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TMI Blog2017 (1) TMI 1042X X X X Extracts X X X X X X X X Extracts X X X X ..... e assets / documents were seized. Arguments were based on these seizures, framed in the case of M/s.Flemingo/Bermaco Group u/s.153A. The assessee is one of the group company. Consequent to the search & seizure action, notices u/s.153C of the Act were issued and assessments u/s.153C r.w.s. 143(3) of the Act were completed for AYrs.2004-05 and 2005-06 5. During the course of scrutiny assessment, AO made addition on account of share capital by observing that assessee could not substantiate genuineness of transaction and source of fund. By the impugned order, CIT(A) confirmed the action of the AO against which assessee is in further appeal before us. 6. Before CIT(A), the assessee raised ground with regard to the legality of the assessment framed u/s.153C without recording satisfaction by the AO of the searched person and also on the plea that no incriminating material was found during the course of search so as to make any addition u/s.153C. It was also contended by learned AR that during the course of search proceedings conducted in Bermaco Group, no material was found regarding share application money which was received by the company during the year. It was submitted that documen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TTJ 627 i) Mumbai Tribunal In the case of Nikki Agarwal vs. ACIT dated 22-01-2014 being ITA No. 879/M/2011 [2014-TIOL-75-ITAT-MUM] j) Mumbai Tribunal in the case of Parag M. Sanghvi vs. ACIT in ITA No. 8027/Mum/2010 dated 30-09-2015 k) Mumbai Tribunal in the case of Zeenat P. Sanghvi vs. DCIT in ITA No. 8026/Mum/2010 dated 19-12-2014 l) Jaipur Tribunal in the case of Jadau Jewellers & Manufacturers Ltd. vs. ACIT in ITA No. 686/JP/2014-[2016j 175 TTJ 344 m) Latest decision of Mumbai Tribunal in the case of Group company of Appellant, M/ s Bermaco Energy Systems Ltd Vs DCIT dated 31 May 2016 [ITA Nos 2198, 2199 & 2202/Mum/2013] - pages 161-211 of paperbook, AY 2004-05 Volume 2 n) Latest decision of Delhi Tribunal in the case of M/s Suncity Projects Pvt Ltd Vs DCIT dated 21 March 2016 [ITA no 14/Del/2012][2016-TIOL-643-ITAT pages 212-234 of paperbook, AY 2004-05 Volume 2 ] 9. Learned AR further submitted that no documents were found in relation to following additions made by AO while passing order u/s.153C LW.S. 143(3) of the Act, 1961: 1. For AY 2004-05 : Disallowance of Rs. 29,00,000/- being share application money received ii] s. 68 of the Act - Refer Ground No. 4 of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he share applicant companies for relevant Assessment Year. 15. On the other hand, learned DR relied on the order of the lower authorities and contended that assessee could not substantiate genuineness of transaction and creditworthiness of shareholder, therefore, AO was justified in making addition on account of share capital. With regard to legal ground, contention of learned DR was that at para 8.4, CIT(A) has observed that recording of satisfaction is not necessary as there is no need for handing over of the books or documents for the assets seized to another AO, as the AO in the case of assessee company was also the same where search operations were conducted on the basis of joint warrant of authorization. 16. We have considered rival contentions and carefully gone through the orders of the authorities below. We had deliberated on the judicial pronouncements referred by lower authorities in their respective orders as well as cited by learned AR and DR in the context of factual matrix of the case. Issue with regard to addition without finding any incriminating material has been dealt by Tribunal in the group case of assessee M/s. Bermaco Energy Systems Ltd., wherein Tribunal h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f income for the respective years. Applying the proposition of law laid down by ITAT Special Bench in the case of All Cargo Logistics Ltd., 137 ITD 287, which was confirmed by Hon‟ble Bombay High Court vide order dated 21-4-2015, to the facts of the instant case, we can safely reach to the conclusion that in respect of the years for which assessment was not pending on the date of search and when no incriminating material was found during the course of search, the addition so made in the A.Y.2004-05 & 2005-06 were not justified. Hon‟ble Bombay High Court in the case of Continental Warehousing Corporation (Nhava Sheva) Ltd. [2015] 58 taxmann.com 78 held as under: Whether in a case where pursuant to issue of notice under section 153A assessments are abated, Assessing Officer retains original jurisdiction as well as jurisdiction conferred on him under section 153A for which assessments shall be made for each of six assessment years separately - Held, yes - Whether no addition can be made in respect of unabated assessments which have become final if no incriminating material is found during search. Held, yes. 21. In the instant case, the CIT(A) has dismissed the legal g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1922 or the Income-tax Act of 1961 by any person from whose possession or control they have been taken into custody. This is when the authorities have reason to believe that such powers need to be exercised. Therefore, the fetters and which are to be found in other provisions are removed and a notice of assessment in such cases is then issued. That is mandated by sub-section (1) of section 153A. It is not only the issuance of the notice but assessment or reassessment of total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition has to be made. ■ There is much substance in the contentions of the assessee that the provisions such as section 153A enabling assessment in case of search or requisition making specific reference to the provisions which enable carrying out of search or exercise of power of requisition that the assessment in furtherance thereof is contemplated. ■ Assessee's reliance upon the Division 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. ■ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity of the order of the Commissioner under section 263. Had that been the case, the Division Bench was not required to trace out the history of section 153A and the power that is conferred thereunder. When the revenue argued before the Division Bench that the