TaxTMI 
TaxTMI 
2017 (7) TMI 173
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....nts etc., For the previous year relevant to the 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 befor....
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....herefore, there was no question of abatement. In such a case, 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 iss....
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....31/05/2016 in ITA No.2198, 2199 & 2202/M/2013, wherein additions made under Section 153A were upheld to be not justified in so far as no incriminating material was found 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 ....
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....id not find any mention of incriminating material with regard to bogus share capital or unsecured loans having been received by assessee in these years. Whatever share capital and unsecured loans 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 jurisdict....
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....of account etc. This is because it is of the view that the books of account are required to be summoned or taken into custody. It, therefore, issues a summons in that regard. It may also requisition the books of account or other documents 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....
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....material was unearthed during the search or during the 153A proceedings, the Assessing Officer while passing order under section 153A read with section 143(3) cannot disturb the assessment order ■ The stand of revenue that these observations are made 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 pe....
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....ions of the Delhi High ITA No.2198,2199&2202/13 Court as a whole and in entirety, it is not possible to agree with revenue that the High Court of Delhi reached a conclusion different than the view taken by the Division Bench. 23. ITAT Delhi Bench in the case of Jakson Enterprises, 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 ass....
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....at the Hon'ble High Court held that sec. 153A applies if incriminating material is found even if assessments are completed. The question as to whether any addition can be made in respect of completed assessments when no incriminating material was found, was apparently left open. However, we find that there are sufficient indirect 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, un....
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....to sec. 153A( 1), the total income shall be computed afresh uninfluenced by the fact whether or not there is any incriminating material. In fact, this is the position which follows when we read the judgment of the Hon'ble Delhi High Court in Anil Kumar Bhatia (supra) in juxtaposition to the special bench order in the case of All Cargo Global 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 (....
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.... AO in absence of incriminating material concerning this addition. This addition was questioned by the assessee on the basis that there was no incriminating material found concerning the addition made in the assessment u/s 153A of the Act, which has been rejected by the Hon‟ble High Court with the above finding. It was held by the Hon‟ble High 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....
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....r other documents have to be taken into consideration while assessing or re-assessing the total income under the provisions of sec. 153A of the Act. Even any undisclosed income or undisclosed property has been found after the conclusions of the search, same would also be taken into consideration. The requirement of assessment or re-assessment under the said section has to 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 ....
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....f has been held null and void, the other issues raised in other ground nos. 7 and 8 questioning the validity of the disallowance ofITA No.2198,2199&2202/13 deduction u/s 80IB on scrap sales (ground no.7) and disallowance made u/s 14A (ground no.8) have become infructuous and academic only. These grounds thus do not require any adjudication. The same are being disposed off as such. 24. Similar 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 ....
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....e, that on initiation of proceedings undersection 153A, the assessments/reassessments finalised for the assessments 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). [Para 10] In the instant case, the Assessing Officer while passing the independent assessment 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 assessm....
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....hing 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 intimation and the Assessing Officer had reason to believe that income had escaped assessment and it was open to the Assessing Officer to re-assess the income under section 153A, even without any incriminating material found during the search action, is not tenable. The next argument of the revenue has been that since in the case in hand, 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 o....
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....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 dated 19-12-2014 xi) Jaipur Tribunal in the case of Jadau Jewellers & Manufacturers (P) Ltd. vs. ACIT in ITA No. 686/JP/2014- [2016] 175 TTJ 344 29. The ITAT Delhi Bench in the case of M/s Suncity Projects Pvt. Ltd., 2016-TIOL-643-ITAT-Del, held as under:- 13. We 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 th....
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....uring 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 the search, no additions could have been made to the income already assessed." 14. In clause (iv) above, their Lordships held "Obviously an assessment has to be made under this Section only on the basis of seized 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., 2....
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....eld that "Further it may also be mentioned that the books of account and documents seized are incriminating in nature. The authorised officer on the basis of findings during the course of search showed that the share capital introduced in the books of account are not genuine and this led the AO to raise a question regarding the genuineness of the same in terms of section 68 of the Act. In light of the above legal and factual position and other materials in possession of the AO, it is hereby held that initiation of proceedings u/ s 153C of the Act and assuming the jurisdiction by the AO in terms of section 153C of the Act in respect of the assessee are valid." During appellate proceedings, CIT(A) has 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 o....
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....that at the time of search the search party was not having this information in possession on the basis of which addition was made. 20. Thus, the case of the assessee is that the additions were made to its income on the basis of details submitted by the assessee during 153C assessment and in respect of transactions which were duly accounted in the audited books of account of the assessee. In other words, the addition to the income of the assessee is not made on the basis of any incriminating material found during the course of search and as such, the addition made by the Assessing Officer in an assessment completed pursuant to the notice issued u/s.153C of the Act is bad in law. 21. In view of the above discussion, we can summarize that during 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 ....
