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TMI Blog2017 (9) TMI 834X X X X Extracts X X X X X X X X Extracts X X X X ..... in the balance sheet for the year ending 31-03-2006 is disclosed in the return of income as evidence by the audited accounts and which has not been abated, the amount of loan cannot be added. Accordingly, we reverse the orders of CIT(A) as well as that of the AO and delete the addition made by the AO. This jurisdictional issue of the assessee’s appeal is allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee before CIT(A) also raised the issue of jurisdiction under section 153C of the Act, he also confirmed the assumption of jurisdiction by the AO vide Para 7, 7.1, 7.2, 7.3 as under: - "7.0 I have carefully examined the facts of the case, the stand taken by the A.O in the assessment order and in the remand report, the grounds of appeal, the written submissions filed by the appellant during the hearing proceedings and the rejoinder to the remand report. In this group of cases, a search & seizure action u/s.132(1) of the Act was carried out on 31.10.2009 and Shri Viren Ahuja who is the promoter director of the group had admitted undisclosed income u/s.132(4) of the Act. Appellant is a closely connected case wherein the affairs of the appellant are also controlled and managed by Shri Viren Ahuja. Since the case of the appellant was also centralized along with the other group of cases of Flemingo I Bermaco which included the case of Shri Viren Ahula, the same A.O exercised jurisdiction in respect of all the cases of the group. It is envisaged uls.153C of the Act that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized belong ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taining and not belonging to the appellant The appellant is the owner of the books of account and the document seized and therefore, the said books of account and the document belong to it. The appellant's books of account and document and the loose sheets belonging to the appellant (16 loose papers of seized material exhibited as Annexure A-iS and page nos.1 to 5 of seized material exhibited as Annexure A-21 containing trail balance, profit and loss account and balance sheet of the appellant, ledger in the books of appellant, details of unsecured loan taken by the appellant from IFSL Ltd. etc.) are found in the premises of M/s.Flemingo / Bermaco Group (joint warrant of authorization) while conducting search operation u/s.132 of the Act and the same have been seized and are handed over to the A.O In this case, the A.O of 153A person and the A of 153C person are one and the same. It is also seen that the A 0 has duly recorded reasons for arriving at his satisfaction to show that the above books of account and documents belong to the appellant. At this stage, it is sufficient that the A.O merely records satisfaction with reference to the ownership of the books of account / docume ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment years, the proceedings will have to be closed. If the returns filed by the other person for the period of six years does not show that the income reflected in the document has been accounted for, additions will be accordingly made after following the procedure prescribed by law and after giving adequate opportunity of being heard to such other person. That, in sum and substance, is the position. It will be seen that whereas section 1588D refers to the satisfaction of the Assessing Officer that any gundisclosed income" belongs to any person other than the searched person. section 153C(1) in contrast refers merely to the satisfaction of the Assessing Officer that the valuable article or books of account or document "belongf to a person other than the searched person. The latter prevision does not refer to any undisclosed income at all. The machinery provided in section 153C read with section 153A merely facilitates an enquiry regarding the existence or otherwise of undisclosed income in the hands of the person other than the searched person. The starting point of the enquiry is the seizure of the valuable article or books of account or document, which according to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inion, it is not necessary for the Revenue authorities to have masons to believe that the petitioner would not produce any books of account or document or that the petitioner is in possession of any money, bullion, jeweler,' or other valuable article or thing which it had not or will not disclose for the purpose of the assessment proceedings. The petitioner was not searched. Search was on a third person and the validity of the seizure has to be examined with reference to the said person searched. At the time when the Assessing Officer having jurisdiction over the searched person reaches the satisfaction that the document belongs to a person other than the searched person, it is not necessary for him to also reach a firm conclusion/opinion that the document shows undisclosed income belonging to such other person. That is a matter for enquiry, which is to be conducted in the manner prescribed by section 153C. The fact that the procedure envisaged by section 153C is somewhat cumbersome and that the person other than the searched person is put to some inconvenience cannot be an argument to hold that the entire proceedings are bad in law. 7.2 The appellant also submitted that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... credit of ₹ 1.50 crores and that information was also noted by the AO from the audited accounts of the assessee and the addition is not based on any incriminating material found during the course of search. The learned Counsel for the assessee stated that the assessment for AY 2006-07 was completed and no assessment has been abated as the period for issuance of notice