TaxTMI 
TaxTMI 
2021 (10) TMI 111
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.... its original return of income for AY 2014-15 on 30.11.2014 disclosing its total income of Rs. 11,56,94,090/-. The case was selected for scrutiny by issuing notice u/s 143(2) of the Act and thereafter the AO made certain disallowances and thus the total income was assessed originally on 3rd September, 2016 at Rs. 11,69,65,820/-. 4. Thereafter the search and seizure operation u/s 132(1) of the Act was conducted at the business premises of the assessee on 8th November, 2016 pursuant to which notice u/s 153A was initiated against it. The AO issued notice u/s 153A dated 22.05.2017 and in response the assessee filed the return of income by reiterating originally returned income at Rs. 11,56,94,090/-. Thereafter the AO issued statutory notices u/s 143(2) dated 25.07.2017 and 142(1) dated 10.01.2018. The AO noted that the assessee is engaged in the business of manufacturing and trading of jewelleries and that assessment originally was framed u/s 143(3) on 03.08.2016 determining total income of Rs. 11,69,65,820/- by making a disallowance of loss on sale on sale of fixed assets amounting to Rs. 5,59,038/-, disallowance of expense on surrender of tenancy right of Rs. 2,50,000/-, disallowa....
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....on of AO to be erroneous as well as prejudicial to the revenue, since the AO's action was in line with the settled position of law as discussed supra. And secondly, when there was no incriminating material found/un-earthed during search qua the assessee qua the assessment year, then when the AO could not make any other additions/disallowances, or when it was legally impermissible for AO to do so directly, then the question is whether the Ld PCIT can do indirectly what the AO could not have done directly. According to Ld. A.R. admittedly AY 2014-15 is an unabated assessment because there was no assessment proceedings in respect of AY 2014-15 pending before the AO on the date of search on 8th November, 2016 because the scrutiny assessment for AY 2014-15 was completed by the AO on 3.8.2016, so therefore the assessment of the assessee for AY 2014-15 was not pending before the AO on the date of search on 08.11.2016. Since the assessment for AY 2014-15 was not pending before the AO on the date of search i.e. 8th November, 2016, in the absence of incriminating materials unearthed during search, qua assessee qua the assessment year 2014-15, the AO could not have made any addition as per th....
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.... the revenue and the Hon'ble Supreme Court has admitted SLP in PCIT-Agra vs. Devi Dass Garg (2020) 114 taxmann.com 552 (SC) and in the case of PCIT vs. Gahoi Foods Pvt. Ltd. (2020) 117 taxmann.com 118 (SC) and therefore since the leave has been granted by the Hon'ble Supreme Court in the aforementioned SLP cases, the plea of the assessee that in the absence of incriminating materials no addition could have been made should not be accepted. And therefore, we should not interfere with the order of Ld PCIT. 7. Before we advert to the facts and law involved in this lis before us, let us revisit the law governing the legal issue before us. The assessee has challenged in the first place, the very usurpation of jurisdiction by Ld. Principal CIT to invoke his revisional powers enjoyed u/s 263 of the Act. Therefore, first we have to see whether the requisite jurisdiction necessary to assume revisional jurisdiction is existing in this case before the Pr. CIT rightfully exercised his revisional power. For that, we have to examine as to whether in the first place the order of the Assessing Officer found fault by the Principal CIT is erroneous as well as prejudicial to the interest of the Re....
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....his case the original assessment under scrutiny u/s 143(3) of the Act was framed on 3rd September, 2016 making the addition of [Rs. 11,69,65,820 - Rs. 11,56,94,090] Rs. 12,71,730/- (refer page 1 to 6 of PB). Thereafter pursuant to a search conducted on 8th November, 2016 proceedings u/s 153A of the Act was initiated against the assessee and thereafter the AO framed the assessment order u/s 153A/143(3) of the Act dated 29.06.2016 wherein the AO reiterated the total income assessed u/s 143(3) of the Act dated 3rd August, 2016 at Rs. 11,69,65,820/- (refer page no. 7 to 12 of PB). Thereafter show cause notice (SCN) u/s 263 of the Act was issued by the Ld. PCIT dated 5th March, 2020 (refer page 13 to 16 of PB) wherein the Ld. PCIT has conveyed his desire to interfere with the assessment order passed by the AO dated 29.6.2018 u/s 143(3)/153A of the Act wherein he observes that while going through the assessment records of the assessee it was found that while computing the total income, interest paid/payable on loan taken in respect of two of the properties (Lovelock property and Mandevilla garden property) which was shown as 'capital work-in-progress' and which were not put to use till 3....
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.... of this assessee i.e, AY 2014-15, the AO could not have made any addition/disallowances, without the aid of incriminating materials un-earthed during search qua the assessee qua the assessment year i.e, AY 2014-15. For that we rely on the following judgments: i) Hon'ble Delhi High Court in the case of CIT vs.. Kabul Chawla reported in 380 ITR 573 (Del) (ii) PCIT vs. Kurele Paper Mills Pvt. Ltd. in 380 ITR 571, (iii) Hon'ble Calcutta High Court decision in CIT vs. Veerprabhu Marketing Ltd. in 388 ITR 574 (Cal), (iv) PCIT vs. Salasar Stock Broking Ltd. GA No. 1929 of 2016/ITAT No. 264 of 2016 dated 24.08.2018. 10. The Hon'ble Delhi High Court in the case of Kabul Chawla (supra) has summed up the legal position in para 37 of it's order. For ready reference the same is reproduced as under:- Summary of the legal position 37. On a conspectus of section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under : (i) Once a search takes place under section 132 of the Act, notice under section 153A(1) will have to be ....
