TaxTMI 
TaxTMI 
2018 (5) TMI 1820
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....heard together involving the common issues and are disposed of by this common order. 2. The parties before us argued that in the appeal of the assessee the validity of issue of notice u/s 153A and consequential assessment is challenged contesting that additions/ disallowances made are not based on any incriminating material seized during the course of search, therefore, this issue covering ground No. 1 of the appeal of the assessee may be decided first. The main reason for argument of both the parties was that, if the arguments of the assessee that the addition and adjustment made to the total income are to be based only on incriminating material found during the course of search fails, then only the other issues in the appeal of the revenue as well as of the assessee will survive. Hence it needs to be first decided that a. whether for the addition to be made in concluded assessments, revenue necessarily needs incriminating material. The claim of the assessee is in affirmative and revenue denies such proposition. b. Whether the addition made by the ld AO are based on any incriminating material or not. Assessee contends that no such material exists for the relevant assessment y....
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....s challenged that there is no incriminating material found during the course of search and therefore, on the date of search i.e. 21.10.2011 the assessment year 2005-06 to 2009-10 were not pending and therefore, the addition made to the total income of the assessee are not valid. Decision of Ld CIT (A) on the issue 6. The assessee before the ld CIT (A) agitated the above ground that there is no incriminating evidence found during the course of search and therefore, no addition can be made. The ld CIT(A) vide para no. 4 has dealt with this issue as under:- "1. Ground No. 1 and 2 for all the AYs are general in nature and does not require specific adjudication as such. However, ld AR has taken grounds for various AYs upto the AY 2010-11 that no addition can be made u/s 153A where there is no link between any material/ documents found as a result of search u/s 132 of Income Tax Act and the addition ld AR has mentioned these arguments under various grounds. I have considered this argument. Firstly, this will not apply for AY 2011-12 being search AY and AY 2010-11 where there was time available for issuing notice u/s 143(2) and the notice u/s 143(2) could not be issued due to occurre....
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....riminating material found during the course of search. The ld CIT (A) has held that the Assessing Officer has the jurisdiction to assess the total income irrespective of the seized material, as there was one addition on account of evidence gathered during the search. He relied up on the decision of Honourable Delhi high court in case of Anil Kumar Bhatia (Supra). Therefore, the assessee now agitates this issue. Arguments of the Assessee 8. The ld Authorised Representative vehemently submitted that a. There are no incriminating evidences found during the course of search with respect to these assessment years. b. The decision relied up on Ld CIT (A) in case Anilkumar Bhatia Does Not applies in case of the assessee but the decision of Hon Delhi High court in case of CIT V Kabul Chawla applies to the facts of the case. c. Hon Supreme court has held that incriminating evidences should be linked to the specific year and therefore to disturb the already assessed income, there has to be specific incriminating material related to each of the assessment year in which the additions have been made. d. In AY 2004-05, in assessee's own case coordinate bench has held while dealing wit....
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....0-11 where there was time available for issuing notice u/s 143(2) and the notice could not be issued due to occurrence of search and jurisdiction of assessment was merged with section 143A. Secondly, for all AYs there are additions on account of bogus purchase of sandalwood oil on the basis of seized document and various evidences gathered during search and post search inquiry. Therefore, the assessing officer has the jurisdiction to assess the total income irrespective of the seized material as there was one addition on account of evidence gathered during the search. This view is supported by the decision of Hon'ble Delhi High Court in the case of Anil Kumar Bhatia(2012) 24 taxman.com 98 Delhi, where Hon'ble High Court has given the jurisdiction to assessing Officer to assess total income for all AYs except in the case where there was no incriminating material for any of the year covered u/s 153A. In the present case, definitively there is incriminating material which would be discussed in subsequent paragraph when I will deal with bogus purchase of sandalwood oil. Therefore, the instant case is not covered by para 23 of the order of Hon'ble H.C. of Delhi in the case of Anil Ku....
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....rse of search. (ii) Legal position to this effect is also supported from decision of Hon'ble Delhi High Court in the case of CIT v. Kabul Chawla [2016] 380 ITR 573 (Delhi) & Pr. CIT V. Meeta Gutgutia [2017] 395 ITR 526 (Delhi) 10. In the present case, it may be noted that regular assessment u/s 143(3) was completed after exhaustive verification and examination thereby making several adjustments to the returned income. Accordingly, the AO could assume jurisdiction u/s 153A only on the basis of incriminating material found during the course of search thereby suggesting undisclosed income in the hands of the appellant. 11. It may be highlighted that the additions in relation to proceedings u/s 153A were made on the basis of scrutiny of books of accounts maintained in the regular course of business with the aid of special auditor's report obtained after search proceedings, without having nexus to any incriminating material found during the search. It may be noted, that in the present case the special audit report cannot be a basis for any addition as the scope of section 153A in case of completed assessments is confined to incriminating material. 12. That in the absence of ....
