TaxTMI 
TaxTMI 
TaxTMI 
2020 (10) TMI 1018
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....015, as the time limit for passing an order consequent to order u/s 263 dated 30.03.2012, expired on 31.03.2014. 3. The learned Commissioner erred in confirming the order of the Assessing Officer wherein, the income was determined at Rs. 1,54,66,055/- as against the income admitted at Rs. 60,13,760/- by issuing a notice u/s 153A, whereas, no incriminating material was found during the course of search in the case of assessee. 4. The learned Commissioner erred in confirming the order of the Assessing Officer, wherein, an addition of Rs. 94,52,296/- is made merely on a difference of opinion as there is no fresh evidence found during the course of search or in post search enquiries. 5. The learned Commissioner ought to have appreciated that the order u/s 143(3) r.w.s 153A r.w.s 263 of the IT Act is bad in law as the time limit for completing the assessment as per the directions of CIT expired on 31.03.2014 and in respect of addition of Rs. 94,52,295/- no seized material was found during the course of search, therefore, ought to have held that the original assessment made u/s 143(3) is a valid assessment and not to be disturbed. 6. The appellant craves leave to add to, amend or....
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....06.11.2007, as the assessee is one of the Directors in the M/s Indu Projects Ltd, the residential premises of the assessee were also searched. Notices u/s 153A were issued from assessment year 2002-03 to 2007-08. The assessments were completed u/s.143(3) r.w.s 153A for A.Y. 2002-03 to 2007-08 and assessment for the assessment year 2008-09 was made u/s 143(3) of the Act by accepting the income returned. During the period relevant to assessment year 2008-09, the assessee along with her husband Shri Shyam Prasad Reddy sold a property at 7th floor bearing Flat No. 17/7, Mantri Altius, Bangalore, admeasuring 4318 Sq feet for a consideration of Rs..7 crores. While admitting short term capital gains, the assessee claimed 50% of maintenance deposit of Rs..7,69,956/-, renovation and interior works expenses at Rs..1,01,97,894/- and furniture, electrical and other fittings at Rs..1,89,04,590/- aggregating to Rs..2,98,72,440/-. The claim of deduction relating to furniture, electrical and fittings was proposed to be disallowed by Assessing Officer in which assessee's share was of Rs..1,49,36,220/-. The Assessing Officer in the Draft Assessment Order while computing the short term capital ....
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....mation in support of the return of income and also clarified the queries raised by Assessing Officer. The assessment is completed u/s 143(3) r.w.s 153A r.w.s 263 of the Act on 27.02.2015 determining the income at Rs..1,54,66,055/-. The Assessing Officer disallowed expenditure of Rs..94,52,295/- which is 50% of cost of furniture and fittings, based on the observations made by the learned Commissioner of Income Tax (Central) in the proceedings u/s. 263 of the Act dated 30.03.2012. Aggrieved by the order of the Assessing Officer an appeal was filed before the Learned Commissioner of Income Tax (Appeals)-12, Hyderabad, and the Ld.CIT(A) sustained the order of the Assessing Officer. 11. Before us, Learned Counsel for the assessee submitted that originally a search and seizure operation was taken place in the premises of assessee on 06.11.2007, consequent to search the case was notified to DCIT, Central Circle-3, Hyderabad, the assessee filed her return of income u/s 139(1) of the IT Act on 29.07.2008, admitting an income of Rs..60,13,760/-. The Assessing Officer proposed to disallow the expenditure claimed towards furniture and fittings, while making computation of capital gains. Howev....
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....haste. Ld. Counsel submits that in the reassessment proceedings u/s.143(3) r.w.s 153A r.w.s 263 of the Act, the Assessing Officer has not made any enquiries referred in the order u/s 263 of the Act but on the same set of facts disallowed the claim which was originally allowed. Therefore, it is submitted that the claim is disallowed only with difference of opinion on the same set of facts which were originally existing, without bringing any material on record as per the observations of the CIT(Central) to disprove the claim, thus it is submitted that the disallowance made by the Assessing Officer is to be struck down. 13. Learned Counsel for the assessee submitted that the order u/s.263 was passed on 30.03.2012, further, consequent to reopening of the assessment u/s 263, the Assessing Officer, Central Circle-3 issued notice u/s 143(2) on 30.03.2012, and same is served on the assessee on 31.03.2012, therefore, as per the 4th proviso under subsection (2A) of section 153 of the IT Act, the assessment consequent to order u/s.263 should have been made within two years from 31.03.2012, however, the reassessment u/s 263 is made on 27.02.2015, therefore, no reassessment can be made in cons....
