TaxTMI 
TaxTMI 
2018 (5) TMI 1820
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....ssment Year 2005-06 to 2009-10. They are 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 t....
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....fore us. Issue in Appeal 5. The assessee vide ground No. 1 has 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 n....
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....sessments and any upwards, revision to income already assessed should be based on incriminating 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 add....
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....tion. 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 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 paragr....
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.... provisions means -(i) books of account, other documents, found in the course of search but not produced in the course of original assessment, and (ii) undisclosed income or property discovered in the course 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 n....
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....ngle, It has to be kept in mind that from the reason recorded to re-open, it is manifest that the search conducted on the assessee on 21.01.2011 was the event from which the AO says he has "reason to belief' escapement of income. Keeping this factual background 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 document....
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....the judgment of this Court in CIT v. Kabul Chawla 380 ITR 573?" The finding of Hon'ble High Court is as under : [Page 6-8] 12. Indeed, the Court finds that de hors the"question whether the material seized, which admittedly pertains to FY 2010-11, can constitute sufficient material to reopen the assessments for the 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 justify....
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....nd in favour of the Assessee 19. The facts relating to proceedings u/s 153A in the case of M/s. Dharampal Premchand Ltd. and M/s. Dharampal Satyapal Ltd. are same. 20. In fact, the issue of jurisdiction u/s 153A in the absence of incriminating material has been considered by the various courts and reference may be made to following case laws: (a) CIT 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 s....
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...., no additions could have been made to the income already assessed. b. Pr. CIT V. Meeta Gutgutia [20171 395 ITR 526 (Delhi) 56. Section 153A of the Act is titled "Assessment in case of search or requisition". It is connected to Section 132 which deals with 'search and seizure'. Both these provisions, therefore, have to be read together. Section 153A is indeed an extremely potent 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 54....
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.... favour of assessee] g. PCIT v. Kurele Paper Mills P. Ltd. (2016) 380 ITR 571 (Delhi)(HC) H. 153A:Assessment-Search-No incriminating evidence related to share capital issued found during course of search-Deletion of addition was held to be justified. [S.68] Held, dismissing the appeal, that the order of the Commissioner (Appeals) revealed that there was a factual finding that no incriminating evidence related to share capital issued was found during the course 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/REASSESSMEN....
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.... Hon'ble High Court, which has confirmed the finding of the coordinate bench. He further referred to para No. 25 of the order of the coordinate bench. He further referred to the decision of the Hon'ble High Court in case of Dharampal Satyapal ltd (assessee) dated 21.08.2017 wherein, the above finding of the coordinate bench was confirmed. He therefore, stated that the addition is not based on any incriminating material. He further relied upon the decision of the Hon'ble Delhi High Court in CIT Vs. Dharampal Premchand Ltd in 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 incrimina....
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....ly incorrect. Salient Facts of the Case * Search and seizure operation u/s 132 was conducted in the case of the assessee concern and other group concerns/individuals on 21.01.2011. * In the course of the search operations, production units of the DS Group situated in the North-Eastern States, namely Guwahati and Agartala were also covered u/ 132/133A. * On the strength of these production centers DS Group are claiming deduction u/s 80IC of the Income Tax act. Pursuant to search, certain facts have emerged which suggest that the claim of deduction under Chapter 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/pro....
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.... 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 year 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 occurrence of search and jurisdiction of assessment was merged with section 153A. Secondly, for all AYs there are additions on account of bogus purchase of sandalwood oil on the basis of seized documents and various evidences gathered during search and post-search inquiry. Therefore, the AO has the justification 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 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. ....
