TaxTMI 
TaxTMI 
2019 (11) TMI 997
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....2009-2010 to 2012-2013 i.e. IT(SS)A Nos.34 to 37/Ran/2019. For the sake of brevity and convenience, we shall take into consideration the facts and grounds mentioned in IT(SS)A No.34/Ran/2019 (AY: 2009-2010) for deciding the above appeals and decision of which will apply mutatis mutandis to the other appeals also. Grounds of appeal raised by the assessee (Shri Kamal Deo Sharma) for A.Y.2009-2010 in IT(SS)A No.34/Ran/2019 :- 1. For that search operation was only carried out at Transit Office of the appellant in Orissa whereas the appellant resides in Una, Himachal Pradesh since last 15 years. No document or paper relating to appellant was found, as such, no search took place. Initiation of proceedings u/s 153 A, therefore, is ab-initio void and illegal. 2. For that no notice u/s 143(2) was received by the appellant at his place of residence or registered office or at the place of search. As such, the order of assessment passed is ab-initio void and illegal since no notice U/s 143(2) was served. 3. For that the appellant has been regularly assessed to tax U/s 143(1) or 143(3). During the course of search no document whatsoever was found relating to the appellant, as such, Ld. ....
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....income from rent can be estimated. Complete detail of the properties held by the appellant was furnished before the lower authorities. As such, the addition made in absence of any incriminating material is fit to be deleted. 8. For that ld. CIT(A) was not justified in confirming the addition of Rs. 98,88,221/- made by ld AO by disallowing expenses. 50% of the expenses claimed under breaking, sizing, picking, shorting & stacking expenses were disallowed on the ground that bills and vouchers were not produced. Further general expenses and salary to staff claimed in full was disallowed being said as bogus. Disallowance of expenses is arbitrary, illegal and uncalled for. Appellant had disclosed reasonable profit. As such, no disallowance of expenses is called for. There was no incriminating material found during the course of search operation to suggest the same. As such, the ad-hoc disallowance made by Ld AO and confirmed by Ld. CIT(A) is fit to be deleted. 9. For that following the decision of Hon'ble Jharkhand High Court the interest U/s 234A and 234B should only be charged on the returned income and not on the assessed income. 10. For that any other grounds in detail sh....
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....(A), however, the CIT(A) after considering the findings of AO and submissions of the assessee, dismissed the appeals of the assessee for the respective years under consideration. 6. Aggrieved from the order of CIT(A), the assessee is in further appeals before the Income Tax Appellate Tribunal. 7. Ld. AR before us submitted that during the search proceeding a panchnama was drawn, copy of which is annexed in paper book -1 at Page No. 108 to 113. It is seen vide the said panchnama that at page 112 certain inventories/bank account details of the assessee and his group was recorded and in page 113 certain documents/books of account such as purchase bills, sales bills, and raising bills of this group was seized. Vide the said panchnama in page 110 of the paper book-1 it is said during the course of search, statement of Sri Sanjay Pati was recorded who looks after the entire work of the assessee and his group. Ld. AR further as a matter of fact, contended that during the course of assessment proceedings or remand proceeding or in the order of CIT(A) there is no whisper of the statement recorded of the said accountant or the seized documents as mentioned in page 113 of the paper book 1.....
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....ird person which is marked as CMB-24 and CMB-1 wherein it is stated that the assessee had some transactions with Core Minerals. Even in the course of remand proceeding Ld. AO has failed to correlate a single entry from the seized document which could suggest the addition made in the hands of the sundry creditors. It would be pertinent to mention that no opportunity was allowed to the assessee during the course of remand proceedings, rather remand report was prepared at the back of the assessee. It was only when Ld. CIT(A) forwarded the copy of the assessee for counter comments that we made our submissions. We would like to mention that the said seized documents has only been referred for a simple reason that the name of the assessee appeared on the same. As mentioned above there was absolutely no reference to any seized document during the course of assessment and even in the course of remand proceeding Ld. AO in particular has failed to correlate the seized document with the addition made. As such, we would like to submit that the addition made is fit to be deleted. 2. Addition U/s 2(22)(e): Ld. AO while completing the assessment made addition of Rs. 7,61,05,543/-being deemed di....
