TaxTMI 
TaxTMI 
2021 (9) TMI 889
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....(SS) No. 417/Lkw/2019 "1. BECAUSE the Learned CIT(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 ....
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....avour of the assessee and therefore it was prayed that these appeals may also be allowed. 7. The 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 ....
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....udicial pronouncement. In the case of E.N. (Gopakumar Vs. CIT (2016) 75 taxmann.com 215 (Kerala)]- Hon'ble Kerala High Court held that assessment 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 taxma....
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....A.Y. 2015-16." 9. The above findings of ld. CIT(A) which are similar in all appeals clearly demonstrate that Assessing Officer had not made the addition on the basis of any incriminating material and rather he has made the addition on the basis of 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....
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.... to be made any on the basis of incriminating material only which has not been done in these cases as the assessment orders do not indicate or refer to any incriminating material. The fact that the additions were not based on the basis of incriminating material is 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 l....
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..... ST. Francies Clay Decor Tiles [2016] 240 Taxman 168/70 taxmann.com 234 (Ker.) (vi) CIT v. Promy Kuriakose [2016] 386 ITR 597 (Ker.). Further, in the case of CIT Vs Raj Kumor 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 assessee not 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)- H....
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....filed by Revenue. Therefore, the case laws relied on by learned CIT(A) are of no help to Revenue. 5.1 The Lucknow Bench of the Tribunal in a number of cases, after relying on the judgment of Hon'ble Supreme Court in the case of Pr. CIT vs. Meeta Gutgutia (supra) has allowed the appeals of various assessees in the following cases: (i) IT(SS)A No. 630 & 631/Lkw/2019, IT(SS)A No.633 & 634/Lkw/2019 and IT(SS)A 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 an....
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.... is placed in paper book at pages 40 to 48. Therefore, for assessment years 2012-13 & 2014-15 the additions are not sustainable as the additions have not been made on the basis of any seized material which is apparent from the assessment orders itself. 6. We have already held in our order dated 16/12/2020 in the case of the present assessees itself in other assessment years that additions were not made on the basis of any incriminating material as the Assessing Officer, 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 asses....
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....on on 28/04/2015 in the case of search on the companies belonging to Shri Shashwat Agarwal wherein the name of Shri Navin Jain and his family members were mentioned. The Assessing Officer nowhere noted that the names of the assessees was also mentioned in such diary. Moreover, from the findings of the Assessing Officer, we find that the companies of Shri Shashwat Agarwal were engaged in providing accommodation entries of bogus Long Term Capital Gain, unsecured loans etc. to various parties and there 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 ....
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....see commissions paid to various parties. The Assessing Officer held that the addresses of the franchisees were not revealed and that there were discrepancies in the details of the accounts of the franchisees filed by the assessee. Consequently, the franchisee commission payments claimed by the assessee were added back to her income. For the assessment year 2004-05, the Assessing Officer also made an addition on account of stock. The Assessing Officer estimated the undisclosed income, on account of franchisee 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 th....
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....venue. The contention of the Revenue that since the Department has not accepted the decision of Hon'ble Supreme Court in the case of Kabul Chawla and Meeta Gutgutia as SLP in the case of CIT vs. Continental Warehousing Corporation 235 Taxman 568 (SC) has been admitted is also of no help to Revenue. Therefore, in view of the above case laws, we hold that in case of completed assessments, the addition can be made only on the basis of incriminating material found during search. We have already held that no incriminating material 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, ....
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....udicial precedents, ground No. 2 in all the appeals is allowed. Since we have allowed the appeals of the assessee on legal issue, other grounds of appeal do not require any adjudication. 8. In the result, all the appeals of the assessee stand partly allowed." 10. The Tribunal in the above said order has considered the orders relied on by ld. CIT(A) and after considering those has allowed similar grounds relying on the case law of Meeta Gutgutia of Hon'ble Supreme Court. Therefore following the above judicial precedents Ground Nos. 1 and 2 in appeal in IT(SS) No. 417/Lkw/2019 are allowed. As regards other remaining appeals, we find that in these appeals also the additions has not been made on the basis of any incriminating material and rather has been made on the basis of entries in the books of accounts. The dates of filing of returns as mentioned in the chart reproduced earlier in this order are found to be correct from the copies of returns placed in respective paper book pages. The period of issue of notice u/s. 143(2) in the above cases expired on 30.09.2012 and 30.09.2013 respectively whereas the search took place on 31.08.2015 therefore assessments in these ca....