TaxTMI 
TaxTMI 
TaxTMI 
2021 (9) TMI 889
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....IT(A) was wrong in law & on facts in confirming the assessment order passed by AO u/s 153A of the Act as the same was not in consonance with the settled position of law vis-a-vis search cases. 2. BECAUSE the learned CIT(A) has erred in law and on facts in upholding the assessment ignoring the settled position of law that provisions of section 153A, in case where proceedings are not pending, could not be applied in absence of any incriminating material." 4. The ld. AR of the assessee at the outset submitted that assessments in these cases were completed u/s. 153A of the Income Tax Act, 1961 in view of a search and seizure on the group on 31.08.2015. The ld. AR of the assessee submitted that six assessment years were reopened and out of those years the Assessing Officer in these years has not made any addition on the basis of any incriminating material and has made the additions on the basis of entries in the books of account which could not have been made as has been held by various High Courts and confirmed by the Hon'ble Supreme Court in the case of Kabul Chawla and Meeta Gutguitia. The ld. AR of the assessee in this respect filed a chart showing therein serial number of ap....
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.... ld. DR, on the other hand heavily placed reliance on the orders of authorities below and submitted that ld. CIT(A) has passed a detailed order wherein he has relied on a number of case laws for the preposition that in the assessments u/s 153A there is no need for any incriminating material. 8. We have heard the rival parties and have gone through the material placed on record. We find that in these cases, the assessment year involved are 2011-12 and 2012-13. We find that in IT(SS) No. 417/Lkw/2019 only one year i.e. 2011-12 is involved. In this case, the original return of income was filed on 01.01.2013 a copy of which is placed in P.B. Pg. 1. The ITR was processed on 28.02.2013 a copy of such processing is placed in P.B. Pg. 2. In this year the assessment was also completed u/s. 143(3) vide order dated 31.03.2014 and a copy of the assessment order is placed in P.B. Pg. 3 and 4. The search has taken place on 31.08.2015 which is after the date of assessment made in this year u/s. 143(3) of the Act. Therefore, in this year the additions if any could have been made only on the basis of incriminating material found during the search. The additions made by the Assessing Officer does n....
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....t proceedings generated by issuance of a notice under section 153A(1)(a) can be concluded against interest of assessee including making additions even without any incriminating material beinq available against assessee in search under section 132 on basis of which notice was issued under section 153A(1)(a). The above order has been passed after considering cases of; (i) CIT v. Kabul Chawla [2016] 380 ITR 573/(20151 234 Taxman 300/61 taxmann.com 412 (Delhi), °i (ii) CIT v. Continental Warehousing Corpn. (Nhava Sheva) Ltd. [2015] 374 ITR 645/232 Taxman 270/58 taxmann.com 78 (Bom.). (iii) Principal CIT v. Kurele Paper Mills (P.) Ltd. [2016] 330 ITR 571 (Delhi). (iv) CIT v. Lancy Constructions [2016] 383 ITR 168/237 Taxman 728/66 taxmann.com 264(Kar.) (v) CIT v. ST. Francies Clay Decor Tiles [2016] 240 Taxman 168/70 taxman.com 234 (Ker.) and (vi) CIT v. Promy Kuriakose [2016] 386 ITR 597 (Ker.). Further, in the case of CIT Vs Raj Kumar Arora [2014| 52 taxmann.com 172 (Allahabad) [2014] 367 ITR 517 (Allahabad)- Hon'ble Allahabad High Court held that Assessing Officer has power to reassess*returns of assesses not only for undisclosed income found during search ope....
