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TMI Blog2014 (10) TMI 778X X X X Extracts X X X X X X X X Extracts X X X X ..... which disallowance could have been pegged and under these circumstances, ad hoc disallowance being without any basis is not sustainable - there was no incriminating material before the AO which was found during the course of search to support the ad hoc disallowance and addition – AO made disallowance and addition during the reassessment proceedings u/s 153A of the Act without any basis and justified cogent reason - CIT(A) rightly deleted the disallowance and addition as per letter and spirit of the relevant provisions of the Act – Decided against revenue. - I.T.A.No.1294/Del/2013 C.O. No.100/Del/2013 (In I.T.A.No.1294/Del/2013) - - - Dated:- 31-1-2014 - SHRI G.D. AGRAWAL AND SHRI CHANDRAMOHAN GARG, JJ. For The Appellant : Ms Renu Jauhri, C.I.T. DR Sr.DR, Ms Y.Kakkar, DR For The Respondent: S/Shri Salil Kapoor, Sanat Kapoor ORDER PER CHANDRA MOHAN GARG, JUDICIAL MEMBER This appeal has been preferred by the Revenue against the order of Commissioner of Income Tax(A) II, New Delhi dated 31.12.2012 in Appeal No. 353/09-10 for AY 2002-03. 2. The revenue has raised sole ground in this appeal which reads as under:- 1. On the facts and in the circumstances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons which were required vide questionnaire dated 30.09.2009 to complete the assessment proceedings as mentioned in para 3 above. It is not out of place to mention here that the counsel of the assessee firm has never produced books of accounts with supporting bills and vouchers at any stage during the assessment proceedings. In these circumstances, veracity of trading results written by the assessee firm could not be established. Further, reasonability, nature, purpose and authenticity of various expenses debited to the Profit and loss account could not be examined. Though, the assessee firm has filed Audit Report u/s 44AB of the I.T.Act, 1961 along with the return of income but the findings of any audit report on the various issues related to the balance sheet and profit and loss account of the assessee firm are not substitute to the explanation and replies required to be filed by the assessee firm in response to the questions raised by the Assessing Officer vide letter dated 30.09.2009 on various issues relevant to assessment which the Assessing Officer deemed fit to raise. The facts of the case clearly show that the assessee has failed in his duty to address all such relevant que ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . We have heard rival arguments of both the parties and carefully perused the record placed before us, inter alia orders of the authorities below and legal propositions and citations relied by both the parties. Ld. DR submitted that the facts of the case clearly show that the assessee has failed in his duty to address all such relevant questions though specifically asked to reply by the Assessing Officer and the assessee has not filed the required details and explanation which were required vide questionnaire dated 30.09.2009, then the Assessing Officer was left with no other alternative but to disallow the amount of ₹ 10 lakh out of total claim of expenses amounting to ₹ 5.25 crores. The DR further submitted that the Commissioner of Income Tax(A) wrongly held that the ad hoc disallowance is not sustainable. The DR supported the assessment order and submitted that the impugned order may be set aside by restoring that of the Assessing Officer. 9. The DR placed reliance on the recent decisions of Hon ble Jurisdictional High Court of Delhi in the case of Commissioner of Income Tax vs Anil Kumar Bhatia (2012) 24 Taxman 98 (Del) and Commissioner of Income Tax vs Chetan Da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion during the assessment or reassessment proceedings u/s 153A of the Act has been dealt with by various courts but in the recent judgment of Special Bench Mumbai in the case of All Cargo Global Logistics Ltd. vs DCIT (supra), the incorporation of provisions has been made as under:- 51. Having held so, an assessment or reassessment u/s 153A arises only when a search has been initiated and conducted. Therefore, such an assessment has a vital link with the initiation and conduct of the search. We have mentioned that a search can be authorised on satisfaction of one of the three conditions enumerated earlier. Therefore, while interpreting the provision contained in section 153A, all these conditions will have to be taken into account. With this, we proceed to literally interpret to provision in 153A as it exists and read it alongside the provision contained in section 132(1). 52. The provision comes into operation if a search or requisition is initiated after 31.5.2003. On satisfaction of this condition, the AO is under obligation to issue notice to the person requiring him to furnish the return of income of six years immediately preceding the year of search. The word used is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the course of search, and undisclosed income or undisclosed property discovered in the course of search. 