....ase, no addition could be made u/s.153C of the Act in case where assessment was not pending unless some incriminating material was found during the course of search. 7. In support of the proposition, learned AR relied on the decision of the Special Bench of Hon. Mumbai Tribunal in the case of All Cargo Global Logistics Ltd., (2012) 18 ITR (T) 106 (Mumbai) (SB) wherein it was held that 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 u/s 153A can be made on the basis of the incriminating material which in the context of relevant provisions means books of account and other documents found in the course of search but not produced in the course of original assessment and undisclosed income or property disclosed during the course of search. 8. Reliance was also placed on the decision of Hon. Bombay High court in the case of CIT vs. Continental Warehousing Corporation (Nhava Sheva) Ltd. [2015] 374 ITR 645 (Bombay) wherein it is held as under: " Whether in a case where pursuant to issue of notice under section 153A assessments are abated, Assessing Of....
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....ound during course of search and assessments were not pending in so far as time limit for issue of 143(2) notice have already been expired as on date of search. 12. On the other hand, learned DR relied on the order of the lower authorities and contended that assessee was in receipt of bogus share application money, therefore, AO has correctly made addition under Section 68 of the IT Act. He further, contended that the agriculture income so earned by assessee was correctly held by AO as income from other source. 13. We have considered rival contentions and carefully gone through the orders of the authorities below and found from record that there was search under Section 132 on 31/10/2009 at business premises of group concern M/s. Flemingo / M/s. Bermaco Energy Systems Ltd managed by Mr. Viren Ahuja. Additions in the hands of M/s. Bermaco Energy Systems Ltd was made by AO and the tribunal vide its order dated 31/05/2016 in ITA No.2198,2199 & 2202/13 deleted the addition by recording a finding that no incriminating material was found in course of search and the time limit for issue of notice under section 143(2) for the relevant assessment years had already been expired, therefore,....
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....ns were received by the assessee, was duly recorded in the regular books of account and shown ITA No.2198,2199&2202/13 in the audited accounts filed along with the return of income for the respective years. Applying the proposition of law laid down by ITAT Special Bench in the case of All Cargo Logistics Ltd., 137 ITD 287, which was confirmed by Hon'ble Bombay High Court vide order dated 21-4-2015, to the facts of the instant case, we can safely reach to the conclusion that in respect of the years for which assessment was not pending on the date of search and when no incriminating material was found during the course of search, the addition so made in the A.Y.2004-05 & 2005-06 were not justified. Hon'ble Bombay High Court in the case of Continental Warehousing Corporation (Nhava Sheva) Ltd. [2015] 58 taxmann.com 78 held as under: Whether in a case where pursuant to issue of notice under section 153A assessments are abated, Assessing Officer retains original jurisdiction as well as jurisdiction conferred on him under section 153A for which assessments shall be made for each of six assessment years separately - Held, yes - Whether no addition can be made in respect of unab....
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....uments for that might be useful and or any assets representing withholding or part income or property which has not been or would not have been disclosed for the purpose of the Indian Income-tax Act, 1922 or theIncome-tax Act of 1961 by any person from whose possession or control they have been taken into custody. This is when the authorities have reason to believe that such powers need to be exercised. Therefore, the fetters and which are to be found in other provisions are removed and a notice of assessment in such cases is then issued. That is mandated by sub-section (1) of section 153A. It is not only the issuance of the notice but assessment or reassessment of total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition has to be made. ■ There is much substance in the contentions of the assessee that ITA No.2198,2199&2202/13 the provisions such as section 153A enabling assessment in case of search or requisition making specific reference to the provisions which enable carrying out of search or exercise of power of requisition that the assessment in furtherance thereof is c....
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....ade in passing or that they are not binding on instant Court is not agreeable because the essential controversy before the Bench was somewhat different. Revenue urged that was only in relation to the legality and validity of the order of the Commissioner under ITA No.2198,2199&2202/13 section 263. Had that been the case, the Division Bench was not required to trace out the history of section 153A and the power that is conferred thereunder. When the revenue argued before the Division Bench that the power undersection 153A can be invoked and exercised even in cases where the second proviso to sub- section (1) is not applicable that the Division Bench was required to express a specific opinion. The provision deals with those cases where assessment or reassessment, if any, relating to the assessment years falling within the period of six assessment years referred to in sub-section (1) ofsection 153A were pending. If they were pending on the date of the initiation of the search undersection 132 or making of requisition under section 132A, as the case may be, they abate. It is only pending proceedings that would abate and not where there are orders made of assessment or reassessment and ....
