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TMI Blog2016 (11) TMI 1046X X X X Extracts X X X X X X X X Extracts X X X X ..... purpose of disallowing interest on housing loan. Thus we hold that in the absence of any incriminating material found during the course of search and the assessment proceedings having not abated at the time of search, the Assessing Officer has no jurisdiction to make the addition under section 153A of the Act. - Decided in favour of assessee - I. T. A. Nos. 286, 287 and 289, 330, 331, 332, 333 and 334, 560, 565, 556 and 567, 715, 716, 717, 736, 737 and 738, 748, 749, 753, 754 and 755, 1037/Chandi/2013, 41, 42 and 43, 59, 433, 434, 435, 436 and 437/Chandi/2014 - - - Dated:- 23-8-2016 - Bhavnesh Saini (Judicial Member) And Annapurna Gupta (Accountant Member) For the Assessee : Ashok Goel, Chartered Accountant, Ashwani Kumar, Sudhir Sehgal For the Department : Manjit Singh, Manoj Mishra, Departmental Representatives ORDER 1. These 37 appeals were heard together and are being disposed of by a common order. It was agreed by both sides that a common issue arose for the purpose of addressal by the Bench in all the appeals and, therefore, they advanced similar contentions. It is in these circumstances that these appeals are being disposed of by a common order. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the present case was heard. The facts relating to the case are that the assessee filed its return of income under section 139 of the Income-tax Act, 1961 (in short the Act ) on June 29, 2004, declaring an income of ₹ 2,89,220. The returned income was accepted under section 143(1) of the Act as no notice under section 143(2) of the Act was issued within the stipulated time. Search and seizure operations were conducted on the residential and business premises of M/s. Modern Group, to which the assessee belongs, on March 17, 2010, and the assessee was also covered. In response to the notice under section 153A(1), the assessee declared the same income as declared in the return filed under section 139(1) of the Act being ₹ 2,89,220. The Assessing Officer assessed the income at ₹ 8,85,515 after disallowing interest of ₹ 5,96,295 claimed under section 24(b) of the Act in the absence of any evidence of the same. 6. Aggrieved with this order of the Assessing Officer, the assessee filed an appeal before the learned Commissioner of Income-tax (Appeals). One of the grounds urged before the learned Commissioner of Income-tax (Appeals) was that the assessment framed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... December 8, 2015). 10. Shri Sudhir Sehgal, the learned counsel for the assessee, belonging to the Heera Moti group, in his arguments, reiterated the above contentions and further drew our attention to several other judgments of the High Courts and the Income-tax Appellate Tribunal on this issue. The learned counsel for the assessee also placed reliance on the decision of the hon'ble Punjab and Haryana High Court in the case of CIT v. Brinsar Foods Pvt. Ltd. (I. T. A. Nos. 192-204-224-225-2015, dated August 3, 2015). 11. The learned Departmental representative, Shri Manjit Singh, on the other hand, argued at length drawing our attention to several aspects of the issue in support of his contention that the ground of the assessee be outrightly dismissed. The gist of the arguments of Shri Manjit Singh, learned Departmental representative, was that : (1) The Chandigarh Bench of the Income-tax Appellate Tribunal has already decided this issue against the assessee in the case of Vipin Kumar Verma v. Asst. CIT, vide order dated August 22, 2012. (2) The hon'ble Supreme Court has granted special leave petition against the High Court's ruling in the case of CIT v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 was borrowed from the judgment in the case of CIT v. Chetan Das Lachman Das [2012] 254 CTR (Delhi) 392, which was clarified in Filatex India Ltd. v. CIT [2014] 49 taxmann.com 465 (Delhi), as being merely clarificatory that the assessment under section 153A emanates and starts on the foundation of search. (10) That wherever the Legislature deemed fit, it carried an exception to the rigours of section 153A as in the third proviso to the section and, therefore, there was no scope to read/interpret the section in the likewise manner in the absence of clear language to this effect. (11) That even on facts there was incriminating material, being statement recorded under section 132(4) by the Assessing Officer of Shri Krishan Kumar Goyal of the Modern group of cases, wherein he had admitted that incriminating documents were found and, in pursuance of this statement, made surrender of additional income of ₹ 11 crores. 12. In rejoinder, the learned counsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment under section 153A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment. 17. We find that the issue first came up for consideration before the High Court of Bombay in the case of CIT v. Murli Agro Products Ltd. (supra), wherein on the issue of exercise of revisionary powers by the Commissioner of Income-tax under section 263 of the Act on the order passed by the Assessing Officer under section 153A, it was contended by the Revenue that the impugned order was erroneous and prejudicial to the interests of the Revenue since the Assessing Officer had only determined the undisclosed income and not the total income which is the mandate of section153A. The hon'ble High Court, while adjudicating the issue, dealt at length with the purpose of introduction of the new search assessment procedures, as against the earlier block assessment procedures and then went on to interpret the proviso to section 153A(1), and held that it is only pending pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tation of the section by the Division Bench of the same court in the case of CIT v. Murli Agro Products Ltd. (I. T. A. No. 36 of 2009 (Bom)) and held that finalised assessments cannot be touched by resorting to the provision of section 153A and addition was to be made only on the basis of material unearthed during search since search and requisition are the crucial words appearing in the substantive provision and the proviso and they would throw light on the issue of applicability of the provision. The court upheld the understanding of the legal provision of section 153A by the Special Bench in the Income-tax Appellate Tribunal in this case and further held that the Delhi High Court had in the case of CIT v. Anil