TaxTMI 
TaxTMI 
2021 (11) TMI 928
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....aluru, ('Tribunal' for short) as shown in the cause title. 3. The appeals were admitted to consider the following substantial question of law: In ITA Nos.322/2018 to 324/2018: "Whether on the facts and in the circumstances of the case, the Tribunal was justified in law in quashing the assessment order passed under Section 143(3) r/w Section 153A of the Act by following the judgment of this Hon'ble High Court in the case of M/s Lancy Constructions? In ITA Nos.354/2018 and 355/2018: "Whether on the facts and in the circumstances of the case and in law, the Tribunal was correct in law in holding that incriminating material is necessary condition for proceedings under Section 153A of the Act by following the judgment of this Court in the case of CIT V/s. Lancy Constructions?" In ITA Nos.380/2018, 382/2018 to 385/2018: "1. Whether on the facts and in the circumstances of the case and in law, the Tribunal is right in law in allowing the depreciation on capitalization of expenditure incurred during the assessment year 2007-08 and 2008-09? 2. Whether on the facts and in the circumstances of the case and in law, the Tribunal ....
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....essee and quashed the assessment orders passed under Section 143 (3) read with 153A of the Act dismissing the appeals filed by the Revenue. Being aggrieved, the Revenue has preferred these appeals. 5. Learned counsel for the Revenue argued that the conditions for issuance of notice under Section 153A of the Act being well settled, merely on the ground that no incriminating material was seized by the Department, the proceedings initiated under Section 153A of the Act cannot be held to be unjustifiable; the finding of the Tribunal, runs contrary to the provisions of the Act and the judicial pronouncements. Much emphasis was placed on the Co-ordinate Bench decision of this Court in the case of Canara Housing Development Company. .v. Deputy Commissioner of Income Tax Central Circle-I [2014 (49) Taxxman.com 98] inter alia citing other judgments which would be discussed infra. 6. Learned counsel for the assessee argued that the Tribunal has rightly allowed the appeals filed by the assessee. The judgment of this Court in the case of Commissioner of Income Tax .v. M/s Lancy Constructions [2016 (237) Taxman 728], is squarely applicable to the present case. The Tribunal having consider....
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....six assessment years and for the relevant assessment year or years : Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years and for the relevant assessment year or years referred to in this sub-section pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate: Provided also that ........... Provided also that ........." 10. In Canara Housing Development Company, supra, the coordinate Bench of this Court while considering proceedings under Section 263 of the Act vis-à-vis proceedings under Section 153A of the Act, has observed thus: "10. Section 153A of the Act starts with a non obstante clause. The fetters imposed upon the Assessing Officer by the strict procedure to assume jurisdiction to reopen the assessment under Sections 147 and 148, have been removed by the non obstante clause with which sub section (1) of Section 153A opens. The time-limit within which the notice under Section 148 can be issued, as provided in Section 149 has also been made inapplicable by the no....
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....y of bringing to tax the total income of an assessee whose case is covered by Section 153A, by even making re-assessments without any fetters. This means that there can be only one assessment order in respect of each of the six assessment years, in which both the disclosed and the undisclosed income would be brought to tax. When once the proceedings are initiated under Section 153A of the Act, the legal effect is even in case where the assessment order is passed it stands reopened. In the eye of law there is no order of assessment. Re-opened means to deal with or begin with again. It means the Assessing Officer shall assess or reassess the total income of six assessment years. Once the assessment is reopened, the assessing authority can take note of the income disclosed in the earlier return, any undisclosed income found during search or and also any other income which is not disclosed in the earlier return or which is not unearthed during the search, in order to find out what is the "total income" of each year and then pass the assessment order. Therefore, the Commissioner by virtue of the power conferred under Section 263 of the Act gets no jurisdiction to initi....
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....cted in the premises of the assessee." 12. In Commissioner of Income Tax V/s. IBC Knowledge Park (P) Ltd., [(2016) 385 ITR 346 (Kar.), the coordinate Bench of this Court has referred to the decisions of M/s Lancy Constructions supra as well as Canara Housing Development Company supra along with other judgments cited at the Bar and has observed that the relevant sections as well as judicial precedents would enunciate that, Section 158BD of the Act deals with undisclosed income of a third party. However, insofar as the incriminating material of the searched person or other person detected during the course of search is concerned, the same can be considered during the course of assessment. Further, such incriminating material must relate to undisclosed income which would empower the assessing officer to upset or disturb a concluded assessment. Otherwise, a concluded assessment would be disturbed without there being any basis for doing so which is impermissible in law. Even in the case of the searched person, the same reason would hold good as in the case of any other person. It has been held that detection or the existence of incriminating material is a must for disturbing the asse....
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....t likely to disclose. 15. On a plain reading of Sectioin153A of the Act, it is evident that the trigger point for exercise of powers thereunder is a search under Section 132 or a requisition under Section 132A of the Act. Once a search or requisition is made, a mandate is cast upon the assessing officer to issue notice under Section 153A of the Act to the person, requiring him to furnish the return of income in respect of each assessment year falling within six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made and assess or reassess the same. Since the assessment under Section 153A of the Act is linked with search and requisition under Sections 132 and 132A of the Act, it is evident that the object of the section is to bring to tax the undisclosed income which is found during the course of or pursuant to the search or requisition. However, instead of the earlier regime of block assessment whereby, it was only the undisclosed income of the block period that was assessed, Section 153A of the Act seeks to assess the total income for the assessment year, which is clear from the firs....
