TaxTMI 
TaxTMI 
2018 (2) TMI 2025
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.... 9,95,81,999 3 FDs, PF and misc 49,91,897 The Assessing Officer while completing the assessment has failed to examine the issue as to why this amount has not been offered to tax. It is also observed that assessee has claimed deduction in respect of interest paid on ICICI loan at Rs. 11,21,756/- against the income from house property. However, Assessing Officer failed to examine the utilisation of loan and its allowability as deduction while computing the income from house property. During the course of search at the premises of Ms.Priti Milan Mehta, certain pages were seized out of which page 118 to 127 pertain to Swiss Bank Account statement with JP Morgan in the name of the assessee. This particular bank account with JP Morgan was not disclosed by the assessee in his return of income filed u/s.139 or u/s.153A of the Act. The Assessing Officer failed to examine the said mentioned bank account and tax the undisclosed income. The Assessing Officer was given show cause notice and assessee has replied as under:- "3. The assessee submitted his explanation through his authorized representative. The explanation of the assessee is summarized below:- 1. As regards first ....
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.... the circumstances of the case and in law, the Hon'ble Principal Commissioner of Income Tax (Central)-I erred in holding that the assessment order passed by the Ld. AO u/s. 153A r.w.s 143(3) of the Act dated 18.06.2015 is erroneous and prejudicial to the interest of the revenue and hence set aside the appellant case back to the Ld. A.O. for making a fresh assessment. The appellant prays that the said action of Hon'ble Principal CIT be may kindly be quashed. Ground No. 3:- On the facts and in the circumstances of the case and in law, the Hon'ble Principal Commissioner of Income Tax (Central)-I erred in holding that the Ld. A.O. has failed to examine Goodwill credited from GuficHira Construction amounting to Rs. 3,76,98,585 and setting aside the appellant's case back to the Ld. A.O. for making a fresh assessment of such issue. The appellant prays that the said action of Hon'ble Principal CIT be may kindly be quashed. Ground No. 4:- On the facts and in the circumstances of the case and in law, the Hon'ble Principal Commissioner of Income Tax (Central)-I erred in holding that the Ld. A.O. has failed to examine the utilization of loan and allowability of interest amounting t....
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.... of search.As per the said provisions, the Assessing Officer had no jurisdiction to make additions in respect of non-abated years i.e. years for which assessment were completed u/s 143(3) of the Act or time limit for issuing notice u/s 143(2) had expired except if the additions were based on incriminating material found during the course of search. As per the said provisions, the Assessing Officer had no jurisdiction to make additions in respect of non-abated years i.e. years for which assessment were completed u/s 143(3) of the Act or time limit for issuing notice u/s 143(2) had expired except if the additions were based on incriminating material found during the course of search. The learned AR also submitted that no incriminating material was found during the course of search that took place in case of assessee with respect to the above issues at the assessee's premises. Hence, in absence of incriminating material, the Assessing Officer could not have made any additions on the above issues. The issue is now settled by the decision of the Hon'ble Bombay High Court in case of CIT v. All Cargo Global Logistics Ltd (375 ITR 645) wherein, it has been held that in respect of non-abate....
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....habad High Court in the case of CIT Vs. Dr. Ashok Kumar in I.T.A No.192 of 2000 wherein it has been held that the assessment order approved by the Addl. CIT u/s.153D, cannot be subjected to revision u/s.263 of the Act. Therefore, it was submitted that since the CIT has not revised the approval of Addl. CIT in the present case, the CIT could not have revised the order passed by Assessing Officer u/s. 143(3) r.w.s 153A of the Act. In this proposition the CIT has relied upon the decision of:- 1. Hon'ble Allhabad High Court in case of CIT Vs. Dr. Ashok Kumar in ITA No.192 of 2000. 2. Tribunal's judgement in case of Trinity Infra Ventures Ltd. Vs. DCIT CC 2(1) in ITA No.584-589/Hyd/2015 dated 04.12.2015 3. Tribunal's judgement in case of Dhariwal Industries Ltd. Vs. CIT in ITA Nos.1108-1113/Pn/2014 dated 23.12.2016. 8. The learned AR submitted that CIT has no CIT has not conducted any enquiry before directing the Assessing Officer to decide the issues afresh. It was submitted that a show-cause notice dated 09.02.2017 was issued to the assessee wherein, he proposed to revise the assessment orders on certain issues. In reply dated 23.02.2017 to the show cause notice, the assessee f....