13. Further, the above view of Special Bench has been reiterated and followed by G Bench of ITAT, Mumbai in the case of Gurinder Singh Bawa vs DCT(supra). The relevant operative portion of this order reads as under:- 6. We have perused the records and considered the rival contentions carefully. The dispute raised is regarding legal validity of addition made by AO under section 153A of the Act. Under the provisions of section 153A, in all cases, where search is conducted under section 132 of the Act, AO is empowered to assess or reassess total income of six assessment years preceding the assessment year in which search was conducted. The section also provides that assessment or reassessment relating to any assessment year falling within period of six assessment year if pending on the date of initiation of search shall abate. There have been divergent views regarding scope of application of section 153A in cases where no incriminating material was found indicating any undisclosed income. Some of the Tribunal Benches had taken the view that in case no incriminating ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of income as capital account had been credited by the assessee by the amount of gift. Similar was the position in relation to addition under section 2(22)(e). The AO had not referred to any incriminating material found during the search based on which addition had been made. Therefore following the decision of the Special Bench (supra), we hold that the AO had no jurisdiction to make addition under section 153A. The addition made is therefore deleted on this legal ground. On merit also we do not find any case to sustain the addition. The addition made is on account of gift which is nothing but loan taken by the assessee which was converted into gift during the year. Thus source of gift was loan which the AO himself has admitted had been taken by the assessee in the year prior to 2000. Therefore, addition if any could have been made in the year of loan. Similarly, claim of the assessee and finding of CIT(A) that there was no accumulated profit has not been controverted before us. We agree with CIT(A) that current year profit has to be excluded. Therefore, there is no case for any addition under section 2(22)(e). We, therefore, dismiss the appeal of the revenue and allow the appeal f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account or other documents not produced in the course of original assessment but found in the course of search and undisclosed income or undisclosed property discovered in the course of search. It is not the case of the revenue that the Assessing Officer asked to submit any document, detail or material which was not before him during the original assessment proceedings and also there was incriminating material, evidence or document before the Assessing Officer which were found during the course of search or any undisclosed property was discovered during the course of search. Although it is a wellaccepted proposition that when the assessee is not submitting required documents, details during the assessment or reassessment proceedings and the assessee is not cooperating with the Assessing Officer during these proceedings, then the Assessing Officer is left with no alternative but to complete assessment proceedings on merits and on the basis of material available on record. In this situation, the Assessing Officer is empowered to make estimated or ad hoc additions pertaining to doubtful claim of the assessee. But at the same time, we also observe that during the reassessment proceedin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... based on justified and cogent reasons wherein we are unable to see any ambiguity or perversity and we decline to interfere with the same. Accordingly, sole ground of the revenue is dismissed. C.O. No.100/Del/2013 18. Against the impugned order of the Commissioner of Income Tax(A), the assessee has also filed following cross objections:- 1. That the notice issued u/s 153A and the assessment order made under section 153A r.w.s. 143(3) is illegal, bad in law, barred by limitation and without jurisdiction. 2. That the additions/disallowance made by the Assessing Officer by passing the assessment order u/s 153A r.w.s. 143(3) are illegal, bad in law and without jurisdiction. 3. That the additions made by the Assessing Officer are not based on any incriminating material found during the course of search. Hence assessment order passed u/s 153A/143(3) and the additions/disallowances are illegal, bad in law and without jurisdiction. 4. That the Assessing Officer has erred in framing the assessment u/s 153A r.w.s. 143(3) when the assessment already completed u/s 143(1) before commencement of the search, which does not stand abated as per proviso to section 153A(1) of the I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithin the period prescribed in section 153B(l) and hence there is no illegality on this account. It is also a settled law that the service of the demand notice is deemed to have been done once the assessment order is signed and the requisite entry is made in the demand and collection register. Reference is also made to section 282 of the Act that provides for the service of notice / order by delivery or transmission by post etc. As per Section 27 of the General Clauses Act, service is deemed to be effected when the order/notice is sent to the correct address by post. This matter has been recently dealt in the case of Milan Poddar v CIT [2012] 24 Taxman.com 27 (Jharkhand) which relies on the decisions of the Supreme Court in the cases of D Vinod Shivappa v Nanda Beliappa AIR 2006 SC 2179; Harcharan Singh v Shivrani AIR 1981 SC 1284; and C C Alavi Haji v Palapetti Muhammad 2007 6SCC555. The case law relied upon by the AR is differentiated on facts since in that case the envelope containing the order was handed over to the postal authorities on 2.1.2008 whereas the time barring date was 31.12.2007. In the case at hand, when the appellant received the order dated 29.12.2009 on 2.1.2010 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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