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TMI Blog2016 (5) TMI 958X X X X Extracts X X X X X X X X Extracts X X X X ..... essee during the course of assessment u/s.153A though it was not part of the seized material and it cannot be considered for framing assessment u/s.153A of the Act as assessment for the assessment year 2006-07 has already been completed u/s.143(3) and re-assessment u/s.153A be made only on the basis of incriminating material found in the course of search but not produced in the course of original assessment The taxing authority can act only if there is power under the statute to do so. Being so, the contention of the Departmental Representative cannot be accepted that before the Commissioner of Income Tax, the assessee has conceded that the statement of affairs needs to be examined, so that revision of jurisdiction u/s.263 is appropriate. In our opinion this is not a fit case for revision u/s.263 of the Act and we are cancelling the order passed u/s.263 for the year 2006-07. The revision order passed for the assessment years 2007- 08, 2008-09, 2009-10, 2010-11 and 2011-12 were mere aftermath to the order passed u/s.263 for the assessment year 2006-07. The Commissioner of Income Tax himself agreed that findings for assessment year 2006-07 having cascading effect on the subseq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... posed to estimate the drawings at a higher level and thus add back the cash found during 'search as unexplained cash since not supported by the Cash Flow Statement filed. For all these deficiencies, he has proposed that the assessment completed u/s 153A be reviewed u/s 263 as Assessing Officer could not examine the issues due to paucity of time as the information was filed before Assessing Officer only on 28.3.2014. 4. From the proposals sent by the Assessing Officer, it was noticed that the assessee has filed three Statement of Affairs for the year- 2006-07 - i) Statement of Affairs along with the return u/s 139(1) ii) During the course of proceedings u/s 143(3) and iii) During the proceedings u/s 153A in the financial year 2013-2014. All the three Statement of Affairs are different among themselves. During the course of the proceedings u/s 143(3) finalized on 31.12.2009, the Assessing Officer has analyzed the Statement of Affairs for the assessment years 2006-07 and 2007-08 and has made additions in the Asst.Year 2007-08 as below:- The assessee s business is money lending and filed a statement of affairs as on 31.03.2007 Opening Balance of capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cies in the three Statements of Affairs which could not be examined properly by the Assessing Officer during the proceedings u/s 153A finalized on 28.3.2014. Thus, the acceptance of the Revised Statement of Affairs was suffering from defects resulting in a assessment erroneous and prejudicial to the interests of revenue. 6.1 The assessee filed revised statement of affairs for assessment year 2005-06, figures of which are basis for opening balances of assessment year 2006-07. Following major discrepancies are as under (a) figures of loans received has been increased to Rs. .15,02,54,907/- from Rs. .8,70,17,359/- (difference Rs. .6,32,37,548/-. The credit appearing in the books of accounts of assessee is not explained, therefore ,it would have been covered u/s.68, after allowing the assessee an opportunity to explain being difference in opening balances for assessment year 2006-07. (b) Figures for opening balance of loan given for assessment year 2006-07 has been increased to Rs. 43,25,53,096/- (28,97,14,166/- +65,78,171/-+ 1,00,000/-+13,61,60,759/-) from Rs. .21,06,23,375/- (difference Rs. 22,19,29,721/-) liable to be considered as un-explained investment. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reduced to Rs. 1,33,75,858/-. Now in the statement of affairs filed on 28/03/2014, it has been increased to Rs. 54,71,54,871/-. No explanation is filed by the assessee for such difference and sources of investment (c) On 11/04/2006, there is a deposit of Rs. 5,21,898/-. The assessee has credit it as 'other income' but it is not reflected from the statement of taxable income. This amount has escaped assessment. Similarly, there is another credit of Rs. 25,000/- on 19/09/2006. (d) The assessee had given list of balances of loan received and paid during the assessment proceedings u/s 143(3) taken up against return filed u/s 139(1). The assessee has furnished a list of such loan paid and loan received balances as per SOA filed on 28/03/2014. It is noticed that there is huge difference in the total as well as individual name wise details of loan received and paid when compared with the list given earlier. A comparison is given hereunder:- Loan paid balance as on 31.03.2007 (f) The assessee vide his letter dated 26.03.2014 has submitted that the is not able to furnish evidences for sources of fund invested in shares of M/s. Thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sh found during the course of search at Rs. 14,50,000/- cannot be accepted as the drawings reflected in such Cash Flow Statement would not have been adequate for the assessee s life style and the Assessing Officer has accordingly proposed to estimate the drawings at a higher level and thus add back the cash found during search as unexplained cash since not supported by the Cash Flow Statement filed. For all these deficiencies, the Assessing Officer has proposed that the assessment completed u/s.153A be reviewed u/s.263 by Commissioner of Income Tax as he could not examine the issues due to paucity of time as the information was filed before him only on 28.03.2014. 18. Thus based on the above proposition, the assessment recorded was called for and the same was examined by the Commissioner of Income Tax and issued notice u/s.263 on 20.06.2014. After the proposals sent by the Assessing Officer, it was noticed that the assessee has filed three Statement of Affairs for the year- 2006-07 - i) Statement of Affairs along with the return u/s 139(1) ii) During the course of proceedings u/s 143(3) and iii) During the proceedings u/s 153A in the financial year 2013-2014. All the three ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... First of all u/s.263 of the Act, the Commissioner of Income Tax must call for examining the records of the proceedings under Act and after examining the same if he came to a conclusion that the order passed by the Assessing Officer to be erroneous in so far as it is prejudicial to the interest of revenue, then he can revise the assessment order u/s.263 of the Act and issue notice. There should be independent application of mind by Commissioner of Income Tax himself. He cannot solely act upon the proposal sent by Assessing Officer so as to rectify any omission on the part of the Assessing Officer since