TaxTMI 
TaxTMI 
2018 (10) TMI 605
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....to get its accounts audited U/s 142(2A) of I.T. Act, in the assessment order dated 11.08.2011. In this regard, the Assessing Officer has stated in paragraph V. at page 3 and 4 of the Assessment Order as under:- "V. Accordingly, vide this office letter dated 15/16-12-2010, assessee was ordered to get its accounts audited u/s 142(2A) from M/s Adesh jain & Associates, 408, Pratap Chamber, Gurudwara Raod, Karol Bagh, New Delhi and to furnish a report on such audit in the prescribed proforma duly signed and verified by the C.A. within a period of 60 days from the date of receipt of this direction. The assessee did not co-operate with the Special Auditor for conducting the special audit and as such vide letter dated 07-02-2011, the assessee was asked to show cause why prosecution proceedings u/s 276D be not initiated for failure to comply with the direction issued u/s 142(2A). The assessee intimated vide letter dated 11-02-2011 that an invitation has been extended to the special auditor to commence the special audit on 14.02.2011 and there was no mala-fide intention on the part of the assessee and it was requested that further extension of 60 days may kindly be followed. The Special Au....
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....and contrary to facts and law and that too by recording incorrect facts and findings, without giving adequate opportunity of hearing, in violation of principles of natural justice and the same deserves to be quashed. vii. That in any case and in any view of the matter action of Ld. A.O. in framing the impugned assessment order is contrary to law and facts, void ab initio, beyond jurisdiction and the same is not sustainable on various legal and factual grounds. viii. That having regard to the facts and circumstances of the case, Ld. A.O. has erred in law and on facts in charging interest u/s 234A and 234B of the Income Tax Act, 1961. ix. That the appellant craves the leave to add, modify, amend or delete any of the grounds of appeal at the time of hearing and all the above grounds are without prejudice to each other." (3.1) The Ld. CIT(A) disposed off the appeal vide order dated 30.04.2012. In his order, the Ld. CIT(A) upheld the assumption of jurisdiction by Assessing Officer U/s 153A of I.T. Act. The Ld. CIT(A) also upheld the extension of time limit for submission of Audit Report U/s 142(2A) of I.T. Act and dismissed the assessee's contention that assessment was barred....
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....tural and ordinary meaning of the words should be adopted as held by the Hon'ble Apex Court in the following cases Taru Lata Shyam v/s. CIT 108 ITR 345. Keshavji Raoji & Co. v/s. CIT 183 ITR 1: Gum Devdutta VKSS Maryadit v/s. State of Maharashtra AIR 2001 SC 1980 and CIT v/s. Anjum M.H. Ghaswala 252 ITR (Constitution bench). It is the cardinal Rule of interpretation of statute that the words of the statute must be understood in their natural, ordinary or popular sense unless the language of the statute is ambiguous 183 ITR 1 SC (SUPRA). The constitution bench of the Hon'ble Apex court in the case of Anjuman Ghaswala (SUPRA) has held that the purposive interpretation can be resorted to only where the language of the statute is either ambiguous or conflicting or gives a meaning leading to absurdity. The language of section 153A in my opinion is simple clear and unambiguous in as much as it empowers the AO to issue notice and make assessment of specified six years where a search is initiated u/s 132 or requisition is made u/s 132A of the Act. The initiation of valid search u/s 132 or requisition u/s 132A is the only condition for invoking the provisions of section 153A. The decision o....
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....on of time so granted by the officer cannot be reckoned for the purpose of extending the limitation for assessment available under clause (iii) of Explanation 1 of section 153(3) of the Act, is the contention of the appellant. I am unable to agree with this contention of the appellant. In my view, the Assessing Officer under sub-section (2C) has authority to fix the time for the appellant to get the accounts audited and produce the auditor's report from the auditor appointed by him under section 142(2A). Necessarily the Assessing Officer has to fix the time after consultation with the auditor because only the latter knows what time he requires for completing the audit entrusted to him. However, it may so happen that the auditor, for many reasons, may not be able to complete the audit or prepare the report within the time granted by the Assessing Officer and it is absolutely within his powers to request for extension of time from the Assessing Officer for completion of audit and for filing report. If the officer is convinced, he is free to extend the time initially granted under sub-section (2C). In this case, admittedly, within the time originally granted by the Assessing Officer f....
