TaxTMI 
TaxTMI 
TaxTMI 
2019 (11) TMI 1244
X X X X Extracts X X X X
X X X X Extracts X X X X
....he AO as no incriminating document was found at the premises of the assessee during the course of search. 4. That the addition/disallowance made is unjust, arbitrary and is not based on any material on record. The CIT(Appeal) has erred in sustaining the addition of Rs. 5,31,000/- out of addition of Rs. 7,77,648/-. 5. That in view of the facts and circumstances of the case, the CIT(A) has erred in law and on facts in upholding the addition of Rs. 5,31,000/- U/s 69 of the act on account of Cheque deposited in the Standard Chartered Bank of the Assessee's minor son. 6. That the CIT (A) has failed to appreciate that deposit of Rs. 5,31,000/- in the Bank Account represent Gift from grandfather/ uncle of mother to the minor son and the same has been wrongly treated as income. 7. That the explanations given, evidence produced and material placed and made available on record have not been properly considered and judicially interpreted and the same do not justify the addition made. 8. That the addition made is based on mere surmises and conjunctures and the same cannot be justified by any material on record. 9. That interest U/s 234A 234B and 234C of the Income Tax Act, 1961 has....
X X X X Extracts X X X X
X X X X Extracts X X X X
....3A of I.T. Act has not been passed after abatement of any pending assessment proceedings under second Proviso to Section 153A(1) of I.T. Act. There is also no dispute between the two sides that no incriminating materials were found / seized under aforesaid search and seizure action under Section 132 of I.T. Act. In these facts and circumstances, the issue, whether, the AO had the jurisdiction to make the aforesaid addition is squarely covered in favour of the assessee by Kabul Chawla vs. CIT (supra), and by order dated 25.04.2018 of ITAT, Delhi, in the case of H.B. N. Dairies & Allied vs. ACIT in ITA Nos.1393 to 1395/Del/2013, in which the aforesaid order of Hon'ble Delhi High Court in the case of Kabul Chawla vs. CIT (supra) was considered in detail. The relevant portion of the order of H.B. N. Dairies & Allied (supra) vs. ACIT is reproduced as under: "6. I have heard both the sides and perused the relevant material on record. The short controversy is whether the loss declared by the assessee in its returns u/s 153A of the Act for the assessment years 2004-05 and 2005-06 at Rs. 23,05,880/- and Rs. 23,59,200/- respectively be carried forward and set off against the positive inco....
X X X X Extracts X X X X
X X X X Extracts X X X X
....material time. Whereas the return for the assessment year 2004- 05 was processed u/s 143(1) of the Act, assessments were completed u/s 143(3) in respect of the assessment years 2005-06 and 2006-07. The assessee's Profit & Loss Account for the assessment year 2004-05 shows incurring of expenses at Rs. 95.21 lac against which loss of Rs. 24.30 lac was computed and claimed in the return of income. The return of the assessee was processed u/s 143(1) determining loss at the declared figure. Profit & Loss Account of the assessee for the assessment year 2005-06 shows incurring of expenses at Rs. 1.31 crore and the assessee filed return at a loss of Rs. 23,59,200/-. After making some disallowance, the Assessing Officer completed assessment u/s 143(3) on 30.11.2007 at a loss of Rs. 18.17 lac. In so far as the assessment year 2006-07 is concerned, the assessee filed return and the assessment was completed u/s 143(3) on 02.12.2008 determining Nil income, but charging tax u/s 115JB on book profit of Rs. 10,90,440/-. Thus, it is evident that the assessments for the assessment years 2004-05 to 2006-07 stood completed on the date of search on 20.11.2009. 8. At this juncture, it is significant t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....because of the time limit setting in, the Intimation sent to the assessee u/s 143(1) is also treated as a completed assessment for this purpose. 10. Au contraire, the assessment years having non-completed or pending assessments mean the years for which the assessments were pending on the date of search which are abated in terms of the express provisions of the second proviso to section 153A. This will also embrace the years in respect of which the time limit for issuing notice u/s 143(2) is still available with the AO as on the date of search. 11. Adverting to the extant factual matrix, it is seen that the assessment years under consideration fall in the category of `completed assessments' and not the `pending assessments' abating on the date of search. Both the ld. Members have considered the judgment of the Hon'ble jurisdictional High Court in the case of Kabul Chawla (supra). The facts of that case are that a search was carried out u/s 132 on 15.11.2007 on BPTP Ltd., a leading real estate developer operating all over India and some of its group companies including the premises of the assessee, who owned and controlled the group. No assessment proceedings were pending for....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he disclosed and the undisclosed income would be brought to tax". iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in 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 153 A 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 AO. vii.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the gross profit rate to be applied at 12%. Some additions were sustained and others were deleted. The Tribunal rejected the plea of the assessee that since no material was recovered during the course of search, finalized assessments for the periods covered by the block years could not be reopened. The assessee relied on the judgment in the case of Kabul Chawla (supra) and argued that since no incriminating material was found, no additions could be made in respect of the completed assessments. The Hon'ble High Court dismissed the appeals on the ground that the additions were not baseless as these were based on the inferences drawn by the Assessing Officer. It further held that if the element of guess work has some reasonable nexus with the statement recorded and documents seized, then, the additions can be sustained. 14. It is, thus, seen that whereas the judgment in Kabul Chawla (supra) clearly lays down that in the absence of any incriminating material found during the course of search, no fresh addition can be made in respect of completed assessments, the judgment in the case of Smt. Dayawanti (supra) is peculiar to its facts inasmuch as the addition in that case was based....
X X X X Extracts X X X X
X X X X Extracts X X X X
....1.2007 for the assessment year 2005-06 was Rs. 18,17,685/-. In the fresh assessments u/s 153A, the Assessing Officer was authorized to repeat the originally assessed income (loss) plus fresh additions, if any, based on the incriminating material found at the time of search. Admittedly, no incriminating material was found in respect of the assessment years under consideration. There is no reference whatsoever to any incriminating material found during the course of search casting shadow of doubt on the genuineness of such expenses. Since these expenses were claimed as deduction in the original returns and the Assessing Officer accepted the loss so declared except for making some modification for the assessment year 2005- 06, the AO was supposed to restrict his exercise of completing assessments u/s 153A only to the amount of income/loss determined originally. It was not open to him to venture to re-examine the details in respect of expenses in assessment proceedings u/s 153A read with section 143(3) of the Act for the patent reason that, admittedly, no incriminating material in respect of such expenses was found during the course of search. 17. The contention of the ld. DR that th....