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....ses, ITA No.383/Del/2013, order dated 27-5-2015, held as under :- 9. Having gone through the orders of the authorities below, we find that the Learned CIT(Appeals) has rejected the contentions of the assessee on the issue of validity of assessment framed under sec. 153A read with sec. 143(3) of the Income-tax Act, 1961 in absence of incriminating material found during the course of search and in the absence of the pendency of the assessment as on the date of search on the basis that for framing assessment under sec. 153A, no such requirement is there and the only requirement is that search has been conducted under sec. 132 of the Act. 10. Having gone through the decisions cited by the learned AR including the decision of Special Bench of the ITAT in the case of AL Cargo Global Logestic Ltd. vs. CIT (supra), we find that the ratio laid down therein, supports the contentions of the assessee on the issue. It reads as under: "58. Thus, question No. 1 before us is answered as under :- (a) In assessments that are abated, the AO retains the original jurisdiction as well as jurisdiction conferred on him u/s 153A for which assessments shall be made for each of the six assessment....
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.... hints given by the Hon 'ble Delhi High Court in the case of Anil Kumar Bhatia (supra) about not making of any addition in respect of an assessment year for which the assessment is already completed unless some incriminating material is found during the course of search. This can be seen from the following observations of the Hon'ble High Court :- "20. A question may arise as to how this is sought to be achieved where an assessment order had already been passed in respect of all or any of those six assessment years, either under Section 143(1)(a) or Section 143(3) of the Act. If such an order is already in existence, having obviously been passed prior to the initiation of the search/requisition, the Assessing Officer is empowered to reopen those proceedings and reassess the total income, taking note of the undisclosed income, if any, unearthed during the search." 9. The above extracted observations of the Hon'ble High Court, which are though obiter dicta, make the point clear that where an assessment order has already been passed for a year(s) within the relevant six assessment years, then also the A.O is duty bound to reopen those proceedings and reassess the tota....
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....Logistics Ltd. (supra). The other judgment relied by the Ld. DR in the case of Madugulu Venu (supra) also talks about the need for making fresh assessment in respect of the assessment years for which the assessments are not pending on the date of search but does not set out the scope of such assessment, which is the issue before us." 13. We, thus, find that the decision of the Hon‟ble Jurisdictional Delhi High Court in the case of Anil Kr. Bhatia (supra) supports the case of the assessee that in absence of incriminating material found during the course of search an addition u/s 153A of the Act cannot be made in the assessment framed thereunder. The decisions relied upon by the ld. CIT, DR in the cases ofCanara Housing Development Company vs. DCIT (supra) of Hon‟ble Karnataka High Court andFilatex India P. Ltd. vs. CIT (supra) of Hon‟ble Delhi High Court having distinguishable facts are not applicable in the present case. In the case of Filatex India Pvt. 12 Ltd. (supra), the questionITA No.2198,2199&2202/13 raised on the applicability of provisions u/s 153A was that "whether the Tribunal erred on facts and in law in not holding that re- computation of book profi....
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....gh Court that there cannot be multiple assessments, once sec. 153A of the Act is applicable. Section 153A(1)postulates one assessment; putting the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which search was conducted or requisition was made. 14. In para no. 3 of the judgment the Hon‟ble Delhi High Court while discussing the cited decisions in the cases CIT vs. Chetan Das (2012), 254 CTR (Del) 292 and CIT vs. Anil Kr. Bhatia(2012), 2010-11 Taxman 453 (Del) cited by the ld. AR of the assessee appellant, has noted certain observations made and findings given by the Hon‟ble Court therein. Thereafter in para no. 4 of the judgment, the Hon‟ble High Court has held as under: "The first ITA No.2198,2199&2202/13 question, we notice was not raised by the appellant before the AO, CIT(A) and before the Tribunal. The appellant claims that the contention being legal can be raised at any stage. We have examined sec. 153A of the Act and find that the submission/contention has no merit". 15. When we peruse the facts of the case in the case of Filatax India Ltd. and the question raised therein it comes out th....