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....est of revenue and he directed the Assessing Officer to examine the issue afresh. In respect of this the learned AR submitted that certain allegedly incriminating documents were found from the search conducted in premises of Ms.Priti Milan Mehta 11.03.2014. It was submitted that Ms.Priti Milan Mehta is ex-wife of assessee. They were divorced on 04.09.2009. It was submitted that the documents were not found from the search conducted in case of assessee. Hence, with respect to the current assessment year, the Assessing Officer would have no jurisdiction to make any addition pertaining to the said bank account since the said document has not be found during the course of search conducted in case of assessee. The learned AR submitted that the Assessing Officer has to assesses the income found during the course of search S. 132 of the Act conducted in case of assessee. On a conjoint reading of section 153A and section 132 of the Act, it is evident that the purpose of section 132 of the Act is to unearth the documents in possession of assessee which have not been disclosed by him in his return of income. He relied upon the decision of Hon'ble Bombay High Court in case of CIT v. All Cargo....
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....assessee. The Assessing Officer in case of assessee should have recorded separate satisfaction that the said document belongs to assessee. The recording of such satisfaction the Assessing Officer in case of assessee should have completed the assessment u/s 143(3) r.w.s. 153C of the Act. The correct course of action for making addition, if any, on this issue would be making assessment u/s 143(3) r.w.s. 153C of the Act. Hence, the Assessing Officer in case of assessee could not have made this addition while passing the assessment order u/s 143(3) r.w.s. 153A of the Act since this addition could only have been made if the assessment order was passed u/s 143(3) r.w.s. 153C of the Act after following the above mentioned procedure. Since the Assessing Officer could not have made this addition in the assessment order passed u/s 143(3) r.w.s. 153A of the Act, non-consideration of this issue in the assessment order would not make the order erroneous or prejudicial to the interest of assessee. 10. In respect of assessment years 2009-10, 2010-11, 2011-12, 2012-13 & 2013-14, the learned AR submitted that all these year are non-abated, therefore no incriminating material was found during the c....
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.... search. The learned DR is relied upon the decision of Hon'ble Supreme Court in the case of Rajmandir Estates (P.) Ltd. Vs. Pr.CIT [77 taxman.com 285 (SC)] and submitted that the Assessing Officer has completed assessment without holding requisite investigation except for calling for records. Commissioner passed order under section 263 of the Act and opined that this could be a case of money laundering which went undetected due to lack of requisite enquiry into increase and it is nonapplication of mind of Assessing Officer. The action of 263 of the Act was upheld by the Hon'ble Supreme Court of India. The learned DR also relied upon the decision of Hon'ble Delhi High Court in case of CIT Vs. Ashok Logani [2011] 11 taxmann.com 208 wherein it is held that the Assessing Officer vide passing the order the assessment becomes final and no appeal can be filed against the order of Assessing Officer by the revenue department. Limited jurisdiction is given to the CIT to revise such orders, if he finds that the same is prejudicial to the interest of revenue and on the facts of this case, when it is found that there was no proper consideration by the Assessing Officer to the issue at hand, he ....
