TaxTMI 
TaxTMI 
2018 (10) TMI 259
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....acts and circumstances of the case, the ld CITA was justified in deleting the addition made in the sum of Rs. 35,000/- on account of commission for getting accommodation entries , for want of incriminating materials found during the course of search relatable to such issue. 3. The brief facts of this issue is that the assessee filed its return of income for the Asst Year 2012-13 u/s 139 of the Act on 9.2.2013 declaring total loss of Rs. 60/-. There was a search and seizure operation conducted u/s 132 of the Act on 7.11.2013 at the business as well as residential premises of the 'Dollar Group' at Kolkata and other places. Consequent to the search, notice u/s 153A of the Act was issued on 13.4.2015 seeking return for the Asst Year 2012-13. In response to the said notice, the assessee filed its return of income declaring total loss of Rs. 60/- on 6.5.2015. The assessee stated that the time limit for issuance of notice u/s 143(2) of the Act for the Asst Year 2012-13 in respect of the original return filed on 9.2.2013 had expired on 30.9.2013 and hence as on the date of search, the year under consideration (i.e Asst Year 2012-13) would fall under the category of unabated assessment and....
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.... 3.3. It was argued that admittedly no incriminating materials were found for Asst year 2012-13 in the course of search with regard to share capital and share application money and accordingly pleaded not to disturb the originally assessed income, which is same as the returned income. The ld AO however did not heed to the contentions of the assessee and proceeded to frame the assessments u/s 153A of the Act by making an addition towards share application money u/s 68 of the Act in the sum of Rs. 70,00,000/- on the plea that the assessments to be framed u/s 153A of the Act clears all the decks and would enable the ld AO to assess or reassess the total income as per the provisions of the Act irrespective of incriminating materials found in the search. In the said assessment, he also made addition of Rs. 35,000/- towards commission paid on account of unaccounted income ( i.e the share capital received) through accommodation entries. Further disallowance of Rs. 1,700/- was made towards preliminary expenses written off in the said assessment. The ld AO completed the assessment u/s 153A / 143(3) of the Act on 29.3.2016 determining the total income at Rs. 70,36,640/- as against the retur....
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.... in the case of Veer Prabhu Marketing Ltd (supra), assessee's appeal on grounds no. 1 is allowed and as such I am not inclined to adjudicate appeal on ground no. 2 and 3 on merit. Aggrieved, the revenue is in appeal before us. 6. With regard to the preliminary argument of the ld AR that there was no incriminating material found during the course of search with regard to the issue of share capital, share application money and share premium, the ld DR argued that the expression 'incriminating material' is not found in the provisions of the Act and it is only the Hon'ble Courts which had imported those words while rendering the decisions. He stated that the Hon'ble Courts are divided on this issue and placed reliance on the decision of the Hon'ble Karnataka High Court in the case of Canara Housing Development Co vs DCIT reported in (2014) 49 taxmann.com 98 (Kar HC) wherein it was held that search assessments could be framed even without the existence of incriminating materials found in the course of search. He argued that the basic foundation for conducting the search is governed by the provisions of section 132 of the Act which has to be read harmoniously with section 153A of the ....
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....C) wherein SLP of the revenue was dismissed. 8. We have heard the rival submissions. We find it would be necessary to address the preliminary issue of whether the addition could be framed u/s 153A of the Act in respect of a concluded proceeding without the existence of any incriminating materials found in the course of search. The scheme of the act provides for abatement of pending proceedings as on the date of search. It is not in dispute that the assessment for the Asst Year 2012-13 was originally completed u/s 143(1) of the Act and the time limit for issuance of notice u/s 143(2) of the Act had expired and hence it falls under concluded proceeding , as on the date of search. We hold that the legislature does not differentiate whether the assessments originally were framed u/s 143(1) or 143(3) or 147 of the Act. Hence unless there is any incriminating material found during the course of search relatable to such concluded year, the statute does not confer any power on the ld AO to disturb the findings given thereon and income determined thereon, as finality had already been reached thereon, and such proceeding was not pending on the date of search to get itself abated. The provi....
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....eme of assessment proceedings should be understood in the following manner pursuant to the search conducted u/s. 132 of the Act :- (a) Notice u/s. 153A of the Act would be issued on the person on whom the warrant of authorization u/s. 132 of the Act was issued for the six assessment years preceding the year of search and assessments thereon would be completed u/s. 153A of the Act for those six assessment years. (b) In respect of the year of search, notice u/s. 143(2) of the Act would be issued and assessment thereon would be completed u/s. 143(3) of the Act. (c) In respect of concluded assessments prior to the year of search, no addition could be made in the relevant assessment year unless any incriminating material is found during the course of search with respect to the relevant assessment year. (d) Pursuant to the search u/s. 132 of the Act, the pending proceedings would get abated. In respect of abated assessments, the total income needs to be determined afresh in accordance with the provisions of section 153A and other provisions of the Act. 6.4.1 The concluded assessments for the purpose of section 153A of the Act shall be - (i) assessment years where assess....
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....losed 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 Ld. 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.e. those pending on the date of search) and the word 'reassess' to complete 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 Ld. AO. ....
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....ue preferred Special Leave Petition before the Hon'ble Supreme Court and the same was dismissed by the apex court which is reported in 380 ITR (St.) 4 (SC). Hence it could be safely concluded that the decision of Hon'ble Delhi HC in the case of Kabul Chawla supra would have to be considered on the impugned issue and in any case, the Hon'ble Supreme Court in the case of CIT vs Vegetable Products Ltd reported in 88 ITR 192 (SC) had held that if two reasonable constructions of a taxing provision are possible, that construction which favours the assessee must be adopted. 8.6. We also find that the Hon'ble Jurisdictional High Court recently in the case of Principal CIT vs M/s Salasar Stock Broking Ltd in G.A.No. 1929 of 2016 ITAT No. 264 of 2016 dated 24.8.2016 had endorsed the aforesaid view of Hon'ble Delhi High Court in Kabul Chawla's case and also placed reliance on its own decision in the case of CIT vs Veerprabhu Marketing Ltd reported in (2016) 73 taxmann.com 149 (Cal HC). 8.7. We find that the provisions of section 132 of the Act relied upon by the ld DR would be relevant only for the purpose of conducting the search action and initiating proceedings u/s 153A of the Act. Once ....