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....stment and Finance Ltd Vs ITO (2017-TIOL-188- HCMUM- IT) Bombay High Court confirmed (Copy Enclosed) 5. Green view Restaurant Vs ACIT (2003) 133 Taxman 432 (Gauhati 2003 263 ITR 169 (Gauhati)/ 20003 185 CTR 651 Gauhati (Copy Enclosed) "From facts, it was clear that there was a delay on the part of the appellant and its partner in retracting the statements recorded. The*(tm) attention of the Court had also not been drawn to any material on record to establish that any attempt was made on behalf of the appellant to prove the allegation of inducement, threat or coercion through the witnesses. Having examined the impugned orders rendered by the Tribunal with the reasoning in support of its finding against the complaint of threat, inducement or coercion, no good and sufficient reason was found to differ 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 ....
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....cords for long and in all probability be anxious to do away with such evidence at the shortest possibility) the element of guess work is to have some reasonable nexus with the statements recorded and documents seized. In this case, the differences of opinion between the CIT (A) on the one hand and the AO and ITAT on the other cannot be the sole basis for disagreeing with what is essentially a factual surmise that is logical and plausible. These findings ITA 357/2015 & connected matters Page 26 do not call for interference. The second question of law is answered again in favour of the revenue and against the assessee. * It would also be relevant to mention that the case of Kabul Chawla or Meeta Gutgutia is not applicable to the facts of the case for AYs 2005-06 to A.Y 2010-11 on account of the following: * Incriminating documents were found during course 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 as....
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....ed under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May 2003, the Assessing Officer shall (a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income......... (b) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition made: Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years. From a bare reading of the provisions of 153 A it is clear that the basic pre-requisite to issue notice under section 153A is that a search is initiated u/s 132 or books of account, other documents or any assets are requisitioned u/s 132A. In the instant case there is no dispute that 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 undiscl....
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....ess a taxing provision, by reading into it more words than its contains CIT v/s. Vadilal Lallubhai [(1972) 86 ITR 2 (SC)] Literal construction means that there is no room for any intendment. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used. ICAI vs. Price Waterhouse, (1997) 90 Com p. Case 113, 140, 141 (SC) State of West Bengal vs. Scene Seven P. Ltd. AIR 2000 SC 3089, 3094 Harbajan Singh vs. Press Council of India (2002) 3 SCC 722, 727. District Registrar and Collector v. Canara Bank, (2005) 1 SCC 496. Strict construction: A tax is imposed for public purpose for raising general revenue of the state. A taxing statute is to be strictly construed. Lord Hasbury and Lord Simonds stated: "The subject is not to be taxed without clear words for that purpose; and also that every Act of Parliament must be read according to the natural construction of its words." It is settled law that a taxation statute in particular has to be strictly construed and there is no equity in a taxing provision Lakshmi Bai v/s. CIT - [(1994) 206 ITR 688, 691 (SC)]. "The subject is not to be ta....
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....s, the broken period up to the date on which the search was conducted was also included in what was known as 'block period'. Though a single assessment order was to be passed, the undisclosed income was to be assessed in the different assessment years to which it related. But all this had to be made in a single assessment order. The block assessment so made was independent of and in addition to the normal assessment proceedings as clarified by the Explanation below Section 158BA (2). After the introduction of the group of Sections namely, 153A to 153C, the single block assessment concept was given a go-by. Under the new Section 153A, in a case where a search is initiated under Section 132 or requisition of books of account, documents or assets is made under Section 132A after 31.5.2003, the Assessing Officer is obliged to issue notices calling upon the searched person to furnish returns for the six assessment years immediately preceding the assessment year relevant to the previous year in which the search was conducted or requisition was r* made. The other difference is that there is no broken period from the first day of April of the financial year in which the search took....
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....income, taking note of the undisclosed income, if any, unearthed during the search. For this purpose, the fetters imposed upon the Assessing Officer by the strict procedure to assume jurisdiction to reopen the assessment under Sections 147 and 148, have been removed by the non obstante clause with which sub section (1) of Section 153A opens. The time-limit within which the notice under Section 148 can be issued, as provided in Section 149 has also been made inapplicable by the non obstante clause. Section 151 which requires sanction to be obtained by the Assessing Officer by issue of notice to reopen the assessment under Section 148 has also been excluded in a case covered by Section 153A. The time-limit prescribed for completion of an assessment or reassessment by Section 153 has also been done away with in a case covered by Section 153A. With all the stops having been pulled out, the Assessing Officer under Section 153A has been entrusted with the duty of bringing to tax the total income of an Assessee whose case is covered by Section 153A, by even making reassessments without any fetters, if need be."(Para 20) * The Assessing Officer has to determine not merely the undi....