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....een reconciled. In any view of the case as stated above, the addition being made is completely unjustified, illegal and fit to be deleted, since, not being made on basis of any seized material. 4. Rental income Rs. 52,500/-: Ld. AO made addition of Rs. 52,500/- being deemed rental income. During the course of assessment proceeding Ld. AO failed to even specifically mention for which property said addition has been made. However, in the course of remand proceeding Ld AO states that the addition is being made for the house property in Joda, Orissa stating that the assessee failed to establish that the said property was used as transit office. We would like to mention that the search upon the assessee was only conducted on the said premises which can be clearly seen from the copy of panchnama which is annexed in paper book No. 1 at page No. 108 onwards. This itself is sufficient to show an establishment that the said property was used as transit office by the assessee and his group for controlling the business. In any view of the case the addition made by Ld. AO is not based upon any seized material found during the course of search proceeding. 5. Disallowance of expenses: Rs. 9....
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....emand report. The CIT(A) has also not enhanced the income of the assessee considering any incriminating material found and referred by the AO in the assessment order. Ld. AR also submitted that these all exercise must be done by the AO while framing the assessment order. Accordingly, ld AR of the assessee submitted that the additions made by the AO on various heads and confirmed by the CIT(A) may kindly be deleted and appeals of the assessee may kindly be allowed. 9. On the other hand, ld. DR relied on the orders of authorities below and submitted that with regard to ground No.1 this forum has no right to hear the case. In respect of ground No.2, ld. DR submitted that the ld. CIT(A) has rightly discussed this issue and the order of CIT(A) should not be disturbed as this issue has not been objected by the assessee before the Assessing Officer. With regard to ground No.3, ld. DR submitted that the proceedings u/s 132 is sufficient for reopening for the last six years of the case. In the Tax Evasion Petition there was sufficient information that the assessee is not disclosing his true income. During the statement recorded the accountant has accepted that the assessee is not disclosin....
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....ur considered opinion, the Tribunal has no power to hear the validity of search. In the totality of facts and circumstances of the case, we decline to accept the ground No.1 taken by the assessee regarding validity of search proceedings. Therefore, this ground of appeal is dismissed. 11. With regard to ground No.2, the assessee has contested that the assessee has not received notice u/s.143(2) of the Act at his registered office or place of search. The CIT(A) while dealing with the issue has dismissed the ground of assessee after observing as under :- 5.1 Appellate finding and decision : The appellant through the above ground contended that he has not received Statutory notice u/s. 143(2) either at his registered office or place of search and therefore the AO has no jurisdiction to pass order u/s. 153A/143(3) of the Act. However, it is evident from assessment order vide para 4, the AO categorically stated that a "Statutory notice u/s. 143(2) of the Act was issued on 02/11/2016 fixing the date of compliance on 11/11/2016". Further, in response to the said notice of hearing Shri Deepak Banga, CA and AR of the appellant attended before the AO. Therefore the contention of the appe....
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....served upon him; or (b) not served upon him in time; or (c) served upon him in an improper manner: Provided that nothing contained in this section shall apply where the assessee has raised such objection before the completion of su assessment or reassessment." 5.4 In the instant case of the appellant, the AR of the appellant Sri Deepak CA appeared from time to time and cooperated in the assessment proceedings. No objection as to issue and service of notice u/s. 143(2) was ted before the AO till the completion of assessment. Therefore the appellant can't raise the validity of issue of notice u/s. 143(2) during appellate proceeding. Hence the contention of the appellant is rejected even on this count also. In this regard reliance is placed on the decision of the Hon'ble Punjab & Haryana High Court in the case of Josh Builders & Developers (P.) Ltd. Vs. PCIT-1, Chandigarh reported in [2017] 79 taxmann.com 435 wherein it was held that the Assessee, having not raised any objection with regard to issuance and service of a valid notice during assessment proceedings and rather, without any objection, having voluntarily taken part in such proceedings, could not seek annulment of....