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.... be concluded even without any incriminating material being available against the assessee in the search under Section 132 of the Act on the basis of which the notice was issued under Section 153A (1)(a) of the Act. 17. The Hon'ble High Court of Allahabad in the case of Commissioner of Income Tax, Central, Kanpur.v. Raj Kumar Arora [(2014) 52 Taxmann.com 172 (Allahabad)], has held thus: "8. Section 153A of the Act along with Section 153B and 153C replaced the "Post Search Block Assessment Scheme" in respect of any search under Section 132A or requisition under Section 132A made after 31.05.2003. CBDT explained these provisions through circular dated 5.9.2003, which is reported in (2003) 263 ITR (St) 62. The said circular is as under: .......... 10. Under the block assessment proceeding under Chapter XIV-B only the undisclosed income found during the search and seizure operation were required to be assessed and the regular assessment proceedings were preserved. The introduction of Section 153A of the Act provides a departure from this proceeding. Under Section 153A of the Act, the Assessing Officer has been given the power to assess or reassess the tota....
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.... 573 (Delhi)], Hon'ble Delhi High Court considering the decision in CIT V/s. Anil Kumar Bhatia [(2013) 352 ITR 493 (Del)], has held thus: "21. Therefore it is clear that the decision in CIT V/s. Anil Kumar Bhatia (supra) does not deal with a situation where, as in the present case, no incriminating material was found during the search conducted under Section 132 of the Act." 19. It is significant to note that the Co-ordinate Bench of this Court in Canara Housing Development Company supra relied upon by the Revenue has also been considered in Kabul Chawla supra and has held thus: "26. In the High Court the question was whether the CIT could invoke the power under Section 263 of the Act once the proceedings under Section 153A was initiated. The High Court in Canara Housing (supra) answered the question in the negative. It referred to the decision of this Court in CIT v. Anil Kumar Bhatia (supra) and came to the conclusion that once proceedings are initiated under Section 153A of the Act the legal effect was that even where an assessment order is passed, it would stand reopened. In the eye of law there was no order of assessment. It meant that the AO "shall assess....
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....legal basis as there was no incriminating material qua each of those assessment years. In the judgment of Kabul Chawla supra, the Hon'ble High Court of Delhi has referred to the decision of the Rajasthan High Court in Jai Steel (India), Jodhpur V/s. ACIT [(2013) 36 Taxman 523 (Raj)] and also took note of the decision of the Bombay High Court in Commissioner of Income Tax V/s. Continental Warehousing Corporation (Nhava Sheva) Ltd. [(2015) 58 taxmann.com 78 (Bom)] which accepted the plea that if no incriminating material was found during the course of search in respect of an issue, then no additions in respect of any issue can be made to the assessment Section 153A and 153C of the Act. The legal position has been summarized in Kabul Chawla supra as under: "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 153 A (1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the pr....
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.... Petition has been dismissed condoning the delay. Thus, the judgment of the Hon'ble High Court of Delhi in Meeta Gutgutia has reached finality. 22. The Hon'ble High Court of Judicature at Bombay, Nagpur Bench in the case of Commissioner of Income Tax V/s. Murli Agro Products Ltd., [ITA No.36/2009, D.D. 29.10.2010] has held thus: "9. What Section 153A contemplates is that, notwithstanding the regular provisions for assessment/reassessment contained in the IT Act, where search is conducted under Section 132 or requisition is made under Section 132A on or after 31/5/2003 in the case of any person, the Assessing Officer shall issue notice to such person requiring him to furnish return of income within the time stipulated therein, in respect of six assessment years immediately preceding the assessment year relevant to the previous year in which the search is conducted or requisition is made and thereafter assess or reassess the total income for those assessment years. The second proviso to Section 153A provides for abatement of assessment/re-assessment proceedings which are pending on the date of search/requisition. Section 153A(2) provides that when the assessment made unde....
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....Act could not have disturbed the assessment/ reassessment order which has attained finality, unless the materials gathered in the course of the proceedings under Section 153A of the Income-tax Act establish that the reliefs granted under the finalised assessment/reassessment were contrary to the facts unearthed during the course of 153A proceedings." 25. Similarly, the Hon'ble High Court of Gujarat in the case of Ramesh Bhai Jivraj Desai supra, in paragraph 6 has held as under: "6. Thus, having regard to the materials on record, the Tribunal is right in holding that once it is held that the assessment has attained finality, then, the Assessing Officer, while passing independent assessment order under Section 153A read with Section 143(3) of the Act cannot disturb the assessment/reassessment, which has attained finality unless the materials gathered in the course of the proceedings under Section 153A of the Act establish that the reliefs granted in the final assessment/reassessment were contrary to the facts coming during the course of Section 153A proceedings. 26. In the light of these judgments, we have analyzed Section 153A of the Act vis-à-vis the material ....
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....ed under Section 132A, after May 31st 2003. In such cases, the assessing officer shall issue notice to such person requiring him to furnish within such period as may be specified in the notice, return of income in respect of six assessment years immediately preceding the assessment year relevant to the previous year in which the search was conducted under Section 132 or requisition was made under Section 132A. Thus, it is clarified that the appeal, revision or rectification proceedings pending on the date of initiation of search under Section 132 shall not abate. 28. Section 153B provides for the time limit for completion of search assessments. 29. Section 153C provides that where an Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account documents seized or requisitioned belong or belongs to a person other than the person referred to in Section 153A, then the books of account, or documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against such other person and issue such other person notice ....