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....he requisition is made, there is no question of any abatement since no proceedings are pending. In this latter situation, the Assessing Officer will reopen the assessments or reassessments already made (without having the need to follow the strict provisions or complying with the strict conditions of Sections 147, 148 and 151) and determine the total income of the Assessee. Such determination in the orders passed under Section 153A would be similar to the orders passed in any reassessment, where the total income determined in the original assessment order and the income that escaped assessment are clubbed together and assessed as the total income. In such a case, to reiterate, there is no question of any abatement of the earlier proceedings for the simple reason that no proceedings for assessment or reassessment were pending since they had already culminated in assessment or reassessment orders when the search was initiated or the requisition was made."(Para 21) "In the light of our discussion', \ve‗fihd it difficult to uphold the view of the Tribunal expressed in Para 9.6 of its order that since the returns of income filed by the Assessee for all the six years u....
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....ecided earlier by observing in Para 3 that "Learned counsel for the appellant assessee has relied on the decision of this Court in CIT \/s. Chetan Dass laxman dass, (2012) 254 CTR (Del) 392. The said decision notices insertion of Section 153A by Finance Act, 2003, its purpose and object, had the earlier proceedings for block assessment under Chapter XIVB, the difficulties and the legal issues which had arisen on the difference between regular assessment and block assessment. It is in this context that in the case of Chetan Dass Laxman Dass (supra), the Division Bench, [to which one of us (Sanjiv Khanna, J) was a party], has observed that Section 153A (1) (b) provides for assessment or re-assessment of the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which the search took place. It was emphasized that there is no condition in this Section that the additions should be strictly made on the basis of evidence found during the course of the search or other post search material or information available with the Assessing Officer, related to the evidence found. Subsequent observation to the effect that the assessment under ....
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....standing the Assessee had filed the return before the date of search which stood processed under section 143(l)(a) of the Act. In the light of the aforesaid, the reasons given by the Tribunal that no material was found during the search cannot be sustained since we have held that the Assessing Officer has the power to reassess the returns of the Assessee not only for the undisclosed income, which was found during the search operation but also with regard to the material that was available at the time of the original assessment. We find that the Tribunal dismissed the appeal while relying upon the decision of a Coordinate Bench of the Tribunal in the case of Anil Kumar Bhatia Vs. ACIT (2010) 1 ITR (Trib.) 484 (Delhi). We find that the said decision of the Coordinate Bench of the Tribunal was set aside by the Delhi High Court in Commissioner of Income Tax 1/s. Anil Kumar Bhatia (2012) 24 taxmann.com 98(Delhi). We find that the Tribunal only dismissed the appeal on this legal issue and had not considered the matter on merits. For the reasons stated aforesaid, the Tribunal has committed an error in dismissing the appeal of the Revenue. We, accordingly, set aside the order of t....
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.... reopened and that income also shall become the subject matter of said proceedings." Recently same view is also expressed by Hon'ble Delhi Bench in the case of Apoorva Extrusion Pvt. Ltd., ITA No. 3308/Del/2010 for the A.Y. 2002-03, vide order dated 09.10.2014. The relevant portion is mentioned as below: "5. In order to answer whether the quashing of the initiation of assessment for the year under consideration on the given count is valid or not, we need to consider the mandate of the relevant part of sub-section (1) of section 153C, which reads as under: " Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that any money, bullion, jewellery or valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in section 153A, then the books of account or documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue....