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....e was represented by her own auditor, who filed the return on behalf of the assessee. That apart, neither in the course of the hearing before the Assessing Officer or before the Commissioner (Appeals), the assessee raised any grievance as regards the appearance made by the auditor on her behalf, on the footing that there was no proper service of notice in relation to the assessment proceedings initiated originally by the assessing authority, viz., the Joint Commissioner. Thus, it was rightly held by the Tribunal, that the alleged irregularity was practically waived by the assessee which could not be found fault with inasmuch as, at no point of time till the final order was passed by the Commissioner (Appeals), the assessee made any grievance as regards the representation and appearance made by one S in his capacity as auditor, who admittedly filed the returns. Therefore, the ultimate relief granted by the Tribunal in directing the Commissioner (Appeals) to decide the appeal de novo in accordance with law after providing adequate opportunity to the assessee, was perfectly in order. 5.6 Further, the Hon'ble Delhi High Court in the case of CIT Vs.Vision Inc. reported in [2012]....
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....es for consideration is whether the notice issued on 30-12-2004 under section 143(2) was validly served upon the assessee-firm on 31-12-2004 as claimed by the Assessing Officer. One proceeds on the assumption that the notice was not served on either of the two partners of the assessee-firm and that it was served on some person who was not specifically authorized to receive notice. Even so, one is not persuaded to hold that there was no valid service of the notice upon the assessee-firm. It should be remembered that the basic purpose of issuing a notice under section 143(2) is to give an opportunity to the assessee, who has submitted his return, to support the same by adducing the necessary evidence, documents, etc. Clause (ii) of section 143(2) in terms says that if the Assessing Officer considers it necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not underpaid the tax in any manner, he may serve on the assessee a notice requiring him, on a date to be specified therein, either to attend his office or to produce, or cause to be produced, any evidence on which the assessee may rely in support of the return. T....
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....hat date on behalf of assessee. The Commissioner (Appeals) has noted in his order that in the remand report the Assessing Officer has stated that in the notice dated 30-12-2004, the case was fixed for hearing on 5-1-2005. This statement constitutes sufficient evidence to refute the contention advanced on behalf of the assessee. As regards the other part of the contention that there was no evidence of any one appearing before the Assessing Officer on behalf of the assessee on 5-1-2005, one may refer to the grounds taken by the revenue in the appeal. In one ground it has been asserted that pursuant to the notice issued on 30-12-2004 the counsel for the assessee appeared before the Assessing Officer on 5-1-2005 and filed his power of attorney. A true copy of the power of attorney has been filed along with the grounds of appeal. The grounds of appeal have been served upon the assessee and there was sufficient time for the assessee to have inspected the assessment record in case it wanted to dispute the assertion made in the ground of appeal. This was not done and therefore the assertion made in the ground of appeal remains uncontroverted. It follows that it will be fair and reaso....
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....t there was no service of the notice upon the assessee and therefore the assessment order was null and void. Where the facts show that there has been effective service of the notice upon the assessee pursuant to which he has also participated in the proceedings for assessment of his income, there is nothing in law to compel the Court to hold that despite notice that his case is posted for hearing before the Assessing Officer, the assessment order passed after giving him full opportunity of being heard would still be invalid. That will be a travesty of justice. [Para 14] In the instant case, authorized representative appeared before the Assessing Officer on 5-1-2005, which was the date specified in the notice dated 30-12-2004 as the date of hearing and filed his power of attorney. There is no case set up by the assessee that such appearance by its authorized representative was either under protest and without prejudice or that the authorized representative or the assessee at any point of time during the assessment proceedings had raised the plea that no notice under section 143(2) had been served upon the assessee. In fact, the objection that there was no valid service of the ....
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....assessment because of the view it took on the question of validity of the assessment, the issue was to be remitted to the Tribunal for a fresh disposal. [Para 20] 5.7 Reliance is also placed on the decision of Hon'ble Delhi High Court in the case of CIT-II, New Delhi Vs. Madhsy Films Pvt Ltd reported in 301 ITR 69 wherein the Hon'ble court held that, where notice issued to assessee under section 143(2) had been dispatched by speed post at its address as per its return and same had not been received back, it could be presumed that it had reached assessee, particularly when no affidavit had been filed by assessee to effect that notice was not received by it. 5.8 In view of the facts of the appellant's case and relying on the decisions cited above, the contention of the appellant that no proper notice u/s.143(2) was issued and served is liable to be rejected. Accordingly, ground No.2 is dismissed." 12. It is clear from the above observations of the CIT(A) that there was no mandatory to issue notice u/s.143(2) of the Act and served to the assessee for completion of assessment u/s.153A of the Act. The provisions of Section 153A of the Act is a special provision to unearth the escap....
