TaxTMI 
TaxTMI 
2020 (10) TMI 1018
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....ssing Officer passed u/s 143(3) r.w.s 153A r.w.s 263 on 27.02.2015, 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 ass....
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.....60,13,760/-. A search and seizure operation was conducted in the case of M/s. Indu Group of Companies on 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.....
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....Y. 2008-09 admitting an income of Rs..60,13,760/-. In the course of assessment proceedings, the assessee filed information 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 propose....
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....ly furniture as claimed by the assessee or not and further according to the revisionary Authority the claim is allowed in 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 ye....
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....ed that as assumed by the Ld.CIT(A) if the order is only an order passed u/s 143(3) r.w.s 153A of the Act, no addition can be made 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 31.12.2....
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....t of improvement to the asset sold. As the order u/s 143(3)/153A is consequent to search u/s 132 and no additions were made in the absence of any seized material, it was contended 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....
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....ish evidences to establish her contentions that the furniture got transported to Bangalore. Ld. DR relying on the decision in the case of Gopal Lal Bhadruka v. DCIT [346 ITR 106 (AP)] 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....
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....er can be held to be erroneous, prejudicial to the interest of the revenue has been considered by the Hyderabad Bench of the Tribunal in the case of Shri CH Krishna Murthy v. ACIT in ITA.No. 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....
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.... assessment order can be passed only after the receipt of such approval. The fact that such approval has been obtained should also be mentioned in the body of the assessment order itself." Thus, from the 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 t....
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.... can be inferred that the Range Head had failed to cause any enquiry in this regard" blaming the Range Head for not conducting proper enquiry. The Ld. CIT is inferring that Addl. CIT has not conducted proper enquiry. This is only an inference. 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....
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....pending and the assessment made on 31.12.2009 u/s. 143(3)/153A is not abated. Once the assessment is not abated the only course left for the Assessing Officer is to restrict the additions/disallowances based on the incriminating material seized during the 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 t....
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.... assessments made u/s 143(3) r.w.s. 153A of the Act, for the assessment years which are concluded and no proceedings are pending as on the date of search. The relevant portion of the order is extracted below: 12. We have heard both the parties, perused the materials available on record 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. ....
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....ing documents found reveals that the assessee has inflated labour charges for the assessment years 2008-09 & 2009- 10. Based on the documents found during search, the assessee has accepted that he has inflated 10% labour charges and which is common in this line of business. Consequent to search action u/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. ....
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....as the issue has been already decided by the ITAT, special bench and held that where the assessments are not pending as on the date of search, the A.O. losses jurisdiction u/s 153A of the Act to reassess the income of those completed assessments. Though the provisions of section 153A of the Act does not specify abated and completed assessments, 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 f....
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....ady completed and subsiding. The relevant portion is extracted below: "We have heard Sri J.V. Prasad, learned counsel for the appellant, and gone through the impugned judgement and order of the learned Tribunal. It appears that the learned Tribunal found on fact that after completion of assessment proceedings and after reaching finality thereon, the Assessing Officer tried to 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 logisti....
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...., the assessing officer should complete the assessment of those years by determining the very same total income that was assessed in the earlier proceeding. 24. In view of the above, We are unable to agree with the contentions of Ld Standing Counsel that the assessing officer would get unfettered powers in the case of unabated assessments, once they were reopened us 153A of the Act. In our view, in the case of unabated assessments, the total income should be 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 f....
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....ments for the assessment years 2004-05 & 2005-06 are already concluded and there is no pending proceeding for those assessment years. The time limit for issue of notice u/s 143(2) of the Act, for the assessment years 2004-05 & 2005-06 has been expired. The A.O. made additions towards deemed dividend u/s 2(22)(e) of the Act without any incriminating materials and also based on the books of accounts and financial statements, which were already part of regular return of income filed by the assessee u/s 139(1) of the Act, for those assessment years. Therefore, considering the facts and circumstances of the case and also respectfully following the decision of coordinate bench of ITAT, Visakhapatnam in the case of Sri Hari Prasad Bhararia Vs. DCIT (supra), we are of the view that the A.O. has no jurisdiction to make additions in respect of concluded assessments in the absence of any incriminating materials found during the course of search. In this case, undoubtedly the A.O. has made additions towards deemed dividend on the basis of financial statements filed by the assessee along with regular return of income without any material found during the course of search. Therefore, we....