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TMI Blog2016 (9) TMI 198X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the proceedings initiated under Section 153A are bad in law in the absence of any incriminating material belonging to the assessee being found during the course of the search. 3. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the action of the AO in making addition of Rs. 15.91,792/- being income from sale of scrap treating the same as not eligible for deduction under section 80-IB of the Act. 4. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law'in not following the judgment of the jurisdictional Delhi High Court in the case of Sadhu Forgings Ltd. (2011) 336 ITR 444 (Del) which is squarely applicable to the facts of this case. 5. On the facts and circumstances of the case! the learned CIT(A) has erred both on facts and in law in confirming the disallowance of Rs. 1.25,000/- under Section 14A of the Act read with Rule 8D. 6. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the action of the AO in ignoring the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elow and submitted that the proceedings initiated u/s 153A r.w.s 143(3) of the Act are legal and valid. However, he could not controvert the fact that in the similar set of facts and circumstances, the Tribunal order dated 27.5.2015 [supra] the proceedings u/s 153A/143(3) of the Act has been declared as null and void. The relevant operative paras of the Tribunal order [supra] read as follows: "3. Since the issue raised in ground nos. 2 to 6 is legal in nature and going to the root of the matter, we preferred to adjudicate it first. 4. We have heard and considered the arguments advanced by the parties on the issue, material available on record and the decisions relied upon in this regard. 5. The facts in brief are that the assessee belongs to Jakson Group of Companies headed by Shri S. K. Gupta and is in the area of assembly of DG Sets. The search operation was conducted on 10.02.2010 in the group. Notice u/s 153A was issued and in response the assessee filed return of Rs. 25,72,304/- and assessment was framed u/s 153A r.w. s.143(3) of the Act. During the course of assessment proceedings the assessee questioned the validity of initiation of proceedings u/s 153A of the Act on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... requirement is that search has been conducted at the premises of the assessee under sec. 132 of the Act. In support, he placed reliance on the following decisions: i) CIT vs. Fila Tex India Ltd. - ITA No. 269/2014 dated 14.7.2014 (Del.); ii) Canara Housing Development Co. vs. DCIT - ITA No. 38/2014 dated 25.7.2014 (Karnataka). iii) CIT vs. Anil Kumar Bhatia 24 Taxman.com 98 (Del). iv) Promain Ltd. Vs. DCIT 95 ITD 489 (Del) (SB). v) M.B. Lal 279 ITR 298 (Del) vi) Dr. A.K. Bansal, 355 ITR 513 (All). vii) ITO vs. Varia Pratik Engineering 120 TTJ 1 (Ahd) viii) CIT vs. Raj Kumar Arora, ITA No. 56/2011 (All. H.C.) ix) DCIT vs. Apoorva Extrusion Pvt. Ltd. & ors. ITA Nos. 3308/Del/2010 (A.Y. 2002-03) & ors. Order dated 09.10.2014. 9. Having gone through the orders of the authorities below, we find that the Learned CIT(Appeals) has rejected the contentions of the assessee on the issue of validity of assessment framed under sec. 153A read with sec. 143(3) of the Income-tax Act, 1961 in absence of incriminating material found during the course of search and in the absence of the pendency of the assessment as on the date of search on the basis that for framing assessment u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c. 153A( 1) providing that the pending assessments within the period of six assessment years shall abate. The Hon'ble Delhi High Court in the case of Anil Kumar Bhatia (supra) dealt with a situation in which some incriminating material was found in respect of a non-pending assessment. It was in that background that the Hon'ble High Court held that sec. 153A applies if incriminating material is found even if assessments are completed. The question as to whether any addition can be made in respect of completed assessments when no incriminating material was found, was apparently left open. However, we find that there are sufficient indirect hints given by the Hon 'ble Delhi High Court in the case of Anil Kumar Bhatia (supra) about not making of any addition in respect of an assessment year for which the assessment is already completed unless some incriminating material is found during the course of search. This can be seen from the following observations of the Hon'ble High Court :- "20. A question may arise as to how this is sought to be achieved where an assessment order had already been passed in respect of all or any of those six assessment years, either under Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e' would be determined by considering the originally determined income plus income emanating from the incriminating material found during the course of search. In the other scenario of the assessments pending on the date of search which would abate in terms of second proviso to sec. 153A( 1), the total income shall be computed afresh uninfluenced by the fact whether or not there is any incriminating material. In fact, this is the position which follows when we read the judgment of the Hon'ble Delhi High Court in Anil Kumar Bhatia (supra) in juxtaposition to the special bench order in the case of