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....und in mind, we cannot take our eyes of the mechanism which gets triggered after a search u/s 132 of the Act, wherein the provision of section 153A of the Act kicks in. Now the settled position of law in case of search is that no addition can be made without any incriminating evidence unearthed during the search as held by the Hon'ble jurisdictional High Court in CIT V Kabul Chawla - 61 Taxmann.com 412 (Delhi). If that is so, whether the AO can reopen an assessment without any incriminating material, which would suggest escapement of income of the Year which he proposes to reopen. Here when we again peruse the reasons recorded we do not find any whisper of any tangible material or trace of any incriminating material which could arm the AO invoke section 147/148 of the Act. 16. The Hon'ble ITAT further observed vide Page 49 Para 25 that in the case of search, escapement of income should be on the basis of seized documents and not on the basis of further enquiry of investigation. The Hon'ble ITAT vide finding recorded at Page 81 Para 50 also observed that escapement of income should be on the basis of facts and evidence and not on the basis of inference. 17. After appreciating ....
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.... other AYs in question, it is seen that, even for FY 2010-11, the ITAT, after undertaking a detailed analysis, found that what was seized was not incriminating material. The categorical factual findings by the ITAT, which have not been shown by the Revenue to be perverse, are inter alia that the material seized does not show inflation of the profit of the eligible undertakings; or that the eligible undertakings are not carrying out manufacturing activities or that the material transferred to the eligible undertakings is less than the market value and that "none of the material relates to the purchases from sister concerns. "All of this is de hors the fact that the material pertains only to FY 2010-11. 13. If, even for FY 2010-11, what was seized did not constitute incriminating material, then the essential jurisdictional fact for justifying the assumption of jurisdiction under Section 153 A of the Act did not exist. Learned counsel for the Assessee is therefore right in submitting that, in view of the above factual findings of the ITAT, the further question as to whether the said material was sufficient to reopen the assessments for the other AYs, with which these appeals are co....
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....T v. Kabul Chawla [20161 380 ITR 573 (Delhi) SEARCH AND SEIZURE - BLOCK ASSESSMENT - UNDISCLOSED INCOME - GENERAL PRINCIPLES - ASSESSMENTS COMPLETED ON DATE OF SEARCH - NO INCRIMINATING MATERIALS FOUND DURING SEARCH - BLOCK ASSESSMENT NOT VALID - INCOMETAX ACT, 1961, ss. 132, 153A The legal position that emerges on a perusal of section 153A and section 132 of the Income-tax Act, 1961, is as under : (i) Once a search takes place under section 132 of the Act, notice under section 153A( 1) will have to be mandatorily issued to the person in respect of whom search was conducted requiring him to file returns for six assessment years immediately preceding the previous year relevant to the assessment year in which the search takes place, (ii) Assessments and reassessments pending on the date of the search shall abate. The total income for such assessment years will have to be computed by the Assessing Officers as a fresh exercise, (iii) The Assessing Officer will exercise normal assessment powers in respect of the six years previous to the relevant assessment year in which the search takes place. The Assessing Officer has the power to assess and reassess the "total income" of the si....
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....power which enables the Revenue to re-open at least six years of assessments earlier to the year of search. It is not to be exercised lightly. It is only if during the course of search under Section 132 incriminating material justifying the re-opening of the assessments for six previous years is found that the invocation of Section 153 A qua each of the AYs would be justified .......................................................................... 71. For all of the aforementioned reasons, the Court is of the view that the ITAT was justified in holding that the invocation of Section 153A by the Revenue for the AYs 2000-01 to 2003-04 was without any legal basis as there was no incriminating material qua each of those AYs. (c) Pr.CIT V. Lata Jain f20161 384 ITR 543 (Delhi) 7. It has been noticed by the ITAT in the impugned order that for the AYs in question no incriminating material qua the Assessee was found. 8. In that view of the matter, and in light of the decision of this Court in CIT v. Kabul Chawla [2016] 380 ITR 573 (Delhi), the Court is of the view that the impugned order of the ITAT suffers from no legal infirmity and no substantial question of law arises for det....