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....nded by Finance Act, 2015 (w.e.f.-01/06/2015). Therefore, if the order u/s. 263 passed either before or after 01/06/2015, the words 'declared' and 'shall be' are remained in the framework of the Act. Therefore, the intention of the legislature was clear that the Commissioner of Income Tax has the power to make revision of the order of the AO if it is erroneous and prejudicial to the interest of the revenue. III) It is worth mentioning that that the section 263 does not invalidate the order of the Pr. Commissioner of Income Tax. IV) Reliance is also placed SC decision in the case of C.I.T v/s. Amitabh Bachchan reported in [2016] 69 taxmann.com 170 (SC), wherein the powers of Pr Commissioner of Income Tax has been explained. This is the latest legal position; therefore, the same may be taken note of. V) The various objection raised by the assessee during the course of hearing including issuing of Svrong notices', raised neither before the AO nor Pr. Commissioner of Income Tax, therefore, at this juncture the same may not be entertained. Moreover, the assessee fully co-operated during the assessment as well as revision proceedings. VI) The plea of divorce w....
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....ered. Moreover, in case of Hon'ble Karnataka High Court, the Hon'ble Delhi High Court has considered the decision of Hon'ble Karnataka High Court. Learned AR submitted that the Jurisdictional High Court in case of CIT v. All Cargo Global Logistics Ltd (375 ITR 645) has decided in favour of the assessee and wherein it is held that in case of non-abated additions can only be made on the basis of incriminating material found during the course of search pertaining to those additions. In case of CIT Vs. Ballarpur Industries Ltd. [2017] Tax Pub (DT) 4015 (Bombay High Court / 85 taxmann.com 10) relied by the Assessing Officer. Learned AR submitted that the reason for upheld the CIT u/s.263 of the Act was that the assessing officer had failed to cause inquiry. In the present case, all the details were filed before CIT and the CIT had not applied his mind to the details filed by the assessee. In respect of Bassera Realtors (P.) Ltd. v CIT [163 TTJ 736 (Chandigarh)], the Assessing Officer has not applied his mind. In respect of Hon'ble Delhi High Court in case of CIT Vs. Ashok Logani [2011] 11 taxmann.com 208, learned AR submitted that assessee has filed relevant details before the CIT, no i....
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....8.2010 Not selected 31.07.2012 Not selected 16. Short table for issue involves in the years which reads as under:- Sr.No. Issue Ground No A.Y. 08-09 A.Y. 09-10 A.Y. 10-11 A.Y. 11-12 A.Y. 12-13 A.Y. 13-14 A.Y. 14-15 1. CIT erred in assuming jurisdiction u/s. 263 and holding that assessment completed had been made without carrying out necessary enquires and hence, the assessment order is erroneous and prejudicial to the interest of the revenue. 1 2. CIT erred in setting aside the assessee's case back to the Ld. A.O. for making a fresh assessment. 2 3. Amount received from partnership firm upon retirement 3 - - - - - - 4. Amount credited in capital account - 3 - - - - - 5. Interest waived by HDFC bank - - 3 - - - - 6. Disallowance u/s 24(b) of the Act 4 4 4 - - - - 7. Disallowance of interest u/s 57(iii) - - - 3 3 3 3 8. Disallowance u/s 14A - - - 4 4 4 4 9. Bank account with JP Morgan 5 5 5 5 5 5 5 10. Payment made to Kingstar - - - - - 6 - 17. We have heard the rival contention of both the parties we find that following propositions has been emerged to decided this issue which is as un....
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....ercising jurisdiction u/s 263 of the Act. 19. Further it is observed that in the case of Jitendra Mehta v. CIT in ITA No. 1872/Mum/2015 dated 24.06.2015 also, the CIT sought to revise the assessment order passed u/s 153A of the Act on the ground that the Assessing Officer had not examined the issue of depreciation on windmill. However, the year pertaining to which assessment order was passed, being a non-abated year, addition could have been made in case any incriminating material was found during the course of search pertaining to the said addition. It was held by the Hon'ble Tribunal that since no incriminating material was found during the course of search pertaining to the addition, the Assessing Officer could not have made any addition and hence, the CIT cannot term the assessment order as erroneous and prejudicial to interest of revenue. The relevant portion of the order of Hon'ble Tribunal is reproduced below: "2.4 It was further submitted by Ld. AR that in the latest decision of Hon'ble Bombay High Court dated 21/4/2015 in the case of CIT vs. Continental Warehousing Corporation (NhavaSheva) Ltd. and CIT vs. All Cargo Global Logistics Ltd. in Income Tax Appeal No. 523 of ....