All Cargo Global Logistics Ltd. (supra). The other judgment relied by the Ld. DR in the case of Madugulu Venu (supra) also talks about the need for making fresh assessment in respect of the assessment years for which the assessments are not pending on the date of search but does not set out the scope of such assessment, which is the issue before us." 13. We, thus, find that the decision of the Hon'ble Jurisdictional Delhi High Court in the case of Anil Kr. Bhatia (supra) supports the case of the assessee that in absence of incriminating material found during the course of sear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the Hon'ble High Court that several additions relying upon the incriminating material found in the course of search were made by the AO in the assessment proceedings u/s 153A of the Act and addition u/s 115JB was made by the AO in absence of incriminating material concerning this addition. This addition was questioned by the assessee on the basis that there was no incriminating material found concerning the addition made in the assessment u/s 153A of the Act, which has been rejected by the Hon'ble High Court with the above finding. It was held by the Hon'ble High Court that there cannot be multiple assessments, once sec. 153A of the Act is applicable. Section 153A(1) postulates one assessment; putting the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which search was conducted or requisition was made. 14. In para no. 3 of the judgment the Hon'ble Delhi High Court while discussing the cited decisions in the cases CIT vs. Chetan Das (2012), 254 CTR (Del) 292 and CIT vs. Anil Kr. Bhatia(2012), 2010-11 Taxman 453 (Del) cited by the ld. AR of the assessee appellant, has noted certain observations ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 accounts or other documents have to be taken into consideration while assessing or re-assessing the total income under the provisions of sec. 153A of the Act. Even any undisclosed income or undisclosed property has been found after the conclusions of the search, same would also be taken into consideration. The requirement of assessment or re-assessment under the said section has to be read in the context of sections 132 or 132A of the Act, in much as, in case nothing incriminating is found on account of such search or requisition, then the question of re-assessment of the concluded assessment does not arise, which would require more reiteration and it is only in the context of the abated assessment under second proviso which is required to be assessed. 17. In the case of SSP Aviation Ltd. vs. DCIT (supra) where the validity of assessment framed u/s 153C was challenged it was held that if the AO is satisfied that any money, bullion, Jewellery or other valuable article or thing or books of account or documents seized in the cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 to 6 on the issue is thus allowed." 4. In view of the above, in the present case also, material fact which emerges from the records is that no incriminating material has been found during the course of search relating to the assessee for A.Y. 2008-09 to justify additions made by the AO on account of sale of scrap and on account of disallowance u/s 14A of the Income-tax Act, 1961 [hereinafter referred to as 'the Act'] r.w.r 8D of the Income-tax Rules, 1962 [hereinafter referred to as 'the Rules'] and that too, that the assessment order based on the original return filed u/s 139 of the Act has not been pending and the same has been completed on the date of the search. Therefore, assessment framed u/s 153A r.w.s 143(3) of the Act for ay 2008-09 is not valid and we hold the same as null and void. Accordingly, the issue covered by the Tribunal order dated 27.5.2015 is decided in favour of the assessee and thus these legal grounds are allowed. Ground Nos. 3 to 5 5. Since by the earlier part of this order the assessment order has been held as null and void, therefore, the other grounds of the assessee on merits have become academic and infructuous and thus we dismis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ype of material being undertaken by the assessee would also generate scrap in the process of manufacturing. The receipts of sale of scrap being part and parcel of the activity and being proximate thereto would also be within the ambit of gains derived from industrial undertaking for the purpose of computing deducting under Section 80IB." 10. In the present case, undisputedly the impugned amount received by the assessee has been derived from sale of scrap generated from the activities carried out by the assessee which are part and parcel of the manufacturing process of industrial undertaking and scrap was general from carrying out the said activities has been sold. Thus, in view of the above noted factum, the issue is squarely covered in favour of the assessee by the said decision of the Hon'ble Jurisdictional High Court in the case of CIT Vs. Sadhu Forging Ltd [supra]. Accordingly, Ground Nos. 1 to 3 of the assessee are allowed and the AO is directed to grant deduction u/s 80IB of the Act partaking toe h amount received from sale of scrap and impugned addition is directed to be deleted. Consequently, the said grounds having sole effective issue are allowed. 11. In the result, al ..... X X X X Extracts X X X X X X X X Extracts X X X X
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