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....of search as was manifest from the order of the Assessing Officer. Consequently, it was held that the Assessing Officer was not justified in invoking section 68 for the purposes of making additions on account of share capital. There was nothing to show that the factual determination was oerverse. (AY. 2002- 2003). Editorial : The Supreme Court has dismissed the special leave petition filed by the Department against this judgment [2016] 380 ITR 64(St.) CIT v. All Cargo Global Logistics Ltd [2015] 374 Itr 645 (Bom) SEARCH AND SEIZURE - ASSESSMENT IN SEARCH CASES - ASSESSMENT IN PURSUANCE OF NOTICE IN RELATION TO SIX YEARS - SCOPE OF ENQUIRY - FINALISED ASSESSMENT/REASSESSMENT SHALL NOT ABATE - ONLY UNDISCLOSED INCOME AND UNDISCLOSED ASSETS DETECTED DURING SEARCH COULD BE BROUGHT TO TAX IN RESPECT OF THOSE YEARS - INCOME-TAX ACT, 1961, s. 153A i. CIT v. Gurinder Singh Bawa [2017] 79 taxniaim.com 398 (Bombay) Section 153A of the Income-tax Act, 1961 - Search and seizure - Assessment in case of - Proceedings under section 153A were without jurisdiction where no assessments were pending at that time and no incriminating evidence was found during search [Assessment year 200....
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.... ITA No. 512/2016 dated 21.08.2017 in the case of the sister concern, wherein, also it was held that addition cannot be made without any incriminating material. In the end, he vehemently relied upon the order of the ld Hon'ble Delhi High Court in case of CIT Vs. Kabul Chawla 308 ITR 573 and further subsequent decisions of Hon'ble Delhi High Court and Mumbai High Court. Therefore, his contention was that there is no incriminating material found during the course of search. He further supported his arguments by citing the decision of the Hon'ble Supreme Court in case of CIT Vs. Sinhgad Technical Educational Society 397 ITR 344 that incriminating material must pertain to the Assessment Year in question. He further referred to the details copies of the seized material to show that all these seized material are part of the regular books of accounts of the assessee. 11. He also refereed to all the seized materials and submitted explanation for them. He stated that they are the average cost of material purchased, suppliers list, stock register, excise returns, quantitative details etc. he stated that all these documents does not have any element of escapement cont of income a....
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....pter VIA made by DS companies is grossly inflated. (Ref Para 4/Page2/A)) * On the basis of information received from the Investigation Wing it is clear that the assessee company has claimed excessive deduction/s 80IB/IC of the Act, by attributing entire value addition to the Guwahati unit, being eligible unit and thereby contravening the provisions of Section 80IA (8) of the Income Tax Act and transferring the goods and services held for the purpose of the eligible units to any other business carried on by the assessee. (Ref Para 6/Page 2/AO) * The detailed flow chart of manufacture/processing impended at Page 4 to 8 of the AO order gives credence to this. * Search revealed that bogus purchase of sandalwood oil. Incriminating material was seized in the form of documents, which proved beyond doubt that assessee concern was inflating purchases. This was also reinforced by the statements recorded during the course of the search. * Tabulation of Incriminating material seized & used for making addition by AO Sr No Reference to seized Material Reference in AO order 1. Annexure A-l/page 52 Para 98/Page 43/AO. Scanned copy on Page 61/AO 2. Annexure A-ll/Page 61-7....
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.... as there was one addition on account of evidence gathered during the search. This view is supported by the decision of the Hon'ble Delhi High Court in the case of Anil Kr Bhatia (2012) 24 taxman.com 98 where Delhi High Court has given the jurisdiction to the AO to assess total income for all AYs Accordingly, these jurisdictional grounds are dismissed. I would not discuss the jurisdictional argument on various substantive grounds to avoid repetition. [B] On Law Several High court judgments have held that statement u/s 132(4) or u/s 131 is good evidence. It has been categorically held by the Jurisdictional High Court that addition made on the basis of statements recorded during course of search cannot be deleted without proving statements to be incorrect. In fact, Supreme Court has also dismissed SLP challenging the judgment of the High Court where the High court has held that statement made under section 133A could be relied upon for purpose of assessment. 1. Kishore Kumar Vs CIT (62 taxmann.com 215, 234 Taxman 771) (Copy Enclosed) where Hon'bie Supreme Court; dismissed SLP against High Court's order where it was held that since assessee himself had state....
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....iffer from it. In the facts and circumstances of the case, having regard to the materials on record, the appellant had failed to establish that the statements of its partner had been recorded in the course of the search by using coercion, threat or inducement. Hence, the contentions advanced by the appellant in that regard were dismissed and the conclusion of the Tribunal on that count was affirmed." [Para 9] 6. Raj Hans Towers TP.) Ltd. Vs CIT (56 taxmann.com 67, 230 Taxman 567, 373 ITR 9) (Copy Enclosed) where Hon'ble Delhi High Court held that where assessee had not offered any satisfactory explanation regarding surrendered amount being not bona fide and it was also not borne out in any contentions raised before lower authorities, additions so made after adjusting expenditure were justified (SURVEY CASE) 7. PCIT Vs Avinash Kumar Setia 2017 81 taxmann.com 476 (Delhi) (Copy Enclosed) where Hon'ble Delhi High Court held that Where assessee surrendered certain income by way of declaration and withdraw same after two years without any satisfactory explanation, it could not be treated as bona fide and, hence, addition would sustain (SURVEY CASE). * Supreme Court....
