TaxTMI 
TaxTMI 
2016 (8) TMI 1509
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....d. and M/s. Specialty Food Ingredients P. Ltd. Business of these concerns are manufacturing and sale of proprietary items being food flavours made from combination of spices, etc. For the A.Y.200102 Jayant B Patel (HUF) filed its original return of income on 31.07.2001 declaring total income of Rs. 10,04,171/. In response to notice u/s.153A, the assessee filed its return of income on 19.08.2008 declaring total income at Rs. 19,49,1711. The assessment u/s. 143(3) r.w.s. 153A of the Act was completed on 30.12.2008 determining taxable income at Rs. 46,67,690/Subsequently, in respect of the original assessment, the ITAT, 'J' Bench vide its order No.4153/Mum/2009 dated 27.10.2010 for A.Y.200102 set aside the matter and restored it back to the file of A.O. to frame denovo assessment. Consequent to the above mentioned ITA T order, notice u/s.143(2) dt. 13.12.2010 and fresh opportunity letter dated 06.06.2011 were issued and served on the assessee. The assessee was asked to produce relevant details such as copy of 7/12 statement for agricultural' land, sale bills for the crop sold, documentary evidence with respect to the expenses incurred like fertilizers, pesticides, seeds, m....
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....his appellate proceedings, the CIT(A) found that the Ld. A.R. for the assessee has filed a copy of letter dt.07.10.2011 furnished before the Ld. A.O. with reference to the agricultural income. As per this letter, a copy of lease deed of agricultural land with detailed statement of income from agricultural activity was also furnished before the Ld. A.O. Further, an affidavit of the staff who was handling the agricultural operation of the assessee was filed before the AO vide assessee's letter dated 03.10.2011. It was also found that the assessee had filed a letter dated 29.11.2011 vide entry No.1478 dated 16.10.2011 in the office of the Ld. AO along with the the copies of documentary evidence in respect of agricultural operation so carried out, and also purchase vouchers, cash vouchers for expenditure, purchase bills for seeds, manure, maintenance etc. As per CIT(A), the Ld. A.O. has not taken cognizance of all these documentary evidences and was carried away by the queries and response in the first round of the assessment. As the entire assessment was set aside by the ITAT for giving fresh opportunity to the assessee, the CIT(A) observed that the A.O. was duty bound to not only mak....
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.... are the same as the assessee has neither purchased nor sold the shares through BSE. Further, BSE has already stated that these transactions never took place through the exchange. In similar circumstances, when the assessee admits certain income, how the bogus long term capital gain earned on other scrips are not in the nature of the taxable income is to be explained by the assessee. As per the directions of the Hon'ble Tribunal in the first round, the matter was set aside and the assessee was given an opportunity to cross examine the brokers. The Ld. A.O. issued summons u/s.131 of the I.T.Act to the brokers which were returned back by post. It was, therefore, presumed that the assessee had not done any transactions through these brokers which were bogus firms. It was also felt that the assessee had managed to get bogus contract notes to show fictitious long term capital gains. Further, Shri Narendra R. Shah, one of the brokers, in his statement given to the department stated that he had given bogus purchase bills in order to get accommodation entries of capital gains to various parties. Accordingly, Ld. A.O. observed that in view of the gamut of facts obtaining in this case, i....
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.... assessment year 200102. In the interest of justice and fairplay, we restore this issue back to the file of AO for verifying the record and taxing the same in the current assessment year. We direct accordingly. 9. All other additions made by the AO in respect of sale of shares are being confirmed. 10. In view of the detailed finding given by lower authorities with regard to addition made on account of seizer of cash and jewellery, we confirm the respective additions so made by AO in the hands of the assessee in his individual capacity. 11. In the year 200708, the revenue has challenged the addition deleted by the CIT(A) on the ground of telescoping amounting to Rs. 63,73,000/. 12. It was contended by ld. DR that assessee could not establish link between the income declared and cash found during the course of search, therefore, benefit of telescoping cannot be given. Reliance was placed on the decision of Ahmedabad Bench in the case of Shri Ketan I Shah, ITA No.610&611/Ahd/2012, dated 29112013. Reliance was also placed on the decision of Hyderabad bench in the case of Sri Jayachandra Reddy, ITA No.1765/Hyd/2013, dated 2022015, wherein it was held that telescoping can be accepted....
