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TMI Blog2018 (10) TMI 605X X X X Extracts X X X X X X X X Extracts X X X X ..... A, AM This appeal by the Assessee is filed against the order of Ld. CIT(A)-II, Delhi, dated 30.04.2012 for Assessment Year 2003-04. A search action U/s 132 of Income Tax Act, 1961 (for short, The I.T. Act ) conducted in the premises of the Assessee on 27/08/2008. At the time of search, the original return filed by the Assessee U/s 139 of I.T. Act stood accepted u/s 143(1) of I.T. Act and the time prescribed for notice U/s 143(2) of I.T. Act had already expired. Thus, no assessment was pending in the case of the assessee on the date of search. After search, notice U/s 153A of I.T. Act was issued in response to which the Assessee filed return on 30.09.2009 declaring income of ₹ 12,59,090/-. The Assessee was ordered to get its accounts audited U/s 142(2A) of I.T. Act, in the assessment order dated 11.08.2011. In this regard, the Assessing Officer has stated in paragraph V. at page 3 and 4 of the Assessment Order as under:- V. Accordingly, vide this office letter dated 15/16-12-2010, assessee was ordered to get its accounts audited u/s 142(2A) from M/s Adesh jain Associates, 408, Pratap Chamber, Gurudwara Raod, Karol Bagh, New Delhi and to furnish a report on suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iii. That having regard to the facts and circumstances of the case, Ld. A.O. has erred in law and on facts while making addition of ₹ 15,00,000/- on account of alleged residual roof rights in completed projects vide para 1 of the assessment order. iv. That having regard to the facts and circumstances of the case, Ld. A.O. has erred in law and on facts in making disallowance of ₹ 10,10,476/- u/s 37(1) on account of expenditure of alleged to be penal in nature vide para 2 of the assessment order. v. That having regard to the facts and circumstances of the case, Ld. A.O. has erred in law and on facts in making addition of ₹ 1,79,507/- u/s 43B of the I. T. act vide para 5 of the assessment order. vi. That in any case and in any view of the matter, action of Ld. A.O in making additions/disallowances and in framing the impugned assessment is bad in law, illegal, unjustified, barred by limitation and contrary to facts and law and that too by recording incorrect facts and findings, without giving adequate opportunity of hearing, in violation of principles of natural justice and the same deserves to be quashed. vii. That in any case and in any vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessment proceedings must be held to the pending from the time and the said proceedings are initiated until they are terminated by a final order of assessment. 6. The Hon ble Supreme Court in the case of Rajesh Jhaveri Stock Brokers v/s CIT 291 ITR 500 SC has held that processing of the return u/s 143(1) does not amount to assessment and therefore intimation does not amount to an order of assessment. Therefore, in view of authoritative pronouncements, it cannot be said that the assessment is concluded on processing of return u/s 143(1) and therefore no assessment is pending which can abate. Further, the assessment under the above provisions is mandatory in all cases even if no incriminating material is found in the course of search u/s 132 requisition made u/s 132A as held by the Tribunal in the case of Rajat Tradecom India 120 ITD 48 (Indore). The provisions contained u/s 153A are plain and clear and there is no ambiguity. Therefore, the natural and ordinary meaning of the words should be adopted as held by the Hon ble Apex Court in the following cases Taru Lata Shyam v/s. CIT 108 ITR 345. Keshavji Raoji Co. v/s. CIT 183 ITR 1: Gum Devdutta VKSS Maryadit v/s. State ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent under clause (2A). The proviso to sub-section (2C) authorises the Assessing Officer to extend the time for producing the audit report on application made by the appellant and if the Assessing Officer finds that the appellant has established good and sufficient reason for getting the time extended for furnishing the audit report, he should extend the time. Based on this proviso, the contention raised by the AR that once time is fixed by the Assessing Officer for the appellant to produce audit report prepared by the auditor appointed by the Department under sub-section (2A), extension of time can be granted only on request by the appellant. Since the appellant did not apply for extension of time and since extension of time in this case was applied for only by the auditor, the extension of time granted by the Assessing Officer though after obtaining approval from the Commissioner is not in terms of the proviso to sub-section (2C) and so much so, the extension of time so granted by the officer cannot be reckoned for the purpose of extending the limitation for assessment available under clause (iii) of Explanation 1 of section 153(3) of the Act, is the contention of the appellant. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons obviously attributable to him and it is for him to produce good and sufficient reason before the Assessing Officer along with application for extension of time for getting the audit done and for producing the audit report. It may so happen that the appellant or his employee may turn sick or may need more time to produce the entire books of account or to answer queries of the auditor to complete the auditing and for producing the audit report within the time originally granted by the Assessing Officer. In that event, the appellant can legitimately approach the Assessing Officer with a request for extension of time for furnishing the audit report. However, the proviso specifically authorizing the appellant to apply for and obtain extension of time from the officer for furnishing audit report does not mean that the Assessing Officer lacks the authority under sub-section (2C) to extend the time on the request from the auditor. In my view, since auditing has to be done by the auditor appointed under sub-section (2A) of section 142, the convenience of the auditor is what matters and if the