power under section 153A can be invoked and exercised even in cases where the second proviso to sub-section (1) is not applicable that the Division Bench was required to express a specific opinion. The provision deals with those cases where assessment or reassessment, if any, relating to the assessment years falling within the period of six assessment years referred to in sub-section (1) of section 153A were pending. If they were pending on the date of the initiation of the search under section 132 or making of requisition under section 132A, as the case may be, they abate. It is only pending proceedings that would abate and not where there are orders made of assessment or reassessment and which are in force on the date of initiation of the search or making of the requisition. As that specific argument was canvassed and dealt with by the Division Bench and that is how it was called upon to interpret section 153A , then, each o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ec. 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 under sec. 153A, no such requirement is there and the only requirement is that search has been conducted under sec. 132 of the Act. 10. Having gone through the decisions cited by the learned AR including the decision of Special Bench of the ITAT in the case of AL Cargo Global Logistic Ltd. vs. CIT (supra), we find that the ratio laid down therein, supports the contentions of the assessee on the issue. It reads as under: "58. Thus, question No. 1 before us is answered as under :- (a) In assessments that are abated, the AO retains the original jurisdiction as well as jurisdiction conferred on him u/s 153A for which assessments shall be made for each of the six assessment year separately : (b) In other cases, in addition to the income that has already been assessed, the assessment u/s 153A will be made on the basis of incriminating material, which in the context of relevant provisions means (i) books of account, other documents, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een 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 Section 143(1)(a) or Section 143(3) of the Act. If such an order is already in existence, having obviously been passed prior to the initiation of the search/requisition, the Assessing Officer is empowered to reopen those proceedings and reassess the total income, taking note of the undisclosed income, if any, unearthed during the search." 9. The above extracted observations of the Hon'ble High Court, which are though obiter dicta, make the point clear that where an assessment order has already been passed for a year(s) within the relevant six assessment years, then also the A.O is duty bound to reopen those proceedings and reassess the total income but by 'taking note of the undisclosed income if any, unearthed during the search'. The expression 'unearthed during the search' is quite significant to denote that in respect of completed or non-pending assessments, the Assessing Officer is albeit duty bound to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 search an addition u/s 153A of the Act cannot be made in the assessment framed thereunder. The decisions relied upon by the ld. CIT, DR in the cases of Canara Housing Development Company vs. DCIT (supra) of Hon‟ble Karnataka High Court and Filatex India P. Ltd. vs. CIT (supra) of Hon‟ble Delhi High Court having distinguishable facts are not applicable in the present case. In the case of Filatex India Pvt. 12 Ltd. (supra), the question raised on the applicability of provisions u/s 153A was that "whether the Tribunal erred on facts and in law in not holding that re-computation of book profit, de-hors any material found during the course of search in the order passed u/s 153A of the Act was without jurisdiction, being outside the scope of proceedings under that section?" The other question was, "whether on the facts and circumstances of the case, the Tribunal erred in law in upholding the action of the AO in denying set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 made and findings given by the Hon‟ble Court therein. Thereafter in para no. 4 of the judgment, the Hon‟ble High Court has held as under: "The first question, we notice was not raised by the appellant before the AO, CIT(A) and before the Tribunal. The appellant claims that the contention being legal can be raised at any stage. We have examined sec. 153A of the Act and find that the submission/contention has no merit". 15. When we peruse the facts of the case in the case of Filatax India Ltd. and the question raised therein it comes out that in that case admittedly during the course of search incriminating material including statements were found and resulted in additions and the addition made u/s 115JB of the Act was not based upon any incriminating material. Thus, the question raised before the Hon‟ble High Court was as to whether the Tribunal has erred in law in not upholding that re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 course of the search belongs to a person other than the person who was searched, then such assets or books of accounts or documents shall be handed over by him to the AO having jurisdiction over such other person. Once, that is done, the AO having jurisdiction over such other person shall proceed against him for making an assessment or reassessment of his income in accordance with the provisions of sec. 153A. The petitioner therein was not searched u/s 132 of the Act, however, some documents belonging to it were found during the search carried out in the premises of Puri Group of Companies. 