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....e of search & were the basis of addition made by the AO. * Search at all the premises of the Assessee concern revealed that the assessee was manufacturing chewing tobacco, Zarda under brand names like 'Rainiqandha' at the Noida factory premises. However, in order to claim deduction u/s 8QIB/IC the assessee concern sent the final product for packing to Guwahati and Aqartala factory premises. This is reported in the report of the Investigation Wing and is discussed at length in the order of the AO. * Statements were recorded during the course of search at the premises of the assessee concern and search/survey operations at the premises of the associate concerns. These in corroboration with the seized material proved beyond an iota of doubt that purchases of sandalwood were being inflated, thus affecting the profits generated. * As a result of the blatant attempt to reduce profits by inflation of purchases and redirecting finished goods to Guwahati & Agartala to claim benefit of 80IB/80IC, certain complexity was found as a result of which reference u/s 142(2A) was made to the Special Auditor. The Special Auditor pointed out several inconsistencies/falsities in the Acc....
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....search was initiated under section 132 of the Income Tax Act. So, the A.O is empowered by the Income Tax Act and its provisions under section 153A to assess the 'total income' of the assessee which includes undisclosed income. [B] Principles of Interpretation of a Taxation Statute mandate that it is not permissible to construe any provision of a statute, much less a taxing provision, by reading into it more words than its contains. With regard to interpretation of Section 153A/153C, the Revenue also submits that a taxing statute is to be strictly construed and there is no equity in a taxing statute. The Income Tax Act is a self-contained code, and provides machinery for imposing and collecting tax, obtaining reliefs and appeals against improper orders etc. While tax law is a part of the general law, it has got its own distinct features. There are some special provisions which are attracted while interpreting tax laws. The need of interpretation arises only when the words used in the statute are on their own term, ambivalent and do not manifest the intention of legislature. [Keshavji Ravji & Co. v/s. CIT - [(1990) 183 ITR 1 (SC)]. Similarly rule of interpretat....
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....in a taxing provision Lakshmi Bai v/s. CIT - [(1994) 206 ITR 688, 691 (SC)]. "The subject is not to be taxed without clear words' for that purpose " CIT vs. Provident Inv. Co. Ltd. (1954) 32 ITR 190 (SC) J.K. Steel Ltd. vs. UOI AIR 1970 SC 1173 CIT vs. Indo Oceanic Shipping Co. Ltd. (2001) 247 ITR 247 (Bom) Hansraj & Sons vs. State of J & K (2002) 6 SCC 227, 237-39 In A.V. Fernandez: v/s. State if Kerala, [AIR 1957 SC 657] His Lordship Bhagwati 3. has stated the principle of taxing laws as follows : "In construing fiscal statutes and in determining the liability of a subject to tax one must have regard to the strict letter of law. If the Revenue satisfies the court that the case falls strictly within the provisions of the law, the subject can be taxed. If, on the other hand, the case is not covered within the four corners of the provisions of the taxing statute, no tax can be imposed by inference or by analogy or by trying to probe into the intentions of the legislature and by considering what was the substance of the matter." [C] The following judgments of various High Courts, including jurisdictional High Court clearly hold that assessment u/s 153A nee....
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....he financial year in which the search took place or the requisition was made and ending with the date of search/requisition. Under Section 153A and the new scheme provided for, the AO is required to exercise the normal assessment powers in respect of the previous year in which the search took place." (Para 18) * Assessing Officer is bound to issue notices to the Assessee to furnish returns for 6 Assessment years. Assessing Officer is empowered to assess or re-assess the total income including undisclosed income of the Assessee "Under the provisions of Section 153A, as we have already noticed, the Assessing Officer is bound to issue notice to the Assessee to furnish returns for each assessment year falling within the six assessment years immediately preceding the assessment year relevant to the previous year in which the search or requisition was made. Another significant feature of this Section is that the Assessing Officer is empowered to assess or reassess the "total income" of the aforesaid years. This is a significant departure from the earlier block assessment scheme in which the block assessment roped in only the undisclosed income and the regular assessment proceedings....
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....ely the undisclosed income of the Assessee, but also the 'Total Income' of the Assessee in whose case a search or requisition has been initiated "Now there can be cases where at the time when the search is initiated or requisition is made, the assessment or reassessment proceedings relating to any assessment year falling within the period of the six assessment years mentioned above, may be pending. In such a case, the second proviso to sub section (1) of Section 153A says that such proceedings "shall abate". The reason is not far to seek. Under Section 153A, there is no room for multiple assessment orders in respect of any of the six assessment years under consideration. That is because the Assessing Officer has to determine not merely the undisclosed income of the Assessee, but also the 'total income' of the Assessee in whose case a search or requisition has been initiated. Obviously there cannot be several orders for the same assessment year determining the total income of the Assessee. In order to ensure this state of affairs namely, that in respect of the six assessment years preceding the assessment year relevant to the year in which the search took place th....
