AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2019 (5) TMI 406
X X X X Extracts X X X X
X X X X Extracts X X X X
....gs for the year under consideration has not abated and no incriminating material relating to the same was found in search. 2. The assessee craves to amend, alter and modify any of the grounds of appeal. 3. The appropriate cost be awarded to be assessee." 2. The assessee has raised issue of validity of addition made by the AO in the assessment framed U/s 153A of the Act. Since, this issue goes to the route of the matter therefore, we first take up the issue of validity/sustainability of the addition made by the AO in the assessment framed U/s 153A of the Act. There was a search and seizure action carried out at the residential and business premises of the assessee group on 10.10.2014. Subsequently the AO issued noticed U/s 153A of the Act on 22.12.2014. In response to the notice U/s 153A of the Act the assessee filed his return of income on 29.09.2010 declaring income of Rs. 1,23,12,260/- and Rs. 1,60,73,870/- for the assessment years 2010-11 & 2011-12 respectively. During the course of assessment proceedings, the AO observed that the assessee has claimed long term capital gain arising from sale of share of Rs. 11,31,564 and Rs. 8,53,677/- as exempt U/s 10(38) of the Act. Th....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of making the reassessments under section 153A is subject to tax, hitherto undisclosed income unearthed during the course of the search. It is for this reason that the second proviso to section 153A(1) provides only for the abatement of the pending assessments. This is done to ensure that the regular assessment proceedings under the normal provisions and the assessment proceedings under section 153A are not conducted simultaneously since that would result in redundancy. Therefore, already completed assessments do not abate and they shall hold the field. It can be interfered by the AO while making the assessment u/s 153A only if some incriminating material is unearthed during the course of search or requisition of documents or undisclosed income or property is declared in the course of search which were not produced or not already disclosed or made known in the course of original assessment. The issuance of notices under section 153A(1) for all the six assessment years does not entail altogether a fresh exercise of making a fresh assessment. Hence, the completed assessment can be interfered with by the AO while making assessment u/s 153A only on the basis of the incriminating docum....
X X X X Extracts X X X X
X X X X Extracts X X X X
....declared the long term capital gain of Rs. 11,31,564/- and Rs. 8,53,677/- for the assessment years 2010-11 & 2011-12 respectively though the same was claimed as exempt U/s 10(38) of the Act. Thus, the facts emerged from the record clearly manifest that the assessee declared these transactions of purchase and sale of shares and consequential long term capital gain in the original return of income filed U/s 139(1) of the Act for these two assessment years. Since, the assessment years 2010-11 & 2011-12 were not pending as on the date of search on 10.10.2014 therefore a question arises whether the addition can be made by the AO in the proceedings U/s 153A of the Act in the absence of any incriminating material indicated such undisclosed income. At the outset, we note that the Assessing Officer in the assessment order passed U/s 153A of the Act has not made any reference to any incriminating material found or seized during the course of search and seizure action, however the addition is made based on the statement of the assessee recorded U/s 132(4) of the Act. The AO has also not disputed that there was no incriminating material found or seized during the course of search and seizure a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....g an identical issue has held in para 8 as under:- "8. We have considered the rival submissions as well as relevant material on record. The first aspect involved in the matter is sustainability of the addition made by the Assessing Officer without any incriminating material found or seized during the course of search and seizure action. There is no dispute that the original return of income filed by the assessee U/s 139(1) of the Act on 11/10/2010 was not pending assessment as on the date of search on 03/4/2013. Therefore, the assessment was completed U/s 143(1) and it was not abated due to the search and seizure action U/s 132 of the Act on 03/4/2013. The order of the Assessing Officer is based on the statement of the assessee recorded U/s 132(4) of the Act and specifically the question No. 77. It is pertinent to note that during the course of search and seizure action, the statement of the assessee was being recorded from 04/4/2013 to 05/4/2013 and as many as 78 questions were put to the assessee. The statement of the assessee recorded U/s 132(4) runs into about 50 pages. The statement of the assessee was recorded from 12.00 noon on 04/4/2013 and continued up to 1.00 a.m. on 0....
