TaxTMI 
TaxTMI 
2025 (7) TMI 1916
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.....w.s. 143(3) was made after search on assessee & there was no incriminating evidence for any concealed income or any corroborating evidence were found during search operation." 2. Briefly the facts of the case are that the assessee filed his original return of income u/s. 139(1) of the Income Tax Act, 1961 ('the Act') on 04-03-2018, declaring total income of Rs. 25,72,564/ -. Subsequently, a search and seizure operation u/s. 132(1) of the Act was carried out on 08-02-2021 in the case of JMJ Group and others and consequent to the same, the case of the assessee was centralized with the office of the DCIT, CC-2(2), Mumbai and a notice u/s. 153A of the Act dt. 06-10-2021 was issued and served on the assessee. In response to the notice, the assessee filed his return of income on 22-11-2021, declaring total income of Rs. 25,72,564/- as declared in the return filed u/s. 139(1) of the Act. Subsequently, notices u/s. 143(2) and 142(1) of the Act were issued. After taking into consideration the submissions/documentation filed by the assessee, the returned income was accepted and assessed income was determined at Rs. 25,72,560/ -. 3. Subsequently, the assessment records were cal....
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.... of Rs 2,17,79,049/- claimed by you should have been disallowed in the Assessment. 6. From the above discussion, it is clear that the AO has failed to decide on the above matters in consonance with the applicable and binding statutory provisions and legal positions and/or accounting standards and reporting requirements and/ or logical and arithmetical inconsistencies. Hence, this issue has been and remains unverified and unexarnined by Assessing Officer (AO) as well as has been and remained unexplained on your part during the course of the above stated assessment proceedings for AY 2017-18. Thus, the order passed by the A.O. has rendered the assessment erroneous in so far as it is prejudicial to the interest of revenue, for the reasons as mentioned above. Therefore, prima facie, action under Section 263 of the Income Tax Act, 1961 is considered necessary. 7. In this regard, please refer to Explanation 2 to Section 263 which is reproduced verbatim hereunder :- "For the purpose of this section, it is hereby declared that an order passed by the A.O. shall be deemed to be erroneous in so far as it is prejudicial to the interest of the revenue, if in ....
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....y proceedings u/s 263 of the Act, the analysis and findings that follow are presented in rebuttal. The text, substance and spirit of the relevant provisions of Section 263 of the Act are detailed below. Explanation-2 below sub-section (1) of section 263 (inserted by the Finance Act 2015 w.e.f. 01.06.2015) is clear on the matter of revisions and the relevant part of the provisions is reproduced hereunder: "Explanation-2 - For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Commissioner or Commissioner; (a) the order is passed without making inquiries or verification which should have been made; (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order/ direction or instruction issued by the Board under section 119; or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme....
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....allowance of the costs of acquisition and the indexation would be required only if the assessee's submissions are found to be incorrect by the Assessing Officer. The impugned matter is set aside to the Assessing Officer to redo and complete the assessment in the case of the assessee for the A.Y. 2017-18. The fresh order of assessment may be passed thereafter by the Assessing Officer after carrying out the necessary enquiries and investigations in line with the directions as above." 5. Against the said findings and directions of the Ld. PCIT, the assessee is in appeal before us. 6. During the course of hearing, the Ld.AR challenged the assumption of jurisdiction by the Ld. PCIT u/s. 263 of the Act. In this regard, it was submitted that the AO has passed the order u/s. 143(3) r.w.s. 153A of the Act, consequent upon the search and seizure proceedings conducted in the group cases. During the course of search/survey proceedings, the residential and business premises of the assessee were covered and physical verification of the entire premises was carried out by the search party and no documentary evidences or any other incriminating material whatsoever were found or seized by ....
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....xed cost of acquisition and having not done that the AO has not made mistake in the instant case and the order so passed cannot be held as erroneous as well as prejudicial to the interest of the Revenue. It was further submitted that where the AO does not have the jurisdiction to disturb the completed assessment in absence of any incriminating material, the Ld. PCIT equally does not have the jurisdiction to invoke the provisions of section 263 of the Act as what cannot do directly by the AO, the same cannot be done indirectly by the ld PCIT by enlarging the scope of assessment by acquiring jurisdiction u/s 263 and holding the order so passed by the AO u/s. 143(3) r.w.s. 153A of the Act as erroneous as well as prejudicial to the interest of the Revenue. It was submitted that the assessee has raised this jurisdictional matter before the ld PCIT as well as can be seen from his written submissions made during the revisionary proceedings, however, the ld PCIT has failed to appreciate the same and more so, no finding has been recorded by him disputing the said factual and legal position. 9. In support, reliance was placed on the decision of the Hon'ble Bombay High Court in the cas....
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....hich stood abated as per section 153A(1). 11. In the present case, as contended by Shri Mani, learned counsel for the assessee, the assessment for the assessment year 1998-99 was finalised on 29-12-2000 and search was conducted thereafter on 3-12-2003. Therefore, in the facts of the present case, initiation of proceedings under Section 153A would not affect the assessment finalised on 29-12-2000. 12. Once it is held that the assessment finalized on 29.12.2000 has attained finality, then the deduction allowed under section 80 HHC of the Income-tax Act as well as the loss computed under the assessment dated 29-12-2000 would attain finality. In such a case, the A.O. while passing the independent assessment order under Section 153A read with Section 143(3) of the IT. Act not have disturbed could 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. 13. In the present case, there is nothing on re....