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....nder consideration before the search took place were processed under Section 143(l)(a) of the Act, the provisions of Section 153A cannot be invoked. The Assessing Officer has the power under Section 153A to make assessment for all the six years and compute the total income of the Assessee, including the undisclosed income, notwithstanding that the Assessee filed returns before the date of search which stood processed under Section 143(1) (a)."(Para 22) Highlights of the case of Fiiatex India Ltd., ITA No. 269/2014 and CM No. 10077/2014 dated 14.07.2014 of Hon'bie Delhi High Court The decision of Hon'ble Delhi High Court in the case of Anil Kumar Bhatia has been followed recently in another case of Fiiatex India Ltd. (269/2014 and CM No. 10077/2014) by Hon'ble Delhi High Court vide order dated 14-07-2014, The Question of law referred before Hon'bie Delhi High Court in this case is as under: "Whether the Tribunal erred on facts and in law in not holding that recomputation of book profit, de-hors any material found during the course of search, in the order passed under section 153A of the Act was without jurisdiction, being outside the scope of proceedings ....
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.... or made without any relevance or nexus with the seized material, is basically clarificatory that the assessment under section 153A emanates and starts on the foundation of the search, which is the jurisdiction precondition." After that Hon'ble Delhi High Court has discussed the case of Anil Kumar Bhatia decided by Hon'ble Delhi High Court earlier and quoted from Para 18 & 22 of this order (mentioned supra) and finely decided in Para 4 of this order that after examination of section 153A the submission/contention of the appellant has no merit. * Highlights of the case of Raj Kumar Arora, ITA No. 56/2011 dated 11.07.2014 of Hon'ble Allahabad High Court The decision of Hon'ble Delhi High Court in the case of Anil Kumar Bhatia has been followed recently in another case of Raj Kumar Arora, ITA No. 56/2011 by Hon'ble Allahabad High Court vide order dated 11- 07-2014. The Question of law referred before Hon'ble Allahabad High Court in this case is as under: "Whether ITAT has erred in law in dismissing the appeal of the department and holding that no addition can be made for gift in assessment completed under section 153A unless some incriminating mater....
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....e Department afresh on merit. The question of law is answered accordingly." Highlights of the case of Canara Housing Development Company, ITA No. 38/2014 dated 25.07.2014 of Hon'bie Karnataka High Court The decision of Hon'ble Delhi High Court in the case of Anil Kumar Bhatia has been followed recently in another case of Canara Housing Development Company, ITA No. 38/2014 by Hon'ble Karnataka High Court vide order dated 25-07-2014. In this case the Hon'ble Court has also observed that the decision of Hon'ble special bench in the case of All Cargo Global Logistic Ltd. dated 06/07/2012 is not correct. The Question of law referred before Hon'ble Karnataka High Court in this case is as under: "When once the proceedings under Section 153A of the Act is initiated, whether the Commissioner of Income Tax can invoke the power under Section 263 of the Act to review the order of assessment passed by the Assessing Authority?" At the end the Hon'ble Court has decided in Para 11 that "the Tribunal has of proceeded on the assumption by virtue of the judgment of the special bench of the Mumbai, the scope of enquiry under Section 153A is to be confirmed on....
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.... where the AO is satisfied that any " books of account or document " apart from money, bullion or jewellery etc., seized from the person searched belong to a person other than the person searched u/s 153A, then such books of account or documents etc. shall be handed over to the AO having jurisdiction over such other person and the AO of such other person shall proceed to " assess or reassess income of such other person in accordance with the provisions of section 153A. thus, the effect of sub-section (1) of section 153C is that where all the necessary ingredients of this sub-section are satisfied, the matter of making assessment or reassessment goes back to section 153A. Since the assessment or reassessment of such other person has to be done in accordance with the provisions of section 153A, let us examine the prescription of the relevant parts of section 153A(1), which is as under :- "Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of M....
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....umber of years for which the incriminating material is found. When we read section 153C in a holistic manner, it becomes evident that the triggering point for assuming jurisdiction on the person other than the person searched u/s 153C is the finding of any money, bullion, jewellery or books of account or document from the person searched. Once any money, bullion, jewellery or books of account or document seized or requisitioned from the person searched are found to be belonging to the other person, then, the assessment or reassessment of such other person is to be necessarily completed in terms of section 153A, which in no uncertain terms refers to six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made. Further, the use of the word 'shall' in section 153A immediately before clause fa) has left nothing to doubt that the assessment is required to be made for all the six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made. As the legislature has not made the making of such assessment or reas....
