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TMI Blog2015 (11) TMI 1358X X X X Extracts X X X X X X X X Extracts X X X X ..... der section 143(3) r.w.s. 153C is bad in law in as much as no incriminating material was found connected to the assessment under consideration and the AO has issued notice without proper recording of satisfaction. 4. I am concerned here with assessment years 2007-08 and 2009- 10. A search and seizure action under section 132 was carried out on 20.01.2012 at the office of Provogue India Ltd. and residence of its Directors. The search action was completed on 17.03.2012. It deserves to be noticed that for A.Y. 2007-08 assessee filed its regular return of income under section 139 of the Act on 01.10.2007 declaring loss of Rs. 13,21,804/- and for A.Y. 2009-10 return of income was filed on 16.09.2009 declaring loss of Rs. 14,11,167/-. Since no notice was issued under section 143(2) of the Act returns are deemed to have been processed under section 143(1) of the Act and they reached finality on 31.03.2009 and 31.03.2011 respectively; both the dates falling before the search action took place. 5. During the course of search, of the office premises of Provogue India Ltd., loose papers with serial No. 9 to 32 have been found and seized, which are Trial Balances of the following three compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no addition/disallowance can be made since the same is not based on any incriminating material, the learned CIT(A) admitted, in para 5.5 of his order, that the AO has not made any disallowance on the basis of any incriminating material found during the search and also observed that there was no prior assessment order under section 143(3) of the Act. He also observed that when a return is processed under section 143(1) of the Act it is merely a check on accuracy of computation and calculation of taxes due. The claims relating to expenditure and income is not examined and therefore the AO is entitled to examine all aspects by issuing notice under section 153C of the Act. The next contention of the assessee was that the AO was not justified in holding that the business was not set up and commenced. The case of the assessee company was that it had already set up and commissioned its business. Explaining further it was contended that business cannot be a continuous course of activity and it is not necessary that all the activities should be started at the same time. Land was acquired, clearing of plot, levelling and excavation work began in A.Y. 2007-08, consent was obtained from Mahar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Warehousing Corporation (Nhava Sheva) Ltd. 374 ITR 645 held, in the context of provisions of section 153A, that no addition can be made in respect of assessment which have become final if no incriminating material is found during the search. Reliance was also placed upon the decision of the ITAT Cochin (Third Member) in the case of DCIT vs. Royal Cartons Pvt. Ltd. (ITA 472/Coch/2013 dated 16.09.2015) wherein the Third Member observed, in the contest of provisions of section 153C, that in respect of completed assessment or assessments terminated by the operation of law on the basis of regular return filed, the addition has to be made only on the basis of the material found during the course of search operation. This decision was based on another Third Member decision in the case of Trishul Hi-Tech Industries vs. DCIT - 2014-TIOL-862-ITAT-KOL wherein the Bench observed that the provisions of section 153C of the Act was amended to obviate practical difficulties which arose in its interpretation from time to time. When seized material is sent to the Assessing Authority having jurisdiction over the other person the Assessing Authority, receiving such seized material, should not act mech ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whether the incriminating documents are related to the year under consideration or not and once the assessments are reopened by issuing notice under section 153C of the Act the AO is free to make any addition though the addition may not be with reference to the incriminating documents found during the course of search. 13. I have carefully considered the rival submissions and perused the record. It is not in dispute that the assessments in both the cases have attained finality by operation of law in as much as the assessee filed returns of income before the search and seizure action took place and even the proceedings under section 143(1) of the Act have attained finality before the date of receipt of the files by the AO concerned. Under identical circumstances the ITAT Mumbai "SMC" Bench in the case of Hagwood Commercial Developers Pvt. Ltd observed that the notice issued under section 153C without incriminating material is not sustainable in law. The ITAT Cochin (Third Member) also had an occasion to consider identical issue wherein it was observed that the amendments made to section 153C are clarificatory and retrospective in operation and unless there is incriminating material ..... X X X X Extracts X X X X X X X X Extracts X X X X
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