TaxTMI 
TaxTMI 
2016 (6) TMI 1254
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.... the Investigation Wing of the department on 22.3.2011 in the case of Amtek Group of cases including the assessee M/s Lotus Buildtech Ltd which was also covered u/s 132(1) of the Income tax Act, 1961 [for short, 'the Act'], which is a group company of Amtek Group. Subsequently, the case was centralized with Central Circle -14, New Delhi and notice u/s 153A of the Act was issued to the assessee on 4.10.2011 and in response to which the assessee fled return declaring income at NIL on 24.11.2011. Further, notice u/s 143(2)/142(1) alongwith questionnaire on 7.2.2012 were issued to the assessee fixing the case for hearing on 13.2.2012. After detailed investigation and enquiry, the AO framed assessment order u/s 153A r.w.s 143(3) of the Act at total income of Rs. 41,20,000/- as against the NIL income returned by the assessee by making a sole addition on account of disallowance of expenditure u/s 40A(3) of the Act. Aggrieved, the assessee carried the matter before the ld. CIT(A) who held that disallowance u/s 40A(3) of the Act is proper. However, he directed the AO wherever the land is shown as work in progress, to the extent of disallowance u/40A(3) of the Act, the value of work ....
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....mently contended that in the case of Kabul Chawla [supra] no question of law has been framed, hence it has no precedentiary value. Further, placing reliance on the decision of the Hon'ble Supreme Court in the case of Attar Singh [supra], contended that cash payments exceeding the prescribed limit attracts the payments made for acquiring stock in trade and other materials. The ld. CIT-DR also pointed out from the copies of the audited balance sheet as on 31.3.2008 of the assessee and contended that there was closing stock of Rs. 11.24 crores on 31.3.2007 which was increased to 27.66 crores for the year ended on 31.3.2008. Therefore, cash payments made by the assessee towards acquiring stock in trade and other materials in cash payments exceeding prescribed limits attracts the provisions of section 40A(3) of the Act r.w.r 6DD of the I.T. Rules, 1962 [hereinafter 'the Rules' for short]. 6. The ld. CIT-DR, in WS-I mainly placed reliance on the decision of the Hon'ble Jurisdictional High Court of Delhi in the case of Anil Kumar Bhatia 24 Taxmann.com 98 dated 7.8.2012 to prove that the jurisdiction of the AO u/s 153A of the Act and procedure thereon in the light of the amendment....
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....ntion towards para Nos. 4.2 to 4.7 of the assessment order and page 13 of the impugned order and pointed out that the findings of the AO has been upheld by the ld. CIT(A) by holding that disallowance u/s 40A(3) is proper. The ld. CIT-DR vehemently contended that the ld. CIT(A) misunderstood the ratio of Hon'ble Supreme Court in the case of Attar Singh [supra] and directing the AO that whenever the land is shown as work in progress to the extent o disallowance u/s 40A(3) of the Act, the value of work in progress will be reduced by this amount. The ld. CIT-DR again drew our attention towards Revenue's paper book dated 11.5.2015 pages 1 and 2 and submitted that in the present case, the assessee made payments towards investments, therefore, there would be no occasion to reduce the same from work in progress. Therefore, the directions of the ld. CIT(A) are not sustainable. 9. The ld. AR also placed rejoinder to the submissions of the ld. DR and contended that as per the decision of the Hon'ble High Court of Madhya Pradesh in the case of National Textile Corporation Vs. CIT reported 286 ITR 497 [MP] Tribunal cannot comment on the decision of Hon'ble High Court and ignore suc....
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....nd even on merits the additions made by the AO u/s 40A(3) of the Act cannot be held as sustainable and the ld. CIT(A) was right in directing the AO not to tax the same. 11. On careful consideration of the above submissions, at the very outset, we observe that the ld. CIT-DR has pressed into service the WS-I [pages 13 to 21 dated 21.3.2016] to allege that payments of Hon'ble High Court of Delhi in the case of Anil Bhatia[supra] and Filatex India Ltd [supra] have not been over ruled by the Hon'ble High Court decision in the case of CIT Vs. Kabul Chawla [supra] and ratio of this decision only applies to the cases where the assessments are completed u/s 143(3) of the Act. The ld. CIT-DR has stressed on this legal contention that the jurisdiction of the AO to make assessment u/s 153A of the Act is valid after search even if no material relating to that is found and seized. 12. The ld. CIT-DR has vehemently contended that since no question of law has been framed by the Hon'ble High Court in the decision of Kabul Chawla [supra], therefore, the same has no precedentiary value. The above contentions, we note that at para 20 of the said decision, the Hon'ble High Court of D....