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.... assessment year immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made/ When we read section 153C in conjunction with section 153A of the Act, the position which follows is that if the books of account or document etc.. belonging to the other person are found during the course of the person searched, then the assessment or re-assessment of such other person is required t o be made of 'six assessment years immediately preceding assessment years relevant to previous year7 in which such search is conducted or requisition is made. Section 153C is a jurisdictional provision, which on the fulfilment of the stipulated conditions, enables the making of assessment or reassessment of such other person in accordance with the provisions of section 153A. There is naturally no separate provision under the Act nor there do any for making the , assessment of such other person for the reason of the bodily lifting of the provisions of section 153A in section 153C of the Act for this purpose. Since section 153A specially provides for assessment or re-assessment of six- assessment years preceding the year of search, and in ....
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....eopardizing the whole scheme of assessment pursuant to search or requisition. To a specific query it was candidly accepted bv the Ld. AR that in items of section 153A, the initiation of assessment or reassessment for all the six assessment years in the case of person searched is not dependent on the findings of any incriminating material. It is beyond our comprehension that when such a course of action is permissible u/s 153A in the case of person searched, then how can there be any bar on the initiating or making of assessment or reassessment for some of the years of other person, more so. when section153Cfl) has been expressly made to accord with the provisions of section 153A. We. therefore, jettison the-contention urged on behalf of the Assessee as sans merit. * Recently same view is also expressed by Hon'ble ITAT Banglore Bench in the case of Nandini Delux vs ACIT, 54 Taxmann.com 162 vide order dated 05.12.2014. The relevant portion of Para 6.3.9 of the order is mentioned as below: "Respectfully following the decision of the Hon'ble High Court of Karnataka in the case of Canara Housing Development Co. (supra), we hold that once the assessment is reope....
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....sment proceedings generated by issuance of a notice under section 153A(l)(a) can be concluded against interest of assessee including making additions even without any incriminating material being available against assessee in search under section 132 on basis of which notice was issued under section 153A(l)(a). The above order has been passed after considering cases of (i) CIT v. Kabul Chaw la 120161 380 ITR 573/ f20151 234 Taxman 300/61 taxmann.com 412 (Delhi) (para 4), (ii) CIT v. Continental Warehousing Corpn. (Nhava Sheva) Ltd. [2015] 374 ITR 645/232 Taxman 270/58 taxmann.com 78 (Bom.) (para 4), (iii) Principal CIT v. Kurele Paper Mills (P.) Ltd. [2016] 380 ITR 571 (Delhi) (para 4), (iv) CIT v. Lancy Constructions [2016] 383 ITR 168/2.37 Taxman 728/66 taxmann.com 264 (Kar.) (para 4), (v) CIT v. ST. Francies Clay Decor Tiles [2016] 240 Taxman 168/70 taxmann.com 234 (Ker.) (para 5) and (vi) CIT v. Promy Kuriakose [2016] 386 ITR 597 (Ker.) (para 5). 2. CIT Vs Kesarwani Zarda Bhandar Sahson Alld. TITA No. 270 of 20141 (Allahabad) where Hon'ble Allahabad High Court held that Assessing Officer has power to re....
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....g material from these parties for a long time. She submitted that it is not necessary that revenue should have found material for each year when it is established that the assessee is booking the purchases price and receiving cash back from suppliers. She stated that though the paper relates to AY 2011-12 but the practice of overbilling is continuing for several years. 19. She further stated that the surrounding circumstances of the case show that the seized material is incriminating in nature. She referred to the statements recorded of seven employees of the assessee and other parties. She further stated that simultaneous searches were also conducted at M/s. Surya Vinayak Industries Ltd and that is the corroborative material, which proves inflation of purchases and transfer of goods to units in Guwahati and Agartala for claim of excess deduction u/s 80IA. She further referred to the excise records of the perfumery division to show that assessee has purchased sandalwood oil from Surya Vinayak Industries and it is bogus. She referred to the page No. 91 of the assessment order wherein, the summons were issued to the owner of M/s. Surya Vinayak Industries Ltd and despite that; they....