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....de in the absence of any incriminating seized material. It is submitted that the directions of the Ld. CIT (Central) in the order passed u/s 263 is only on surmises and conjectures and further no enquiries are made as directed in the order, the suspicion however strong it may be it cannot be turned into evidence. Therefore, the addition made on a difference of opinion, surmises and conjectures, suspicion deserves to be deleted. 16. Coming to the addition made without any seized material, Learned Counsel for the assessee submitted that, originally during the course of proceedings u/s 143(3) r.w.s. 153A consequent to search on 06.11.2007, assessment was completed by accepting the income returned, no additions were made as no incriminating material was seized in the case of assessee. However, during the course of proceedings u/s 143(3) r.w.s 153A r.w.s 263 of the Act, an addition of Rs..94,52,295/- was made based only on the observations of the Ld. CIT in the proceedings u/s. 263 of the Act. It is submitted that original assessment u/s 143(3) dated 31.12.2009, had been completed without making any addition attained finality. Learned Counsel for the assessee submitted that, subsequen....
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....nded that the order of the Ld. CIT passed u/s 263 is an invalid order. It is submitted that any addition made in subsequent order dated 27.02.2015, u/s.143(3) r.w.s 153A r.w.s 263 obliging the directions of the Ld. CIT has no legs to stand as the order of the Ld. CIT itself an invalid order. Learned Counsel for the assessee submitted that due to circumstances prevailing after the search on 18.07.2012, the assessee opined that the assessment made u/s.143(3)/153A will abate even though no incriminating material was found, therefore, the appeal before the ITAT was withdrawn. However, considering the legal position developed over a period that no addition can be made in the proceedings consequent to search without any seized material, the order u/s 143(3)/153A dated 31.12.2009, is legally correct since to disallow the cost of fittings and furnishings while computing capital gains no incriminating material was found during the search. Therefore, the Ld. CIT (Central) should not have disturbed the order merely on suspicion and to make further enquiries. Therefore, the order u/s.263 of the Act is an invalid order without any fresh material brought on record. The subsequent addition germi....
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....)] submits that the evidences not only unearthed during the course of search but other evidences emanating from the records can be considered for the purpose of making additions in search assessments. Ld. DR vehemently supported the order of the Ld.CIT(A). In reply Ld. Counsel for the assessee submits that assessee is a Director in number of companies and the goods were transported in vehicle belonging to the assessee companies and therefore the transportation of furniture to Bangalore cannot be doubted. 21. We have heard the rival submissions, perused the orders of the authorities below. In this case the search and seizure operations were initially taken place in the premises of assessee on 06.11.2007 and the assessment u/s. 143(3) r.w.s. 153A was completed on 31.12.2009 accepting the income of Rs..60,13,760/- returned by the assessee. In the course of the assessment proceedings the Assessing Officer proposed to disallow the expenditure incurred by the assessee towards furniture and fittings as an improvement for the property at Bangalore while computing the capital gains on account of sale of such property on the ground that the furniture and fittings were not shown in the sale....
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....766/HYD/2012 dated 13.02.2015 and the Tribunal held as under: "23. At this stage, one has to remember, the settled position of law is, for invoking jurisdiction u/s 263 of the Act, two conditions have to be satisfied cumulatively. Firstly, order must be erroneous and secondly it must be prejudicial to the interests of revenue. In absence of any one of the two conditions, the power conferred u/s 263 cannot be exercised. On a perusal of the assessment order as a whole, specifically, para 17, it is very much evident that Assessing Officer was conscious about the fact that Barium Division was having outstanding liability of the advance given by Chrome Division at the time of demerger. He was also aware of the fact that outstanding liability was converted as advance given to assessee against which shares of newly formed company i.e. VBCPL were allotted to assessee and his associates. Therefore, it is clear from the assessment order that Assessing Officer has examined the issue of conversion of the outstanding liability of Barium Division to advance in the name of assessee through journal entries as well as allotment of shares against such advance to assessee and his family members. Fu....