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....to be done by the auditor appointed under sub-section (2A) of section 142, the convenience of the auditor is what matters and if the auditor approaches with a request for extension of time the Assessing Officer is bound to consider the same and grant extension of time, if he is satisfied that the request is bona fide. In fact, if the auditor drags his feet and unreasonably delays the report, the officer can extend the time for furnishing report suo motu and approach the Commissioner or Chief Commissioner for appointing a substituted auditor by following the procedure under section 142(2A). I, therefore, hold that the order of the passed by assessing officers is well within the time allowed under the law. The AO to specify the period for the appellant to furnish the audit report u/s 2C includes the authority to re-fix the period, whether by extending or reducing it and it can be done su-moto or on the request of the auditor. Therefore, I do not find any infirmity in assuming jurisdiction by the A.O. u/s 153C of the Act and consequential assessment order framed, accordingly. The grounds therefore are dismissed." (3.2) The Ld. CIT(A) deleted the aforesaid addition of Rs. 15 lacs but....
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.... limit for notice u/s 143(2) in respect of return filed u/s 139(1) of I.T. was already barred by limitation at the time of search. In view of these facts, the Ld. Counsel for Assessee contended that the matter is squarely covered in favour of the Assessee by the order of Jurisdictional Delhi High court in the case of Kabul Chawla vs. CIT (2016) 380 ITR 573 (Delhi). The Ld. Counsel for Assessee also made submissions on the merits of aforesaid addition of Rs. 10,10,476/-. The Ld. CIT(DR) has also made detailed submissions both on applicability of the ratio in the case of Kabul Chawla (supra) and on merits of the addition. In particular, she highlighted that a lot of incriminating material was found in the case of the Assessee for Assessment Year 2005-06 and there was surrender of undisclosed income also for A.Y. 2005-06. Although, she contended that seized material pertaining to one Assessment Year can also be relied upon to draw inference that there can be similar transactions throughout the period of six years covered by 153A of I.T. Act, she failed to establish that the aforesaid addition of Rs. 10,10,476/- made in the case of Assessee in this year was similar to, or was in conson....
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....(4) of the Act. The ld. JM, being the senior Member, proposed the following question for reference to the Third Member: - "Whether, in the absence of recovery of any incriminating material during the course of search against the assessee, when assessments have already completed, authorities below were justified in invoking section 153A of the I.T. Act for the purpose of making additions by disallowing claim of losses and brought forward of losses qua each of assessments under appeals i.e 2004- 05, 2005-06 and 2006-07?" 3. On the other hand, the ld. AM proposed the following two questions:- "(a) Whether, when we are presented with two precedents of equal strength from higher court(s), and specially when the earlier precedent has already been considered in the later one; harmonious reading of precedents requires that both precedents are treated by us with equal respect; that the distinguishable facts of the two precedents are appreciated; and that the precedent which is closer to facts of the case before us, is preferred by us for our guidance? (b) Whether, additions can be made in assessments u/s 153A of I.T. Act even for those assessment years in respect of which no inc....
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....tal income of Rs. 52,49,283/- for the assessment year 2006-07. In other words, he did not allow the carry forward of the losses for the assessment years 2003-04, 2004-05 and 2005-06 and as the sequitur, did not permit the set off of such brought forward losses against the positive income for the assessment year 2006-07. The assessee remained unsuccessful before the ld. CIT(A) as well. Aggrieved thereby, it came up before the Tribunal contending that such losses should be allowed to be carried over for set off against the positive income for the assessment year 2006-07. The contention of the assessee for carry forward was based on the premise that no incriminating material was found during the course of search in relation to these assessment years and, hence, the Assessing Officer was not within his power to disallow the loss claimed in the returns of income for these years. The ld. AM, who passed the draft order first, noticed that the Assessing Officer disallowed the loss claimed by the assessee for the assessment years 2004-05 and 2005-06 on the ground that claim of various expenses was not verifiable. In the absence of such details furnished before the ld. CIT(A) as well as the ....
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....e in making addition u/s 153A of the IT Act provided some incriminating material in the case of the assessee for any assessment year (s) (referred to in clause (b) of section 153A(1) of the Income-tax Act) is unearthed as a result of search u/s 132 of the IT Act whether by statement u/s 132(4) of the IT Act or by way of undisclosed investment or by way of incriminating documents or in any other manner.' This is how, he held that the disallowance of loss claimed by the assessee for the assessment years 2004-05 and 2005-06 on the ground of claim of various expenses made by the assessee, not being fully verifiable, was in order. The ld. JM reiterated the fact that no incriminating material or document or evidence was found during the course of search in relation to such two assessment years and, hence, the loss so claimed for carry forward and set off should be allowed against the income for the A.Y. 2006-07. 7. It has been noticed above that search in this case was conducted on 20.11.2009. The assessment years under consideration are 2004-05, 2005-06 and 2006-07. The assessee filed returns for these years originally u/s 139 at the material time. Whereas the return for the assessme....