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....ble to the facts of the present case. 10. The decision of Lunar Diamond Ltd. (supra), Vardhman Estates (supra) and Bhan Testiles (supra) relied upon by learned counsel for the assessee related to the requirement of service of notice upon the assessee within a prescribed time and thus not applicable to the present case. The case of Pawan Gupta (supra) related to mandatory issue of notice under Section 143(2) of the Act in the case of regular assessment as also on block assessment. This being not a case of assessment based on search under Section 153A, the same is not applicable to the present case. In the case of Raj Kumar Chawla (supra) relied upon by learned counsel for the assessee was that of the Tribunal, wherein, a view was taken that if a return filed under Section 148 of the Act is sought to be scrutinized, the compliance of provision contained in proviso under Section 143 (2) of the Act is mandatory. The issue of requirement of notice under section 143(2) for an assessment under section 147 came up for consideration before this court recently in CIT v. Madhya Bharat Energy Corpn. ITA No. 950/08 decided on 11-07-2011. In that case also, this court has held that in the ab....
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....turn. That being so, no further notice under Section 143(2) could be contemplated for assessment under Section 153A. 14. No specific notice was required under section 143(2) of the Act when the notice in the present case as required under Section 153A (1) (a) of the Act was already given. In addition, the two questionnaires issued to the assessee were sufficient so as to give notice to the assessee, asking him to attend the office of the AO in person or through a representative duly authorized in writing or produce or cause to be produced at the given time any documents, accounts, and any other evidence on which he may rely in support of the return filed by him.' In view of the aforesaid pronouncement, we do not find any error or perversity in the approach of the Tribunal warranting interference by this Court. 9. With regard to the judgments relied upon by the learned counsel for the assessee, suffice it to notice that none of them was relating to applicability of requirement of issuance of notice under Section 143(2) of the Act within the prescribed period thereunder relating to framing of assessment under Section 153A of the Act. Thus, the assessee cannot derive any adv....
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.... additions/disallowances could not be made in the assessment framed u/s.153A of the Act de horse reference to any incriminating material found in the course of search in this regard. The return of income was filed by the assessee u/s.139 of the Act, which was processed u/s.143(1)(a) of the Act. Even in page 4 of the assessment order in second para, the AO has observed as under :- "Further, this is to state that finding of incriminating document is not a necessity to complete assessment u/s.153A under the I.T.Act. Issue of warrant of search and a conduct of search is sufficient for proceedings u/s.153A. Further, when no incriminating document is found, the assessment is to be completed as a normal assessment. The same procedure is followed in this case." 14. On perusal of the above observations of the AO, we find total absence of reference to any incriminating material which may have any bearing to impugned additions/disallowances. As a corollary, it is manifest that additions/disallowances have been made without reference to any specific incriminating material/document found as a result of search and seizure action under s.132 of the Act and is based on re-appreciation of facts ....
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....in the case of assessee, leave alone the question of any incriminating material for the year under appeal. Perusal of the assessment orders framed u/s. 153A r.w.s. 143(3) dated 30.3.2014 would reveal that the addition made in respect of share capital and premium does not pertain to any incriminating material found during the course of search. It is only for the reason of making enquiries after the conduct of search and during the course of assessment proceedings carried out in pursuance to section 153A, the AO formed an opinion expressing his doubt regarding genuineness of share capital and creditworthiness of entities which have invested share capital with the assessee, therefore, the same has been added to the income of the assessee. Therefore, in our considered opinion, the action of the AO is based upon conjectures and surmises and hence, the additions made is not sustainable in the eyes of law, because this issue in dispute is now no more res-integra, in view of the decision dated 28.8.2015 of the Hon'ble Delhi High Court in the case of Commissioner of Income Tax vs. Kabul Chawla (2016)380 ITR 573(Del.) and appeal filed before the Hon'ble Supreme Court Of India by the ....