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.... available as cash in hand, even if undisclosed. It was held in Commissioner of Income-tax Vs. K.S.M. Guruswamy Nadar & Sons [1984] 19 Taxman 533 (Mad.) : "In the instant case, in addition to the bogus cash credits, there was an addition towards the suppression of profit also. In such a case when there were two additions, it is open to the assessee to prove that the cash credits came from the suppressed profits towards which an addition has already been made, and, therefore, there should be telescoping of one with the other and that there should be only one addition. It was thus clear in the instant case that the view taken by the Tribunal that the additions towards the suppressed book profit should have been telescoped with the additions towards the cash credits, was legally tenable." 14.10.10 I have perused the facts obtaining in this case and find that against the offered income which is undisclosed there has to be either undisclosed investment or unaccounted cash. Ld.A.O. has not brought anything on record to suggest as to where the undisclosed income on account of G.P. on cash sale was invested. In view of the same, by adding the undisclosed cash which is more or less the ....
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....me gifts. Revenue is not in appeal with regard to addition deleted by CIT(A), however, the assessee has challenged the addition on the plea that no incriminating material was found and that assessment was not pending as on the date of search. In respect of assessment year 200304 the assessee has filed its return of income on 3092003, the time period for issue of notice u/s.143(2) have already been expired much before the date of search i.e. 10.1.2007. Similarly for assessment year 200405, return of income was filed by the assessee on 3092003. The time limit for issue of notice u/s.143(2) had expired much before the date of search on 10.1.2007. No incriminating material was found during the course of search. 19. The jurisdictional High Court in the case of Continental Warehousing Corporation (Nhava Sheva) 374 ITR 645, vide order dated 2142015 have considered the decision of Special Bench in the case of All Cargo and also the decision of Delhi High Court in the case of Anil Bhatia (supra), on which CIT(A) has relied for dismissing legal ground raised by assessee. After elaborate discussion the Hon'ble High Court held, Head Note, reads as under : A bare perusal of section 153A woul....
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....at the assessment in furtherance thereof is contemplated. ■ Assessee's reliance upon the Division Bench judgment of this Court rendered in CIT v. Murli Agro Products Ltd. [2014] 49 taxmann.com 172 in that context is, therefore, well placed. ■ The Division Bench outlined the ambit and scope of the powers conferred by section 153A and observed that on a plain reading of section 153A, it becomes clear that on initiation of the proceedings under section 153A, it is only the assessment/reassessment proceedings that are pending on the date of conducting search under section 132 or making requisition under section 132A stand abated and not the assessments/reassessments already finalised for those assessment years covered under section 153A. By a Circular No. 8 of 2003, dated 18-9-2003 (See 263 ITR(St) 61 at 107) the CBDT has clarified that on initiation of proceedings under section 153A, the proceedings pending in appeal, revision or rectification proceedings against finalised assessment/reassessment shall not abate. It is only because, the finalised assessments/reassessments do not abate, the appeal revision or rectification pending against finalised assessment/reasse....
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....reassessment and which are in force on the date of initiation of the search or making of the requisition. As that specific argument was canvassed and dealt with by the Division Bench and that is how it was called upon to interpret section 153A , then, each of the above conclusions rendered by the Division Bench would bind the instant Court. ■ Even otherwise, Court is in agreement with the Division Bench when it observes as above with regard to the ambit and scope of the powers conferred under section 153A . Even if the exercise of power under section 153A is permissible still the provision cannot be read in the manner suggested by the revenue. Not only the finalised assessment cannot be touched by resorting to those provisions, but even while exercising the power can be exercised where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after 31-3- 2003. There is a mandate to issue notices under section 153(1)(a) and assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is m....
