TaxTMI 
TaxTMI 
2017 (7) TMI 252
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....sessment under section 153A of the Income Tax Act, 1961 (in short 'the Act') was framed making addition on account of deemed dividend under section 2(22)(e) of the Act. In appeal, the addition made was upheld by the Ld. CIT (Appeals). 4. Aggrieved by the same, the assessee filed the present appeal before us. 5. Before us, besides challenging the addition on merits the assessee raised an additional ground, challenging the addition made in the absence of any incriminating material with regard to the same found during search. The additional ground raised by the assessee reads as under : "1. That the Worthy Commissioner of Income Tax (Appeals) has erred in confirming the addition of Rs. 55,00,933/- under the head deemed dividend u/s 2(22)(e) and this addition was not called for since no incriminating material with regard to the above addition has been found during the course of search." 6. During the course of hearing before us, the learned counsel for the assessee submitted that the additional ground raised is a legal ground and ought to be admitted in view of the judgment of the Hon'ble Apex in the case of National Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 38....
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....f 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. 17. We find,that the issue first came up for consideration before the High Court of Bombay in the case of CIT Vs. M/s Murli Agro Products Ltd. (supra), wherein on the issue of exercise of revisionary powers by the Commissioner of Income Tax u/s 263 of the Act, on the order passed by the Assessing Officer under section 1 53A, it was contended by the Revenue that the impugned order was erroneous and prejudicial to the interest of the Revenue since the Assessing Officer had only determined the undisclosed income and not the total income which is the mandate of section 153A. The Hon'ble High Court, while adjudicating the issue, dealt at length with the purpose of introduction of the new search assessment procedures, as against the earlier block assessment procedures and then went on to interpret the proviso to section 153A(1 ), and held that it is only pending proceedings which are abated on initiation of procee....
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....ized assessments cannot be touched by resorting to the provision of section 153A and addition was to be made only on the basis of material unearthed during search, since 'search' and 'requisition' are the crucial words appearing in the substantive provision and proviso and they would throw light on the issue of applicability of the provision. The Court upheld the understanding of the legal provision of section 153A by the Special Bench in the I.T.A.T. in this case and further held that the Delhi High Court had in the case of Anil Kumar Bhatia also reached to the same conclusion. It also referred to the judgment of the Karnataka High Court in the case of Canara Housing Development Co. Vs. DCIT (2014) 49 TAxmann..98 and stated that even as per that judgment, the scope of enquiry in search carried under section 153A had to essentially revolve around search or requisition under section 132A of the Act. 20. In the case of Kabul Chawla (supra), the Delhi High Court after considering various decisions of High Courts, summarized the legal position in paragraph 37, which is reproduced below : "37. On a conspectus of Section 153A(1) of the Act, read with the....
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....earthed 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. " 21. The Delhi High Court further reiterated the proposition laid down in Kabul Chawla (supra) in the case of CIT Vs. RRJ Securities, 380 ITR 612 and Pr. CIT Vs. Lata Jain in ITA No.274/2016 dt.29-04-2016. 22. On going through the above judgments, we find that the reason for upholding the proposition that addition u/s 153A, in case of earlier completed assessments, can be made only on the basis of incriminating material found during search or requisition is that: 1. Assessment u/s 153A can be framed only in cases where a search is initiated u/s 132 or Books of Accounts, other documents or any assets are requisitioned u/s 132A of the Act. Moreover notices u/ s 153A(1 )(a) can be issued and income assessed or reassessed of six years preceding the assessment year relevant to the previous year in which search is conducted or requisition is made. Thus the crucial words "search" and "requisition" appear in the substantive provisio....
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....made under this section. The section has provided, for the removal of doubts, by way of insertion of Explanation at the end of the section that save as otherwise provided in this section, section 153B and section 153C, all other provisions of this Act shall apply to assessment made under this section. This implies that nature of assessment or reassessment made under this section shall be governed by the normal provisions of the Act. In case it is an assessment made for the first time, all provisions of assessment which are applicable to assessments made u/s 143(3) shall apply and in case it is a reassessment being made all principles of reassessment which are applicable in case of proceedings u/s 147/148 shall become applicable. Thus in cases where assessments have already been made addition to be made in proceedings u/s 153A is to be restricted to incriminating material found if any. 24. It is amply evident from the above that the issue is settled, with a number of decisions of the High Courts holding that in the case of completed assessments, no addition can be made in the absence of any incriminating material. Though we do agree that there are decisions of High courts w....
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....tion under section 153A of the Act to the extent of incriminating material found, is to be made only in the case of completed assessments or re-assessments, which do not abate under section 153A of the Act. There is therefore no similarity between the assessment procedures prescribed under Block assessment regime and the current procedures u/s 153A/B/C/D of the Act. Moreover, by prescribing one assessment for each of the six years, covered under search, the Legislature has done away with the requirement of making assessment only of undisclosed income prescribed in the earlier block assessment requirement, and thus doing away with consequent litigation regarding the same. 29. The learned D.R. further argued that even the Circular outlying the objective behind bringing the present search assessment procedures stated that the assessee shall assess/reassess "total" income for each of the six years. The learned D.R. stated that the mandate of the current requirement was to assess the "total" income, hence, it cannot be restricted to the extent of incriminating material only. 30. We find that the meaning of the word "total" income in the context of completed assessment ....
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....ther we may add that the Hon"ble Delhi High Court, in its decision rendered in the case of Kabul Chawla (supra),has dealt and distinguished most of these decisions primarily by finding that those decisions dealt with the fact situation where material had been unearthed during search and therefore could not apply in situations where no material was found during search. 33. The Ld. DR further contented that the statement of Sh. Kishan Kumar Goyal which was recorded during the course of search conducted on the Modern Group, constituted incriminating material. As per the Ld. DR, in the statement, Sh. Kishan Kumar Goyal admitted that incriminating documents relating to various investment companies, excess cash and jewellery were found. The assessee in consequence thereof had surrendered additional income of Rs. 11 crores. 34. The statement referred to by the Ld. DR is reproduced as under: "Q.3 Do you want to say anything else further? Ans. During the course of search operation certain incriminating documents relating to various investment companies, excess cash & jewellery were found at my residence. In this connection I would like to offer additional income t....