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....ne. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment. 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." 6. Respectfully following the precedent of the Hon'ble Jurisdictional High Court in the case of CIT vs. Kabul Chawla, as aforesaid, we allow the appeal of the Assessee, because AO has completed the assessment and made the addition in dispute without any incriminating material found during the search and seizure operation and the addition in this case w....
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....led the return of income on the basis of audited trading profit and loss account and balance sheet. The AO has made addition only on the basis of tax evasion petition filed by somebody else. Copy of the tax evasion petition is placed on record at page Nos.102 to 107. 17. It is pertinent to mention here that completed assessments can be interfered with by the Assessing Officer while making the assessment under section 153A of the Act only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment. However, in the case in hand, the AO has not referred to any incriminating material found during the course of search while framing the assessment. Section 153 A of the Act, 1961 provides for the scheme of assessment of income in case of a searched person. For the sake of completeness of our order, we would like to reproduce the provisions of Section 153A of the Act, which read as under :- [Assessment in case of search or requisition 153A. [(1)] Notwithstanding anyth....
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....a) the Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income, represented in the form of asset, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more in the relevant assessment year or in aggregate in the relevant assessment years; (b) the income referred to in clause (a) or part thereof has escaped assessment for such year or years; and (c) the search under section 132 is initiated or requisition under section 132A is made on or after the 1st day of April, 2017. Explanation 1.-For the purposes of this sub-section, the expression "relevant assessment year" shall mean an assessment year preceding the assessment year relevant to the previous year in which search is conducted or requisition is made which falls beyond six assessment years but not later than ten assessment years from the end of the assessment year relevant to the previous year in which search is conducted or requisition is made. Explanation 2.-For the purposes of the fourth proviso, "asset" shall include immovable property being land or building or both, shares and securities, loans and advances, deposits in bank....
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....he competence of the Assessing Officer to make the original assessment converges with the assessment to be made under section 153A of the Act, i.e. only one assessment shall be made for such assessment years, based on the findings of the search as well as any other material existing or brought on record by the Assessing Officer. Notably, there would be assessments in the period of the six assessment years identified in section 153A(1) of the Act, which would have become final (i.e. which are not pending on the date of search); such assessments do not abate in terms of the second proviso to section 153A(1) of the Act. The scope and ambit of the assessment where the original assessment has not abated is the controversy before us. In this context, it would be pertinent to refer to the judgment of the Hon'ble Bombay High Court in the case of All Cargo Global Logistics Ltd. (supra), wherein the scope of assessment under section 153A of the Act has been considered. One of the points addressed by the Hon'ble High Court was whether the scope of assessment under section 153A of the Act envisages additions, which are otherwise not based on any incriminating material found during the ....
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.... the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment " can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material." v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the Assessing Officer. vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153A only on the basis of some incriminating material unearthed dur....
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....s any material found during the course of search in order to justify the additions made in the impugned assessment. Thus, on facts, it has to be concluded that the additions made to the returned income by the Assessing Officer in the impugned assessment is not with reference to any incriminating material found in the course of search. Thus, following the parity of reasoning laid down by Hon'ble Bombay High Court in the case of All Cargo Global Logistics Ltd. (supra), the impugned additions could not have been made in the impugned assessment since the original assessment made under section 143(3) of the Act had become final and did not abate. Thus, in the absence of any incriminating material, the Assessing Officer is not empowered to make the impugned additions in an assessment finalized under section 143(3) r.w.s. 153A of the Act. Accordingly, assessee succeeds on its Additional Ground of appeal No.5(b), as above. 8.3 As a consequence of above, all the additions made to the returned income are deleted. Thus, all the other issues raised by the assessee in its appeal become infructuous and are not being adjudicated. 18. Further in the case of Priya Holding (P.) Ltd. Vs. ACIT,....
