TaxTMI 
TaxTMI 
TaxTMI 
2017 (10) TMI 167
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....using 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 reliance on the decisions of the Hon'ble High ....
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....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. Accordingly, the AO should have issued notice u/s.143(2) by 31....
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....nt 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 of account, other documents or any assets are requisitioned undersection 132A aft....
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....ontext 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, the assessments/reassessments finalised for the assessment years covered under section 153A stand ....
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....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 substantive provision and the provisos. That would throw light on the issue of applicability of the provision. It being enacted ....
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....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 discussed the decision of Honble Jurisdictional Delhi High Court in the case of CIT vs. Anil Kumar Bhatia (2012) 211 Taxmann 453 (Del.), while deciding the issue. The relevant p....
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....sing 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, the total income shall be determined by restricting additions only to those which flow from incriminating material found during the course of search. If no incriminating material is found in res....
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....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, which is the subject matter of questions no. (II) and (III), was/is not justified in the assessment order u/s 153, as no incriminating material was found concerning the addition u/s 115JB of the Act." The....
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....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 the Tribunal in the case of All Cargo Global Logistic Ltd. (supra). It has been observed by the Hon'ble High Court that the condition precedent for application of sec. 153A is that there should be a search u/s 132 and i....
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....f 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 Assessing Officer and assessment based on the original return of income filed under sec. 139 of the Act was not pending as on the date of search, we following the above cited decisions by the learned AR, discussed above, hold that the asse....
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.... 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 years covered under section 153A. By a circular No. 8, dated 18-9-2003 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....
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....r 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 twelve months from the end of the month in which the return was filed. Hence, the assessment is deemed to be completed and not pending on the date of search on 14-8-2008. Admittedly, no incriminating material was found from the premises of the assessee during the search under section 132. Once assessment under section 143(3) had....
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....al 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 - 157 TTJ 189 iv) High Court of Bombay on the case of CIT v. Murli Agro Products Ltd. [2014] 49 Taxmann.com 172 ITA No.2198,2199&2202/13 v) ITAT Mumbai Bench in case of ACIT v. Jayendra P. Jhaveri [2014] 65 SOT 118 vi) Jodhpur ITAT in the case of Ayushi Builders & Developers vs. DCIT [2014] 166 TTJ 25 vii) ITAT Pune Bench in case of ACIT vs. SRJ Peety Steels P.Ltd. [20....
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....h 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 jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. vii. 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 or requisition of document....
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..... 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 assessment in respect of the six assessment years were pending so as to have abated. The impugned order accepted the aforesaid submission of the respondent- assesse e by inter alia placing reliance upon the decision of the Special Bench of the Tribunal in All Cargo Global Logistics Ltd. rendered on July 6, 2012 [2012] 18 ITR (Trib) 106 (Mum) [SB]. The Tribunal in the impugned order further held that no incriminating material was found during the course of the search. Thus the entire proceedings under section 153A of the Act were without jurisd....
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....turn 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 should have issued notice by 30.09.2009, but no such notice was issued. Thereby the assessment was treated to be completed since on the date of search i.e. on 31.10.2009, time limit for issuing notice u/s. 143(2) was already expired much before date of search. Further, in this case no notice u/s. 148 was issued for reopening of the assessment. 9. In the case of M/s. Flemingo Duty Free Shop Pvt Ltd the assessee filed return of income for Assessment Year 2008-09 on 28.09.2008 declaring its total income at Rs..28,57,69,800/-. With the return of income,....