the Assessing Officer has the remedy to rectify the same under the Act. From the proceedings u/s.263 of the Act in the present case, it is evident from the first para of the impugned order that the Commissioner of Income Tax acted upon the proposal sent by the Assessing Officer which is not permitted u/s.263 of the Act. 20. Further issue raised by the Commissioner of Income Tax is subject matter of appeal in respect of original assessment passed u/s.143(3) of the Act before the Tribunal for the assessment year 2007-08. The original assessment order passed u/s.143(3) was set asi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e order passed u/s.153A r.w.s.143(3) of the Act. There is no dispute that Section 153A is applicable in this case. Hence, the Assessing Officer is obliged to issue notice under section 153A in respect of six preceding years, preceding the year in which search etc. has been initiated. Thereafter, he has to assess or reassesses the total income of these six years. It is obligatory on the part of the Assessing Officer to assess or reassess total income of the six years as provided in section 153A(1)(b) and reiterated in the 1st proviso to this section. The second proviso states that the assessment or reassessment pending on the date of initiation of the search or requisition shall abate. There is no divergence of views in so far as the provision contained in section 153A till the 1st proviso. The divergence starts from the second proviso which states that pending assessment or reassessment on the date of initiation of search shall abate. This means that an assessment or reassessment pending on the date of initiation of search shall cease to exist and no further action shall be taken thereon. The assessment shall now be made under section 153A. The case of the assessee is that necessar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e provision and the submissions, it is found that this provision also makes it clear that the abatement of pending proceedings is not of such permanent nature that they cease to exist for all times to come. The interpretation of the assessee, though not specifically stated, would be that on annulment of the assessment made under section 153(1), the Assessing Officer gets the jurisdiction to assess the total income which was vested in him earlier independent of the search and which came to an end due to initiation of the search. 22. The provision contained in section 132(1) empowers the officer to issue a warrant of search of the premises of a person where anyone or more of conditions mentioned therein is or are satisfied, i.e. (a) summons or notice has been issued to produce books of account or other documents but such books of account or documents have not been produced, (b) summons or notice has been or might be issued, he will not produce the books of account or other documents mentioned therein, or (c) he is in possession of any money or bullion etc. which represents wholly or partly the income or property which has not been and which would not be disclosed for the purpos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent or reassessment, which had abated, shall be made, for which extension of time has been provided under section 153B. 25. The question now is - what is the scope of assessment or reassessment of total income under section I53A(1)(b) and the first proviso? For answering this question, guidance will have to be sought from section 132(1). If any books of account or other documents relevant to the assessment had not been produced in the course of original assessment and found in the course of search, such books of account or other documents have to be taken into account while making assessment or reassessment of total income under the aforesaid provision provision. Similar position will obtain in a case where undisclosed income or undisclosed property has been found as a consequence of search. In other words, harmonious interpretation will produce the following results :- (a) In so far as pending assessments are concerned, the jurisdiction to make original assessment and assessment under section 153A merge into one and only one assessment for each assessment year shall be made separately on the basis of the findings of the search and any other material existing or brought on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be made on the basis of incriminating material, which means books of account, other documents, found in the course of search but not produced in the course of original assessment, and undisclosed income or property discovered in the course of search. It was admitted fact in this case that there was no incriminating material discovered in the course of search action. There was also no allegation that the assessee has failed to produce books of accounts and documents in the course of original documents. It is also a fact that recorded by Commissioner of Income Tax that the Assessing Officer failed to examine the books of accounts produced by him due to paucity of time and the Assessing Officer proposed the Commissioner of Income Tax to review the order u/s.153A of the Act. 29. In our opinion, the Commissioner of Income Tax wanted to do the things indirectly which cannot be done directly. Further, he mentioned in the order that the Assessing Officer examined the statement of affairs for the assessment years 2006-07 and 2007-08 during the course of assessment u/s.143(3) of the Act finalised on 31.12.2009 and he wanted to review the same which is nothing but causing roving inqu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and arrive at a conclusion, such conclusion cannot be termed to be erroneous simply because the Commissioner of Income Tax wanted to do further enquiry as he has not satisfied with the enquiry made by the Assessing Officer. In the present case, the Assessing Officer made enquiry both in the course of original assessment u/s.143(3) for the assessment year 2006-07 and also during the course of assessment u/s.153A of the Act and the assessee has given a detailed explanation to Assessing Officer to consider the same after being satisfied by the explanation given by the assessee, he adopted not to make any addition. 31. Further, as held by jurisdictional High Court in the case of Mariam Aysha vs. Commissioner of Agricultural Income Tax 104 ITR 381 that consent cannot give jurisdiction is an essential principle of law. The taxing authority can act only if there is power under the statute to do so. Being so, the contention of the Departmental Representative cannot be accepted that before the Commissioner of Income Tax, the assessee has conceded that the statement of affairs needs to be examined, so that revision of jurisdiction u/s.263 is appropriate. In our opinion this is not a f ..... 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