auditor approaches with a request for extension of time the Assessing Officer is bound to consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s null and void in view of provisions contained u/s 153-A, of the Act. Or alternatively, b) The disallowance u/s 37(1) of the act as made by the AO may please be allowed or c) Any other suitable order as your honour may deem fit may please be passed. (3.4) As can be inferred from perusal of grounds of appeal; the quantum addition in dispute is the aforesaid disallowance of ₹ 10,10,476/-. (4) At the time of hearing, the Ld. Counsel for Assessee submitted that the aforesaid addition of ₹ 10,10,476/- was not based on any incriminating material found at the time of search, in the case of the Assessee. The Ld. Counsel for the Assessee further submitted that no material, much less any incriminating material, had been found during search in the case of the Assessee, for Assessment Year 2003-04. He further submitted that the original return filed U/s 139(1) of I.T. Act had been accepted u/s 143(1) of I.T. Act and no assessment was pending at the time of search, and furthermore that the time limit for notice u/s 143(2) in respect of return filed u/s 139(1) of I.T. was already barred by limitation at the time of search. In view of these facts, the Ld. Counsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... E.N. Gopakumar vs. CIT (Central) [2016] 75 taxmann.com 215 (Kerala) x. Continental Warehousing Corporation (Nhava Sheva) Ltd. [2015] 64 taxmann.com 34 (SC) xi. CIT vs. Chetan Das Lachman Das [2012] 25 taxmann. (4.1) We have heard both sides carefully and attentively. We have also perused all the material on record. We find that the case of Kabul Chawla vs. CIT (supra) relied upon by Ld. Counsel for Assessee was considered in the case of the HBN Dairies Allied Ltd. Vs. ACIT and in accordance with the majority view of the Members of ITAT Delhi Benches, Delhi, the issue was decided in favour of the Assessee vide order dated 25.04.2018 read with order dated 24.05.2018 in ITA Nos 1393, 1394 1395/Del/2013 for Assessment Years 2004-05, 2005-06 2006-07 respectively. The relevant portion of the aforesaid order dated 25.04.2018 is reproduced as under:- 2. Before proceeding with the matter, it is relevant to note that both the learned Members, apart from differing on the merits of the case, also could not be in unison in making reference u/s 255(4) of the Act. The ld. JM, being the senior Member, proposed the following question for reference to the Third Member: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts of the case are that a search and seizure operation u/s 132 of the Act was carried out in HBN group on 20.11.2009. This group is engaged in diverse businesses ranging from dairy development and marketing of dairy products; real estate development; home loan finance and running a broadcast channel, namely, CNEB through various companies. Notice was issued u/s 153A of the Act to the assessee, inter alia, for the three years under consideration. In response, the assessee filed returns of income u/s 139 read with section 153A of the Act on 10.02.2011 declaring Nil income for such years. In the computation of income, the assessee declared loss of ₹ 23,05,880/- for the assessment year 2004-05; loss of ₹ 23,59,200 for the assessment year 2005- 06; and as against some positive business income for the assessment year 2006- 07, it claimed set off of the amount of brought forward losses for the assessment years 2003-04, 2004-05 and 2005-06. The Assessing Officer completed assessments on 29.12.2011 determining Nil income for the assessment year 2004-05; Nil income for the assessment year 2005-06; and total income of ₹ 52,49,283/- for the assessment year 2006-07. In othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at: though no incriminating material relevant for assessment years 2004-05, 2005-06 and 2006-07 against the assessee, were unearthed during the course of search u/s 132 of the IT Act; but incriminating material relevant for other years referred to in clause (b) of section 153A(1) of the IT Act were indeed unearthed. He considered the judgments of the Hon'ble Delhi High Court in the case of Kabul Chawla vs. CIT (2016) 380 ITR 573 (Delhi) and Smt. Dayawanti through Smt. Sunita Gupta Anr. VS. CIT Anr. (2017) 390 ITR 0496 (Delhi) and thus observed on pages 19 and 20 of his proposed order that when two precedents of equal strength from higher courts are available, the precedent which is closer to the facts of the case should be preferred. Ex consequenti, he applied the judgment in the case of Smt. Dayawanti (supra) to hold that : even in respect of those assessment years in respect of which no incriminating materials was unearthed during search u/s 132 of the IT Act; and even if no assessments or re-assessments are pending for those assessment year (s) on the date of search u/s 132 of the IT Act; there is no obstacle in making addition u/s 153A of the IT Act provided some i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ars, namely, completed assessments and non-completed or pending assessments. Assessment years having completed assessments mean the years for which either the assessments stood completed by the AO u/s 143(3) or section 144 before the date of search or the years for which the regular assessments were not taken up after the filing of the returns by the assessee and further that the time limit for issuing notice u/s 143(2) stood expired on the date of search. 