X X X X Extracts X X X X
X X X X Extracts X X X X
....(iv) Sri Ram Tie Up Pvt. Ltd., 2, Banarashi Ghosh, 2nd Bye Lane, Kolkata (v) ________________________do _________________________ (vi) Tara Vinimay Pvt. Ltd., 101, Balaram Dey Street, G. Floor, Kolkata (vii) Victor Project Pvt. Ltd., 2 Mullick Street, Ist Floor, Kolkata (viii) Yatan Traders Pvt. Ltd., 62/1, Hriday Krishna Banerjee Lane, Howrah. In reply to the question No. 34, the assessee has clearly stated that the transaction of loan from all the parties were taken on interest in the F.Y. 2009-10 and these were repaid in the F.Y. 2011-12. Thereafter a specific question was put to the assessee regarding the loan taken from M/s Dipnarayan Vyapar Pvt. Ltd. as question No. 39 and in reply to the same, the assessee stated that the loan was taken about three years back on interest but the assessee was not able to remember the person through whom the loan was taken. Therefore, there was no ambiguity in the reply to question No. 39 except that the assessee was not able to tell the name of the person who helped the assessee in procuring the loan. Since the Investigation Wing was not satisfied with the answers of the assessee as they could not extract the statement which ca....
X X X X Extracts X X X X
X X X X Extracts X X X X
....l these statements are only regarding one transaction of loan that cannot be applied to the entire transactions of loan taken from 12 parties. Therefore, except the statement of the assessee to question No. 77, which was subsequently clarified in question No. 12, there was nothing in the shape of any material or document much less incriminating material with the Assessing Officer to make the addition to the total income of the assessee. If the statement of the assessee is read in toto then there will be no admission regarding any of the loan transactions being an accommodation entry. Therefore, the question arises whether in absence of any incriminating material, the Assessing Officer can make any addition to the total income of the assessee when the assessment was not abated due to the search and seizure action. The Hon'ble Delhi High Court in the case of CIT Vs. Kabul Chawla (supra) has considered and observed in para 37 and 38 as under: 37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: i. Once a search takes place under Sectio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....assessment. Conclusion 38. The present appeals concern AYs, 2002-03, 2005-06 and 2006- 07.On the date of the search the said assessments already stood completed. Since no incriminating material was unearthed during the search, no additions could have been made to the income already assessed. Thus, the Hon'ble High Court has ruled that the Assessing Officer while making the assessment U/s 153A of the Act can make the addition only on the basis of some incriminating material unearthed during the course of search or requisition of documents, which were not produced or not already disclosed or made known in the course of original assessment. In the case in hand, all the transactions were duly recorded in the books of account. Even the loans were already paid during the F.Y. 2011-12 and therefore, these transactions were disclosed and known in the course of original assessment/return of income. Hence in absence of any incriminating material, the Assessing Officer cannot make any addition to the total income of the assessee. In the subsequent decision, the Hon'ble Delhi High Court in the case of Pr.CIT Vs. Meeta Gutgutia (supra) has held in para 57 to 72 as under: 57. The....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of 2015 (Pr. Commissioner of Income Tax v. Kurele Paper Mills P. Ltd.), this Court declined to frame a question of law in a case where, in the absence of any incriminating material being found during the search under Section 132 of the Act, the Revenue sought to justify initiation of proceedings under Section 153A of the Act and make an addition under Section 68 of the Act on bogus share capital gain. The order of the CIT (A), affirmed by the ITAT, deleting the addition, was not interfered with." 59. In Kabul Chawla (supra), the Court referred to the decision of the Rajasthan High Court in Jai Steel (India) v. Asstt. CIT [2013] 36 taxmann.com 523/219 Taxman 223. The said part of the decision in Kabul Chawla (supra) in paras 33 and 34 reads as under: '33. The decision of the Rajasthan High Court in Jai Steel (India), Jodhpur v. ACIT (supra) involved a case where certain books of accounts and other documents that had not been produced in the course of original assessment were found in the course of search. It was held where undisclosed income or undisclosed property has been found as a consequence of the search, the same would also be taken into consideration while computin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f the Bombay High Court in CIT v. Continental Warehousing Corpn (Nhava Sheva) Ltd. [2015] 58 taxmann.com 78/232 Taxman 270/374 ITR 645 (Bom.) which accepted the plea that if no incriminating material was found during the course of search in respect of an issue, then no additions in respect of any issue can be made to the assessment under Section 153A and 153C of the Act. The legal position was thereafter summarized in Kabul Chawla (supra) as under: "37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: i. Once a search takes place under Section 132 of the Act, notice under Section 153 A (1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. iii. The AO will exercise normal assessment powers in respect of the six years previo....