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....by the AOs as a fresh exercise. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to 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 153 A 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 153 A is relatable to abated proceedings (i.....
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....ubmissions-II dated 21.3.2016, available at pages 21 to 25 of Revenue's paper book, we are of the view that similar legal contentions and objections against the applicability of the judgment and propositions laid down by Hon'ble Supreme Court and various Hon'ble High Court was also posed to the Tribunal in the case of Lairy Distributors Pvt. Ltd ITA No. 6947/Del/2014 and other appeals by the then ld. CIT-DR and in the order dated 27.1.2016 the legal contentions of the Revenue were considered in detail and dismissed being devoid of merits. The relevant operative part of the order of the Tribunal in the case of Lairy Distributors [supra], contention of the ld. CIT-DR which were quite similar to the written submissions-II of the Revenue filed in the present case and the similar legal contentions raised by the then ld. CIT-DR were reproduced in the order of the Tribunal dated 27.1.2016 [supra] which read as follows: "32. The ld. CIT-DR also submitted written objections regarding decisions relied by the ld. AR qua applicability of dicta on propositions or ratio of these judgments and orders of Hon'ble Supreme Court, Hon'ble High Court and Hon'ble Jurisdictional High Co....
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....nal High Court in (i)SSP Aviations Ltd; (ii) Chetan Das Lachhman Das; (iii) Madugula Venu; (iv) Filatex India Ltd; (v) Anila Bhatia. (ii) SSP Aviation Ltd. (346 ITR 177 Delhi High Court). Para 17 of the order relied by the AR" ..Assessing officer having jurisdiction over the other person to follow the procedure prescribed hy section 153A in an attempt to ensure that the income reflected hy the document has been accounted for hy such other person. If he is so satisfied after obtaining the returns from such other person for the 6 assessment years, the proceedings will have to be closed." are clearly obiter and this would become clear from (i) para 15 where High Court clearly held that "...there is no requirement in Section 153C(i) that the Assessing Officer should also be satisfied that such valuable articles or books of accounts or documents belonging to the other person must be shown to conclusively reflect or disclose any undisclosed income, and (ii) para 7 "..The main contention of the petitioner is that the Assessing Officer has illegally assumed jurisdiction u/s 153C read with Section 153A of the Act, that there was no undisclosed income to the assessed in the petitio....
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....se where no case law, no legal provisions are found referred or discussed & hence cannot be taken as a binding precedent as held in CIT v. B.R. Constructions { 202 ITR AP FB}. (viii) Kabul Chawla. Delhi High Court (Order dated 28-08-2013): Judgment cannot be relied as a binding precedent because; (i) In this judgment (which deals with jurisdictional issues of incriminating material etc. whereby AO's authority is being challenged) is in ignorance of applicable provisions of 124 which act as a bar to rake up jurisdictional issues later. Since this decision is rendered without reference to the statutory bars, it cannot be used as a binding precedent as held in State v. Ratan Lai Arora (2004) 4 SCC 590. (ii) Unlike the present appeals, this judgment is not in the context of section 153C. (iii) Judgment neither shows formulation of questions nor shows as to what all questions of law were raised by the Revenue. (iv) It does not considers its own judgment in SSP Aviation Ltd which was directly on section 153C. (v) It holds something not even indicated in the law & hence goes against the plain words of law. (vi) It relied heavily on certain portions from its judgments in Chet....
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....uppressing the fact that these jurisdictional objections were not raised within time mentioned u/s 124. (d) This is contrary to later decision of the Tribunal in Apoorva Extrusion Ltd. Without prejudice to the above this decision is found to be resulting in absurdity whereby by the search action certain years/transactions would get covered which by the time of 153C had not even taken place.Especially in case of RL Allied Industries it would be noticed that adjudication done by the ITAT is not even borne out of the grounds (that order is time barred) raised before the ITAT. (xiv) Jasjit Singh Delhi Trib.flTA 1436/Del/2012}: Not available as a precedent because (a) It is obtained by suppressing the fact that AO's jurisdiction was not challenged within 124 time; (b) Controversy there was different about whether order to be passed u/s 143(3) or u/s 153C. (c) Adjudications of 6 years travels beyond the controversy (even in addl. Ground) raised before ITAT (xv) Brightways Housing & Land Developers Ltd. (ITA 5117-18/Del/2013 (xvi) Devi Dayal Petro Chemicals P. Ltd. ITA No. 4335-36/Del/2013 Not available as precedent because these are (a) Obtained by suppressing the fac....