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....r income which is not disclosed in the earlier return of income OR which is not unearthed in the course of j search under section 132 of the Act, in order to find out and determine what is the 'total income' of each year and then pass the order of assessment. The grounds of appeal raised by the Assessee at S. Nos. 2 to 5 are accordingly dismissed for all four assessment years 2005-06 to 2008-09." * Same view is also expressed by Hon'ble High Court of Andhra Pradesh in the case of Gopal Lai Bhadruka vs. DCIT 346 ITR 106 dated 15.12.2011, where Hon'ble High court has held as under (page no.17 to 21 of Paper Book no. 3): "The question of law agitated before the Tribunal was whether, for the purpose of computing income under section 153A/153C, the Assessing Officer was required to confine himself only to the material found during the course of search operations. The Tribunal held against the Assessees. Held that by virtue of section 158B-I the various provisions of Chapter XIV-B are made inapplicable to proceedings under section 153A/153C. The effect of this is that while the provisions of Chapter XIV-B limit the inquiry by the Assessing Officer to those materi....
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.... Delhi Kerala Court held that notice issued under section 153A -return must be filed even if no incriminating documents discovered during search 4. Smt Davawanti Vs CIT (2016) 75 taxmann.com 308 (Delhi)/r20171 245 Taxman 293 (Delhi)/r20171 390 ITR 496 Delhi)/r20161 290 CTR 361 (Delhi) (Copy Enclosed) where Hon'ble Delhi High Court held that Where inferences drawn in respect of undeclared income of assessee were premised on materials found as well as statements recorded by assessee's son in course of search operations and assessee had not been able to show as to how estimation made by Assessing Officer was arbitrary or unreasonable, additions so made by Assessing Officer by rejecting books of account was justified." 16. The ld CIT DR submitted a chart showing various seized papers where in 11 set of papers were mentioned and submitted that it is the tabulation of incriminating material seized and used for making addition by ld AO. She has mentioned the reference of those papers in the assessment order too. 17. She further stated that the order of the coordinate bench and Hon High court on which the assessee is placing huge reliance was with respect to the provisi....
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....he submitted that from the seized material it is apparent that the bogus purchase of sandalwood oil has been made from Surya Vinayak Industries and Allied perfumers Pvt. Ltd. Therefore, she submitted that there is enough incriminating material found during the course of search. She further relied upon the several decision mentioned in her written submission. She further stated that the decision relied upon by the ld AR in case of CIT Vs. Kabul Chawla and Meeta Gutgutia (supra) do not apply to the facts of the case for the simple reason that incriminating material were found during the course of the search. She further stated that the search at the premises of the assessee revealed that the assessee was manufacturing the Pan Masala at the Noida factory, however, only packing etc was made at Eligible Units in Guwahati and Agartala. She referred that this the report of the investigation wing and discussed at length in the order of the ld AO. She further stated that statement of several persons were recorded which proves beyond doubt that purchases of sandalwood oil is inflated. She further stated that auditor appointed u/s 142(2A) has also shown the serious discrepancies in the book o....
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....overbilling of the material. c. He further submitted that assessee is producing goods in eligible units, which are eligible for tax holidays, why the assessee will purchase goods, which are showing higher purchase prices then the actual price when its full income is exempt. This issue is not answered by revenue or ld CT DR. d. The assessee as well as the supplier has denied the alleged fact of over invoicing. e. On the over invoiced bill the duty element and VAT element is chargeable, there is no allegation that those goods are over invoiced. f. Further as the unit of the assessee manufacturing are free from excise duty, the amount of duty paid on procurement of goods which is on the higher price than the actual sale price as alleged than there is over invoicing of the purchase of material, it will put assessee is great financial loss as the duty paid by the assessee on over invoiced amount shall become the cost of the assessee. Hence, no prudent businessperson will do that. 23. He further referred to para no. 98 of the assessment order wherein it has been stated that even that paper which is referred to by the ld CIT DR was not found and seized from the assessee but from ....
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....a No. 120 wherein, the additions with respect to the bogus purchases have been made. His argument was that there is no evidence of inflation in the rate or bogus purchase of the material from Surya Vinayak Industries and APPL by the assessee. In nutshell he submitted that there is no evidence found during the course of search of nature of incriminating evidence based on which the ld Assessing Officer has made the addition. Decision and reasons 26. We have carefully considered the rival contentions and perused the orders of the lower authorities. Admittedly, the assessee is a company, which was subjected to search on 21.01.2011. Therefore, on the date of search the Assessment Year up to 2009-10 were completed assessment year. Therefore, for disturbing the already assessed income/ returned income for all those years there has to be a recovery of any incriminating evidence during the course of search. Any addition or disallowance to be made in these years u/s 153A of the Act has to be made on evidences found during the course of search. The evidences have also to be with respect to each of the Assessment Year involved in the appeal. Therefore, if the incriminating material for exam....