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the additions on the ground that it was not based on any incriminating material found during the course of the search in respect of AYs under consideration i.e., AY 2006-07. The Gujarat High Court referred to the decision in Kabul Chawla (supra), of the Rajasthan High Court in Jai Steel (India) (supra) and one earlier decision of the Gujarat High Court itself. It explained in para 15 and 16 as under: '15. On a plain reading of section 153A of the Act, it is evident that the trigger point for exercise of powers thereunder is a search under section 132 or a requisition under section 132A of the Act. Once a search or requisition is made, a mandate is cast upon the Assessing Officer to issue notice under section 153A of the Act to the person, requiring him to furnish the return of income in respect of each assessment year falling within six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made and assess or reassess the same. Since the assessment under section 153A of the Act is linked with search and requisition under sections 132 and 132A of the Act, it is evident that the object of th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on is to make assessment In case of search or requisition, it goes without saying that the assessment has to have relation to the search or requisition, in other words, the assessment should connected With something round during the search or requisition viz., incriminating material which reveals undisclosed income. Thus, while in view of the mandate of sub-section (1) of section 153A of the Act, in every case where there is a search or requisition, the Assessing Officer is obliged to issue notice to such person to furnish returns of income for the six years preceding the assessment year relevant to the previous year in which the search is conducted or requisition is made, any addition' or disallowance can be made only on the basis of material collected during the search or requisition, in case no incriminating material is found, as held by the Rajasthan High Court in the case of Jai Steel (India) v. Asst. CIT (supra), the earlier assessment would have to be reiterated, in case where pending assessments have abated, the Assessing Officer can pass assessment orders for each of the six years determining the total income of the assessee which would include income declared in the r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d that while it cannot be disputed that considering section 153A of the Act, the Assessing Officer can reopen and/or assess the return with respect to six preceding years ; however, there must be some incriminating material available with the Assessing Officer with respect to the sale transactions in the particular assessment year.' 62. Subsequently, in Devangi alias Rupa (supra), another Bench of the Gujarat High Court reiterated the above legal position following its earlier decision in Saumya Construction (P.) Ltd. (supra) and of this Court in Kabul Chawla (supra). As far as Karnataka High Court is concerned, it has in IBC Knowledge Park (P.) Ltd.(supra) followed the decision of this Court in Kabul Chawla (supra) and held that there had to be incriminating material qua each of the AYs in which additions were sought to be made pursuant to search and seizure operation. The Calcutta High Court in Salasar Stock Broking Ltd. (supra), too, followed the decision of this Court in Kabul Chawla (supra). In Gurinder Singh Bawa (supra), the Bombay High Court held that: "6. . . . . . once an assessment has attained finality for a particular year, i.e., it is not pending then the sa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....wer was categorical and reads thus: "Ans:- I hereby admit that these papers also contend details of various transactions include purchase/sales/manufacturing trading of Gutkha, Supari made in cash outside Books of accounts and these are actually unaccounted transactions made by our two firms namely M/s. Asom Trading and M/s. Balaji Perfumes." 