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2017 (10) TMI 167
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....ourt in the case of CIT v. Continental Warehousing Corporation (Nhava Sheva) Ltd. [374 ITR 645] and in the case of CIT v. Gurinder Singh Bawa [386 ITR 483], he submits that the assessments made without any incriminating materials are bad in law. The Learned Counsel for the assessee further submits that the additions were not made based on any seized material and there is no any reference to seized material by the Assessing Officer in the Assessment Orders. Therefore, he submits that in the absence of any seized material and since the assessments were not abated the additions could not have been made by the Assessing Officer. The Learned Counsel for the assessee also referring to the Paper Book filed, submits that in group cases i.e. M/s. Bermaco Energy Systems Ltd. v. DCIT in ITA.No. 2198, 2199 and 2202/Mum/2013 dated 31.05.2016 it was held that in the absence of incriminating material the additions made while completing the assessment u/s. 153A are not justified. 4. On the other hand, Ld. DR submits that in the course of search proceedings loose sheets and books of accounts were seized. Therefore, it cannot be said that there is no incriminating material. He strongly placed rel....
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....he absence of any incriminating material found and also since the assessments were not abated observing as under:- "20. We have considered rival contentions, carefully gone through the orders of authorities below and also the paper book filed by the ld. AR, particularly, the pages to which our attention was invited during the course of hearing. We had also deliberated on the judicial pronouncements referred by ld.AO and CIT(A) in their respective orders as well as cited by ld. AR and DR during the course of hearing before us in the context of factual matrix of the instant case. From the record we found that search was carried on 31-10-2009 at the business and residential premises of the assessee. Thereafter assessment was framed u/s.153A r.w.s.143(3) of I.T.Act. In respect of assessment year 2004-05, the assessee has filed its return of income on 31-10-2004, which was processed u/s.143(1) but no scrutiny assessment notice u/s.143(2) was issued till 31-10-2005. As per the relevant provisions of law prevailing during the year under consideration notice u/s.143(2) is required to be issued before expiry of 12 months from the end of the month in which return was furnished. Acco....
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.... material is found during search. Held, yes. 21. In the instant case, the CIT(A) has dismissed the legal ground raised by the assessee by relying on the decision of Hon'ble Delhi High Court in the case of Anil Kumar Bhatia. The ITAT Delhi Bench in the case of Jakson Enterprises vs. ACIT dated 27-05-2015 being ITA No. 383/Del/2013, has dealt with the decision of Delhi HC in the case of CIT vs. Anil Kumar Bhatia which was relied by CIT(A) and it was held that in the absence of any incriminating material no addition u/s.153A can be made. 22. 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....
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.... of this Court rendered in CIT v. Murli Agro Products Ltd. [2014] 49 taxmann.com 172 in that context is, therefore, well placed. ■ The Division Bench outlined the ambit and scope of the powers conferred by section 153A and observed that on a plain reading of section 153A, it becomes clear that on initiation of the 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 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....
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....ion. As that specific argument was canvassed and dealt with by the Division Bench and that is how it was called upon to interpret section 153A , then, each of the above conclusions rendered by the Division Bench would bind the instant Court. ■ Even otherwise, Court is in agreement with the Division Bench when it observes as above with regard to the ambit and scope of the powers conferred under section 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 undersection 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 substantiv....
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....o the income that has already been assessed, the assessment u/s 153A will be made on the basis of incriminating material, which in the context of relevant provisions means (i) books of account, other documents, found in the course of search but not produced in the course of original 8 assessment, and (ii) undisclosed income or property discovered in the course of search." 11. The issue raised before the Special Bench was as to whether scope of assessment u/s 153A 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....
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....ome if any, unearthed during the search'. The expression 'unearthed during the search' is quite significant to denote that in respect of completed or non-pending assessments, the Assessing Officer is albeit duty bound to assess or reassess the total income but there is a cap on the scope of additions in such assessment, being the items of income 'unearthed during the search'. In other words, the determination of 'total income' in respect of the assessment years for 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....
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....risdiction, being outside the scope of proceedings under that section?" The other question was, "whether on the facts and circumstances of the case, the Tribunal erred in law in upholding the action of the AO in denying set off, of book loss unabsorbed depreciation relatable to earlier assessment year in terms of clause (III) of Explanation 1 to section 115JB of the Act?" The relevant facts of that case noted in para no. 2 of the decision are that the AO in the proceedings u/s 153A of the Act, had 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, wh....