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.... entries in the books of account which is not in accordance with law with the settled position of law in a number of cases it has been held by various High Courts that in case of concluded assessment the addition can be made only on the basis of incriminating material found during search. Even Hon'ble Supreme Court in the cases of Kabul Chawla and Meeta Gutgutia has dismissed the SLPs filed by the Department against the order of Hon'ble High Courts. The Lucknow Bench in a number of cases has allowed this ground of appeal under similar facts and circumstances after placing reliance on the order of Hon'ble Supreme Court in the case of Meeta Gutgutia. For the sake of completeness the findings of Lucknow bench in IT(SS) No. 519 to 522/Lkw/2019 vide order dated 12.07.2021 are reproduced below: "4. We have heard the rival parties and have gone through the material placed on record. We find that in this case the assessment years involved are 2010-11, 2011-12, 2012-13 and 2013-14. We find that in assessment year 2010-11, the original return was filed on 14/10/2010, a copy of the acknowledgement of the return of income is placed at page 1 of the paper book. The processing of s....
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.... further strengthened by the findings of learned CIT(A) where the assessee had raised this ground of appeal and wherein the learned CIT(A) has held that the law does not require the Assessing Officer to take action in these cases to make assessment only on the basis of incriminating material. While holding so the learned CIT(A) has relied on a number of case laws. For the sake of completeness, the findings of learned CIT(A) in I.T.A. No.519 are reproduced below: "5.1 Ground No. 1,2&3 for assessment year 2010-11 to assessment year 2013-14 and ground no. 1 for assessment year 2014-15 and assessment year 2015-16 pertain to legal challenge to notice u/s 153A of the Act. It is also submitted by the ld. A.R. of the appellant that order u/s 153A of the Act is invalid in absence of incriminating material found as a result of search for these relevant assessment years. Appellant also placed reliance on the following case laws: (i) CIT v. Kabul Chawla [2016] 380 XTR 573 (Delhi), (ii) CIT v. beepak Kumar Agarwal (2017) 251 Taxmon 22 (Bom.)/86 taxrnann.com, (iii) CIT v. Vikas Sutgutia (2017) 396 ITR 691 (Del.), (iv) CIT v. bevangi (2017) 394 ITR 184 (Suj.), etc. 5.2 Undersigned has....
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.... only for undisclosed income found during search operation but also with regard to material available at time of original assessment. Similarly, in the case of CIT Vs Kesarwani Zarda Bhandar Sahson Alld. ITA No. 270 of 2014 (Allahabad)- Hon'ble Allahabad High Court held that Assessing Officer has power to reassess returns of assessee not only for undisclosed income found during search operation but also with regard to material available at time of original assessment. Also, in the case of CIT Vs St. Francis Clay Decor Tiles (385 ITR 624)-Hon'ble Kerala High Court held that notice issued under section 153A- return must be filed even if no incriminating documents discovered during search. In the case of CIT Vs Anil Kumar . Bhatia (24 taxmann.com 98, 211 Taxman 453. 352 ITR 493)- Hon'ble Delhi High Court held that jurisdiction of AO under 153A is to assess total income for the year and not restricted to seized material. Post search reassessment in respect of all 6 years can be made even if original returns are already processed u/s 143(1)(a) - Assessing Officer has power u/s 153A to make assessment for all six years and compute total income of assessee, including und....
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....No. 637 & 638/Lkw/2019 dated 01/02/2021 (ii) I.T.A. No.510 to 512/Lkw/2019, I.T.A. No. 513 & 514/Lkw/2019, I.T.A. No.515 & 516/Lkw/2019 and I.T.A. No.517/Lkw/2019 dated 16/12/2020 (iii) IT(SS)A No.130-143/Lkw/2018 dated 03/03/2020 (iv) I.T.A. No.430 to 433/Lkw/2016 dated 15/03/2018 (v) I.T.A. No.551, 553, 554, 99,100,113,115,92,93,94,95,96, 104 and 109 vide a consolidated order dated 27/05/2021 For the sake of completeness the findings of Lucknow Tribunal in I.T.A. No.630, 631, 633, 634, 637 & 638 are reproduced below: "5. We have heard the rival parties and have gone through the material placed on record. We find that a search & seizure operation was carried out on the group of assessees on 23/08/2016 and in the earlier appeals which were decided by the Tribunal vide order dated 16/12/2020, the Tribunal had made a finding of fact that in assessment year 2013-14, the additions could not have been made as additions were not made on the basis of material found during the course of search and the assessments in those years had already stood completed. In the present case, the years involved are assessment years 2012-13 and 2014-15. In respect of I.T.A. No.633 & 634 for ass....