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....planation. For the removal of doubts, it is hereby declared that, for the purposes of this sub-section,- (a) an order passed on or before or after the 1st day of June, 1988 by the Assessing Officer shall include- (i) an order of assessment made by the Assistant Commissioner or Deputy Commissioner or the Income Tax Officer on the basis of the directions issued by the Joint Commissioner under section 144A; (ii) an order made by the Joint Commissioner in exercise of the powers or in the performance of the functions of an Assessing Officer conferred on, or assigned to, him under the orders or directions issued by the Board or by the Chief Commissioner or Director General or Commissioner authorized by the Board in this behalf under section 120; (b) "record shall include and shall be deemed always to have included all records relating to any proceeding under this Act available at the time of examination by the Commissioner; (c) where any order referred to in this sub-section and passed by the Assessing Officer had been the subject matter of any appeal filed on or before or after the 1st day of June, 1988, the powers of the Commissioner under this sub-s....
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....oner may annul the order of the Assessing Officer. He may enhance the assessed income by modifying the order. He may set aside the order and direct the Assessing Officer to pass a fresh order. 16. A perusal of sub-clause (c) of the above would contemplate that if any order, which is subject matter for revision under section 263 is challenged in appeal, then, on the items which are subject matter of appeal, no power under section 263 could be exercised by the ld. Commissioner. We may elaborate further, for example- an assessment order was passed, it contains five issues, which were challenged before the ld. CIT(A), but Id. Assessing Officer failed to look into few Issues, which may arise from the record, then Inspite of the assessment order being challenged before the Id. CIT(A), the Id. Commissioner would have jurisdiction on such items, which are not subject matter of appeal in that assessment order. 17. At this stage, before considering the multi-fold contentions of the Id. Representatives, we deem it pertinent to take note of the fundamental tests propounded in various judgments relevant for judging the action of the CIT taken u/s 263. The ITAT in the case of M....
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....orate discussion in that regard. 18. In the light of above, let us examine the facts and circumstances of the appeals before us. There is no dispute to the fact that all these assessees have filed their returns within due date provided under section 139(1) of the Income Tax Act. They have disclosed the long-term capital gain assessable in their hands. Those returns have been accepted under section 143(1) of the Income Tax Act. The assessments have attained finality. No notice under section 143(2) for scrutinizing the returns have been issued upon the assessee before the search carried out. Even the time limit for issuance of such notice have already been expired before the search. During the course of search, no incriminating material was found which can authorize the Id. Assessing Officer to assess the income under section 153A of the Income Tax Act. To buttress this observation, we have taken note of the relevant part of the assessment orders in the case of each assessee in the earlier part of this order. The Hon'ble Delhi High Court has considered the scope of section 153A in the case of CIT-vs. Kabul Chawala (supra). The assessment years involved therein were A.Ys.....
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....latable 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 course of search or requisition of documents or undisclosed 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 AYs, 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. 39. The question f....
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....t, the AO would have the jurisdiction to assess or reassess the 'total income taking into consideration the incriminating material collected during the search and other material which would include income declared in the returns, if any, furnished by the assessee as well as the undisclosed income. However, in case during the search no incriminating material is found, in case of completed/unabated assessment, the only remedy available to the Revenue would be to initiate the reassessment proceedings under sections 147/48 of the Act, subject to fulfilment of the conditions mentioned in sections 147/148, as in such a situation, the Revenue cannot be left with no remedy. Therefore, even in case of block assessment under section 153A and in case of unabated/ completed assessment and in case no Incriminating material is found during the search, the power of the Revenue to have the reassessment under sections 147/148 of the Act has to be saved, otherwise the Revenue would be left without remedy. 12. If the submission on behalf of the Revenue that in case of search even where no incriminating material is found during the course of search, even in case of unabated/ completed ass....
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....e case of PCIT-vs .- Abhisar Buildwell (P) Ltd. (supra) is misplaced. According to the ld. PCIT, the factum of the difference in sale consideration, vis-à-vis valuation of the property for the purpose of stamp duty valuation ought to be considered as an incriminating aspect, which would not come to the light if search or consequential search assessment had not taken place. The ld. PCIT thereafter made reference to section 50C of the Income Tax Act. We have considered this finding of the ld. PCIT, but these findings are not in consonance with the proposition of law laid down by the Hon'ble Supreme Court in the case of Abhisar Buildwell (P) Ltd. Had the assessees have not disclosed long-term capital gain in their regular returns of income and then a discovery of this factum was unearthed during the course of search. The situation would be different. The Id. PCIT has not made reference to any seized material found during the course of search. He is of the view that the subject matter of a regular assessment, which would have taken under section 143(3) after issuance of a notice u/s 143(2) ought to have been considered in this search assessment under section 153A, but this p....
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....pra). Therefore, in view of the above discussion, the orders of Id. Pr. CIT in each case of the appellant are not sustainable. They are quashed. 9. Respectfully following the above decision of the Co-ordinate Bench of the Tribunal, nothing warrants us to deviate from the view taken as above. Accordingly, we set aside the impugned order passed by the learned PCIT under section 263 of the Act by allowing the grounds raised by the assessee." 11. Per contra, the Ld. CIT-DR has vehemently argued the matter and has relied upon the findings of the Ld. PCIT, which we have already been taken note and the same are not been repeated for the sake of brevity. 12. We have heard the rival contentions and perused the material available on record. In this case, the assessee has filed original return of income on 04-03-2018 and which was processed u/s. 143(1) of the Act and on the date of search i.e., 08-02-2021, the time limit for issuance of notice u/s. 143(2) of the Act has expired and, it is therefore a case of completed/unabated assessment as on the date of search. As per settled position so laid down by the Hon'ble Supreme Court in case of Abhisar Buildwell, where during the....