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....o page NO. 18. Page No. 20 to 30 of the paper book is the purchase quantity of the raw material for FY 2006-07, 2007-08 and for eight months of 2008-09. It is the quantitative details of purchase of various materials. Page No. 31 is the title for Annexure A-14 and page No. 32 is a quantitative reconciliation of perfume as on 31.12.2010. This statement shows the reconciliation of the receipt as per MD and receipt as per account. Each of the difference of excess or shortage have been reconciled and given in the remarks column. Page No. 33 is the title of annexure A-15 and page No. 35 to 44 is the annual financial statement under the Central Excise Rules. These are the copies of returns filed submitted by the assessee to the Superintendent Central Excise, Range -27, Division-VI, Nehru Palace, New Delhi vide letter dated 24.11.2009 of the perfumery division of the assessee. These are extracted from the regular books of account and stock records maintained by the assessee. Annexure A-16 page NO. 7 to 12 is the copy of the stock register from 01.04.2009 to 31.03.2010, which shows the name of the item, unit, opening balance, total receipts, total consumption, closing stock, physical stock....
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.... Shri Rajiv Kumar who is managing Director of Dharampal Stayapal Ltd. This paper was shown to him vide question No. 13, which was replied by him by asking for some time. He further replied this question vide question No. 27. The ld AO further examined Shri Rajiv Gupta on 13.06.2011 where he has denied of having paid any excess cash to the assessee. The director of M/s. Surya Vinayak Industries Ltd was also summoned and his statement was recorded on 02.05.2011 wherein, he too have denied having received the payment other than by cheque or payment any cash in lieu of sales of material to the assessee company. The ld Assessing Officer himself has stated that the paper is dated 30.11.2010 that means the transaction in this paper are showing the transaction for the month of November 2010. The excess amount paid up to 31.10.2010 is mentioned. The balance is also shown up to 30.11.2010, therefore, it is apparent that this paper does not pertain to Assessment Year 2005-06 to 2009-10 but for Assessment Year 2011-12. None of the transaction showed in this paper pertain to the impugned Assessment Years mentioned before us. The Hon'ble Supreme Court in case of Sinhagd Technical Educational....
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....he four appeals under consideration is allowed and in favour of the assessee." The matter reached honourable Bombay High court [2015] 63 taxmann.com 14 (Bombay)/ [2015] 235 Taxman 163 (Bombay)/ [2015] 378 ITR 84 (Bombay)/ [2015] 278 CTR 144 (Bombay) where in para no 7 it is held that If there is reference made to some loose papers found and seized from his residence indicating some "on money" receipt during the admission process then above co-relation and assessment year wise ought to have been established. In the circumstances, we do not think that the tribunal's order raises any substantial question of law. On further appeal before Honourable Supreme court in [2017] 84 taxmann.com 290 (SC)/ [2017] 250 Taxman 225 (SC)/ [2017] 397 ITR 344 (SC)/ [2017] 297 CTR 441 (SC) held as under:- "15. At the outset, it needs to be highlighted that the assessment order passed by the AO on August 7, 2008 covered eight Assessment Years i.e. Assessment Year 1999-2000 to Assessment Year 2006-07. As noted above, insofar as Assessment Year 1999-2000 is concerned, same was covered under Section 147 of the Act, which means in respect of that year, there were re-assessment proceedings. Insofar a....
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....hich was disclosed therein was culled out and it showed that the same belongs to Assessment Year 2004-05 or thereafter. After taking note of the material in para 9 of the order, the position that emerges therefrom is discussed in para 10. It was specifically recorded that the counsel for the Department could not point out to the contrary. It is for this reason the High Court has also given its imprimatur to the aforesaid approach of the Tribunal. That apart, learned senior counsel appearing for the respondent, argued that notice in respect of Assessment Years 2000-01 and 2001-02 was even time barred. 19. We, thus, find that the ITAT rightly permitted this additional ground to be raised and correctly dealt with the same ground on merits as well. Order of the High Court affirming this view of the Tribunal is, therefore, without any blemish. Before us, it was argued by the respondent that notice in respect of the Assessment Years 2000-01 and 2001-02 was time barred. However, in view of our aforementioned findings, it is not necessary to enter into this controversy. 20. Insofar as the judgment of the Gujarat High Court relied upon by the learned Solicitor General is concerned, we....