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.... evidence deducted as a result of search. No reference of such incriminating material, if any, is found in any of the assessment orders for the purposes of making various additions/disallowances. 6.3. The legal issue emanating on such facts that in the absence of any incriminating material/evidence, no addition can be sustained under s.153A is no longer res integra in view of the decision of the Hon'ble Jurisdictional High Court in the case of Saumya Construction (P.) Ltd. (supra) and Devangi alias Roopa in Tax Appeal No.54 of 2017 order dated 02/02/2017. Similar view was earlier taken by the Hon'ble Delhi High Court in the case of Kabul Chawla (supra). 6.4. In view of long line of judicial precedents governing the field, we hold that additions/disallowances made without any nexus to incriminating material found, if any, as a result of search operations are not sustainable in the eyes of law in section 153A of the proceedings. Hence, the additions/disallowances made by the AO in all the captioned appeals require to be quashed. Thus, we find merit in the legal ground raised by the assessee. In this view of the matter, we do not intend to adjudicate various additions/....
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.... fresh appraisal of the existing material that formed part of the original assessment. The hon'ble Delhi High Court adjudicated the issue in paragraphs 4 and 5 of the said judgment which is being reproduced for a ready reference : "4. There is no dispute that the search and seizure proceedings in this case did not result in anything, therefore, material either in the form of books of account or other documents related to the issue of deemed dividend under section 2(22) of the Act. The amounts paid were in fact originally declared in the assessment returns of the assessee. The Commissioner of Income-tax, therefore, had opportunity to exercise his powers as it were on the basis of returns as filed originally and validly under section 263 of the Act. 5. In the circumstances in the absence of any material disclosing that the issue of deemed dividend had been wilfully derived or had been deemed or otherwise withheld from the assessment an addition under section 153A was warranted-based on the proposition taught by this court in judgment dated August 28, 2015 in I.T.A. No. 707 of 2014 titled CIT v. Kabul Chawla [2016] 380 ITR 573 (Delhi). Therefore, we concur with the Income-tax ....
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....d. [2014] 49 taxmann.com 172 was applied. That judgment held that, once the assessment has attained finality before the date of search and no material is found in the course of proceedings under Section 132(1), then, no addition can be made in the proceedings under Section 153A. 7. After setting out this principle in great details, the Members of the Tribunal rendered their opinion that factually there was no incriminating material found during the course of search relating to the addition made on account of deemed dividend. The very fact that Section 132 was resorted requiring the Assessing Officer to record the necessary satisfaction, was lacking in this case. The assessment, which had gained finality, in the absence of any material termed as incriminating having thus been subjected to assessment/re-assessment, the Tribunal held in favour of the assessee. We do not think that the Tribunal's understanding of the legal provisions in the backdrop of these peculiar facts suffers from such legal infirmity or perversity necessitating our interference in further Appellate jurisdiction. 8. We are of the firm opinion that the present Appeals do not raise any substantial questions ....
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....nder section 153A, it was contended by the Revenue that the impugned order was erroneous and prejudicial to the interest of the Revenue since the Assessing Officer had only determined the undisclosed income and not the total income which is the mandate of section 153A .The Hon'ble High Court, while adjudicating the issue, dealt at length with the purpose of introduction of the new search assessment procedures, as against the earlier block assessment procedures and then went on to interpret the proviso to section 153A(1) , and held that it is only pending proceedings which are abated on initiation of proceedings under section 153A of the Act, while the assessments which have attained finality cannot be disturbed unless materials gathered in the course of proceedings under section 153A of the Act established otherwise. 18. Thereafter, the Delhi High Court in the case of Anil Kumar Bhatia, (supra) interpreted the provisions of section 153A of the Act at length, and held that as against the earlier block assessment procedure which roped in only the undisclosed income and the regular assessment proceedings were preserved, resulting in multiple assessments, under the present assess....
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....ed to the judgment of the Karnataka High Court in the case of Canara Housing Development Co. (supra) and stated that even as per that judgment, the scope of enquiry in search carried under section 153A had to essentially revolve around search or requisition under section 132A of the Act. 20. In the case of Kabul Chawla (supra), the Delhi High Court after considering various decisions of High Courts, summarized the legal position in paragraph 37, which is reproduced below : "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 153A(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....