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.... aforesaid facts it becomes clear, the Assessing Officer while exercising power u/s 153A has to pass the assessment order as per the approval granted by addl. CIT u/s 153D. In these circumstances, Assessing Officer having examined the issue and applied his mind to the facts and having passed the order in terms with the directions of the Range Head as per the statutory provisions contained u/s 153D, the assessment order cannot be held to be erroneous. In fact ld. CIT has blamed the range head for the directions given by him while approving the draft assessment order. Therefore, if at all, there is any error, it is in the order of the range head and not in the assessment order. Without revising the directions of addl. CIT, assessment order could not be revised." 25. In the assessee's case the Assessing Officer proposed to disallow the expenditure claimed by the assessee towards furniture and fittings and the Addl. CIT by order dated 31.12.2009 u/s. 153D accepted the claim of the assessee with the following observations: - "In the case of Sri I. Syam Prasad REDDY and Sundari for the A.Y. 2008-09: The AO in the draft assessment order proposed for the A.Y. 2008-09 in the case of ....
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....nce. The order passed by the Ld. Addl. CIT u/s. 153D clearly states that he has looked into the documents and annexures thereon and on satisfying himself of the evidences directed the Assessing Officer that the claim of the assessee is acceptable. Therefore, when the view taken by the Addl. CIT and the Assessing Officer can be accepted as one of the possible views, Assessment Order cannot be treated as erroneous even though some prejudice caused to the revenue. In such circumstances, if at all if there is any error it is in the order passed by the Range Head i.e., the Addl. CIT, and not in the Assessment Order passed by the Assessing Officer on the directions of the Addl. CIT. Therefore, when the assessment order passed by the Assessing Officer u/s. 143(3)/153A is not erroneous, the findings of the Ld.CIT(Central) in his order passed u/s. 263 has no relevance and such order of the Ld.CIT is not sustainable in law. In that scenario one has to look at what is the incriminating material found in the course of search leading to the disallowance/addition. Admittedly no incriminating material was found in search proceedings leading to disallowance of expenditure incurred on furniture a....
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....search proceedings. As we have already observed that no incriminating materials were found during search leading to disallowance of expenses claimed while computing the capital gains, we hold that no disallowance can be made without search materials. 30. In the case of CIT v. M/s. Murali Agro Products Ltd., in Income Tax Appeal No. 36 of 2009 dated 29.10.2010, the Hon'ble Bombay High Court held as under: - "12) Once it is held that the assessment finalised on 29.12.2000 has attained finality, then the deduction allowed under section 80 HHC of the Income-tax Act as well as the loss computed under the assessment dated 29-12-2000 would attain finality. In such a case, the A.O. while passing the independent assessment order under Section 153A read with Section 143 (3) of the I.T. Act could not have disturbed the assessment/ reassessment order which has attained finality, unless the materials gathered in the course of the proceedings under Section 153A of the Income-tax Act establish that the reliefs granted under the finalised assessment/reassessment were contrary to the facts unearthed during the course of 153A proceedings. 13) In the present case, there is nothing on record ....
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....ecord and gone through the orders of the authorities below. The factual matrix of the case is that there was a search action u/s 132 of the Act. Consequent to the search, the assessee case was centralized and accordingly, notice u/s 153A of the Act was issued requiring assessee to file return for 6 assessment years immediately preceding the assessment year in which search is conducted. The assessee filed returns in response to notice u/s 153A of the Act. The A.O. completed the assessment u/s 143(3) r.w.s. 153A of the Act and made additions towards deemed dividend under the provisions of section 2(22)(e) of the Act. The A.O. was of the opinion that transactions between the assessee and his company is coming within the definition of deemed dividend under the provisions of section 2(22)(e) of the Act. It is the contention of the assessee that the assessment order passed by the A.O. u/s 143(3) r.w.s. 153A of the Act, for the assessment years 2005-06 to 2009-10 is null and void as the A.O. has made additions towards deemed dividend u/s 2(22)(e) of the Act without any incriminating materials. The assessee further contended that as per section 153A of the Act, de-novo assessment can be ma....