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....ding circumstances. He submitted that there is no evidence available, which even remotely proves that the assessee has debited the bill and has not received sandalwood. Further, there is no evidence that there is over invoicing of purchases of material by the assessee in theses years. 22. Even based on seized material he submitted that there is no over invoicing. He referred to the seized material relied upon by the ld CIT DR placed at page No. 55 of paper book and stated as under :- a. He submitted that the paper is dated 30.11.2010. No date on the paper pertain to Assessment Year 2005-06 to 2009-10. He referred to the Hon'ble Supreme Court decision in Sinhgad Education Technical Society (supra) and submitted that addition can be made only in the assessment year to which the paper pertains. b. He further submitted that even otherwise the assessee has received the excess sum and therefore, it cannot be inferred from that paper that assessee has received over invoiced bogus bills of purchase of sandalwood oil from Surya Vinayak Industries ltd or Allied Perfumer Pvt. Ltd . He submitted that in case of over invoicing of the bills, the receiver of the bill firs....
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..... Therefore, according to him if assessee is purchasing sandalwood compound by receipt of bogus bills from Surya Vinayak Industries then that party would not have paid higher cash of such a high magnitude to the assessee. He submitted that the excess amount paid by that party is to the tune of Rs. 12.54 crores. He further referred that at the bottom of the page the amount of excess received is shown to be of Rs. 9.49 crores. He further submitted that Surya Vinayak Industry has denied having issued any bogus/ over invoiced bills to the assessee. 25. He further stated that the ld CIT (A) in his order has not stated that assessee has purchased the bogus bills for sandalwood compound from those parties. He submitted that ld CIT(A) himself has stated that whatever quantity has been built by those parties has been received by the assessee and consumed too otherwise, the consumption ratio of finished will given an absurd result. He further stated that as the ld CIT (A) himself has agreed that material purchased has been received there couldn't be any basis for booking the bogus bills. In view of this he submitted that there is no evidence found during the course of search which shows t....
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....rs in question. In view of the above facts, it is apparent that if any addition is made to the total income of the assessee u/s 153A of the Act in concluded assessment then it has to be based on incriminating material, which needs to be correlated with respective Assessment Year in which the addition is made. We have also perused the decision relied up on by the revenue of Hon kerala High court in case of E N Gopakumar ( supra) where in para no . 8 honourable high court has held that the addition can be made in search assessment years without incriminating evidences. However as Honourable jurisdictional high court binds us and further it also has the support of several other Honourable high courts such as Bombay and Gujarat, we hold that in absence of incriminating material in concluded assessment years, no additions can be made in the hands of the assessee. 27. In the light of the above judicial principle, now we proceed to analyze various seized material relied up on by revenue for making the additions/ disallowances in respective years. The relevant documents are furnished by the ld CIT DR in paper book No. 2 filed by her, which contains the document as annexure A-1 and part ....
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....nt in which details of cash payment starting from 02.11.2010 to 24.11.2010 is mentioned totaling to Rs. 10.50 crores. A further details of account of SVIL and APPL is mentioned and net of it is stated to have been amount excess received of Rs. 9.49 crores which result in to amount to receive of Rs. 30436590/-. The paper seized is in fact (typed) as under:- Date Bill No. Qty Rate Amount 19.11.10 SVI-128 250 70000 17500000 19.11.10 SVI-128 300 70000 21000000 26.11.10 SVI-132 100 79000 7900000 Total 650 46400000 Excess paid up to 31.10.2010 (67056965) Less Bill NO 121 for 110 KG @ 7000/- (81850-74850) RATE DIFF 770000 Less Bill NO. 137 for 175 Kg"3000 (83000-80000) rate difference 525000 Add 30% of 56% i.e. 22.4% on 285 Kgs on 2,22,33,500/- 498030 Add. 40% of 56% i.e. 22.4% on 650 Kgs on 46400000 1039360 Amount to pay (20414575) Paid by us 105000000 Amount excess paid 125414575 Details of cash paid 02.11.2010 5000000 04.....