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....o be read in the context of sections 132 or 132A of the Act, in much as, in case nothing incriminating is found on account of such search or requisition, then the question of re-assessment of the concluded assessment does not arise, which would require more reiteration and it is only in the context of the abated ITA No.2198,2199&2202/13 assessment under second proviso which is required to be assessed. 17. In the case of SSP Aviation Ltd. vs. DCIT (supra) where the validity of assessment framed u/s 153C was challenged it was held that if the AO is satisfied that any money, bullion, Jewellery or other valuable article or thing or books of account or documents seized in the course of the search belongs to a person other than the person who was searched, then such assets or books of accounts or documents shall be handed over by him to the AO having jurisdiction over such other person. Once, that is done, the AO having jurisdiction over such other person shall proceed against him for making an assessment or reassessment of his income in accordance with the provisions of sec. 153A. The petitioner therein was not searched u/s 132 of the Act, however, some documents belonging to it were....
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....r view has been taken by ITAT Jodhpur in the case of Vishal Dembla, 40 taxmann.com 134, wherein it was held that where the assessee has already submitted his return prior to search which has attained finality and no incriminating document was found during the search, gifts already disclosed by the assessee in the return of income which has attained finality, could not be disturbed u/s.153A. 25. The Hon'ble jurisdictional High Court in the case of Murli Agro Products Ltd., 49 taxmann.com 172, held as under :- Held : The object of inserting sections 153A, 153B and 153C by Finance Act, 2003 by discarding the existing provisions relating to search cases contained in Chapter XIV B of the Act, as stated in the Memorandum explaining the provisions in the Finance Bill 2003 was that under the existing provisions relating to search cases, often disputes were raised on the question, as to whether a particular income could be treated as 'undisclosed income' or whether a particular income could be said to be relatable to the material found during the course of search, etc. which led to prolonged litigation. To overcome that difficulty, the legislature by Finance Act, 2003, ....
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....nt order under section 153A read with section 143(3) could not have disturbed the assessment/reassessment order which has attained finality, unless the materials gathered in the course of the proceedings under section 153A establish that the reliefs granted under the finalised assessment/reassessment were contrary to the facts unearthed during the course of 153A proceedings. In the present case there was nothing on record to suggest that any material was unearthed during the search or during the 153A proceedings which would show that relief under section 80HHC was erroneous. In such a case, the Assessing Officer while passing the assessment order under section 153A read with section 143(3) could not have disturbed original assessment order relating to section 80HHC deduction and consequently the Commissioner could not have invoked jurisdiction under section 263of the Act. 26. The ITAT Mumbai bench in the case of Jayendra P. Jhaveri, 46 taxmann.com 457 observed as under :- Head Note : So far as the question as to the processing of return under section 143(1) vis-à-vis assessment made under section 143(3) is concerned, it may further be observed that after processing ....
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...., no books of account were found during the search action that itself is the incriminating material against the assessee, has no force of law. Though the revenue may not be satisfied with the explanation of the assessee that the books of account were lost in flood, still the assessment or addition cannot be made on this ground. Such an inference of concealment of income cannot be made just on mere assumptions, presumptions or suspicion. The next limb of argument of the revenue, while relying upon the authority of Supreme Court has been that the Court should not place reliance on the decisions without discussing as to how the factual situation fits to the factual situation of the decision on which ITA No.2198,2199&2202/13 reliance is placed. His contention is that one additional or different fact may make a world of difference between conclusions in two cases. There is no doubt about the above said proposition of law laid down by the Supreme Court. The Court must observe the facts and circumstances of the case under which a certain proposition of law is laid down by the Supreme Court and then to compare the same with the facts and circumstances of the case under adjudication befo....
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....have carefully considered the arguments of both the sides and have perused the material placed before us. In the case of Kabul Chawla (supra), Hon'ble Jurisdictional High Court has considered all earlier decisions of Hon'ble Delhi High Court and has also considered the decisions of other High Courts and Tribunals and summarized the legal position in paragraph 37 and at the conclusion of the case in paragraph 38, which are reproduced below:- "Summary of the legal position. 37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under:- i. Once a search takes place under Section 132 of the Act, notice under Section 153A(1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. ITA No.2198,2199&2202/13 ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. iii. The AO will exercise norm....