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....s are bad in law. 26. Our attention was also invited to para 7.3 of the CIT(A)‟s order which reads as under:- "The appellant also submitted that the AO instead of recording satisfaction in the case of 153A person recorded the satisfaction only in the case of 153C person and therefore then entire proceedings is vitiated. The contention of the appellant is not acceptable. There is nothing on record to say that the satisfaction is recorded only in the file of 153C person and not in the file of 153A person. On verification of assessment records, it is seen that the satisfaction note in this case is a separate loose sheet and it is kept in a separate folder including the satisfaction note of other cases in the group. I am of the opinion that it does 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 ....
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....ion 158BC of the Act; or (b) in the course of the assessment proceedings under section 158BC of the Act; or (c) immediately after the assessment proceedings are completed under section 158BC of the Act of the searched person. 30. It was vehemently argued by learned AR that even if the AO of searched person and the "other person" is one and the same, then also he is required to record his satisfaction. This view has also been accepted by the CBDT and CBDT has also clarified in Circular No 24/2015 dated 31.12.2015. 31. Reliance was placed on decision of Delhi ITAT in the case of Narsi Creations v. Deputy Commissioner of Income-tax, Central Circle-12, New Delhi [IT Appeal Nos. 3186, 3188 to 3194 (Delhi) of 2013] [2016] 70 taxmann.com 156 (Delhi - Trib.), wherein Delhi ITAT held 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 oth....
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....d. The Assessing Officer has not given to the assessee the material relied upon by him nor he has given any opportunity to cross examine the parties relied upon by him. Therefore, it is submitted that the addition made by the Assessing Officer is in gross violation of principles of natural justice. It is submitted that the Assessing Officer has relied upon the material that has not been given to the assessee and therefore, the addition made to the income of the assessee is required to be deleted in view of the following judgments: (i) Kishinchand Chellaram v CIT [125 lTR 713 (SC) (ii) CIT v. Ashwani Gupta [322 lTR 396 (Del) (iii) ClT v. SMC Share Brokers Ltd. [288 lTR 345 (Del) (iv) Tin Box Co. v. ClT [249 lTR 216 (SC) (v) Gargi Mall Mohata & Co. v. A. V. Vishwanath Sastri [96 lTR 97 (All) (vi) ClT v. Dharam 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....
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....ncome tax authorities but they could not produce them since these parties had denied to appear. Further after providing all the required documents before the AO, he has not taken any effort to issue them notice u/s. 133(6) or summons u/s. 131 of the Act to verify the various details regarding share application filed by the assessee company. 41. With regard to the addition made under the head income from other sources and allowing only Rs. 6,00,000/- as agricultural income, it was contended that the agricultural income was declared from the sale of nursery plants. In the assessment finalized under section 153C read with section 143(3) of the Act dated 27.12.2011, the AO required the assessee to explain and justify the agricultural income declared in the return of income. The explanation furnished by the assessee was not found satisfactory by the AO. In the assessment order, the AO has also referred to the enquiry conducted by him deputing his Inspector. 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 agricultu....
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.... found around 20 laborers working on the farm, who confirmed that they were regular employees receiving wages from the assessee company. The aforesaid material definitely points out carrying on of agricultural activities, a factum which has been otherwise also accepted by the CIT(A). 13. In the context of the quantum of agricultural income, the declaration made by the assessee is based on its Books of Account, which are duly audited. It is also abundantly clear from the orders of the lower authorities that whatever details that were called for from the assessee, were duly furnished. The assessee has furnished the requisite sale bills i.e. cash memos, which were held to be unreliable by the Assessing Officer. The primary reasons weighing with the Assessing Officer were that all the sales were in cash and that the sale invoices did not contain names and addresses of the parties. In our considered opinion, the aforesaid point raised by the Assessing Officer is not 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 se....
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....acceptance of the agricultural income as per Books of Account. The action of CIT(A) in considering the income level for assessment years 2009-10 and 2010-11 and, thereafter,making a reverse computation and deducing incomes for earlier assessment 2006-07 to 2008-09 is also quite flawed. No reasons have been assigned CIT(A) for such a methodology which in any case does not operate as a good substitute to the income computed as per the Books of Account, especially where no clinching infirmity has been found in the Books of Account maintained. 15. In view of the aforesaid factual matrix, in our view the CIT(A) clearly erred. In not accepting the agricultural income as deducted by the assessee on the basis of books of Account maintained. Thus, we set aside the order of CIT(A) and direct the Assessing Officer to accept the agricultural income declared by the assessee as returned. As a consequence, assessee succeeds on this aspect of the matter. 18. In assessment year 2006-07, 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....