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....From the above, it is evident that the where nothing assessment year and assessee specific incriminating "money, jewellery or other valuable article or thing or books of account or documents", the assessments for assessment years cannot be disturbed. Further, the concluded assessments should not be disturbed merely for making routine additions, which could have been otherwise done in the regular assessment and of course, the pending assessments fall under exceptions. As stated by the learned counsel point No. 9 of his note reproduced above, "nothing is seized pertaining to asst. yrs. 2000-01 to 2003-04 obviously there is no question of recording satisfaction note". On this reasoning itself, we find that the assessee has to succeed. Therefore, we do not examine the other arguments of the counsel. Otherwise, the counsel argued that the reopening of the assessment for the asst. yrs. 2000- 01 to 2001-02 is impermissible in view of the judgment of Ahmedabad Bench in the case of Vijay M. Vimawal (supra). Further, he also argued that the assessment of asst. yr. 2003-04 was actually completed under s. 143(3) on 30th March, 2006 i.e. prior to receipt of the impugned documents by the AO on 1....
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....d by the High Court) on the sole ground that notice under Section 153C of the Act was legally unsustainable. The events recorded above further disclose that the issue pertaining to validity of notice under Section 153C of the Act was raised for the first time before the Tribunal and the Tribunal permitted the assessee to raise this additional ground and while dealing with the same on merits, accepted the contention of the assessee. 17. First objection of the learned Solicitor General was that it was improper on the part of the ITAT to allow this ground to be raised, when the assessee had not objected to the jurisdiction under Section 153C of the Act before the AO. Therefore, in the first instance, it needs to be determined as to whether ITAT was right in permitting the assessee to raise this ground for the first time before it, as an additional ground. 18. The ITAT permitted this additional ground by giving a reason that it was a jurisdictional issue taken up on the basis of facts already on the record and, therefore, could be raised. In this behalf, it was noted by the ITAT that as per the provisions of Section 153C of the Act, incriminating material which was se....
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.... third party, i.e. the assessee, and, therefore, the said condition precedent for taking action under Section 153C of the Act had been satisfied. 21. Likewise, the Delhi High Court also decided the case on altogether different facts which will have no bearing once the matter is examined in the aforesaid hue on the facts of this case. The Bombay High Court has rightly distinguished the said judgment as not applicable giving the following reasons: "8. Reliance on the judgment of the Division Bench of the High Court of Delhi reported in case of SSP Aviation Ltd. v. Deputy Commissioner of Income Tax [2012] 346 ITR 177 is misplaced. There, search was carried out in the case of "P" group of companies. It was found that the assessee before the Hon'ble Delhi High Court had acquired certain development rights from "P" group of companies. Based thereon, the satisfaction was recorded by the Assessing Officer and he issued notice in terms of Section 153C. Thereupon the proceedings were initiated under section 153A and the assessee was directed to file returns for the six assessment years commencing from 2003- 04 onwards. The assessees filed returns for those years but dis....
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....l from this party in these years and therefore there has to be over invoicing of the purchases is a mere assertion without any material. Therefore, we do not have any hesitation to hold that In the present case the impugned seized paper does not belong to the Assessment Years involved in the impugned appeals. 31. Furthermore, with respect to the same paper it is also important to note that it is evident from that paper that Surya Vinayak Industries have over paid the assessee than what it should have allegedly paid for over invoicing. This evident facts also runs contrary to the other finding that Surya Vinayak industries is company of not having capacity to supply so much material in para no 145 of the order. If it is so then how it could have paid the assessee over and above what is required to be paid if the goods are over invoiced. The sum over paid by that company to the appellant is not small compared to the purchases. Even circular route stated by ld AO in various para of assessment order 143 onwards also proves contrary if read with the order passed u/s 154 of the act. Therefore according to revenue assessee has reduced the profit by booking the over invoiced purchases o....