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....tion is construed as passing of the assessment order except where a notice u/s 143(2) is issued for a scrutiny assessment u/s 143(3) of the Act. In a case, where notice u/s 143(2) is issued, the processing of return u/s 143(1) and the consequential issuance of Intimation does not amount to passing of the assessment order because the assessment order, in such circumstances, is passed after due scrutiny u/s 143(3) of the Act. There can be only one assessment order for one year. The crux of the matter is that where no notice u/s 143(2) is issued within the permissible maximum time, the issuance of Intimation on processing the return u/s 143(1) of the Act, is construed as completion of assessment. However, where such notice is issued, the intimation issued u/s 143(1)(a) loses the character of an assessment order, which in that case, is passed u/s 143(3) after thorough scrutiny. To sum up, an assessment is termed as completed on the passing of an order u/s 143(3) of the Act, but, in a case, where a return has been filed by the assessee, which is processed u/s 143(1), but no further notice u/s 143(2) is issued and the same cannot be issued because of the time limit setting in, the Intima....
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....taken by the Tribunal. It summarized the legal position in para 37 of its judgment as under:- "On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: i. Once a search takes place under Section 132 of the Act, notice under Section 153 A (1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed 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 wou....
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....closer to the facts of the present case. In the case of Dayawanti (supra), a search and seizure operation was carried out on 22.03.2006. The assessee, along with other family members, surrendered Rs. 3.5 crore at the time of search as additional income in respect of 'business carried on outside the books of account' in connection with production and sale of gutka. She further admitted in her statement not to have any source of income or any bank account. She still further admitted to being proprietor only on record and, in fact, Shri Anup Gupta looked after all the operations along with the help of other family members. Notice u/s 153A was issued requiring the assessee to furnish returns. In response, she filed a photo copy of the return earlier filed u/s 139(1) declaring gross profit of Rs. 7.30 lac on sales of Rs. 69.28 lac, yielding gross profit rate of 10.55%. Since no proper books of account were presented, the Assessing Officer rejected the book version u/s 145 and estimated the sales at Rs. 1 crore. He applied GP rate of 20% and determined total income at Rs. 45.90 lac as against the declared income of Rs. 2.42 lac. The CIT (A) reduced the gross profit rate to be applied at ....
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....e during the course of proceedings u/s 153A of the Act. Similar is the position for the assessment year 2005-06 in which the assessee incurred expenses of Rs. 1.31 crore and claimed loss of Rs. 23.59 lac. The Assessing Officer, in the proceedings u/s 153A, reduced such loss to Rs. Nil, thereby implying that only a part of the expenses to the extent of the amount of loss, was disallowed for non-furnishing of necessary details in support of expenses. The crux of the matter is that only a part of the expenses representing loss for the assessment years 2004-05 and 2005-06 was disallowed and not allowed to be carried forward for set off against the income for assessment year 2006-07 simply on the ground that expenses were not fully verifiable since complete details were not furnished during the course of assessment proceedings. 16. Admittedly, assessments for the A.Ys. 2004-05 and 2005-06 stood completed on the date of search. The amount of loss finally determined for the A.Y. 2004-05 in the original assessment was Rs. 23,05,880/-. Similarly, the amount of loss finally determined by the AO in the original assessment order passed u/s 143(3) on 30.11.2007 for the assessment year 2005-0....
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....so as to extrapolate the same to the years under consideration. The trump card of the Department's case is the ratio of Dayawanti (supra), which could have been applied only if the Revenue had established the recording of some bogus expenses by the assessee in later years, so as to enable it to draw an adverse inference for the current years. This is absent in the facts and circumstances of the case. Thus, it is vivid that the ratio decidendi in the case of Dayawanti (supra) does not apply to the facts of the case. In the absence of any material, the genuineness of expenses incurred by the assessee, and that too partly to the extent of losses claimed, could not have been disturbed by the Assessing Officer in the assessment u/s 153A of the Act. Be that as it may, it is further relevant to note that the operation of the judgment in the case of Dayawanti (supra) has been stayed by the Hon'ble Supreme Court vide its judgment dated 03.10.2018, a copy of which has been placed on record. 18. Thus, it is apparent that between the two judgments of Kabul Chawla (supra) and Dayawanti (supra), the facts and circumstances of the instant case are fully covered by the ratio in the case of ....