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....the writ petition before the Delhi High Court. That was challenging the validity of notice under section 153C read with section 153A. In dealing with such situation and the peculiar facts that the Delhi High Court upheld the satisfaction and the Delhi High Court found that the machinery provided under section 153C read with section 153A equally facilitates inquiry regarding existence of undisclosed income in the hands of a person other than searched person. The provisions have been referred to in details in dealing with a challenge to the legality and validity of the seizure and action founded thereon. We do not find anything in this judgment which would enable us to hold that the tribunal's understanding of the said legal provision suffers from any error apparent on the face of the record. The Delhi High Court judgment, therefore, will not carry the case of the revenue any further." We, thus, do not find any merit in these appeals." Therefore as per principle enunciated by the Honourable supreme court, there has to be specific incriminating material for each assessment year assessed u/s 153A / 153C which is concluded and addition can be made based on that only. 30. Based....
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....enue. Therefore it cannot be disputed that assessee has purchased the material. Now the issue is at what rate. If it s the case of the revenue that assessee has purchased goods at Rs. 100 But has booked purchases at Rs. 150 and received Rs. 50 back from the supplier in cash, then revenue should have brought on record the near about comparable prices of those material with reasonable evidences. These facts could have been proved either by the availability of the material in the market or also by the production cost of the supplier. Revenue has not brought on record any such material. Most of the part of the order justifying the addition in absence of this merely remains allegations without evidences. Additions in such a manner cannot be sustained. 33. With respect to the other seized material which have been dealt with by the ld Assessing Officer are dealt with at para No. 107 of the Assessment order as under:- "107. Certain other seized documents also confirm the fact that there is no product by the name of Sandalwood oil (C) or Sandalwood oil (SU) being supplied by M/s Surya Vinayak Industries Ltd. to M/s Dharampal Satyapal Ltd. Page No. 61-71 of Annexure A-ll seized from Pe....
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....12,694 Kg and as per Accounts it is 12,894. A different of 200 Kgs is there and in the remarks column it is mentioned that details are attached. And in this context entries of Page no. 67 are being referred. On this page bill wise detail of purchase from various parties of sandalwood oil for the period 1.4.10 to 31.12.2010 are mentioned. Page No.87 to 90 of Annexure A-11 of the Perfumery Division are now being referred to and discussed. In these pages DSL has calculated the average rate of its raw materials. In these pages also there is no mention of any raw material by the name of Sandalwood oil [C] or [SU]. What is there, is only sandalwood oil, whose average rate is mentioned at Rs. 62503/- per kg. In the same annexure in page no.83 to 86, DSL has made a chart of average rate or last rate whichever is higher as on 31.3.2010 for its raw materials. In this chart only the price of sandalwood oil is mentioned which Rs. 67,864/- per kg. and there is no [C] or [SU]. Further, page no.79 to 89 of Annexure A-15 contains the office of Form ER- 4 (Annual Return F.Y. 2008-09) which was submitted to the Excise Department. In annexure I (page No.84) information relating to major purc....
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....n assessee's own case are passed u/s 147 of the Act whereas, the impugned assessments are framed in this appeal are u/s 153A of the Act. We fully agree with the ld CIT DR that both these sections operate in different fields. We agree to this for the simple reason that there may be cases where the assessment may be required to be reopened u/s 147 of the Act and there are instances where mandatorily the assessment in case of search are required to be carried out u/s 153A of the Act. However, what is important is that in u/s 147 there have to be a „reason to believe' of the Assessing Officer, that income chargeable to tax has escaped assessment. Such reasons also have to be based on some tangible material. The provisions of section 153A of the Act deals with the specific chapter in the case of the persons where proceedings u/s 132 takes place. Even in those cases, it has been held by several Hon'ble High Courts that the concluded assessments can be disturbed only on the basis of some material, which shows a prima facie escapement of income i.e. „Incriminating material'. The provision of section 147 and Section 153A of the Act both deals with the concluded assessments a....
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....spect to the disallowance of deduction under that section, the ld Assessing Officer by passing the order u/s 154 of the Act has increased the deduction, therefore, the whole exercise is revenue neutral. The above argument deserves to be rejected at the threshold itself for the simple reason is that whatever is the disallowance or the adjustment that is required to be made to be eligible undertaking increases the profit derived from that industrial undertaking and consequently, the deduction increases. That does not make the addition unsustainable. It does not have any impact on the nature of addition made by the ld AO. 39. Now we come to various additions made by the ld Assessing Officer for Assessment Year 2005-06 and examine whether it has been made based on any incriminating material found during the course of search for that year. We have weighed the seized papers as per chart submitted by the ld CIT DR, which were referred to by the ld Assessing Officer in the assessment order and also analyzed them with respect to various additions for the impugned assessment years involved. No other documents were produced before us pertaining to the impugned Assessment Years involved in th....