under section 143(2) elapsed on 30-09-2007 whereas, search took place on 31-10-2009. The learned Counsel for the assessee drew our attention to page 80 and 81 of assessee's paper book wherein remand report of ACIT Center Circle 47 Mumbai dated 21-02-2014 vide No. ACIT-47/rr on FDFS/13-14 is filed by the assessee and as the relevant Para 8 reads as under: - "8. This objection of the assessee is found incorrect after verifying the records available in this office. There is an annexure No.A-15 congaing 16 loose papers (seized vide Panchanama dtd. 02.11.2009 at D73/I, TTC Industrial Area, Turbhe Navi Mumbai-74) in which all pages belongs to the assessee i.e. M/s Bermaco Energy Ltd. Apart from this in annexure No. A-21 page No.1 to 5 as ledger accounts in the books of the assessee. These documents belongs to the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at IFSL limited is existent, is without any basis. He stated that IFSL is very much functioning as it can be seen from the records available with the Registrar of Companies (ROC). Assessee's Counsel drew our attention to the documents procured from the ROC which shows that the IFSL limited is an existing company and the assessee has filed extract from ROC website confirming that IFSL Limited is on its record and also copy of ROC return filed on 31-03-2011 which is enclosed at pages 67 to 69 of assessee's paper book. The learned Counsel for the assessee argued that web report of ROC clearly reveals that the IFSL has filed its return for FY 2008-09 which was revised on 07-09-2012 and IFSL has filed its Form No. of 23ACA for FY ending 31-03-2011. Even the permanent account No. of the IFSL given by the assessee i.e. AAACI4383H. The learned Counsel for the assessee in view of the above facts argued that once there is no such material available in the seized record relevant to AY and assessment has not abated, the matter cannot be reassessed invoking the provisions of section 153C of the Act. 7. On the other hand the learned CIT-DR made only one submission that Hon'ble ITAT Mumbai Speci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO and found nothing incriminating in the same, rather the addition is based on the audited accounts of the assessee which is already enclosed in the regular return of income of the assessee and assessment for the same has already attained finality. In view of these facts, we are of the view that these papers cannot be teemed as incriminating material which give jurisdiction to the AO to frame assessment u/s 153C of the Act. We find that this issue is deliberated by the Hon'ble Bombay High Court in the case of CIT vs Continental Warehousing Corporation (Nhava Sheva) Ltd. (2015) 374 ITR 645 (Bom). 9. We find that this issue now stands covered in favour of assessee and against the Revenue by the decision of Hon'ble Bombay High Court in the case of Continental Warehousing Corporation (Nhava Sheva) Ltd. (supra), wherein considering the judgment of the Special Bench of the Mumbai Tribunal in the case of All Cargo Global Logistics 137 ITD 287(SB) (Mum), considered this issue that, whether there is scope of assessment u/s. 153A of the Act in respect to completed assessment which is limited only to undisclosed income and undisclosed assets found during the course of search or not? Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assessment or reassessment pending on the date of initiation of the search or requisition shall abate. We find that 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 u/s 153A. The case of Ld. Counsel for the assessee is that necessary corollary to this provision is that completed assessment shall not abate. These assessments become final except in so far and to the extent as undisclosed income is found in the course of search. On the other hand, it has been argued by the Ld. Standing Counsel that abatement of pending assessment is only for the purpose of avoiding two assessments for the same year, one being regular assessment and the other being assessment u/s 153A. In other words these two assessments coalesce into one assessment. The second proviso does not contain any word or words ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch. The provision contained in section 132 (1) empowers the officer to issue a warrant of search of the premises of a person where any one 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 purpose of assessment, called as undisclosed income or property. We find that the provision in section 132 (1) does not use the word "incriminating document". Clauses (a) and (b) of section 132(1) employ the words "books of account or other documents". For harmonious interpretation of this provision with provision contained in section 153A, all the three conditions on satisfaction of which a warrant of search can be issued will have to be taken into account. Having held so, an assessment or reassessment u/s 153A arises only when a se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be taken into account while making assessment or reassessment of total income under the aforesaid 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 u/s 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 the record of the AO, (b) in respect of non-abated assessments, the assessment will be made on the basis of books of account or other documents not produced in the course of original assessment but found in the course of search, and undisclosed income or undisclosed property discovered in the course of search." 10. We have examined the details and noticed that notice u/s 143(2) of the Act became time barred as on 30.11.2007, whereas search took place much later on 31.10-2009. Therefore, it follows that as on the date of search, there was no pending assessment. Subsequ ..... 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