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..... 8. Finally, in view of the ratio laid down in the above decisions, the ld. AR submitted that the assessment order passed by the A.O under section 143(3) r.w.s. 153A was not erroneous and prejudicial to the interest of the revenue and therefore revisionary powers u/s 263 of the Act were wrongly invoked and exercised by the Commissioner and prayed that the order passed by the Commissioner u/s 263 be set aside and that of A.O be restored by allowing the appeal of the assessee. 9 .....In the case of Continental Warehousing Corporation (Bombay High Court) (supra) in which the Hon'ble Jurisdictional High Court has held the addition can only be made on the basis of incriminating materials found during search in the case of assessments which have attained finality on the date of search action." ............................................................................................. ..................... 11. A close perusal of the above reveal that facts of the assessee's case are squarely covered by the ratio laid down by the above said judgments referred to hereinabove and we, respectfully following the same, quash the order passed by the Commissioner u/s. 263 of the Ac....
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.... Ld. Principal CIT. We find that the impugned order u/s 263 is contrary to law and facts and, therefore the same is hereby quashed" 22. The decision of the Hon'ble Delhi High Court in case of CIT v. Mahesh Kumar Gupta in ITA No. 810 of 2016 dated 22.11.2016 wherein the Assessing Officer had passed the order u/s 153A of the Act in respect of nonabated year. The CIT sought to revise the order passed by Assessing Officer on the ground that the Assessing Officer had not made any addition u/s 2(22)(e) of the Act. It was submitted that no incriminating material was found during the course of search with respect to the said issue and hence, no addition could have been made by the Assessing Officer in his order. The Hon'ble Tribunal accepted the plea of appellant. On appeal to the High Court, the Hon'ble Court upheld the order of the Hon'ble Tribunal and held as under: "3. The ITAT concluded based upon the materials available that the search and seizure operations did not yield any fresh material warranting addition under Section 153A of the Act, and therefore, could not clothe the CIT with the authority to add an amount on the basis of a fresh appraisal of the existing materials that ....
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....Tribunal has held that the assessment order passed u/s 143(3) r.w.s. 153A of the Act cannot be revised without revising the approval of Addl. CIT: 5.4. The Ld. Counsel for the assessee has further submitted that the assessment under section 143(3) read with section 153C was passed after getting approval of Addl. CIT under section 153D of the I.T. Act and therefore such an assessment cannot be revised without revising the directions of the Addl. CIT under section 153D of the I.T. Act. The Ld. Counsel for the assessee, has relied upon the decisions of this Tribunal in the case of Ch. Krishna Murthy vs. ACIT, C.C. 3, Hyderabad in ITA No. 766/Hyd/2012 dated 13.02.2015 and also the decision of Lucknow Bench of ITAT in the case of MehtabAlam 288/Luck/2014 dated 18.11.2014 in support of this contention. He has also placed reliance upon the decision of Hon'ble Allahabad High Court in the case of CIT vs. Dr. Ashok Kumar in I.T. Appeal No. 192 of 2000 wherein it has been held that the assessment order approved by the Addl. CIT under section 153D, cannot be subjected to revision under section 263 of the I.T. Act. In view of the above decision also, we hold that the revision order under sect....