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....nged earlier within 124 time was suppressed. (v) Decision relies on Delhi High Court order (Pepsico Holdings) which was not available as precedent. (xxi) Tanvir Collections P. Ltd. 168 TTT US Deb Not applicable because; (a) It runs contrary to Delhi High Court order in SSP Aviations Ltd; (b) It relied on certain portion of SSP Aviation Ltd. which was just obiter not to be used as a precedent. (c) It relied on its decision in Inlay Marketing & Akash Arogya which were obtained on suppression of material fact that objection was not raised within 124 time and that evidences being adduced were of the nature of additional evidence. (d) Objection challenging the jurisdiction of the AO was raised within 124 time. (xii) Satyam Food Specialities P. Ltd {68 SOT Del}: Not relevant and applicable at all because there relief is given on merits and not on the legal ground of validity of 153C assessment." 15. Furthermore, adjudicating the above legal contentions posed by the ld. CIT-DR were adjudicated and dismissed in the order of the Tribunal in the case of Lairy Distributors [supra] dated 27.1.2016 [which was authored by one of us - C.M. Garg, JM] by observing as under: "34. ....
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....ucted the tax due from the firm to whom he made the payment. 5. For the reasons mentioned above, we allow this appeal, set aside the order of the Appellate Bench of the Allahabad High Court and remand the case back to that Court for deciding the appeal afresh. It is open to the assessee to urge all the points that he has taken in the case. " 35. These observations of the Hon'ble Supreme Court have been echoed in various subsequent decisions of various courts and few of these are respectfully mentioned below: a) Hon'ble Gujarat High Court in the case of P.V. Doshi Vs. CIT 113 ITR 22 [Guj] b) Hon'ble Jurisdictional High Court in K.K.Lumba 241 ITR 152 [Delhi] c) DHC - S.S. Ahluwalia [2014] 82 CCH [158] [Del] 36. To sum up, we have no hesitation to jettison the arguments of the ld. CIT-DR. We are pained to quote from the famous observations of Mr. Justice Crampton in R Vs. O'Connell [1844] ILR 261 @ 312: "Another doctrine broached by ' another eminent counsel I cannot pass by without a comment. That learned counsel described the advocate as the mere mouthpiece of his client, he told us that the speech of the counsel was to be taken as that of the client; a....
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....he better wisdom of the Court below must yield to the higher wisdom of the Court above. That is the strength of the hierarchical judicial system." (Emphasis by underlining supplied by us) 38. Furthermore, in the case of CIT Vs. Godavari Devi Saraf [1978] 113 ITR 589 [Bombay] the Hon'ble Bombay High Court held that an authority like the Tribunal has to respect the law laiddown by the Hon'ble High Court, though of a different state, so long as there is no contrary decision on that issue by the other High Court. Hence we decline to accept the contentions of the ld. CIT-DR about non-applicability of the ratio of the decisions/judgments cited as relied by the ld. Counsel of the assessee and we proceed to consider other legal objections of the assessee. 16. In view of above foregoing discussions, we decline to accept legal contentions and submissions of the ld. CIT-DR about the non applicability of the ratio of decisions/orders/judgments of Hon'ble Supreme Court and Hon'ble High Court in favour of the assessee as cited by the ld. AR. 17. Next question for our adjudication is that whether the assessment orders passed u/s 143(3) r.w.s 153A of the Act are valid and sustainab....
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....e arbitrarily made without any relevance or nexus with the seized material. 20. Their Lordships, in Para 37(iv) & (v) in the last sentence expressly held that obviously an assessment has to be made u/s 153A of the Act only on the basis of seized material and in the absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. 21. While summarising the above legal position, their Lordships were cautious enough to hold that the word 'assess' in section 153A of the Act is related to abated proceedings i.e. those pending on the date of search and the word 'reassess' to completed assessment proceedings. 22. Their Lordships, in para 37 (vi), further held that in so far as pending assessments are concerned, the jurisdiction to make original assessment and the assessment u/s 153A of the Act merges into one and only one assessment shall be made separately for each A.Y on the basis of findings of search and any other material existing or brought on record of the AO. In para 37(vii), their Lordships held that completed assessment can be inferred by the AO while making assessment u/s 153 of the Act only on the basis ....