TaxTMI 
TaxTMI 
2019 (4) TMI 699
X X X X Extracts X X X X
X X X X Extracts X X X X
....ross Objection for Assessment Year 2009-10. 4. Brief facts of the case as culled out from the records placed before us are that the assessee is a Private Limited Company engaged in commodity trading, currency future trading and bullion trading. Search u/s 132 of the Act was conducted on 25.11.10 at the assessee's premises at Indore. The assessee company belongs to Chitresh Mehta Group. Consequently notices u/s 153A of the Act along with 143(2) and 142(1) of the Act duly issued and served upon the assessee. In compliance to the notice assessee e-filed the Income Tax Return on 1.2.2012 declaring income of Rs. 29,29,070/-. During the course of assessment proceedings various information were called relating to the transactions entered in the books of accounts. Submissions were filed. Ld. A.O concluded the assessment after making various additions amounting to Rs. 97,54,952/-. 5. Aggrieved assessee preferred appeal before Ld. CIT(A) and along with challenging the various additions made by the A.O on merits as well as legal ground that no incriminating material was found during the course of search pertaining to the assessment year under consideration and therefore in view of th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t deciding the issue on merits with respect to the action of the AO for rejection of the books of account of the respondent by invoking provisions of sub-section (3) of section 145 of the Income Tax Act, 1961. 3. That, without prejudice to the above, the learned CIT (A) grossly erred, both on facts and in law, in not deciding the issue on merits with respect to the addition of Rs. 50,00,000/- made by the AO in the respondent's income on account of unsecured loan claimed to have been received by the respondent from Shri Balkishan, by invoking provisions of section 68 of the Income-Tax Act, 1961. 4. a. That, on the facts and in the circumstances of the case, the learned CIT(A) grossly erred, both on facts and in law, in not deciding the issue on merits with respect to the ad-hoc addition of Rs. 2,66,835/- made by the AO in the respondent's income by arbitrarily estimating gross profit on sale of Gold Bullion merely on conjectures, surmises, guess-work and whims and without confronting the respondent with the so-called market enquiries conducted by him and further without considering the material fact that the respondent had maintained regular financial books....
X X X X Extracts X X X X
X X X X Extracts X X X X
....iminating material pertaining to Assessment Year 2009-10 was found during the course of search. 11. We observe that a search u/s 132 of the Act was conducted at assessee's premises on 25.11.10. Subsequently assessment proceedings u/s 153A r.w.s. 143(3) of the Act were finalized for Assessment Year 2009-10. It is not disputed that no incriminating material was seized during the course of search pertaining to Assessment Year 2009-10. Additions made by the Ld. A.O for Assessment Year 2009-10 are based on the information called during the course of assessment. Ld. CIT(A) on observing that the additions made by the Ld. A.O are not having any nexus with any incriminating material found during the course of search decided to delete the addition and held the proceedings u/s 153A r.ws. 143(3) of the Act as invalid observing as follows; "5. Ground no.1,2 & 4: by these grounds the appellant has challenged the validity of the assessment made u/s 153A of the Act by contending that no incriminating material/details of undisclosed income were found and hence the assessment was bad in law. Detailed submissions of the appellant on the issue are reproduced at Para No.3 above. 5.....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... then Assessing Officer acts under original jurisdiction and one assessment is made for total income including the addition made on the basis of seized material. But where there is no abatement of assessments and assessments were completed on the date of search then addition can be made only on the basis of incriminating documents or undisclosed assets, etc. In these cases there was no incriminating document found and seized. No assessment proceedings were abated in these assessees. Thus assessments for these assessment years were completed on the date of search. The MCS Trading IT(SS)A No.257 of 2015 and others 27 assessments were completed u/s 143(3) of the Act read with section 153A/153C of the Act after the search. There was no abatement of any proceedings in these cases for these assessment years in terms of second proviso to section 153A of the Act. There is no seized material belonging to the assessee which was found and seized in relation to additions made. In a recent decision, Hon'ble Delhi High Court in the case of CIT vs. Kabul Chawla (supra) has held that completed assessments can be interfered with by the Assessing Officer while making assessment u/s 153A of the A....