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.... income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment. Conclusion 38. The present appeals concern the assessment years 2002-03, 2005-06 and 2006-07. On the date of the search the said assessments already stood completed. Since no incriminating material was unearthed during the search, no additions could have been made to the income already assessed. [Emphasis supplied] 39. The question framed by the Court is answered in favour of the assessee and against the Revenue." Jai Steel (India) vs. ACIT (2013) 259 CTR 281 (Raj) "The provisions of Sections 153A to 153C cannot be interpreted to be a further innings for the AO and/or assessee beyond provisions of Sections 139 (return of income), 139(5) (revised return of income), 147 (income escaping assessment) and 263 (revision of orders) of the Act. The plea raised on behalf of the assessee that as the first proviso provides for assessment or reassessment of the total income in respect of each assessment year falling within the six assessment years, is merely reading the said provision in....
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....sue of share application money, the assessment order could not be regarded as erroneous. Affirming the decision of the ITAT, the Hon'ble Delhi High Court in the said case held as under by stating that since AO could not have made addition on account of share application money, the assessment order was not erroneous and CIT could not have exercised jurisdiction u/s 263 of the Act: "Held, dismissing the appeal, that the Tribunal had held that the order of the Assessing Officer could not be regarded as erroneous even if the Assessing Officer had failed to carry out necessary verification and required enquiries in respect of the share application money, as no addition had been made on account of the reasons for reopening, which were recorded before issue of notice under section 148 of the Act. It had held that the Assessing Officer could not have made an addition on account of the share application money as no addition had been made on account of fixed deposits of Rs. 20 lakhs. The Tribunal had noticed and recorded that in the reasons for reopening it was mentioned that the assessee had made investment in the form of fixed deposits of Rs. 20 lakhs but in the assessment ord....
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....rch which are not disclosed in the original assessment. The power given by the 1st proviso of section 153A of the Income Tax Act, 1961 to 'assess' income for six assessment years has to be confined to the undisclosed income unearthed during search and cannot include items which are disclosed in the original assessment proceedings. Items of regular assessment cannot be added back in the proceedings u/s 153A when no incriminating documents were found in respect of the disallowed amounts in the search proceedings. A search assessment under section 153A should be evidence based. Therefore, we are of the view that assessment order passed by the AO u/s 153A/143(3) dated 31.03.2016 is neither erroneous nor prejudicial to the interest of the Revenue and therefore, Id. Pr. CIT erred in exercising his revisional jurisdiction u/s 263 of the Act and therefore, we quash the impugned order of Id. Pr. CIT passed under section 263 of the Act. " (ii) M/s.Garg Brothers Pvt. Ltd. v DCIT, CC-3(2), Kolkata, ITA No- 2519/Kol/2017 & M/s.Cliff Trexirn Pvt. Ltd. v DCIT, CC-3(2), Kolkata, ITA No.2520/KoF2§17 & M/s.Span Foundation Pvt. Ltd. v DCIT, CC-3(2), Kolkata, ITA No.2521/Kol/2017....
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..../s.l53A of the Act, that the assessment will have to be confined to only incriminating material found as a result of search, the question to be decided is as to whether the proceedings u/s. 143(1) of the Act can be said to be assessment proceedings concluded that have not abated u/s.!53A of the Act. Section 153A of the Act, uses the expressing "pending assessment or reassessment". When a return is filed and acknowledgement or intimation issued u/s. 143(1), the proceedings initiated by filing the return are closed, unless a notice u/s 143(2) of the Act is issued. In the present case, the period for issuing the notice u/s 143(2) elapsed. Therefore the process has attained the finality which can only be assailed u/s 148 or 263 of the Act. It can thus be concluded that making of an addition in an assessment under section 153A of the Act, without the backing of incriminating material, is unsustainable even in a case where the original assessment on the date of search stood completed under section 143(1) of the Act, thereby resulting in non-abatement of such assessment in terms of the Second Proviso to section 153A(1) of the Act. 17. In the light of the discussion above....
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.... The aggrieved Revenue has come up in appeal. Mr. Bagaria, learned Advocate appearing for the assessee, submitted that more or less an identical view was taken by this Bench in ITA 661/2008 [CIT vs. Veerprabhu Marketing Ltd.] wherein the following views were expressed - "We are in agreement with the views expressed by the Karnataka High Court that incriminating material is a pre- requisite before power could have been exercised under sectioni53C read with section 153A. In the case before us, the assessing officer has made disallowances of the expenditure, which were already disclosed, for one reason or the other. But such disallowances were not contemplated by the provisions contained under section 153C read with section 153A. The disallowances made by the assessing officer were upheld-by the CIT(A) but the learned Tribunal deleted those disallowances." In that view of the matter, we are unable to admit the appeal. The appeal is, therefore, dismissed." 13. In the light of the aforesaid binding judicial precedents on the issue of framing of assessment u/s. 153A/143(3) pursuant to a search u/s. 132 of the Act, we note that the AO while framing a....