9. As per the scheme under the Act, a return filed by the assessee is first processed by the A.O. u/s 143(1)(a) of the Act in which total income is computed after making the specified adjustments. As per clause (b), tax and interest, if any, is computed on the basis of the total income computed under clause (a). Clauses (d) and (e) of section 143(1) provide that an Intimation shall be sent to the assessee specifying the sum determined to be payable by, or the amount of refund due to, the assessee and the amount of refund due to the assessee in pursuance of the determination under clause (c) shall be granted to the assessee. Processing of the return u/s 143(1) and the consequential issuing of Intimation is construed as passi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the search. The assessments for such assessments years had already been made u/s 143(1) of the Act. The assessee filed returns for the three assessment years declaring certain income. The assessments were completed u/s 153A for the concerned assessment years making additions, inter alia, on account of low household withdrawals and deemed deduction u/s 2(22)(e) of the Act. It was submitted before the ld. CIT(A) that no evidence was found during the course of search so as to warrant an addition u/s 2(22)(e) of the Act. The ld. CIT(A) held that the additions need not be restricted only to the seized material. The Tribunal concluded that: If some incriminating material is found in respect of such assessment years for which the assessment is not pending, then, the total income would be determined by considering the originally determined income plus income emanating from the incriminating material found during the course of search . That is how, the additions made u/s 2(22)(e), which were not based on any incriminating material found during the course of search, were held to be unsustainable in law and, hence, deleted. The Hon'ble High Court approved the view taken by the Tribuna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sments can be interfered with by the AO while making the assessment under Section 153 A 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. 12. It is evident from the above judgment that once a search takes place u/s 132 of the Act, the assessee is obliged to file returns for the six assessment years immediately preceding the previous year relevant to the assessment year in which the search took place. In so far as the completed assessments as on the date of the search are concerned, the same are to be repeated as increased by certain additions based on incriminating material found during the course of search. In other words, if no incriminating material is found during the course of search, then, the amount of total income determined under the earlier completed assessments, is to be adopted in such fresh assessments u/s 153A without making any further addition. 13. The ld. AM has preferred the judgment in Dayawanti (supra) over Kabul Chaw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that case was based on the assessee s statement made at the time of search admitting : additional income in respect of business carried on outside the books of account in connection with production and sale of gutka . It was not a case in which no incriminating material was found. Rather the assessee s statement given at the time of search confirming the carrying on of business outside the books of account was extrapolated to the earlier years as well. 15. Turning to the facts of the instant case, it is seen that the Assessing Officer has not disallowed any specific amount of expenses on account of any incriminating material found at the time of search. It is pertinent to note that the assessee incurred expenses of ₹ 95.21 lac for the assessment year 2004-05. What the Assessing Officer has done is to disallow loss of ₹ 23.05 lac simply on the ground that the expenses incurred by the assessee were not fully verifiable. It is not even a case of disallowing any particular amount of expense for whatever reason. Thus, it is manifest that only a part of the expenses, representing loss of ₹ 23.05 lac, were disallowed and that too, on the ground that complete detai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f search. 17. The contention of the ld. DR that there was some incriminating material for subsequent years and the same should be considered to have bearing on the disallowance of loss for the two years under consideration, is incapable of acceptance for more than one reason. Firstly, the existence of an incriminating material for the relevant year is sine qua non for making any disallowance of expenses in respect of the completed assessments. The Hon ble Supreme Court in CIT VS. Sinhgad Technical Education Society (2017) 397 ITR 344 (SC) has accentuated the relevance of the incriminating material pertaining to the relevant year alone, though in the context of section 153C of the Act. In that case, it has been held that where the incriminating material was found to be pertaining to a particular year, there was no valid satisfaction for the other years. Secondly, it is not even a case in which some incriminating material indicating recording of bogus expenses in the subsequent years was found, which could have reflection on the years in question. The ld. DR has not drawn my attention towards any part of the statement u/s 132(4) of the assessee, which suggests, even remotely, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period of six years covered by 153A of I.T. Act, she failed to establish that the aforesaid addition of ₹ 10,10,476/- made in the case of Assessee in this year was similar to, or inconsonance with any addition made in the case of the Assessee, in any other year covered by Section 153A of I.T. Act. She also failed to establish that aforesaid addition was based on any incriminating material found in the case of the Assessee either for this year or for any other year covered by Section 153A of I.T. Act. On perusal of the Assessment Order dated 11/08/2011 U/s 153A/143(3) of I.T. Act and on further perusal of order dated 30.04.2012 of Ld. CIT(A), it is found that nowhere it is the case of Revenue that the aforesaid addition of ₹ 10,10,476/- is based on any incriminating material found in the case of the Assessee either for this year or for any other Assessment Year covered by Section 153A of I.T. Act. Respectfully following the decision of ITAT Delhi Benches, Delhi in the aforesaid case of HBN Dairies Allied Ltd. Vs. ACIT in ITA Nos. 1393, 1394 1395/Del/2013 for Assessment Years 2004-05, 2005-06 2006-07 respectively, in which, by majority of the Members of ITAT, the i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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