AI Drafter 
TaxTMI 
TaxTMI 
2022 (10) TMI 216
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....wance of Rs. 4,73,20,759/- and Rs.587/- are liable to be deleted. 2. FOR THAT the Commissioner of Income Tax (Appeal) erred in holding that the addition made by the Assessing Officer in respect of sums of Rs.4,52,40,074/- and Rs. 20,80,685/- in respect of Bank Accounts with HSBC Bank, Geneva in the name of Gingest Marketing Limited and Masonic Limited respectively was correct and such finding has been arised at without considering the facts and law and various judgements of the jurisdictional High Court and other High Court as well as orders of various benches of Tribunals. 3. a) FOR THAT no incriminating material of any nature whatsoever was found in course of search conducted under section 132 of the Act on 22 September 2011 and as such no addition of any nature whatsoever could be made in the income of the Appellant. b) FOR THAT the Commissioner of Income Tax (Appeal) should have held that as no incriminating material or document of any nature whatsoever relating to any of the additions made in the impugned assessment was found in the search and the original assessment under section 143(3) of the Act did not abate in as much as no proceedings was pendi....
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....ncome of the Appellant. f) The Assessing Officer was wrong in making the addition of closing balances as on 31st March, 2006 and 31st December, 2005 respectively in the aforesaid two bank accounts when admittedly there is no material and/or evidence of any sum having been deposited by the Appellant in the said account on any date during the relevant previous year or at any time whatsoever. g) The Assessing Officer grossly erred in making the addition of the said amounts lying deposited in the aforesaid bank accounts with HSBC, Geneva by applying the concept of cumulative accumulation of deposit during the year which concept is alien to the provisions of Income Tax Act, 1961. h) The assessment order is time barred & is required to be cancelled. 5. FOR THAT the Commissioner of Income Tax (Appeal) erred in confirming a sum of Rs. 587/- dis-allowed under section 14A of the Act when admittedly Rule 8D was not in force in the relevant Assessment Year. 3. Briefly stated, the facts as culled out from the records are that the assessment year involved is 2006-07. The original assessment was made under section 143(3) of the Act on 27.08.2008. Subsequentl....
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....ments also. The said communication from HSBC, Geneva contained the names of the shareholders and directors of Gingest Marketing Ltd., and also Masonic Ltd., the two companies incorporated in British Virgin Island. The copy of the Memorandum and Articles of the said two companies and the financial statements and the assets holding statements of the companies were also furnished. Such documents which were filed before the DDIT(Inv.) proved beyond doubt that the said bank accounts belonged to Gingest Marketing Ltd. and Masonic Ltd. companies incorporated in British Virgin Island and that the Appellant had no interest of any kind whatsoever in the said bank accounts. In spite of this, the assessing officer repeated the allegations and the appellant again stated that the alleged bank accounts with HSBC Bank, Geneva, belonged to Gingest Marketing Ltd. and Masonic Ltd. the two companies incorporated in British Virgin Island wherein the appellant was neither a director nor a shareholder. In support of these contentions, the appellant further furnished a confirmatory letter from HSBC, Geneva clarifying that the aforesaid two bank accounts belonged to Gingest Marketing Ltd. and Masonic Ltd. ....
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....ssessment proceedings were pending on the date of the search, no addition could be made as assessment had not abated. It was also submitted that it is a fact that no addition has been made with reference to any seized materials pursuant to Section 153A of the Act. The CIT(A), however, did not agree with any of the submissions made by the Appellant and confirmed the assessment in totality. The findings of the CIT(A) in respect of the addition starts from page 47 till 51 of his order. 7. Further aggrieved, the assessee is now in appeal before this Tribunal raising various grounds as above. The Ld. Counsel for the assessee reiterating the submissions made before the lower authorities, stated that the Appellant fully co-operated in course of the assessment proceedings and even gave his consent to obtain information from HSBC Bank to the A.O. It was submitted that the addition made in the hands of the Appellant in respect of the alleged bank accounts with HSBC Bank, Geneva belonging to Gingest Marketing Limited and Masonic Limited wherein the Appellant was neither a Director nor a shareholder was erroneous. A confirmatory letter from HSBC Bank was filed clarifying that the aforesaid ....