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....r, while making the additions, had not relied on any seized material and had relied on the document marked as BK-2 which was seized by the search party from some other group and there the search took place almost one year before the date of search on the present assessees. The findings of the Tribunal are contained in para 5 of the order, which for the same of completeness, are reproduced below: "5. We have heard the rival parties and have gone through the material placed on record. We find that the first argument of Learned counsel for the assessee was that in case of completed assessments, the addition cannot be made if there is no incriminating material. In this regard Learned counsel for the assessee had submitted that in the year 2013-14 and 2015-16 the assessments stood completed and there was no incriminating material found during the search. In this respect the Bench had asked both the parties to furnish the material which was impounded during the search and which both the parties had filed with the Bench which we have examined and have compared with the material used by Assessing Officer in assessment order. We found that none of the material seized during the search was....
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....re is no mention of bogus transactions of cloth. Moreover, the above findings clearly indicate that the accommodation entries of Long Term Capital Gain and unsecured loans were obtained by the individuals mentioned in the assessment order and there is no mention that the assessees had taken any entry of Long Term Capital Gain or unsecured loans from the companies of Shri Shashwat Agarwal. This fact is further corroborated from the fact that the Assessing Officer in the case of the assessees did not make any addition on account of Long Term Capital Gain or unsecured loans but he made the additions by holding the sale and purchase of cloth which was purchased from Rich Group of Companies to be bogus. All these facts demonstrate that the Assessing Officer had not made the addition on the basis of any incriminating document but had made the addition on account of bogus sale and purchase of cloth for which no document was found during the course of search. Even otherwise, the documents relied on by the Assessing Officer were found at the premises of the companies of Shri Shashwat Agarwal wherein the search was carried out on 28/04/2015 and there too the incriminating material, as mentio....
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....isee fee, at a certain percentage for the assessment years 2001-02 to 2006-07. No addition was made for the assessment year 2006-07, although a disclosure was made. Before the Commissioner (Appeals), the assessee produced additional evidence under rule 46A of the Income-tax Rules, 1962, which included copies of franchisee agreements. A rejoinder was filed by the assessee. On analysis of the additional evidence, the Commissioner (Appeals) held that the accounts of the assessee had been tax audited and that no adverse remarks had been made by the tax auditors. He further held that the Assessing Officer had not rejected the books of account of the assessee. Accordingly, he held that the disallowance of the franchisee commissions paid were unsustainable and deleted the additions made. He deleted the additions made on account of payment of rent, non-refundable security, income from self-controlled outlets and reduced the addition made on account of closing stock. He also deleted the additions of undisclosed income, made on account of franchisee fee, accepting the contention of the assessee that there was no disclosure made for earlier years, or any evidence unearthed during the search b....
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....erial was found from the premises of the assessee therefore, the additions cannot be made in the case of completed assessments which in this case is appeal for assessment year 2013-14 wherein in I.T.A. No.510 the assessment order was already passed u/s 143(3) on 22/03/2016 which is before the search date of 23/08/2016, copy of assessment order is placed at pages 51 to 54 of the paper book. Similarly in I.T.A. No. 515, the assessment was completed u/s 143(3) vide order dated 23/03/2016, the copy of which is placed at pages 54 to 57 of the paper book. Similarly in I.T.A. No.517 relating to assessment year 2013-14, the assessment order u/s 143(3) dated 30/03/2016, a copy of which is placed in paper book at pages 52 to 56. Therefore, the assessments in these cases stood completed. Learned counsel for the assessee had though argued that the assessment for assessment year 2015-16 also stood completed but in our opinion the appeals for assessment year 2015-16 cannot be said to be completed as time for issue of notice u/s 143(2) was still available to the Department which was upto 30/09/2016 whereas the search took place on 23/08/2016 which means that there was time available to the Depart....