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TMI Blog2016 (8) TMI 1132X X X X Extracts X X X X X X X X Extracts X X X X ..... onth, it would be reasonable to take value at 10% higher in the A.Y.2010-2011. Accordingly we direct the AO to make addition on account of estimated value of shop at Nalashopara by taking the value at ₹ 3,300/- per month. We direct accordingly. - I.T.A. No. 3456,3457&3458/Mum/2015, I.T.A. No. 3465 &3466 /Mum/2015 - - - Dated:- 24-8-2016 - SHRI R.C. SHARMA, AM AND SHRI SANDEEP GOSAIN, JM Appellant by : Shri Vijay Mehta Respondent by : Shri N.P. Singh ORDER Per R. C. Sharma, A. M. These are the appeals by the Assessee directed against the Order by the Commissioner of Income Tax (Appeals)- 48, Mumbai ( CIT(A) for short) for the assessment year (A.Y.) 2008-09,2009-10 2010-11 in the matter of order passed u/s 153A r.w.s. 143(3) of the I.T. Act ,1961. ITA No.3456,3457 3458/Mum/2015 2. In ITA No.3456 assessee is aggrieved for addition made u/s 153A r.w.s. 143(3) when there was no incriminating material found during the course of search and the assessment order has already been passed u/s 143(3) of the Act. In respect of AY 2008-09 we found that original return of income was filed u/s 139(1)of the Act on 26.12.08. Scrutiny assessment order u/s 143( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... As the aforesaid discussion shows that the pertinent point raised by the assessee before me is that the impugned addition has been made in the absence of requisite jurisdiction. In order to appreciate the controversy, it is pertinent to observe that Section 153A of the Act postulates the assessment in cases of search or requisition under section 132 or under section 132A of the Act respectively. The said section envisages that the Assessing Officer shall assess or reassess the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which search was conducted. The second proviso to section 153A{1} of the Act also prescribes that assessment or re- assessment, if any, relating to any assessment year falling within the period of six years referred to in sub- section(1) of section 153A of the Act, which is pending on the date of initiation of search or making of requisition as the case may be , shall abate. In other words, in so far as the pending assessments are concerned, the competence of the Assessing Officer to make the original assessment converges with the assessment to be made u/s.153A of the Act, i.e. only one assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he legal position that emerges is as under: i. Once a search takes place under Section 132 of the Act, notice under Section 153A{1} will have to be mandatorily issued to the person searched requiring him to file returns for six A Ys immediately preceding the previous year relevant to the A Y in which the search takes places. ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search take place. The AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ul Chawla (supra), the impugned addition could not have been made in respect of an unabatable assessment which had otherwise become final, in the absence of any incriminating material having been found in the course of search, qua the impugned addition. Accordingly, I set aside the order of the CIT(A) and direct the Assessing Officer to delete the addition of ₹ 75,600/- as the same IS purported to be beyond the scope and ambit of assessment envisaged under section 153A of the Act. Thus, on this aspect, the assessee succeeds. 6. In the result, the appeal of the assessee is allowed as above. 6. The jurisdictional High Court in the case of Continental Warehousing Corporation (Nhava Sheva) 374 ITR 645, vide order dated 21-4-2015 have considered the decision of Special Bench in the case of All Cargo and also the decision of Delhi High Court in the case of Anil Bhatia (supra), on which CIT(A) has relied for dismissing legal ground raised by assessee. After elaborate discussion the Hon ble High Court held, Head Note, reads as under :- A bare perusal of section 153A would indicate as to how a non-obstante clause has been inserted and with a defined intent. Where search ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bench judgment of this Court rendered in CIT v. Murli Agro Products Ltd. [2014] 49 taxmann.com 172 in that context is, therefore, well placed. The Division Bench outlined the ambit and scope of the powers conferred by section 153A and observed that on a plain reading of section 153A, it becomes clear that on initiation of the proceedings under section 153A, it is only the assessment/reassessment proceedings that are pending on the date of conducting search under section 132 or making requisition under section 132A stand abated and not the assessments/reassessments already finalised for those assessment years covered under section 153A. By a Circular No. 8 of 2003, dated 18-9-2003 (See 263 ITR(St) 61 at 107) the CBDT has clarified that on initiation of proceedings under section 153A, the proceedings pending in appeal, revision or rectification proceedings against finalised assessment/reassessment shall not abate. It is only because, the finalised assessments/reassessments do not abate, the appeal revision or rectification pending against finalised assessment/reassessments would not abate. Therefore, the argument of the revenue, that on initiation of proceedings under section 15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... argument was canvassed and dealt with by the Division Bench and that is how it was called upon to interpret section 153A , then, each of the above conclusions rendered by the Division Bench would bind the instant Court. Even otherwise, Court is in agreement with the Division Bench when it observes as above with regard to the ambit and scope of the powers conferred under section 153A . Even if the exercise of power under section 153A is permissible still the provision cannot be read in the manner suggested by the revenue. Not only the finalised assessment cannot be touched by resorting to those provisions, but even while exercising the power can be exercised where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after 31-3- 2003. There is a mandate to issue notices under section 153(1)(a) and assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made. Thus, the crucial words 'search' and 'requisition' appear in the substantive provision and the provisos. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the basis of incriminating material, which in the context of relevant provisions means (i) books of account, other documents, found in the course of search but not produced in the course of original 8 assessment, and (ii) undisclosed income or property discovered in the course of search. 11. The issue raised before the Special Bench was as to whether scope of assessment u/s 153A encompasses additions not based on any incriminating material found during the course of search? 12. In the case of Kusum Gupta (supra) also the return was processed u/s 143(1) of the Act and time limit for issuance of notice u/s 143(2) had expired on the date of search and it was held that no assessment was pending in that case and thus there was no question of abatement of assessment. Therefore, the addition in the assessment u/s 153A would be made only on the basis of incriminating material found during the search. The Delhi Bench of the Tribunal in its recent decision on the issue in the case of Shri Kabul Chawla (supra) and others vide order dated 23.5.2014 has expressed the similar view. It has also discussed the decision of Hon ble Jurisdictional Delhi High Court in the case of CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ' is quite significant to denote that in respect of completed or non- pending assessments, the Assessing Officer is albeit duty bound to assess or reassess the total income but there is a cap on the scope of additions in such assessment, being the items of income 'unearthed during the search'. In other words, the determination of 'total income' in respect of the assessment years for which the assessments are already completed on the date of search, shall not be influenced by the items of income other than those based on the material unearthed during the course of search. There is not and cannot be any quarrel over the proposition that the Assessing Officer has no option but to determine the total income of the assessee in respect of the relevant six assessment years. However, the scope of such determination of total income is different in respect of the years for which the assessments are pending vis-a-vis the years for which assessments are non-pending. In respect to the assessment years for which the original assessments have already been completed on the date of search, the total income shall be determined by restricting additions only to those which flow fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whether on the facts and circumstances of the case, the Tribunal erred in law in upholding the action of the AO in denying set off, of book loss unabsorbed depreciation relatable to earlier assessment year in terms of clause (III) of Explanation 1 to section 115JB of the Act? The relevant facts of that case noted in para no. 2 of the decision are that the AO in the proceedings u/s 153A of the Act, had made several additions, relying upon the incriminating material found in the course of search, which was conducted on 18.1.2006 and subsequent dates. In this paragraph of the decision it has been perused from the impugned order of the Tribunal that incriminating material including statement of Sanjay Agarwal, GM (Marketing) have resulted in additions, which have been upheld. The Hon ble High Court has been pleased to note in this paragraph as it is not the case of the appellant assessee that initiation of proceedings u/s 153A was bad or unwarranted in law as no incriminating material was found during the search. The contention raised by the appellant assessee is that the addition, which is the subject matter of questions no. (II) and (III), was/is not justified in the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court was as to whether the Tribunal has erred in law in not upholding that recomputation of book profit, de-hors any material found during the course of search in the order based u/s 153A of the Act was without jurisdiction, being outside the scope of proceedings under that section. The Hon ble High Court after discussing the issue in detail has been pleased to decide the question against the assessee and has upheld the addition made u/s 115JB of the Act. Thus, having distinguishable facts this cited the decision in the case of Filatax India Ltd. (supra) is not helpful to the revenue. 16. So far as, the decision of Hon ble Karnataka High Court in the case of Canara Housing Development Company (supra) relied upon by the ld. CIT DR is concerned, the issue raised before the Hon ble High Court was regarding validity of revisional order passed u/s 263 of the Act by the ld. CIT partly upheld by the Tribunal and during that course the Hon ble High Court has also been pleased to discuss the decision in the cases of Anil Kumar Bhatia (supra) and the decision of Special Bench of the Tribunal in the case of All Cargo Global Logistic Ltd. (supra). It has been observed by the Hon ble High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of search no addition can be made u/s 153A of the Act where the original assessment was already framed on the date of search. The Hon ble Karnataka High Court in the case of Canara Housing Development Company (supra) has, however, been pleased to express different view, however, as per the established proposition of law, we are bound to follow the decision of Hon ble Jurisdictional Delhi High Court and since, the Hon ble Karnataka High Court and the Hon ble Rajasthan High Court have expressed different views on the issue, the view favourable to the assessee is to be followed. We, thus, reiterate that in absence of incriminating material found during the course of search no addition can be made in a case where original assessment was already framed on the date when search took place. 