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....d that the disallowance under section 14A of the Act is on the basis of a legal interpretation of the said section and is not as a result of any incriminating documents found in course of the search which would warrant such disallowance. (ii) Only other addition in the assessment is the sum of Rs. 4,73,20,709 being the bank balance of the said two companies. For Gingest Marketing Ltd it amounts to Rs. 4,52,40,074 and Masonic Limited amounts to Rs. 20,80,685. Admittedly the said addition has been made without reference to any incriminating material or documents found as a result of the search. The said documents relating to the alleged bank account at HSBC Switzerland were in the possession of the Department prior to the search and the appellant was confronted with them in the course of search proceedings. (iii) AO has alleged that during the Search & Seizure operations, assessee accepted the existence of a/c but stated it was in the name of M/s Masonic Ltd., in which his NRI son, Mr. Amitabh Himatsingka held 600 class-B nonvoting equity shares. In the same statement, the Assessee had clarified and subsequently asserted, through filing of affidavits, that he was ne....
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....rders : a) In the context of Section 153C of the Act which is para materia to Section 153A of the Act the Hon'ble Apex court in the case of CIT v. Sinhgad Technical Education Society 397 ITR 344 in the context of section 153C of the Act has held as under: "18) In this behalf, it was noted by the ITAT that as per the provisions of Section 153C of the Act, incriminating material which was seized had to pertain to the Assessment Years in question and it is an undisputed fact that the documents which were seized did not establish any co-relation, document-wise, with these four Assessment Years. Since this requirement under Section 153C of the Act is essential for assessment under that provision, it becomes a jurisdictional fact. We find this reasoning to be logical and valid, having regard to the provisions of Section 153C of the Act." b) Similar view was taken by the Hon'ble Calcutta High Court in the case of Veerprabhu Marketing Ltd, ITA No. 661/2008 dated 04108/2016. In this case the question of law was framed as follows: "1. Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal is justified in not ho....
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....f challenge is a judgment and order dated 18th December, 2015 by which the learned Tribunal dismissed an appeal preferred by the Revenue registered as ITA No. 1775/Kol/2012 and allowed a cross-objection registered as CO-30/Kol/2013 both pertaining to the assessment year 2005-06. The learned Tribunal was of the opinion that the Assessing Officer had no jurisdiction under section 153A of the Income Tax Act to reopen the concluded cases when the search and seizure did not disclose any incriminating material. In taking the aforesaid view, the learned Tribunal relied upon a judgement of Delhi High Court in the case of Kabul Chawla in ITA No. 78.7/2014 dated 28th August, 2014. 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 66112008, [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 section153C read with section 153A. In the case before us,....
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....re not based on any incriminating material. The Id. CIT(A) on page 38 of his order held as follows: " I have considered the findings of the AO in the assessment order, different case laws was brought on record and appeal orders passed by my predecessors on this legal issue. I find from the assessment order that during the search & seizure operations conducted u/s 132 of the IT Act, 1961, incriminating documents/papers were not seized. At least addition made by AO in the assessment order passed u/s 153A1143(3) are not based of any incriminating documents/papers seized during the search operation. It would also not to be out of context to mention here that in this case, on the date of search, no assessment for this year was pending. Therefore, keeping in view the ratio decided by the jurisdictional bench of Kolkata tribunal in case referred above and the ratio decided by the Hon'ble Calcutta High Court in the case of Veer Prabhu Marketing Ltd. (Supra) in the light of CBDT's decision of not filing SLP in this 'case in the Supreme Court and keeping in view the Apex Court's decision to dismiss SLP on the similar issue in the case of Pr CIT vs Kurele Paper Mills ....
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....course of search at the premises of the assessee as the time limit of issuance of notice u/s 143(2) of the Act stood expired much before the date of conducting search u/s 132 of the Act". 10. Examining facts of the instant appeal in the light of decision of Coordinate Bench, we find that the assessee filed regular return of income u/s 139 of the Act for Assessment Year on 30.09.2008. Assessee's case was not selected for scrutiny, as notice u/s 143(2) of the Act was not issued to the assessee on or before 30.09.2009. Search was conducted on 29.1.2014. Impugned addition at Rs.2,24,326/- is purely based on information called during the course of search proceedings. In this situation the assessment for Assessment Year 2008-09 is to be treated as non-abated assessments for which additions could be made only on the basis of incriminating material found during the course of search. Therefore, in the given facts and circumstances of the case and respectfully following the decision of the coordinate bench referred above, we direct the Ld. A.O to delete the disallowance of Rs.2,24,326/- and accordingly allow Ground No.1 and consequentially Ground No. 2 of the assessee's appeal for 2....
