TaxTMI 
TaxTMI 
2018 (2) TMI 965
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.... the three AY. s. It was stated in the applications that additional grounds were of legal nature and that they went to the root of the matter. Before us, the Authorised Representative made the same submissions that are part of the applications. The Departmental Representative(DR)left the issue to the discretion of the Bench. We have gone through the additional grounds raised by the assessee and find that the same are of legal nature and go to the very root of the matter. In the additional ground the assessee had challenged the action taken by the AO u/s. 153C C of the Act. Therefore, we admit the additional grounds raised by the assessee for all the three years. The additional grounds read as under: "1. The notice dated 22. 10. 2012 issued under section 153C and the subsequent assessment order passed under section 143(3) r. w. s 153C are bad in law as the material seized during the course of search does not reveal any undisclosed income of the Appellant. Thus, the assessment proceedings under section 153C of the Act is void ab initio and the same may be quashed. 2. In the absence of any incriminating material found during the course of search against the Appellant the assessm....
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....r under appeal, that it had not returned any income, that the AO was justified in holding that the expenses debited to the P&L account should have been capitalised. Referring to the case of Vardhaman Developers Ltd. (55 taxmann. com 370), relied upon by the assessee, the FAA held that the business of the assessee had commenced, that it had incurred similar expenses to those discussed in the order of Vardhaman Developers Ltd. (supra). Relying upon her order for the AY. 2012-13, she upheld the disallowance to the extent of 50%. For the other two AY. s also similar disallowance was upheld. 4.1. With regard to order of the then FAA for the AY. 2009-10, she observed that principles of res judicata did not apply to income tax proceedings. The observations were made by deciding the appeal for AY. 2008-09. 4.2. Before us, the AR stated that during the search proceedings certain papers were seized, that the seized material had been placed on record, that as a consequent to the search action the assessee was served with the notice u/s. 153C, on 22/10/2012, that the AO had made dis-allowance of expenses u/s. 37(1) of the Act, that the action of the AO in issuing the notice u/s. 153C was wit....
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....taining to the assessee, that the AO completed assessment u/s. 153C for the above-mentioned three AY. s, that he made disallowance of the claims of expenditure u/s. 37 (1) of the Act, that basically he disallowed the business losses for the above-mentioned three years, that while completing the assessment he did not refer to any of the seized documents, that the seized material also pertained to the AY. 2012-13 and not to any of the AY. s under consideration, that the seized documents, wherein the name of the assessee is mentioned, were extract of the Ledger accounts, that the AO had not mentioned anywhere in his assessment order is as to how the Ledger accounts represented the undisclosed income of the assessee. Here, we would like to reproduce the provisions of section 153C of the Act and same reads as under: "(1)Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153C, where the Assessing Officer is satisfied that, (a) any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, belongs to ; or (b) any books of account or documents, seized or requisitioned, pertains or pertain to,....
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.... taken for the AY. 1999-2000. On the ground that the activities of the trust were not genuine and were not being carried out in accordance with the trust deed, registration of the trust was cancelled u/s. 12AA(3) of the Act, the assessee was treated as an association of persons, a special audit u/s. 142(2A) of the Act was conducted and on the basis of the special audit report, taxable incomes for the AY. s 1999-2000 to 2006-07 were worked out by a common order. The FAA upheld the order of the AO, holding that the assessee was not eligible for exemption u/s. 11 of the Act and, that therefore, donations received were rightly treated as income. In the appeal before the Appellate Tribunal, the assessee raised an additional ground questioning the validity of the notice u/s. 153CC of the Act on the ground that satisfaction was not properly recorded and that the notice u/s. 153CC was time-barred in respect of AY. s 2000-01 to 2003-04. The Appellate Tribunal allowed the appeal on the additional ground and quashed the notice. The order of the Tribunal was upheld by the High Court. The appeal filed by the Department before the Hon'ble Apex Court was decided as follow: ".... . the Tribunal ....