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....nating material found during search or requisition is that: 1. Assessment u/s 153A can be framed only in cases where a search is initiated u/s 132 or Books of Account, other documents or any assets are requisitioned u/s 132A of the Act. Moreover notices u/s 153A(1)(a) can be issued and income assessed or reassessed of six years preceding the assessment year relevant to the previous year in which search is conducted or requisition is made. Thus the crucial words "search" and "requisition" appear in the substantive provision and the proviso, which throws light on the issue of applicability of the provision .Such assessments have a vital link with the initiation and conduct of search .Since search can be authorized only on the fulfilment of conditions enumerated in section 132, those conditions will have to be taken into account while interpreting section 153A and the interpretation arrived at is that in respect of unabated proceedings assessment has to be made on the basis of books of account or other documents not produced in the course of original assessment but found in the course of search and undisclosed income/property discovered in the course of search. section 153A being ....
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..../s 147/148 shall become applicable . Thus in cases where assessments have already been made addition to be made in proceedings u/s 153A is to be restricted to incriminating material found if any. 24. It is amply evident from the above that the issue is settled, with a number of decisions of the High Courts holding that in the case of completed assessments, no addition can be made in the absence of any incriminating material. Though we do agree that there are decisions of High courts which hold otherwise and state that u/s 153A, addition in case of completed assessments need not be restricted to incriminating material, but in view of the Apex court decision in CIT v. Vegetable Products Ltd. [1973] 88 ITR 192 which states that where there are two reasonable constructions of a statute, the construction favouring the assessee should be adopted, we hold that in case of completed assessments under section 143(3)/143(1) of the Act, in the absence of any incriminating material found during the course of search, the Assessing Officer has no jurisdiction to make any addition under section 153A of the Act. 25. We may add that during the course of hearing before us, the learned DR, Shri Ma....
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....d bringing the present search assessment procedures stated that the assessee shall assess/reassess "total" income for each of the six years. The learned D.R. stated that the mandate of the current requirement was to assess the "total" income, hence, it cannot be restricted to the extent of incriminating material only. 30. We find that the meaning of the word "total" income in the context of completed assessment was interpreted by the Delhi High Court in the case of Anil Kumar Bhatia (supra), wherein in para 21, the Court held that in cases 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 are 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 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 sectio....
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....ed additional income of Rs. 11 crores . 34. The statement referred to by the Ld. DR is reproduced as under: "Q.3 Do you want to say anything else further? Ans. During the course of search operation certain incriminating documents relating to various investment companies, excess cash & jewellery were found at my residence. In this connection I would like to offer additional income to the tune of Rs. 11 crore (Rupees eleven crore only) to avoid litigation with the departments, over and above the income of my family and investment companies as stated above subject to no penal action. The disclosure is made u/s 132(4) of the IT Act, 1961 voluntarily. The break-up of the same will be submitted in the next two days. A separate letter to this effect is submitted hereby." From a reading of the above ,it is ev.nt that Sh Goyal admitted that certain incriminating documents relating to various investment companies, excess cash and jewellery was found at his residence. Admittedly there is no reference in the statement to any document found, which revealed that the assessee had wrongly claimed interest on loan taken for his house property, which was the only disallowance made in the ass....
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....ing before the AO as submitted by the AR of the assessee which has not been controverted by the Revenue. The AO has not referred any incriminating materials if any found during the course of search while framing the assessment. It appears that there was no incriminating material was found in the case of the assessee which can be used for completing assessment. The assessee had filed return of income as per Section 139 of the Act, which was available before the AO. The AO has made addition only on the basis of TEP (Tax Evasion Petition) filed by somebody else, financial statements and return of income available before him. There is no any iota of sentence in the assessment order that any annexures prepared by the search team in the Panchanama has been referred in the assessment order. The Tax Evasion Petition has been filed on 21.11.2016 much after search took place, which is not covered under the search and, therefore, it cannot be termed as incriminating materials found during the course of search. We also referred to the Panchanama drawn by search team the statement of Shri Sanjay Pati, Accountant has been recorded which has also not been utilized by the AO while framing the asse....