X X X X Extracts X X X X
X X X X Extracts X X X X
....idences/documents /material found as a result of search action. The appellant has also stated that no incriminating material was found during the course of search to justify any inquiry on the above issues. In view of the facts that no incriminating documents/material/evidences were found related to the issues considered in the assessment order during the search and keeping in view the decisions of the Jurisdictional I.T.A.T. cited above the validity of the assessment u/s 153A of the Income Tax Act, 1961 cannot be upheld. These grounds of the appellant are therefore allowed". 12. We further observe that similar issue relating to the additions made subsequent to search for the Assessment Years for which no incriminating material was found and the additions were made merely on the basis of information called during the course of block assessment came up before the Co-ordinate Bench and was decided in favour of the assessee by the Tribunal observing that if return of income is filed u/s 139 of the Act before the date of search and time limit for issuance of notice u/s 143(2) of the Act for selecting the case for scrutiny assessment expires before the date of search then addition fo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ars from 2008-09 to 2012-13, there is no scope for the A.O to issue a notice u/s 143(2) of the Act for the reason that the time limit is already over before the date of search itself i.e. on 29.1.2014. Therefore, in our opinion, all the assessment years from 2008-09 to 2012-13 are concluded assessments and non abated assessments and any addition has to be made in respect of those assessment years, there must be an incriminating material. In the present case, there is no incriminating material and therefore, the additions made by the A.O. cannot survive. 12. This very issue has been considered by The Hon'ble Bombay High Court in the case of CIT Vs. Continental Warehousing Corporation (2015) 120 DTR (Bom) 89 and has observed that u/s 153A of the Act which enables carrying out a search or exercise of a power of requisition, assessment in furtherance thereof is contemplated. There is a mandatory issue of notice u/s 153(1A) of the Act and assess and reassess the total income of 6 assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made. That the crucial word 'search and requisition' appear ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e Tribunal was right in holding that there had to be incriminating material recovered during the course of search qua the assessee in each year for the purpose of framing an assessment u/s 153A of the Act. 18.From the above all the decisions, it is very clear that the A.O. to make an addition u/s 153A of the Act and there must be incriminating material available to the A.O. during the course of the search. Unless there is an incriminating material, the concluded/non abated assessments cannot be disturbed again u/s 153A of the Act. 19. In so far as Kerala High Court decision in the case of E.N. Gopakumar (supra) the Hon'ble Kerala High Court has held that even without there being any incriminating material, the A.O. is empowered to make an addition u/s 153A of the Act. The same view has been expressed by the Hon'ble Karnataka High Court in the case of Canara Housing Development Company (supra). 20. In the above circumstances, whether the decision of the Hon'ble Supreme Court in the case of CIT Vs. Vegetable Products (supra) has to be applied or not. The Ld. D.R. has submitted that the decision held in CIT Vs. Vegetable Products (supra) cannot be applie....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ategory of completed and non abated assessment and the Ld. A.O can make additions in such assessments only on the basis of incriminating material found during the course of search. In the case of the assessee as there is no incriminating material found during the course of search Ld. A.O could not make any addition on the basis of information called during the course of assessment proceedings and therefore Ld. CIT(A) has rightly held the impugned proceedings u/s 153A r.ws. 143(3) of the Act as invalid. We uphold the same and dismiss revenue's sole Ground No.1. Appeal of the revenue for Assessment Year 2009-10 stands dismissed. 14. Apropos the Cross objections raised by the assessee against the revenue's appeal, we find that as the proceedings u/s 153A r.w.s. 143(3) of the Act has already been held as invalid by us in the preceding paras, dealing with the grounds raised by assessee in the Cross Objections will be merely academic in nature and thus we are inclined not to adjudicate at this stage. Therefore grounds raised in Cross Objection by the assessee we dismissed as infructuous. 15. In the result both Revenue's appeal and Assessee's Cross Objections stands dismissed. 16....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... A.O but could not controvert the fact that the case of the assessee is squarely covered by the decision of the Tribunal in assessee's own case for Assessment Year 2010-11 vide ITA No.257&258/Ind/2015. 19. Per contra Ld. Counsel for the assessee relied on the decision of the Co-ordinate Bench in the case of assessee for Assessment Year 2010-11 and also on the detailed finding by Ld. CIT(A) and further submitted that the assessee is regularly maintaining the books of accounts in the ordinary course of business of bullion trading. Day to day stock entry in respect of each and every item of purchases as well as sales are maintained. Audit under the provisions of Companies Act 1956 u/s 44AB of the Income Tax Act have been conducted and no fault have been found by the Auditors in the maintenance of such books of accounts. Furthermore, the Ld. A.O has also not found any significant defect or deficiency in such books of accounts and he has merely adopted the reasoning for Assessment Year 2009-10 and 2010-11 taken by his predecessor for finalizing the assessment, which is uncalled for. He also contended that the Ld. A.O has not raised any doubt about the correctness of the sales, purch....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ver, for assessment year 2011-12, we have upheld the rejection of books of accounts and therefore, we hold that considering the facts and circumstances of the assessee's case, it would be just and fair to estimate g.p. on sale of gold bullion and silver bullion @0.30% as against 0.29% shown by the assessee in its books of accounts. Thus, the ground nos 7(a) and 7(b) of the appeal of the assessee for assessment year 2010-11 are allowed and ground nos. 6(a) & 6(b) of the appeal of the assessee for the assessment year 2011-12 are partly allowed. Departmental grounds for both the years on this issue are dismissed". 22. It is also pertinent to note that Ld. CIT(A) followed the decision of the Tribunal for Assessment Year 2010-11 and deleted the additions made by the Ld. A.O for the year under appeal and also held that the action of the Ld. A.O rejecting the books of accounts cannot be accepted observing as follows; "5.1 Search and seizure action u/s 132 was conducted at the business premises of the appellant on 25.11.2010. In respect of A.Y. 2011-12 excess stock amounting to Rs. 1,73,81,169/- was found during the search and the appellant surrendered Rs. 5 Crores as addit....