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....s are mentioned in the next column with party name and yearly quantity purchased from them. In this column there is no classification of any sandalwood oil [C] or sandalwood oil [SU]. Just one item is mentioned and that is sandal wood oil. SVIL and Kamakhya Oil Co and other concerns are shown as their suppliers. This proves that only sandalwood oil is being supplied by SVIL. Page No.7 to 12 of Annexure A-16 of Perfumery Division is the statement of raw materials taken from the I.A.S. software which is used in the perfumery division. This statement shows the opening balance, total receipts, total consumption, closing balances, physical balance along with short/excess for the period 1.4.09 to 31.03.10. This statement is showing the date in respect of more than 150 raw materials being purchased by Perfumery Division. In this statement there is mention of only sandalwood oil and not any [C] or [SU]. In the same way page No.2 to 6 of this annexure are the statement of physical stock as on 23.03.2010 prepared by the staff of Perfumery Division. All the items of this physical stock statement dated 23.03.2010 tally with the I.A.S. statement available in ....
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....value thereof is Rs. 118.00 crores" 34. On reading of the above paragraph the main contention of the ld Assessing Officer is that there is no product by the name of sandalwood oil (C) or Sandalwood Oil (U) being supplied by Surya Vinayak Industries ltd to M/s. Dharampal Stayapal Ltd (assessee). The page NO. 226 of Annexure 11, which is also the statement of physical stock as on 23.03.2011, does not fall into the assessment years in the above appeal. Further page NO. 72 of Annexure A-14 also pertain financial year 01.04.2010 to 31.12.2010. The central Excise Return Filed in Form NO. ER-1 cannot be said to be incriminating material, as it does not show any escapement of income involved in those papers. Hon'ble Supreme Court Sinhgad Technical & Education society ( supra) in the para No. 18 has endorsed the reasoning given by the coordinate bench stating it to be logical and valid that incriminating material, which was seized, had to pertain to the Assessment Years in question and the documents seized must established any correlation document-wise with the Assessment Years involved. From the above reading of the documents, it is apparent that none of the seized documents belongs....
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....s required to be tested as per the principle laid down by the Hon'ble Supreme Court in case of Sinhghad Technical Education Society (supra). 36. The ld CIT DR heavily relied on the seized page 52 Annexure A1. We have already dealt with the above paper in earlier paragraphs and noted that it does not pertain to the impugned assessment years involved in these appeals. Therefore, no cognizance of the same can be taken for sustaining any addition in these years. No such material or evidences have been placed before us pointing out such inferences. Therefore, we are afraid, we cannot subscribe to the view canvassed that this paper applies to all the years involved in these appeals. Such an argument is contrary to the decision of Hon'ble Supreme Court as stated above. 37. The revenue further argued that the surrounding circumstances of the case coupled with the statement of the employees, the facts pertaining to the affairs of M/s. Surya Vinayak Industries must be looked into, and these surrounding circumstances are relevant for making the addition. The ld CIT DR in her submission vehemently relied upon the decision of the Hon'ble Delhi High Court in case of Smt Dayawan....
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....to be disallowed u/s 36(1)(iii) of the Income Tax Act, 1961 5496058 7. Details of amount charged at lesser to group concerns rate than rate charged to others 4271539 8. Disallowance u/s 14A interest paid on investment made out of borrowed funds in equity 4911624 9. Additions made u/s 143(3) in order dated 30.03.2007 10. Disallowance u/s 14A interest paid on investment made out of borrowed funds in equity 500000 11 Disallowance for foreign travelling expenses 486409 40. The ld CIT DR could not show us any other material pertaining to Assessment Year 2005-06 other than that has been relied upon by the ld Assessing Officer and contested by ld CIT DR before us. We have examined each of the above addition as well as the computation of deduction made by the ld Assessing Officer and we do not find any incriminating material with respect to all these additions for these years. It is also the fact for Assessment Year 2006-07 to 2009-10. 41. In view of the above facts, for the ground No 1 of the appeal of the assessee, we hold that there is no incriminating material found during the course of search relevant to Assessment Yea....