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.... his order. Respectfully following the judicial pronouncements cited above, we hold that additions/disallowances made without any nexus to incriminating material found, if any, as a result of search operations, are not sustainable in the eyes of law in section 153A of the proceedings. Hence, the additions/disallowances made by the AO in all the captioned appeals require to be quashed. Thus, we find merit in the legal ground raised by the assessee in ground No.3 and the same is allowed. In this view of the matter, we do not intend to adjudicate various additions/disallowances on merits. Thus, appeal of the assessee in IT(SS)A No.34/Ran/2019 for A.Y.2009-2010 is partly allowed. 23. Since, we have held that the assessment framed by the AO u/s.153A of the Act is not sustainable as the AO has not referred to any loose sheet or any specific incriminating document found during the course of search enabling him to make such addition, therefore, rest of the appeals i.e.IT(SS)A No.35 to 37/Ran/2019 for the assessment years 2010-2011 to 2012-2013 being similar in grounds raised in assessment year 2009-2010, the addition made therein by the AO and confirmed by the CIT(A) is not sustainable. T....
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.... explained as payment were made through banking channel and are duly disclosed in the books of the assessee. Moreover depreciation claimed against the same was also allowed. There was no incriminating material found during search to suggest for any such addition. As such, the addition being made is fit to be deleted. 6. For that Ld. CIT(A) was not justified in sustaining the addition of Rs. 4,25,372/- being the alleged difference in turnover as per 26AS and audited accounts. Complete reconciliation for the same was furnished before lower authorities. It was mentioned that the amount in 26AS includes interest received, and other payments includes customs and other statutory duties which have been separately accounted for in our books. As such, there is absolutely no difference in the turnover figure. Moreover there was no incriminating material found or seized during search to suggest for any such addition. As such, the addition made is fit to be deleted. 7. For that Ld. CIT(A) was not justified in confirming the addition of Rs. 52,000/- being made as deemed rental income. There was no vacant residential property for which deemed income from rent can be estimated. Complete detai....
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....ufficient opportunity of hearing to the assessee, so as to substantiate the claim by the assessee with proper documentary evidence. 26. On the other hand, ld. DR in all fairness, submitted that keeping in view the entire facts and circumstances, in which the assessment orders have been passed, if it is found just, proper and necessary to restore the issue to the file of AO then the department has no serious objection to that in the interest of justice. 27. After hearing the submission of both the parties and perusing the entire material on record, we find that the AO has issued show cause notice on 21.11.2016 on the basis of TEP filed on 21.11.2016 for fixing the case on 28.11.2016 on which date the AO passed the assessment order u/s.153A r.w.s.143(3) of the Act. The search was conducted on 3rd July, 2014 and for selection of scrutiny u/s.143(2) of the Act was not expired on the date of search, therefore, this year's assessment would be completed as a regular assessment u/s.143(3) of the Act. The ld. AR of the assessee was also unable to controvert that on the date of search, the assessment for the impugned year has been completed. Our this view is supported by plethora of judici....
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....essment order passed by the AO u/s.153A of the Act is not sustainable as the AO while making assessment has not referred to any document whatsoever found during the course of search. Therefore, our observations made in the ground No.3 in IT(SS)A No.34/Ran/2019 shall also apply mutatis mutandis to these appeals of the assessee. Accordingly, ground No.3 is allowed. 33. Thus, appeals in IT(SS)A Nos.27 to 30/Ran/2019 for A.Y.2009-2010 to 2012-2013 are partly allowed. 34. Now, we shall take up appeals for assessment years 2013-2014 to 2015-2016. 34.1 On perusal of the grounds of appeal raised in the above appeals, we found that similar grounds have been decided by us while considering the appeals of assessee-Shri Kamal Deo Sharma in IT(SS)A No.38/Ran/2019, wherein we have remitted the matter back to the file of AO for de novo assessment. Accordingly, the issues raised in the present appeals being similar to the appeal decided by us in IT(SS)A No.38/Ran/2019 for the assessment year 2013-2014, therefore, our observations made in the above appeal shall also apply mutatis mutandis to these appeals of the assessee. 34.2 Thus, appeals of the assessee for A.Y.2013-2014 to 2015-2016 are all....