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TMI Blog2018 (9) TMI 869X X X X Extracts X X X X X X X X Extracts X X X X ..... ave already been disallowed by the assessee while filing the original return of income which could not be controverted by the revenue - no addition can be made in respect of assessments which have become final if no incriminating material is found during search or during 153A proceedings - See CIT Vs. Kabul Chawla [2015 (9) TMI 80 - DELHI HIGH COURT]. - Decided in favour of assessee - I.T.A. No.541/Mum/2017 And Cross Objection No.103/Mum/2018 - - - Dated:- 12-9-2018 - SHRI SAKTIJIT DEY, JM AND SHRI MANOJ KUMAR AGGARWAL, AM For The Revenue : Vidisha Kalra, Ld. CIT DR For The Assessee : Vijay Mehta, Ld. AR ORDER Per Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by revenue for Assessment Year [AY] 2009-10 contest the order of the Ld. Commissioner of Income Tax (Appeals)-48 [CIT(A)], Mumbai, Appeal No.CIT(A)-48/I.T-187/DCCC-2(2)/2015-16 dated 22/11/2016. The assessment for impugned AY was framed by Ld. Deputy Commissioner of Income Tax, Central Circle -2(1), Mumbai [AO] u/s 143(3) read with Section 153A of the Income Tax Act, 1961 on 27/03/2015 wherein the expenses of ₹ 135.08 Lacs as claimed by the assessee has been disallo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act also prescribes that assessment or reassessment, if any, relating to any assessment year falling within the period of six years referred to in this sub-section pending on the date of initiation of search u/s. 132 or making of requisition u/s. 132A of the Act as the case may be shall abate. 7.1 The chronologies of events relating to status of assessment of the impugned assessment year are that a search action u/s.132(1) of the Act was conducted on the appellant on 30/03/2012. Prior to that, the appellant had filed the return of income u/s. 139 of the Act, on 07/05/2010. It is the case of the assessee that assessment/reassessment was not pending prior to the date of initiation of search. Subsequent to search action, the AO issued notice u/s. 153A(1)(A) for A.Y.2009-10 on 26/09/2013, in response thereof the assessee vide letter dtd. 0810/2013 requested the AO to consider its original return of income filed on 07/05/2010 and total loss of Rs. (-)3,50,107/-, being the same as declared earlier in the original return of income. The assessment u/s. 143(3) r.w.s, 153A was completed on the total income of ₹ 1,35,08,000/- on 27/03/2015. whereby he made the following add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earched to file return of income in respect of each assessment year falling within six assessment years immediately preceding the assessment year in which search is conducted. The AO has to assess or reassess the total income in respect of each assessment year falling within six assessment years. Thus, it is a statutory mandate upon the AO to assesses or reassess the total income on which a person can be said to be assessable under the provisions of the Act. The first proviso covers the income which is to be assessed i.e. emanating not only, from the declared sources but also from any material found during the course of search. However, if the assessment has already been made or finalized before the date of search, then the AO can reassess the total income on the basis of material found or gathered during the course of search over and above the income which already stood assessed. However, the second proviso carves out exception/limitation that, pending assessment or reassessment relating to any assessment year following within the period of six years on the date of search, gets abated. In other words, the assessments which have not attained finality and are pending on the date of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Section 153A(1) what stands revived is the pending assessment/ reassessment proceedings which stood abated as per section 153A(1). 7.5 In the present case. I find that there is nothing on record to suggest that any material was found in the course of search which would show any connection on disallowance of expenses amounting to ₹ 1,35,08000/- made by AO with the seized material which is the subject matter of dispute in assessment order. Nothing is found contrary to the stated position of the assessee. In the instant case the AO disallowed expenses incurred by the assessee prior to the commencement of business, even though the same had not been claimed since the appellant itself made disallowance thereof in its computation of income except the expenses claimed at ₹ 3,50,107/-. On these aspects, I find that there is no material referred to by the AO to say that any incriminating material was unearthed during the search. Therefore, in the factual background, I do not find any justification for the AO to make the impugned additions/disallowance in an assessment finalized u/s 153A of the Act in the absence of any incriminating material having been found during the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rajesh Jhaveri (Supreme Court)161 Taxman 316: Hon'ble Supreme Court in the landmark judgment in the case of ACIT v/s Rajesh Jhaveri Stock Brokers (F) Ltd. 161 Taxman 316(SC) has given detailed expositions regarding nature of 143(1)(a) processing and has categorically and emphatically upheld that 143(1)(a) intimation is not assessment at all. To quote from the order as below: With effect from 1-4-1989, the provisions underwent substantial and material changes. A new scheme was introduced and in the new substituted section 143(1) prior to the subsequent substitution with