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....h the approval of the Addl.CIT u/s.153D of the I.T. Act. We respectfully following the decision of ACIT Vs.Dr. Ashok Kumar, ITA 192 of 2000. We find that in the instant case the original approval was granted by Addl. CIT and this assessment order is cannot be revise without approval of Add. CIT. (III) CIT has not conducted any enquiry before directing the Assessing Officer to decide the issues afresh 29. It has been submitted by the Learned AR that a show-cause notice dated 09.02.2017 was issued to the appellant wherein, the CIT proposed to revise the assessment orders on certain issues. In reply dated 23.02.2017 to the show cause notice, the appellant filed detailed reply on all the issues raised by the CIT in the show cause notice issued. It was held by the CIT that taking into account the reply of appellant, it can be concluded that the order of Assessing Officer is not erroneous and prejudicial to the interest of revenue. 30. It is submitted by the Learned AR that the CIT, in his order, merely noted that the appellant has filed reply in response to the show cause notice. It is submitted that the CIT has not caused any preliminary enquiry as to why the reply furnished by app....
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.... the Act was upheld for the reason that the assessing officer had failed to cause inquiry. It was not a case where all details were filed before CIT and the CIT had not applied his mind to the details filed by appellant. In the case of Bassera Realtors (P.) Ltd. v CIT is the Hon'ble Tribunal held that the CIT had analysed the documents furnished before him and thus, the Hon'ble Tribunal rejected the contention raised by the appellant that CIT had not examined anything. 34. Further, the Ld. DR vide letters dated 11.01.2018 and 24.01.2018 observed that Explanation 2 has been amended by Finance Act 2015 w.e.f. 01.06.2015. Therefore, if the order u/s.263 passed either before or after 01.06.2015, the words "declared" and "shall be" are remaining in the framework of the Act. Therefore, the intention of the legislature was clear that the Commissioner of Income-tax has the power to make revision of the order of the AO if it is erroneous and prejudicial to interest of Revenue. In this connection, it was pointed out by the Ld. AR that though there is an amendment in the provisions of section 263 of the I.T.Act, but the basic ingredients of the provisions remains the same. The Ld. CIT has no....
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.... the original assessment order was erroneous and prejudicial to the interests of the Revenue. 10. For the purpose of exercising jurisdiction under Section 263 of the Act, the conclusion that the order of the A.O is erroneous and prejudicial to the interests of the Revenue has to be preceded by some minimal inquiry. In fact, if the PCIT is of the view that the A.O did not undertake any inquiry, it becomes incumbent on the PCIT to conduct such inquiry. 11. In the considered view of the Court, this can hardly constitute the reasons required to be given by the PCIT to justify the exercise of jurisdiction under Section 263 of the Act. In the context of the present case if, as urged by the Revenue, the Assessee has wrongly claimed depreciation on assets like land and building, it was incumbent upon the PCIT to undertake an inquiry as regards which of the assets were purchased and installed by the Assessee out of its own funds during the AY in question and, which were those assets that were handed over to it by the DMRC. That basic exercise of determining to what extent the depreciation was claimed in excess has not been undertaken by the PCIT. 12. Mr. Asheesh Jain then volunteer....
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....revised by him. ....... We though are not oblivious of the fact that the view that an order passed by the A.O is found to be erroneous and prejudicial to the interest of the revenue remains within the exclusive realm of the wisdom of the CIT, but then the legislature by contemplating an opportunity of being heard to the assessee, can thus safely be held to have presupposed due application of mind by the revisional authority before revising the order passed by the A.O. We are of the considered view that the CIT after receiving the reply/objections of the assessee in respect of the issues on which the order of the A.O is sought to be revised, in all fairness, is required to deliberate on the same, and thereafter on the basis of logical reasoning conclude as to whether in the backdrop of the reply/explanation of the assessee can the order of the A.O be characterized as both erroneous and prejudicial to the interest of the revenue. .... We are afraid that in the case of the present assessee, though the CIT had placed on record the reply of the assessee in respect of the issues on which the order passed by the A.O was sought to be revised and had also referred about the same in the body....