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....d material". In clause (v), the same is reiterated by holding "InITA No.2198,2199&2202/13 absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made". In clause (vii), it is stated "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". Hon'ble Delhi High Court in the case of RRJ Securities Ltd., 2015-TIOL- 2539-HC-DEL-IT, held as under :- "In respect of such assessments which have abated, the AO would have the jurisdiction to proceed and make an assessment. However, in respect of concluded assessments, the AO would assume jurisidciton to reassess provided that the assets/documents received by the AO represent or indicate any undisclosed income or possibility of any income that may be remained undisclosed in the relevant assessment years. This Court in Commissioner of Income Tax (Central)-III v. Kabul Chawla : ITA 707/2014, decided on 28 th August, 2015 = 2015-TIOL-2006-HC-DEL-IT has held that completed assessments could only be interfered with by the AO on the b....
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.... called for a remand report wherein AO has stated regarding satisfaction note. 16. From a perusal of the satisfaction note it can be observed that the AO mentions the following supposedly "incriminating documents" based on which it was proposed to assess the case of the assessee as per provisions of section 153C. o Annexure A/1: In pages 24 to 28 containing trial balance of the assessee company for AY 2008-09 o Annexure A/2 :- In pages 29 to 35 containing P/L & B/s of assessee company for AY 2006-07 o Annexure A/1 :- In pages 36 containing copy of share application of Bhaskar Management Ltd for 14000 equity shares of assessee company o Annexure A/1 :- In pages 40 & 41 gives details of allotment of share of assessee company o At the residential premises of Shri Vini Ahuja Cash Memo book of assessee company (A-1 to A-9). 17. The relevant portion of satisfaction note for the assessment year 2005-2006 mentioned regarding page 129 of share application of Bhaskar Management Ltd for 14000 equity shares of assessee company and in pages 40 & 41 gives details of allotment of share of Assessee company. However, we found that there is nothing incriminating in these details as these....
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....ing the search no information or documents or any other material was found during the search other than which were already on record of the AO as assessment for AY 2005-06 u/s 143(3) was already concluded vide order dated 29.10.2007. Hence, it cannot be said that incriminating material was found during search in relation to which additions were made in assessee's case. From a perusal of the statement recorded under section 132(4) of the Act in respect of the depositions made by Shri Viren Ahuja which was later retracted by affidavit, it can be observed that there was no material found in the course of search which would suggest that the audited books of account was wrong or contrary to the factual position. Further the audited financials disclosing full details of share capital and the computation of income were duly submitted before the AO based on which assessment was completed for AY 2005-06. Ld AO had also accepted the entire income of the assessee as earned from agricultural activities during original assessment based on details submitted. Hence it cannot be said that any incriminating material was found during search on the basis of which AO has made addition u/s. 153C. ....
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.... not matter whether the satisfaction note is kept in a separate folder or in the assessment records of the searched person. It is learnt from. the AO that since joint warrant of authorization was issued in the case of 153A persons, there was difficulty in choosing a particular case wherein the satisfaction note should be placed and therefore, the satisfaction notes were kept in a separate folder. I do not find any infirmity in the action of the AO. In view of the above, the contention of the appellant is found to be untenable." 27. Reliance was placed by learned A.R. on the decision of The Hon'ble Supreme Court in the case of M/s Calcutta Knitwears in Civil Appeal No 3958 of 2014 dated 12.03.2014 (362 ITR 673) where in Hon‟ble Supreme Court has laid down that for the purpose of section 158BD of the Act recording of satisfaction note is a prerequisite and the satisfaction note must be prepared by the AO before he transmits the record to the other AO who has jurisdiction over the other person under section 158BD. Further the provisions of section 153C of the Act are substantially similar to provisions of section 158BD and therefore the above guidelines of Hon'ble Supre....
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.... as under:- Section 153C of the Income-tax Act, 1961 - Search and seizure- Assessment of income of any other person (Condition precedent) - Assessment years 2004-05 to 2007-08 - Whether recording of satisfaction by Assessing Officer of person searched that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized belong to person other than person searched is a sine qua non for initiating action under section 153C - Held, yes - Whether where Assessing Officer of person searched and such other person is same, then also, first while making assessment in case of person searched, Assessing Officer has to record such satisfaction, then, copy of this satisfaction note is to be placed in file of such other person and relevant document should also be transferred from file of person searched to file of such other person and thereafter, in capacity of Assessing Officer of such other person, he has to issue notice under section 153A, read with section 153C - Held, yes - Whether where exercise of recording satisfaction during assessment proceedings of person searched has not been carried out, recording of satisfaction in case of such other perso....