Kumar Bhatia [2013] 352 ITR 493 (Delhi) also reached to the same conclusion. It also referred to the judgment of the Karnataka High Court in the case of Canara Housing Development Co. v. Deputy CIT [2014] 49 taxmann.com 98 (Karn) and stated that even as per that judgment, the scope of enquiry in search carried under section 153A had to essentially revolve around search or requisition under section 132A of the Act. 20. In the case of CIT v. Kabul Chawla [2016] 380 IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 153A merges into one. Only one assessment shall be made separately for each assessment year on the basis of the findings of the search and any other material existing or brought on the record of the Assessing Officer. (vii) Completed assessments can be interfered with by the Assessing Officer while making the assessment under section 153A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment. 21. The Delhi High Court further reiterated the proposition laid down in CIT v. Kabul Chawla [2016] 380 ITR 573 (Delhi) in the case of CIT v. RRJ Securities Ltd. [2016] 380 ITR 612 (Delhi) and Principal CIT v. Ms. Lata Jain [2016] 384 ITR 543 (Delhi) (I. T. A. No. 274 of 2016 dated April 29, 2016). 22. On going through the above judgments, we find that the reason for upholding the proposition that addition under section 153A, in case of earlier completed assessments, can be made only on the basis of incriminating material found during search ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eedings which would not abate as they are not pending on the date of initiation of search or making of requisition. 23. We may add that the requirement of the section is limited to opening or reopening of the cases for the purpose of making assessment or reassessment of the total income of the preceding six assessment years prior to the year of search. It does not contain any provision regarding the concept of making assessment of undisclosed income as was there in the earlier block assessment regime under Chapter XIV-B. It does not specifically contain any provision regarding the nature of addition which can be made under this section. The section has provided, for the removal of doubts, by way of insertion of Explanation at the end of the section that save as otherwise provided in this section, section 153B and section 153C, all other provisions of this Act shall apply to assessment made under this section. This implies that nature of assessment or reassessment made under this section shall be governed by the normal provisions of the Act. In case it is an assessment made for the first time, all provisions of assessment which are applicable to assessments made under section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that as on date there are several judgments of the High Courts upholding the proposition that no addition can be made in the absence of incriminating material in the case of completed assessments under section 153A of the Act. 28. The next argument of the learned Departmental representative was that if addition under section 153A of the Act is to be restricted to the extent of incriminating material found/undisclosed income (term used by the learned Departmental representative) there would be no difference between the procedures prescribed under the block assessment regime prescribed in Chapter XIV and the current search assessment proceedings under section 153A and the very purpose of introducing the new procedure to do away with controversies relating to undisclosed income, would be defeated. We find no merit in this contention of the learned Departmental representative also since the restriction of addition under section 153A of the Act to the extent of incriminating material found, is to be made only in the case of completed assessments or reassessments, which do not abate under section 153A of the Act. There is, therefore, no similarity between the assessment procedures pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame that the understanding of the learned Departmental representative that by including only undisclosed income discovered as a result of search, in the assessment framed under section 153A in those cases where assessment have been completed earlier under section 143(3)/143(1) of the Act, the total income , is not assessed is misplaced. What section 153A of the Act prescribes is that where assessments are completed, they shall be reopened, incomes relating to incriminating material found during the search determined and added to the already assessed income and, thus, total income computed. Thus, restricting the addition made to the extent of incriminating material would not mean, that total income is not determined. 32. As for the reliance placed by the learned Departmental representative on the decisions against the proposition, we agree that there are divergent views of the High Courts on this issue, but as stated above, we uphold the view favouring the assessee in view of the apex court decision in the case of CIT v. Vegetable Products Ltd. [1973] 88 ITR 192 (SC). Further we may add that the hon'ble Delhi High Court, in its decision rendered in the case of CIT v. Kabul C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... admittedly surrendered ₹ 11 crores on account of the same and paid taxes thereon. The statement therefore cannot be stated to be incriminating material for the purpose of disallowing interest on housing loan. 35. Moreover, the Delhi Bench of the Income-tax Appellate Tribunal in the case of Best Infrastructure (India) Pvt. Ltd. v. Asst. CIT (I. T. A. No. 1698/Delhi/2014 dated May 31, 2016) held that any statement recorded during search cannot on standalone basis without reference to any other material discovered during search be treated as evidence found during search . The relevant findings of the co-ordinate Bench at paragraph 23(ii) is as follows : (ii) Any statement recorded during the course of search cannot on a standalone basis without reference to any other material discovered during search and seizure operation would empower the Assessing Officer to make the addition. The words 'evidence found as a result of search' would not take within its sweep statement recorded during search and seizure operations. Therefore, the Revenue's stand that the addition under section 153A can be made in respect of share capital on account of statement of Shri Tarun ..... X X X X Extracts X X X X X X X X Extracts X X X X
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