67. By contrast, there is no such statement in the present case which can be said to constitute an admission by the Assessee of a failure to record any transaction in the accounts of the Assessee for the AYs in question. On the contrary, the Assessee herein stated that, he is regularly maintaining the books of accounts. The disclosure made in the sum of Rs. 1.10 crores was only for the year of search and not for the earlier years. As already noticed, the books of accounts maintained by the Assessee in the present case have been accepted by the AO. In response to question No. 16 posed to Mr. Pawan Gadia, he stated that there was no possibility of manipulation of the accounts. In Smt. Dayawanti Gupta (supra), by contrast, there was a chart prepared confirming that there had been a year-wise non-recording of transactions. In Smt. Dayawanti ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... in its subsequent decisions but also by several other High Courts. 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. Conclusion 72. To conclude: (i) Question (i) is answered in the negative i.e., in favour of the Assessee and against the Revenue. It is held that in the facts and circumstances, the Revenue was not justified in invoking Section 153A of the Act against the Assessee in relation to AYs 2000-01 to AYs 2003-04? (ii) Question (ii) is answered in the affirmative i.e., in favour of the Assessee and against the Revenue. It is held that with reference to AY 2004-05, the ITAT was correct in confirming the orders of the CIT (A) to the extent it deleted the additions made by the AO to the taxable income of the Assessee of franchise commission in the sum of Rs. 88 lakhs and rent payment for the sum of Rs. 13.79 lakhs? The said decision of Hon'ble High Court was challenged by the revenue before the Hon'ble Supreme Court, however, the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ous 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 were preserved, resulting in multiple assessments. Under Section 153A, however, the Assessing Officer has been given the power to assess or reassess the 'total income' of the six assessment years in question in separate assessment orders. This means that there can be only one assessment order in respect of each of the six assessment years, in which both the disclosed and the undisclosed income would be brought to tax. 20. A question may arise as to how this is sought to be achieved where an assessment order had already been passed in respect of all or any of those six assessment years, either under Section 143(1)(a) or Section 143(3) of the Act. If such an order is already in existence, having obviously been passed prior to the initiation of the search/requisition, the Assessing Officer is emp....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sessment of the assessee which are pending on the date of initiation of the search or making requisition "shall abate". Once those proceedings abate, the decks are cleared, for the Assessing Officer to pass assessment orders for each of those six years determining the total income of the assessee which would include both the income declared in the returns, if any, furnished by the assessee as well as the undisclosed income, if any, unearthed during the search or requisition. The position thus emerging is that the search is initiated or requisition is made, they will abate making way for the Assessing Officer to determine the total income of the assessee in which the undisclosed income would also be included, but in case where the assessment or reassessment proceedings have already been completed and assessment orders have been passed determining the assessee's total income and such orders subsisting at the time when the search or the 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 pro....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sessee that as the first proviso provides for assessment or reassessment of the total income in respect of each assessment year falling within the six assessment years, is merely reading the said provision in isolation and not in the context of the entire section. The words 'assess' or 'reassess' have been used at more than one place in the Section and a harmonious construction of the entire provision would lead to an irresistible conclusion that the word 'assess' has been used in the context of an abated proceedings and reassess has been used for completed assessment proceedings, which would not abate as they are not pending on the date of initiation of the search or making of requisition and which would also necessarily support the interpretation that for the completed assessments, the same can be tinkered only based on the incriminating material found during the course of search or requisition of documents. Thus, the Hon'ble High Court has held that for the completed assessments, the same can be tinkered only based on the incriminating material found during the course of search or requisition of documents. The ld. CIT(A) has decided this issue in p....