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.... (b) In other cases, in addition to the income that has already been assessed, the assessment u/s 153A will be made on the basis of incriminating material, which in the context of relevant provisions means (i) books of account, other documents, found in the course of search but not produced in the course of original 8 assessment, and (ii) undisclosed income or property discovered in the course of search." 11. The issue raised before the Special Bench was as to whether scope of assessment u/s 153A encompasses additions not based on any incriminating material found during the course of search? 12. In the case of Kusum Gupta (supra) also the return was processed u/s 143(1) of the Act and time limit for issuance of notice u/s 143(2) had expired on the date of search and it was held that no assessment was pending in that case and thus there was no question of abatement of assessment. Therefore, the addition in the assessment u/s 153A would be made only on the basis of incriminating material found during the search. The Delhi Bench of the Tribunal in its recent decision on the issue in the case of Shri Kabul Chawla (supra) and others vide order dated 23.5.2014 has expressed the s....
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....d income if any, unearthed during the search'. The expression 'unearthed during the search' is quite significant to denote that in respect of completed or non-pending assessments, the Assessing Officer is albeit duty bound to assess or reassess the total income but there is a cap on the scope of additions in such assessment, being the items of income 'unearthed during the search'. In other words, the determination of 'total income' in respect of the assessment years for which the assessments are already completed on the date of search, shall not be influenced by the items of income other than those based on the material unearthed during the course of search. There is not and cannot be any quarrel over the proposition that the Assessing Officer has no option but to determine the total income of the assessee in respect of the relevant six assessment years. However, the scope of such determination of total income is different in respect of the years for which the assessments are pending vis-a-vis the years for which assessments are non-pending. In respect to the assessment years for which the original assessments have already been completed on the date of s....
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....iction, being outside the scope of proceedings under that section?" The other question was, "whether on the facts and circumstances of the case, the Tribunal erred in law in upholding the action of the AO in denying set off, of book loss unabsorbed depreciation relatable to earlier assessment year in terms of clause (III) of Explanation 1 to section 115JB of the Act?" The relevant facts of that case noted in para no. 2 of the decision are that the AO in the proceedings u/s 153A of the Act, had made several additions, relying upon the incriminating material found in the course of search, which was conducted on 18.1.2006 and subsequent dates. In this paragraph of the decision it has been perused from the impugned order of the Tribunal that incriminating material including statement of Sanjay Agarwal, GM (Marketing) have resulted in additions, which have been upheld. The Hon'ble High Court has been pleased to note in this paragraph as "it is not the case of the appellant - assessee that initiation of proceedings u/s 153A was bad or unwarranted in law as no incriminating material was found during the search. The contention raised by the appellant - assessee is that the addition, which ....
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....sed upon any incriminating material. Thus, the question raised before the Hon'ble High Court was as to whether the Tribunal has erred in law in not upholding that recomputation of book profit, de-hors any material found during the course of search in the order based u/s 153A of the Act was without jurisdiction, being outside the scope of proceedings under that section. The Hon'ble High Court after discussing the issue in detail has been pleased to decide the question against the assessee and has upheld the addition made u/s 115JB of the Act. Thus, having distinguishable facts this cited the decision in the case of Filatax India Ltd. (supra) is not helpful to the revenue. 16. So far as, the decision of Hon'ble Karnataka High Court in the case of Canara Housing Development Company (supra) relied upon by the ld. CIT DR is concerned, the issue raised before the Hon'ble High Court was regarding validity of revisional order passed u/s 263 of the Act by the ld. CIT partly upheld by the Tribunal and during that course the Hon'ble High Court has also been pleased to discuss the decision in the cases of Anil Kumar Bhatia (supra) and the decision of Special Bench of the Tribunal in the case....