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..../s 132 of the Act, the assessee case has been centralized and accordingly fresh assessment proceedings have been initiated by issuing notice u/s 153A/153C of the Act for the six assessment years immediately preceding the assessment year in which search was conducted. The assessee has filed revised returns in response to notice u/s 153A of the Act and admitted the additional income disclosed during the course of search. The case has been selected for scrutiny. During the course of assessment proceedings, the assessee was asked to produce books of accounts and relevant bills & vouchers in support of expenditure claimed. In response, the assessee filed written submission and stated that the books of accounts are not available and hence cannot be furnished. Therefore, the A.O. issued a show cause notice and asked to explain why the net profit from the business shall not be estimated. In response to show cause notice, the assessee has filed a written reply and contended that the income for the assessment year 2004-05, 2005-06 and 2007-08 cannot be tinkered with, as there was no incriminating material found during the course of search for the above assessment years and as such no addit....
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....sments, the natural meaning assigned to it should be given to interpret the provisions in such a way that which shall not cause undue hardship to the tax payers. The provisions of section 153A of the Act explained the procedure of assessments, abated assessments and the manner in which the assessment should be framed, which was further supported by circular no.7 of 2003 issued by the CBDT. When the law has explained the position of abated assessments, then the same way the completed assessment should be treated so as to understand that those assessments are reached finality and which cannot be tinkered with unless there was a seized document. Therefore, we are of the considered opinion that where search is initiated, all pending assessments are merge into one and only one assessment for each assessment year shall be made separately on the basis of findings of search and other material existing or brought on record by the A.O. In respect of non abated or completed assessments, the assessment will be made on the basis of books of accounts or other relevant documents found during the course of search, but not produced in the course of original assessment. 22. In the present case on ....
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....o reagitate the assessments. According to us, the learned Tribunal has rightly held that the Assessing Officer has no jurisdiction to reagitate the assessments which were already completed and subsisting. We therefore do not find any element of law to be decided in this appeal. Hence, the appeal is dismissed. There will be no order as to costs." 25. The assessee has relied upon the coordinate bench decision of ITAT, Visakhapatnam in the case of A.T. Rayudu in ITA No.373 to 379/Vizag/2014. The coordinate bench, under similar circumstances held the issue in favour of the assessee. The relevant portion is reproduced hereunder: "22. In this regard, it is also pertinent to refer to the following observations made by the Special bench in the case of All Cargo Global logistics Ltd (supra):- "57 (f) In the case of Parashuram Pottery works co. Ltd Vs. ITO (106 JTR 57)(SC), it has been mentioned in the last paragraph of the judgment that the court has to bear in mind that the policy of law is that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at res....
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....determined by the assessing officer by combining the income already assessed/disclosed in the return of income and the undisclosed income, if any, found during the course of search proceeding. Even otherwise, it is settled proposition of law that the assessee is entitled to take support of the decision in his favour, when two contradictory views have been expressed by the High Courts. In the instant case the Hon'ble jurisdictional High Court comes to the support of the assessee in respect of the legal proposition in addition to the decision rendered by the Hon'ble Bombay High Court. Accordingly, we find merit in the contentions 26. Considering the facts and circumstances of the case and also respectfully following the coordinate bench decision in the case of All Cargo Logistics Pvt. Ltd. (supra), we are of the opinion that the A.O. has made reassessment u/s 153A/153C of the Act on the basis of information/material available in the return of income, without referring to any seized material. Therefore, following the special bench decision (supra) we hold that the A.O. had no jurisdiction to make additions u/s 153A of the Act for the assessments which are not pending as on the....