X X X X Extracts X X X X
X X X X Extracts X X X X
..../2011 Jai Steel (India), Jodhpur vs. Assistant Commissioner of income Tax, Jodhpur (Along with other 16 similar matters) reassessment can be made." 7.5 Similar view point was expressed by the Hon'ble Delhi High court in the case of Kabul Chawla vs. ACIT 380 ITR 573 (Del HC). The relevant observation of Hon'ble court could be seen in para 37 & 38 of order, same is reproduced below: Para 37. On a conspectus of Section 153A (1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: i. Once a search takes place under Section 132 of the Act, notice under Section 153 A (1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the Aos as a fresh exercise. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ated 14/03/2016 Hon'ble court has categorically stated that, in cases of completed assessment, if no incriminating material is found then no additions can be made in the assessment framed u/s 153A of the act. The relevant para no. 18 8s 19 of the court order can be referred to. Similar view of also taken in the following judgments, including by Hon'ble Jaipur ITAT Hon'ble ITAT Jaipur in many cases: a. Continental warehousing Corporation 374 ITR 645 b. PCIT vs. Meeta Gutgutia 152 DTR 153 c. Vijay Kumar D Agarwal V/s DCIT in IT(SS)A Nos. 153,154,155 & 156/Ahd/2012 d. Ratan Kumar Sharma vs. DCIT ITA 797 & 798 /Jaipur/2014 e. Vikram Goyal vs. DCIT ITA 174/Jaipur/2017 etc f. Jadau Jewellers & Manufacturer PL Vs ACIT (686/Jaipur/2014) g. Prateek Kothari Vs. ACIT (312/Jaipur/2015. 7.7 Considering the above I am of the view that as the additions made by AO are without any reference to the seized material, they are not legally tenable. The same are therefore directed to be deleted. The legal ground taken by the appellant is thus allowed. The appellant succeeds on legal ground." In view of the above facts and circumstances as well as in the light of bind....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the n.p. rate of last year, i.e. 13.28% on the alleged unaccounted expenditure of Rs. 6,32,171/- as against n.p. rate of 3.92% declared by the assessee and thereby confirming the addition of Rs. 83,952/-. He has further erred in confirming the addition by not accepting the contention of assessee that no separate addition is called for as it is covered by the extra income offered in respect of Annexure A-2. 4. The assessee craves to amend, alter and modify any of the grounds of appeal 5. The appropriate cost be awarded to be assessee." 8. Ground no. 1 is regarding unaccounted transaction detected during the course of search and seizure action as recorded in the loose papers and other incriminating material found and seized and was marked as Annexure AS-2 and Annexure A-1 to A-6. The assessee has admitted undisclosed income of Rs. 1,35,00,000/- in the statement recorded U/s 132(4) and section 131 of the Act. The relevant details of the undisclosed income and seized material are as under:- F.Y. Annexure Page No. Undisclosed Income 2014-15 AS-2 2 Rs. 20,00,000/- 2014-15 AS-2 6 Rs. 17,00,000/- 2014-15 AS-2 30 Rs. 15,00,000/- 2014-15 AS-2 40 Rs....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e regular books, separate addition for the same is uncalled for and be deleted. The ld. AR further pointed out that assessee has separately offered a sum of Rs. 1,35,00,000/- on the basis of annexure A-2. The peak of annexure A-2 was only Rs. 90,35,400/-. However, the assessee offered Rs. 1,35,00,000/- to cover the discrepancies in other annexures. The peak of page 29-40 to A-1 and page 15-24 of Annexure A-5 is only Rs. 7,14,920/- which is covered by the extra income offered in respect of annexure A-2. Hence, no separate addition in respect of these papers is called for. The ld. AR further submitted that assessee has offered an income of Rs. 2,80,00,000/- as per Annexure A-2 which includes Rs. 93,00,000/- on account of miscellaneous surrender. Therefore, no separate addition of Rs. 7,14,920/-should be made as the same is covered by the disclosure already made by the assessee. 10. On the other hand, the ld. DR has submitted that apart from surrendered made by the assessee on the basis of the seized material the AO during the assessment proceedings which is a regular assessment has further conducted inquiry and found some of the entries to the extent of Rs. 30,09,720/- were not rec....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y point out that this is the imprest account maintained by employee of the company who kept these details for making day to day payment for various sites. On these dates the assessee is having sufficient funds as per the cash book. The employee on giving account of actual expenses incurred, recorded the same in the books of accounts. The paper also indicates that payment has been made to various person. Hence, on such intermediately accounts no addition is called for. The ld. AR further submitted that assessee has offered an income of Rs. 3,22,00,000/- in the computation of total income. It comprises of undisclosed income of Rs. 1,35,00,000/- and also the undisclosed investment of Rs. 2,80,00,000/- without claiming any set-off of income against the investment. The amount of Rs. 2,80,00,000/- includes Rs. 93,00,000/- on account of miscellaneous surrender. Therefore, no separate addition of Rs. 26,650/- should be made as the same is covered by the disclosure already made by the assessee. 14. On the other hand, the ld. DR has relied upon the orders of the authorities below. 15. We have considered the rival submissions as well as the relevant material on record. Though the assessee....