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....e the issue afresh. 42. It is submitted by the Learned AR that certain allegedly incriminating documents were found from the search conducted in premises of Ms.PritiMilan Mehta 11.03.2014. It is submitted that Ms.Priti Milan Mehta is ex-wife of appellant. They were divorced on 04.09.2009. It is submitted that the documents are not found from the search conducted in case of appellant. Hence, with respect to the current assessment year, the Assessing Officer would have no jurisdiction to make any addition pertaining to the said bank account since the said document has not be found during the course of search conducted in case of appellant. 43. It is further submitted that as per S. 153A of the Act, the Assessing Officer has to assesses the income found during the course of search S. 132 of the Act conducted in case of appellant. On a conjoint reading of S. 153A and S. 132 of the Act, it is evident that the purpose of S. 132 of the Act is to unearth the documents in possession of appellant which have not been disclosed by him in his return of income. The purpose of S. 153A of the Act is to tax the income from those documents which have not been disclosed by appellant. At this stage,....
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....d as incriminating documents found from search conducted in case of appellant. 44. It can be inferred from the above decision that to make addition u/s 153A of the Act in respect of non-abated years, two conditions have to be fulfilled; i) The additions have to be made on the basis of incriminating material and; ii) the incriminating material should be found during the course of search in case of appellant and not any other person. 45. In the present case, the document was found during the course of search in the case of third party, hence, the same could not be considered as 'incriminating document' found during the course of appellant's search. In view of the above, it is submitted that no incriminating document pertaining to the issues revised by the CIT was found during the course of search and hence, the proposition canvassed by appellant earlier would apply to this issue also in case of appellant hence, the Assessing Officer had no jurisdiction to make additions in respect of those issues u/s 143(3) r.w.s 153A of the Act. At this juncture, it has been submitted by the Ld. DR that if any document belonging to appellant is found in premises of third party, assessment in c....
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....ix years. The assessee's return was assessed u/s.143 of the Act. The assessment year therefore non-abated as the assessment was concluded u/s.143(3) of the Act before date of search. Since no incriminating material was found during the course of search that took place in the case of assessee on the issues involved the AO could not have made any addition in respect of A.Y. passed u/s.143(3) r.w.s. 153 of the Act. the CIT has no jurisdiction to revise the issue on the ground that particular issue was not considered by AO. We also held that since the CIT has not revise the approval in the present case the CIT should not have revise the order u/s.143(3) r.w.s. 153 of the Act. We also held that CIT has to conduct minimal inquiry by examining the detail filed by the assessee after due application of mind on the detail reply filed by the assessee has to come to conclusion that order passed by the AO is erroneous and prejudice in the interest of revenue. We also rely upon our above discussion on forgoing paragraphs. 49. In respect of undisclosed bank account with JP Morgan, we find that the document was found from the premises of Mrs. Priti Milan Mehta, on 11.03.2014 ex-wife of the assess....
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....ch and hence, the proposition canvassed by assessee earlier would apply to this issue also in case of assessee hence, the Assessing Officer had no jurisdiction to make additions in respect of those issues u/s 143(3) r.w.s 153A of the Act.It is undisputed fact that the documents were seized from the residence of Ms.Priti Milan Mehta. The same fact has also been accepted by the DR vide letter dated 05.01.2018 belonging to DCIT CC-1(2), Mumbai. 54. At this juncture, if any document belonging to assessee is found in premises of third party, assessment in case of assessee should be completed u/s 143(3) r.w.s. 153C of the Act. Document belonging to assessee was found during the course of search conducted in premises of Ms.Priti Milan Mehta. Hence, the correct course of action would be that the Assessing Officer of Ms.Priti Milan Mehta should have recorded satisfaction that the said document does not belong to her but belongs to the assessee. After recording the said satisfaction, the Assessing Officer of Ms.Priti Milan Mehta should have forwarded the documents belonging to the assessee to the Assessing Officer in case of assessee. Further, the Assessing Officer in case of assessee shoul....