19. In absence of rebuttal of this material fact by the Revenue in the present case before us that no incriminating material was found during the course of search relating to the assessee for the assessment year under consideration to justify the additions made in the year by the Assessing Officer and assessment based on the original return of income filed under sec. 139 of the Act was not pending ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue notice to such person requiring him to furnish return of income within the time stipulated therein, in respect of six assessment years immediately preceding the assessment year relevant to the previous year in which the search is conducted or requisition is made and thereafter assess or reassess the total income for those assessment years. The second proviso to section 153A provides for abatement of assessment/reassessment proceedings which are pending on the date of search/requisition. Section 153A(2) provides that when the assessment made under section 153(A)(1) is annulled, the assessment or reassessment that stood abated shall stand revived. Thus, on a plain reading of section 153A, it becomes clear that on initiation of proceedings under section 153A, it is only the assessment/reassessment proceedings that are pending on the date of conducting search under section 132 or making requisition under section 132A stand abated and not the assessment/reassessments already finalised for those assessment years covered under section 153A. By a circular No. 8, dated 18-9-2003 the CBDT has clarified that on initiation of proceedings under section 153A, the proceeding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iso to clause (ii) of sub-section (2) of section 143 is expired, it is not open to the Assessing Officer to assess the income under section 143(3) and the return filed by the assessee under section 139 is deemed to be accepted, which however, can be re-opened under section 147 subject to the fulfilment of ingredients of section 147 and within the time period as prescribed under section 149. So under such circumstances if the return is processed under section 143(1) and not under section 143(3) after the prescribed period of limitation, the same cannot be assessed under section 143(3) though it may be interpreted as mere intimation assessment or otherwise, but the same shall be deemed to be accepted by the Assessing Officer and it will not have any different colour other than the return which is processed under section 143(3). Admittedly, in the case in hand, the return was processed under section 143(1) but the same has attained finality due to the expiry of limitation period of twelve months from the end of the month in which the return was filed. Hence, the assessment is deemed to be completed and not pending on the date of search on 14- 8-2008. Admittedly, no incriminating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iterated. 11. Similar view has been taken by ITAT Jodhpur Bench in the case of IOC Builders and Developers, 50 taxmann.com 396, Pune Tribunal in the case of SRJ Peety Steels (P) Ltd., 20 taxmann.com 101, Mumbai Tribunal in the case of Nikki Agarwal, ITA No.879/Mum/2011, order dated 22-1-2014, Mumbai Tribunal in the case of Shri Parag M. Sanghvi, ITA No.8027/Mum/2010, order dated 30-9-2015, Jaipur Tribunal in the case of M/s Jadau Jewellers Manufacturers Pvt. Ltd., ITA No.686/JP/2014, order dated 14- 12-2015, ITAT Delhi Bench in the case of M/s Rakam Money Matters Pvt. Ltd., ITA No.2821/Del/2011, order dated 10-16-2014. Our view is also supported by following decisions :- i) ITAT Mumbai Bench in the case of Shri Gurinder Singh Bawa vs. DCIT - 28 taxmann.com 328 ii) ITAT Mumbai Bench in the case of Anil P. Khimani vs. DCIT No. 2855 to 2860/Mum/2008 dated 23-02-2010 ii) ITAT Jodhpur Bench in the case of Vishal Dembla vs. DCIT - 157 TTJ 189 iv) High Court of Bombay on the case of CIT v. Murli Agro Products Ltd. [2014] 49 Taxmann.com 172 v) ITAT Mumbai Bench in case of ACIT v. Jayendra P. Jhaveri [2014] 65 SOT 118 vi) Jodhpur ITAT in the case of Ayus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material. v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word assess in Section 153A is relatable 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 153A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 43(2) was expired 30.09.2010. Search took place on 10.01.2011. It is clear from the above dates that assessment for AY 2009-10 was not pending as on the date of search. Furthermore no incrementing material was found during the course of search warranting the addition of ₹ 75,600/- made on account of notional interest. Following the propositions discussed herein above we do not find any merit in the action of AO for making addition in respect of completed assessments, without any incrementing material found during course of search. 16. In the net result, the appeal filed by the assessee for A.Y.2008-09 2009- 2010 are allowed. ITA No. 3458/Mum/2015(AY: 2010-2011) 17. In this year the assessment was pending as on the date of search, therefore, proposition with regard to no addition in the absence of incriminating material is not sustainable in this year. In this appeal assessee is aggrieved for addition of ₹ 1,17,600/- on account of notional rent. 18. We found that in the A.Y. 2009-10 AO has made addition of notional rent by taking estimated rental value of shop at Nalasopara at ₹ 3,000/- per month. As the value has been taken by AO in the AY 2009-10 at ..... X X X X Extracts X X X X X X X X Extracts X X X X
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