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....e assessee that in absence of incriminating material found during the course of search no addition can be made u/s 153A of the Act where the original assessment was already framed on the date of search. The Hon'ble Karnataka High Court in the case of Canara Housing Development Company (supra) has, however, been pleased to express different view, however, as per the established proposition of law, we are bound to follow the decision of Hon'ble Jurisdictional Delhi High Court and since, the Hon'ble Karnataka High Court and the Hon'ble Rajasthan High Court have expressed different views on the issue, the view favourable to the assessee is to be followed. We, thus, reiterate that in absence of incriminating material found during the course of search no addition can be made in a case where original assessment was already framed on the date when search took place. 19. In absence of rebuttal of this material fact by the Revenue in the present case before us that no incriminating material was found during the course of search relating to the assessee for the assessment year under consideration to justify the additions made in the year by the Assessing Officer and assessment based on the ....
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....fter 31-5-2003 in the case of any person, the Assessing Officer shall issue notice to such person requiring him to furnish return of income within the time stipulated therein, in respect of six assessment years immediately preceding the assessment year relevant to the previous year in which the search is conducted or requisition is made and thereafter assess or reassess the total income for those assessment years. The second proviso to section 153A provides for abatement of assessment/reassessment proceedings which are pending on the date of search/requisition. Section 153A(2) provides that when the assessment made under section 153(A)(1) is annulled, the assessment or reassessment that stood abated shall stand revived. Thus, on a plain reading of section 153A, it becomes clear that on initiation of proceedings under section 153A, it is only the assessment/reassessment proceedings that are pending on the date of conducting search under section 132 or making requisition under section 132A stand abated and not the assessment/reassessments already finalised for those assessment years covered under section 153A. By a circular No. 8, dated 18-9-2003 the CBDT has clarified that on ....
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....nce the limitation period as prescribed vide proviso to clause (ii) of sub-section (2) of section 143 is expired, it is not open to the Assessing Officer to assess the income under section 143(3) and the return filed by the assessee under section 139 is deemed to be accepted, which however, can be re-opened under section 147 subject to the fulfilment of ingredients of section 147 and within the time period as prescribed under section 149. So under such circumstances if the return is processed under section 143(1) and not under section 143(3) after the prescribed period of limitation, the same cannot be assessed under section 143(3) though it may be interpreted as mere intimation assessment or otherwise, but the same shall be deemed to be accepted by the Assessing Officer and it will not have any different colour other than the return which is processed under section 143(3). Admittedly, in the case in hand, the return was processed under section 143(1) but the same has attained finality due to the expiry of limitation period of twelve months from the end of the month in which the return was filed. Hence, the assessment is deemed to be completed and not pending on the date of searc....
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....e acquired finality are to be reiterated. 24. Similar view has been taken by ITAT Jodhpur Bench in the case of IOC Builders and Developers, 50 taxmann.com 396, Pune Tribunal in the case of SRJ Peety Steels (P) Ltd., 20 taxmann.com 101, Mumbai Tribunal in the case of Nikki Agarwal, ITA No.879/Mum/2011, order dated 2212014, Mumbai Tribunal in the case of Shri Parag M. Sanghvi, ITA No.8027/Mum/2010, order dated 3092015, Jaipur Tribunal in the case of M/s Jadau Jewellers & Manufacturers Pvt. Ltd., ITA No.686/JP/2014, order dated 14122015, ITAT Delhi Bench in the case of M/s Rakam Money Matters Pvt. Ltd., ITA No.2821/Del/2011, order dated 10162014. 25. Our view is also supported by following decisions : i) ITAT Mumbai Bench in the case of Shri Gurinder Singh Bawa vs. DCIT 28 taxmann.com 328 ii) ITAT Mumbai Bench in the case of Anil P. Khimani vs. DCIT No. 2855 to 2860/Mum/2008 dated 23-02-2010 ii) ITAT Jodhpur Bench in the case of Vishal Dembla vs. DCIT 157 TTJ 189 iv) High Court of Bombay on the case of CIT v. Murli Agro Products Ltd. [2014] 49 Taxmann.com 172 v) ITAT Mumbai Bench in case of ACIT v. Jayendra P. Jhaveri [2014] 65 SOT 118 vi) Jodhpur ITAT in the case of Ayu....
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....de 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 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 AO. 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....