X X X X Extracts X X X X
X X X X Extracts X X X X
....009-10. The gold prices were also increased during the relevant period. The average gold price for the period relevant to the assessment year 2007- 08 was Rs. 8.36 lacs per kg which increased to Rs. 16.32 lacs per kg for the period relevant to the assessment year 2010- 11and Rs. 20,72,000/- for the period relevant to assessment year 2011-12. We also observe that whenever there is tremendous increase in the price of gold, the margin of profit shrinks. Gold market is well informed marked and guided by international price. There was VAT of 1% on the recorded trading of gold. Thus, the gross profit estimated on unrecorded sales cannot be applied to the recorded sales as the margin of tax also are increased by VAT which reduces the margin of profit by the similar amount. The cumulative effect of increase in turnover and increase in gold price must have reduced the gross profit for the assessment years 2010-11 and 2011-12. We also find that the Additional Commissioner of the same Range in the case of Shri Nitesh Kumar Doshi for the A.Y. 2010- 11 has accepted the G.P rate at 0.14% on the recorded sales and Shri Doshi was also engaged in similar business. In the case of Baldev Kri....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eld that the cash sales are more than 90 or total sales and as the cash bills remain With the assessee it gives lot of scope for manipulation of rates, quantity and amount of the bills. The Hon'ble ITAT held the view that during the course of the search proceedings, not a single incriminating document or loose paper was found from which the unaccounted trading of bullion by the assessee could get established. The Hon'ble ITAT also observed that the assessee had maintained stock register and such stock register was duly produced before the Assessing Officer and the Revenue Authorities have not brought on record any single instance of any sales having been made at a rate lower than the then prevailing market rate. If the sale is not found to have been made at the rate below than tee market rate, any allegation regarding manipulation in the cash memos without any basis has no legs to stand . The Hon'ble ITAT deleted the action of the ClT(A) in enhancing the sales on adhoc basis by 20% of the sales shown in the audited accounts for A.Y.s 2010-11 and 2011-12. 5.6 The Assessing Officer has primarily rejected the books of accounts holding that the huge cash sales made are unv....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s appeal by holding that the book results should be accepted and that the action of the Ld. A.O rejecting books of accounts and making the addition for low Gross Profit on sale of gold bar and sale of silver bar is devoid of any merit and uncalled for. We therefore find no inconsistency in the finding of Ld. CIT(A) and the same deserves to be confirmed. Accordingly Grounds 1 & 2 of the revenue's appeal for Assessment Year 2012-13 stands dismissed. 25. In the result the appeals of the revenue for Assessment Year 2009-10 and 2012-13 vide ITA(SS) No.141/Ind/2016, ITA No.353/Ind/2016 are dismissed and Cross Objection of the assessee C.O.No.38/Ind/2016 for Assessment Year 2009-10 is dismissed as infructuous. The order pronounced in the open Court on 09.04.2019. ============= Document 1 Once a search takes place under Section 132 of the Act, notice under Section 153 A(1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYS immediately preceding the previous year relevant to the AY in which the search takes place. ii. ii . Assessments and reassessments pending on the date of the search shall abate. The total incom....