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....the Act was not based upon any incriminating material. Thus, the question raised before the Hon'ble High Court was as to whether the Tribunal has erred in law in not upholding that recomputation of book profit, de-hors any material found during the course of search in the order based u/s 153A of the Act was without jurisdiction, being outside the scope of proceedings under that section. The Hon'ble High Court after discussing the issue in detail has been pleased to decide the question against the assessee and 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....
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....ussed decisions supports the case of the assessee that in absence of incriminating material found during the course of search no addition can be made u/s 153A of the Act where the original assessment was already framed on the date of search. The Hon'ble Karnataka High Court in the case of Canara Housing Development Company (supra) has, however, been pleased to express different view, however, as per the established proposition of law, we are bound to follow the decision of Hon'ble Jurisdictional Delhi High Court and since, the Hon'ble Karnataka High Court and the Hon'ble Rajasthan High Court have expressed different views on the issue, the view favorable 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 A....
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.... search is conducted under section 132 or requisition is made under section 132A on or after 31-5-2003 in the case of any person, the Assessing Officer shall issue notice to such person requiring him to furnish return of income within the time stipulated therein, in respect of six assessment years immediately preceding the assessment year relevant to the previous year in which the search is conducted or requisition is made and thereafter assess or reassess the total income for those assessment years. The second proviso to section 153A provides for abatement of assessment/reassessment 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 ye....
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....h in which return is furnished as per the proviso to clause (ii) of section 143(2) [as was existing at the time of relevant assessment year]. Once the limitation period as prescribed vide proviso to clause (ii) of sub-section (2) of section 143 is expired, it is not open to the Assessing Officer to assess the income under section 143(3) and the return filed by the assessee under section 139 is deemed to be accepted, which however, can be re-opened under section 147 subject to the fulfilment of ingredients of section 147 and within the time period as prescribed under section 149. So under such circumstances if the return is 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 twelv....
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.... without any incriminating material being found during the search action are not in accordance with law and consequential result is that the return/original assessments which have acquired finality are to be reiterated. 27. Similar view has been taken by ITAT Jodhpur Bench in the case of IOC Builders and Developers, 50 taxmann.com 396, Pune Tribunal in the case of SRJ Peety Steels (P) Ltd., 20 taxmann.com 101, Mumbai Tribunal in the case of Nikki Agarwal, ITA No.879/Mum/2011, order dated 22-1-2014, Mumbai Tribunal in the case of Shri Parag M. Sanghvi, ITA No.8027/Mum/2010, order dated 30-9-2015, Jaipur Tribunal in the case of M/s Jadau Jewellers & Manufacturers 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. 28. 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 -....
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.... 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 not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment "can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material." 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. vi. Insofar as pending assessments are concerned, the j....
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....criminating material, the AO does not have any jurisdiction to interfere in concluded assessments." Respectfully following the proposition of law discussed in the above judicial pronouncements, we do not find any merit for the addition made by the AO with respect to share capital and unsecured loans. The disallowance made by the AO on account of personal use of vehicles was on estimate basis, no incriminating material was found to indicate that directors of the company have used the vehicles for their personal purpose. Accordingly, disallowance made by estimating personal elements in respect of expenditure on vehicle is not justified u/s.153A when no incriminating materials in respect to personal use of vehicle were found during the course of search. Since we have already decided the legal issues in favour of the assessee, we are not going into merit of the addition so made." 7. In the case of CIT v. Gurinder Singh Bawa (supra) Hon'ble Jurisdictional High Court has held as under: - "On further appeal before the Tribunal, the assessee inter alia challenged the validity of the assessment made u/s. 153A of the Act. This on account of the fact that no assessmen....
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....evenue that the decision of this court in Continental Warehousing Corporation (Nhava Sheva) Ltd. (supra) would apply to the present facts and also that there are no assessments pending on the time of the initiation of proceedings under section 153A of the Act. The occasion to consider the issues raised on the merits in the proposed questions becomes academic. 8. In the case of M/s. Flamingo (DFS) Private Limited assessee filed return of income for Assessment Year 2008-09 on 06.10.2008 declaring its total income at Rs..1,60,89,620/-. With the return of income, the assessee had enclosed its Audited Balance Sheet and Profit & Loss Account along with Audit Reports, Computation of Total income and other details. Copy of the return of income, computation of total income and Audited Financial Statements of the assessee company were placed at Page Nos.1-28 of the Paper Book. The return was processed u/s. 143(1) but no notice u/s. 143(2) was issued for scrutiny assessment. For Assessment Year 2008-09, notice u/s. 143(2) of the Act was to be issued before expiry of 6 months from the end of the Financial Year in which the return is furnished. Accordingly, in this case Assessing Officer sho....