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....ram Pal Prem Chand Ltd. [295 ITR 105 (Del)] (vii) Rakesh Kapadia v. DClT [48 lTD 283, 289 (Ahd) 36. It was vehemently argued by learned A.R. that on making enquiries with ROC, it was found that these companies have been regularly filing their returns, reports, etc. which clearly indicate that these companies are not defunct. Thus, the report of ADIT(lnv) relied upon by the Assessing Officer does not represent correct status and as such, not reliable. Therefore, the addition made on this basis is required to be deleted. 37. As per learned AR in response to show cause notice issued by AO asking assessee to prove identity of share applicant, genuineness of transaction & creditworthiness of said party, Assessee Company submitted its explanation and various documents. However he mentioned that the assessee could not satisfactorily explain the cash credits into its books and merely submitted following documents of share applicant parties: i) MOA/AOA of the investing companies ii) PAN Details iii) Balance sheet of those companies; and iv) Copy of Income-tax returns filed by the share applicant companies for Assessment Year 38. Our attention was also invited to the following d....
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..... On the basis of the result of his verification exercise, the AO concluded that the assessee appeared to have carried out agricultural activities on its farm but the scale of agricultural operations did not match with the agricultural income declared by the assessee. 42. As per learned AR, the Tribunal in assessee‟s case in the assessment year 2006-07 to 2010-11 vide order dated 17/07/2015 had accepted assessee‟s claim on agricultural income after having the following observation:- On the basis of the discussion in the respective orders of the income tax authorities and other material placed on record, salient features of the controversy can be understood as follows. The appellant company is incorporated on 10.06.1992 and in the past as well as in the captioned assessment years, it had declared agricultural income from sale of nursery plants. The appellant company is possessing agricultural lands situated in Karjat area which is approximately 100 acres. It has also been pointed out, on the basis of the Balance-sheet available in the Paper Book, that the assessee company has necessary agricultural equipments. In the written statement filed, it has been pointed out th....
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....t fatal so as to reject the quantum of agricultural sales entered by the assessee in the Books of Accounts. In fact, at this stage, we may refer to the assertions of the assessee to the effect that in the course of search action on the Group, there is no material or evidence found which would prove that the scale of agricultural activity recorded by the assessee in the Books of Account was inappropriate or false. It would also be appropriate to refer to the statement recorded of Shri Viren Ahuja uls 132(4) of the Act in the course of search, wherein, he was put questions also about the activities of assessee company. The requisite copy of such statement is placed in the Paper Book at pages 3 to 4. By way of question no. 6 to 16, explanation has been sought on various aspects relating to the assessee company but there is no suggestion which shows that the Department was not satisfied with the amount of agricultural income recorded in the financial statements of the assessee company. In fact, questions were specifically put relating to the agricultural activities being carried by the assessed-company Including the assets, turnover and the products. By way of question no. 13, details ....
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...., the only other issue is with regard to action of authorities in not allowing the set off of carry forward losses of earlier assessment years, while computing the income of assessee for current year. On aspect, it is noted that in the return of had claimed deduction for brought forward loss of assessment year 2004-05 of Rs. 10,43,104/-. The Assessing Officer denied the same on the ground that the loss of assessment year 2004-05 has already been set-off in assessment year 2005-06 itself. Assessee is aggrieved with the said decision. 17. On this aspect, the Assessing Officer is directed to consider the claim of assessee as per record and as per law. Thus, on this aspect assessee succeeds for statistical purposes. 18. Insofar as the appeal for assessment year 2006-07 is concerned, the same is partly allowed. 19. Insofar as other four appeals relating to assessment years 2007-08 to 2010-11 are concerned, the facts and circumstances therein are identical to those considered by us in the appeal of assessee for assessment year 2006-07 and, therefore, out decision in the appeal for assessment year 2006-07 shall apply mutatis mutandis in other appeals also. 43. In view of the fa....