18. We, thus, find that the ratio laid down by the Hon‟ble Delhi High Court and Hon‟ble Rajasthan High Court in the above cited and discussed decisions supports the case of the assessee that in absence of incriminating material found during the course of search no addition can be made u/s 15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jurisdictional High Court in the case of Murli Agro Products Ltd., 49 taxmann.com 172, held as under :- Held : The object of inserting sections 153A, 153B and 153C by Finance Act, 2003 by discarding the existing provisions relating to search cases contained in Chapter XIV B of the Act, as stated in the Memorandum explaining the provisions in the Finance Bill 2003 was that under the existing provisions relating to search cases, often disputes were raised on the question, as to whether a particular income could be treated as 'undisclosed income' or whether a particular income could be said to be relatable to the material found during the course of search, etc. which led to prolonged litigation. To overcome that difficulty, the legislature by Finance Act, 2003, decided to discard Chapter XIV B provisions and introduce sections 153A, 153B and 153C in the Act. What section 153A contemplates is that, notwithstanding the regular provisions for assessment/reassessment contained in the Act, where search is conducted under section 132 or requisition is made under section 132A on or after 31-5-2003 in the case of any person, the Assessing Officer shall issue notice to such p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gest that any material was unearthed during the search or during the 153A proceedings which would show that relief under section 80HHC was erroneous. In such a case, the Assessing Officer while passing the assessment order under section 153A read with section 143(3) could not have disturbed original assessment order relating to section 80HHC deduction and consequently the Commissioner could not have invoked jurisdiction under section 263 of the Act. 26. The ITAT Mumbai bench in the case of Jayendra P. Jhaveri, 46 taxmann.com 457 observed as under :- Head Note : So far as the question as to the processing of return under section 143(1) vis-à-vis assessment made under section 143(3) is concerned, it may further be observed that after processing of return under section 143(1) the same can be assessed under section 143(3) by issue of notice under section 143(2) subject to its issuance within the limitation period of 12 months from the end of the month in which return is furnished as per the proviso to clause (ii) of section 143(2) [as was existing at the time of relevant assessment year]. Once the limitation period as prescribed vide proviso to clause (ii) of sub-section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of argument of the revenue, while relying upon the authority of Supreme Court has been that the Court should not place reliance on the decisions without discussing as to how the factual situation fits to the factual situation of the decision on which reliance is placed. His contention is that one additional or different fact may make a world of difference between conclusions in two cases. There is no doubt about the above said proposition of law laid down by the Supreme Court. The Court must observe the facts and circumstances of the case under which a certain proposition of law is laid down by the Supreme Court and then to compare the same with the facts and circumstances of the case under adjudication before it. However, this proposition of law, put by the revenue, is of no help to the revenue but to the assessee only. In view of above, it is accordingly held that the reassessments made by Assessing Officer under section 153A, without any incriminating material being found during the search action are not in accordance with law and consequential result is that the return/original assessments which have acquired finality are to be reiterated. 27. Similar view has been taken b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the 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 AYs immediately preceding the previous year relevant to the AY in which the search takes place. 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. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes 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 in respect of each of the six AYs "in which both the disclosed and the undisclosed income would be brought to tax". iv. Although Section 153A does not say that additions should be strictly made on the basis of evidence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch assessments which have abated, the AO would have the jurisdiction to proceed and make an assessment. However, in respect of concluded assessments, the AO would assume jurisidciton to reassess provided that the assets/documents received by the AO represent or indicate any undisclosed income or possibility of any income that may be remained undisclosed in the relevant assessment years. This Court in Commissioner of Income Tax (Central)-III v. Kabul Chawla : ITA 707/2014, decided on 28 th August, 2015 = 2015-TIOL-2006-HC-DEL-IT has held that completed assessments could only be interfered with by the AO on the basis of any incriminating material unearthed during the course of the search or requisition of the documents. In absence of any incriminating material, the AO does not have any jurisdiction to interfere in concluded assessments." Respectfully following the proposition of law discussed in the above judicial pronouncements, we do not find any merit for the addition made by the AO with respect to share capital and unsecured loans. The disallowance made by the AO on account of personal use of vehicles was on estimate basis, no incriminating material was found to indicate that d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ases of Flemingo/ Bermaco where the search operations were conducted on the basis of joint warrant of authorization issued." 19. The Hon'ble Supreme Court in the case of Mls Calcutta Knitwears in its detailed judgement in Civil Appeal No 3958 of 2014 dated 12.03.2014 has laid down that for the purpose of section 158BD of the Act recording of satisfaction note is a prerequisite and the satisfaction note must be prepared by the AO before he transmits the record to the other AO who has jurisdiction over the other person under section 158BD. Further the provisions of section 153C of the Act are substantially similar to provisions of section 158BD and therefore the above guidelines of Hon'ble Supreme Court shall apply to proceedings under section 153C of the Act for the purposes of assessment of income of other than the searched person. This view has also been accepted by the CBDT and CBDT has also clarified in Circular No 24/2015 dated 31.12.2015 that even if the AO of searched person and the "other person" is one and the same, then also he is required to record his satisfaction as has been held by the Courts. 20. Recent decision of Delhi ITAT in the case of Narsi Creations v ..... X X X X Extracts X X X X X X X X Extracts X X X X
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