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....search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment "can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material." v) In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. (vi) Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. (vii)Completed assessments can be interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the cou....
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....f 2017 has considered the following question of law: "Did the Income Tax Appellate Tribunal (ITAT) fall into error in holding that the additions made under Section 153A read with Section 143(3) of the Income Tax Act, 1961 in the circumstances of the case, were not justified and supportable in law?" After putting reliance upon its decision in the case of CIT Vs. Kabul Chawla (supra) has replied this question as under: "6. The Assessee went in appeal before the Commissioner of Income Tax (Appeals) who dismissed it by an order dated 27th November, 2014. A further appeal was filed by the Assessee before the IT AT. The IT AT, inter alia, found substance in the contention of the Assessee that the assessment under Section 153(A) of the Act, in I.T(SS).A. No. 15/Kol/2022 Assessment Year: 2007-08 Sreedeb Commodities Pvt. Ltd. 7 the absence of any incriminating material found during the search on the premises of the Assessee was not sustainable in law. Reliance was placed on the decision of this Court in Commissioner of Income Tax v. Kabul Chawla, [2016] 380ITR 573. 7. A question was posed to the learned counsel for the Revenue whether in the present case ....
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....with the decision of Hon'ble Delhi High Court. We deem it appropriate to take note of relevant part of the decision, which reads as under: "16. Section 153A bears the heading "Assessment in case of search or requisition". It is well settled as held by the Supreme Court in a catena of decisions that the heading of the section can be regarded as a key to the interpretation of the operative portion of the section and if there is no ambiguity in the language or if it is plain and clear, then the heading used in the section strengthens that meaning. From the heading of section 153, the intention of the legislature is clear viz., to provide for assessment in case of search and requisition. When the very purpose of the provision is to make assessment in case of search or requisition, it goes without saying that the assessment has to have relation to the search or requisition. In other words, the assessment should be connected with something found during the search or requisition, viz., incriminating material which reveals undisclosed income. Thus, while in view of the mandate of sub-section (1) of section 153A of the Act, in every case where there is a search or requisition, ....
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....s. The Assessing Officer issued summons to the said persons, however, they were out of station and it was not known as to when they would return. In this backdrop, without affording any opportunity to the assessee to cross-examine the said persons, the Assessing Officer made the addition in question. 18. In this case, it is not the case of the appellant that any incriminating material in respect of the assessment year under consideration was found during the course of search. At the relevant time when the notice came to be issued under section 153A of the Act, the assessee filed its return of income. Much later, at the fag end of the period within which the order under section 153A of the Act was to be made, in other words, when the limit for framing the assessment as provided under section 153 was about to expire, the notice has been issued in the present case seeking to make the proposed addition of Rs.l 1,05,51,000/- on the basis of the material which was not found during the course of search, but on the basis of a statement of another person. In the opinion of this court, in a case like the present one, where an assessment has been framed earlier and no assessment or r....
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.... legal infirmity so as to give rise to a question of law, much less, a substantial question of law, warranting interference. The appeal, therefore, fails and is, accordingly, dismissed." 11. It is also pertinent to note that, in the case of Kabul Chawla (supra), the Hon'ble Delhi High Court in its concluding paragraph has observed that, on the date of the search, the assessments for assessment years 2002-03, 2005-06 and 2006- 07 already stood completed and the returns in these years were accepted under Section 143(1) of the Act and these acceptance of returns processed under Section 143(1) of the Act was construed by the Hon'ble Delhi Court as completion of assessments and this acceptance of return, according to the Hon'ble Delhi High Court, could be tinkered with if some incriminating material was found at the premises of the assessee. Though, it is not necessary to recite and recapitulate this proposition in other judgments, suffice to say that in the following judgments, unanimous view is taken by Hon'ble High Court as well as ITAT on this point. They concur with the Hon'ble High Court. Just for reference, we note the citations as under:- Sl. No. Particulars 1.....