effect from 1-6-1999, in clause(a), a provision was made that where a return was filed under section 139 or in response to a notice u/s 142(1), and any tax or refund was found due on the basis of such return after adjustment of tax deducted at source, any advance tax or any amount paid otherwise by way of tax or interest, an intimation was to be sent without prejudice to the provisions of section 143(2) to the assessee specifying the sum so payable and such intimation was deemed to be a notice of demand issued u/s 156. What were permissible under the first proviso to section 143(1) (a) to be ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rn could be made by the Assessing Officer. The reason is that under section 143(1)(a) no opportunity is granted to the assessee and the Assessing Officer proceeds on his opinion on the basis of the return filed by the assessee. The very fact that no opportunity of being heard is given under section 143(1)(a) indicates that the Assessing Officer has to proceed after accepting the return and making the permissible adjustments only. As a result of insertion of the Explanation to section 143 by the Finance (No.2) Act of 1991 with effect from 1-10-1991 and, subsequently, with effect from 1-6-1994, by the Finance Act, 1994, and ultimately omitted with effect from 1-6-1999, an intimation sent to the assessee under section 143(1) was deemed to be an order for the purposes of section 246 between 1-6-1994 and 31-05-1999, and under section 264 between 1-10-1991 and 31-5-1999. The expression intimation and assessment order have been used at different places. The contextual difference between the two expressions has to be understood in the context the expressions are used. The assessment is used as meaning sometimes the computation of income , sometimes the determination of the amount of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7, for the A.Y. 1999-2000, the decisions of Hon'ble Supreme Court in case of Rajesh Jhaveri (supra) and DCIT v/s Zuari Estate Development Investment Co (2015) were brought to the kind notice of Delhi High Court in an argument by Revenue that intimation u/s 143(1) is not an Assessment. Hon ble Delhi High Court categorically admitted that this distinction between 143(1) and 143(3) was overlooked in some decisions of High Courts including Delhi High Court. To quote from paras 25 and 35.9 of the order: 25. It appears that the above distinction drawn between the object of provision of Section 14(1) and Section 143(3) of tire Act was overlooked in some of the decisions of the High Courts, including this Court..... .. 35.9 The decisions of this Court and other Courts to the extent inconsistent wills the above decisions of the Supreme cannot be said to reflect correct legal position. In view of above categorical admission by a subsequent Delhi High Court order regarding incorrect legal position of the earlier orders in view of expositions of Hon ble Supreme Courts, the mistake in these orders of high Courts is apparent. Issue No. 2: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asic law on which the entire super structure of Scope of Assessment has been later built. The second proviso to Sec. 153A only mentions that in case assessment or reassessment is pending on the date of initiation of search, such assessment or reassessment shall abate. The purpose is to frame the assessment order after issuance of notice u/s 153A There is no category of Non-Abated Assessment as per the Statute. Such imported expression distorts the harmonious interpretation of the section and leads to illogical conclusion. Assessment in any case is mandatory u/s 153A and assessment order will have to be passed in all circumstances. Thus it is fair and logical to conclude that assessment-unfettered -will have to be passed by AO mandatorily if no earlier assessment is done - 143(1)(a) not being an assessment. 3. Repeated usage of Assessment or Reassessment in Section 153A: Throughout the section 153A, expression Assess or Reassess has been used by legislature in its wisdom. Either Assessment or Reassessment must be done. There cannot be a situation the neither assessment is done nor reassessment. Such a situation will be contrary to spirit and letter of the statute. Equa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earch and seizure operations Search and seizure operation u/s 132 are intrusive and investigative to extreme in the sense that personal space of assessee and his family members is violated to unearth unaccounted income. The investigation team enters and searches the entire residences of the concerned assessee including each and every nook and corner of residence. Thus, principle behind 132 operations is to explore, examine and investigate 100% details of an assessee. Return of income filed for six years u/s 139 are very much part of such details. It would be blatantly absurd and illogical if all other business and personal spaces including residences are searched and investigated and returns of income filed u/s 139 for six years are not verified, merely 143(1) processing does not allow such investigation and verification of return of income. By interpreting law in such a way that in search and seizure cases, returns of income (which is the most basic document related to taxable income) is not subjected to scrutiny ever, would he biggest absurdity and illogical interpretation of law. Since no law can be interpreted in such a way as to lead absurdity, assessment u/s 143( ..... X X X X Extracts X X X X X X X X Extracts X X X X
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