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TMI Blog2019 (6) TMI 890X X X X Extracts X X X X X X X X Extracts X X X X ..... of on money for purchase of agricultural land then the addition made by the AO on the basis of the information received from the ACB and consequential inquiry conducted by the AO during the assessment proceedings cannot be treated as incriminating material to justify the addition on account of on money when the assessment was completed and not pending at the time of search. Accordingly, in the facts and circumstances of the case and in view of the binding precedents the addition made by the AO is not sustainable in law and the additional ground is hereby allowed in favour of assessee. - ITA No. 483/JP/2016 Assessment Year : 2005-06 - - - Dated:- 16-5-2019 - Shri Vijay Pal Rao And Shri Vikram Singh Yadav, JJ. Assessee by: Shri Rajeev Sogani (C.A.) Revenue by: Shri Varinder Mehta (CIT) ORDER Vijay Pal Rao, This appeal by the assessee is directed against the order dated 30.03.2016 of the ld. CIT(A), Jaipur for the assessment year 2005-06. Earlier the appeal of the assessee was disposed off by the Tribunal vide order dated 01.12.2017 and subsequently in MA No. 74/JP/2018 filed by the assessee the earlier order dated 01.12 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order being illegal and void ab initio. 3. The ld. AR of the assessee has submitted that there was search and seizure action U/s 132 of the IT Act in case of Mahaveer Singh Sankhla Group on 23.07.2009. The assessee is also covered under the search and seizure action being a partner in partnership firms namely M/s Aamrit Bottling, M/s Govindam Sweets M/s Hotel Neelam. The assessee filed his return of income on 15.06.2010 in response to notice U/s 153A of the Act declaring total income of ₹ 2,94,101/-. The Assessing Officer in the assessment proceeding U/s 153A of the Act received information from Anti-Corruption Bureau (ACB) regarding own money received by the persons from whom the assessee purchase the land during the year under consideration. Consequently, the AO examined those persons and recorded their statements U/s 131 of the Act. Thus the addition was made by the AO U/s 69 of the Act on account of undisclosed investment based on the information received from ACB as well as the statements recorded U/s 131 of the sellers. The addition is not based on any incriminating material found or seized during the course of search and seizure action. Thus the ld. AR ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the rival submissions as well as the relevant material on record. There is no dispute that the assessment for the year under consideration was not pending on the date of search i.e. 23.07.2009 as the order U/s 143(3) of the Act was passed by the AO on 30.03.2007. A copy of the said assessment order is placed at page 1 to 6 of the paper book, therefore, the Revenue has not disputed the fact that the assessment was not pending as on the date of search and consequently the assessment was not got abated by virtue of search U/s 132 of the Act. It is also not in dispute that no incriminating material was either found or seized during the course of search and seizure action to indicate any undisclosed income on account of on money payment by the assessee for purchase of land. The Assessing Officer has also not alleged or indicated that the seized material found during the search has revealed any undisclosed income on account of on money payment. During the course of assessment proceedings U/s 153A r.w.s. 143(3) of the Act the AO received the statements of the sellers recorded by ACB U/s 161 of Cr.P.C. wherein they have admitted on money receipt in respect of the land purchase by the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r as CIT v. Anil Kumar Bhatia (supra) was concerned, the Court in paragraph 24 of that decision noted that we are not concerned with a case where no incriminating material was found during the search conducted under Section 132 of the Act. We therefore express no opinion as to whether Section 153A can be invoked even under such situation . That question was, therefore, left open. As far as CIT v Chetan Das Lachman Das (supra) is concerned, in para 11 of the decision it was observed: 11. Section 153A (1) (b) provides for the assessment or reassessment of the total income of the six assessment years immediately preceding the assessment year relevant to the previous year in which the search took place. To repeat, there is no condition in this Section that additions should be strictly made on the basis of evidence found in the course of the search or other post-search material or Information available with the Assessing Officer which can be related to the evidence found. This, however, does not mean that the assessment under Section 153A can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act, it is apparent that: (a) the assessments or reassessments, which stand abated in terms of II proviso to Section 153A of the Act, the AO acts under his original jurisdiction, for which, assessments have to be made; (b) regarding other cases, the addition to the income that has already been assessed, the assessment will be made on the basis of incriminating material; and (c) in absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. 34. The argument of the Revenue that the AO was free to disturb income de hors the incriminating material while making assessment under Section 153A of the Act was specifically rejected by the Court on the ground that it was not borne out from the scheme of the said provision which was in the context of search and/or requisition. The Court also explained the purport of the words assess and reassess , which have been found at more than one place in Section 153A of the Act as under: 26. The plea raised on behalf of the assessee that as the first proviso provides for assessment or reassessment of the total income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, 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. v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he earlier regime of block assessment whereby, it was only the undisclosed income of the block period that was assessed, section 153A of the Act seeks to assess the total income for the assessment year, which is clear from the first proviso thereto which provides that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years. The second proviso makes the intention of the Legislature clear as the same provides that assessment or reassessment, if any, relating to the six assessment years referred to in the sub-section pending on the date of initiation of search under section 132 or requisition under section 132A, as the case may be, shall abate. Sub- section (2) of section 153A of the Act provides that if any proceeding or any order of assessment or reassessment made under sub-section (1) is annulled in appeal or any other legal provision, then the assessment or reassessment relating to any assessment year which had abated under the second proviso would stand revived. The proviso thereto says that such revival shall cease to have effect if such order of annulment is set aside. Thus, any proceeding of as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nding reassessment under section 147 of the Act has abated, needless to state that the scope and ambit of the assessment would include any order which the Assessing Officer could have passed under section 147 of the Act as well as under section 153A of the Act. xxx 19. On behalf of the appellant, it has been contended that if any incriminating material is found, notwithstanding that in relation to the year under consideration, no incriminating material is found, it would be permissible to make additions and disallowance in respect of an the six assessment years. In the opinion of this court, the said contention does not merit acceptance, inasmuch as the assessment in respect of each of the six assessment years is a separate and distinct assessment. Under section 153A of the Act, assessment has to be made in relation to the search or requisition, namely, in relation to material disclosed during the search or requisition. If in relation to any assessment year, no incriminating material is found, no addition or disallowance can be made in relation to that assessment year in exercise of powers under section 153A of the Act and the earlier assessment shall have to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he dismissal of the Revenue's SLP on 7th December, 2015. The decision in Dayawanti Gupta 64. That brings us to the decision in Dayawanti Gupta (supra). As rightly pointed out by Mr. Kaushik, learned counsel appearing for the Respondent, that there are several distinguishing features in that case which makes its ratio inapplicable to the facts of the present case. In the first place, the Assessees there were engaged in the business of Pan Masala and Gutkha etc. The answers given to questions posed to the Assessee in the course of search and survey proceedings in that case bring out the points of distinction. In the first place, it was stated that the statement recorded was under Section 132(4) and not under Section 133A. It was a statement by the Assessee himself. In response to question no. 7 whether all the purchases made by the family firms, were entered in the regular books of account, the answer was: We and our family firms namely M/s Assam Supari Traders and M/s Balaji Perfumes generally try to record the transactions made in respect of purchase, manufacturing and sales in our regular books of accounts but it is also fact that some time due t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITAT's findings do not reveal any fundamental error, calling for correction. The inferences drawn in respect of undeclared income were premised on the materials found as well as the statements recorded by the assessees. These additions therefore were not baseless. Given that the assessing authorities in such cases have to draw inferences, because of the nature of the materials - since they could be scanty (as one habitually concealing income or indulging in clandestine operations can hardly be expected to maintain meticulous books or records for long and in all probability be anxious to do away with such evidence at the shortest possibility) the element of guess work is to have some reasonable nexus with the statements recorded and documents seized. In tills case, the differences of opinion between the CIT (A) on the one hand and the AO and ITAT on the other cannot be the sole basis for disagreeing with what is essentially a factual surmise that is logical and plausible. These findings do not call for interference. The second question of law is answered again in favour of the revenue and against the assessee. 69. What weighed with the Court in the above decision was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uisition shall abate . Once those proceedings abate, the decks are cleared, for the Assessing Officer to pass assessment orders for each of those six years determining the total income of the assessee which would include both the income declared in the returns, if any, furnished by the assessee as well as the undisclosed income, if any, unearthed during the search or requisition. The position thus emerging is that the search is initiated or requisition is made, they will abate making way for the Assessing Officer to determine the total income of the assessee in which the undisclosed income would also be included, but in case where the assessment or reassessment proceedings have already been completed and assessment orders have been passed determining the assessee's total income and such orders subsisting at the time when the search or the requisition is made, there is no question of any abatement since no proceedings are pending. In this latter situation, the Assessing Officer will reopen the assessments or reassessments already made (without having the need to follow the strict provisions or complying with the strict conditions of Sections 147, 148 and 151) and determine the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment of the total income in respect of each assessment year falling within the six assessment years, is merely reading the said provision in isolation and not in the context of the entire section. The words 'assess' or 'reassess' have been used at more than one place in the Section and a harmonious construction of the entire provision would lead to an irresistible conclusion that the word 'assess' has been used in the context of an abated proceedings and reassess has been used for completed assessment proceedings, which would not abate as they are not pending on the date of initiation of the search or making of requisition and which would also necessarily support the interpretation that for the completed assessments, the same can be tinkered only based on the incriminating material found during the course of search or requisition of documents. The Allahabad High Court in Commissioner of Income-tax (Central, Kanpur v. Smt. Shaila Agarwal (supra) has held as under:- 19. The second proviso to Section 153A of the Act, refers to abatement of the pending assessment or re- assessment proceedings. The word 'pending' does not operate any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act in pursuance of search or requisition is required to be made. In view of the above discussion, the answer to the substantial question of law (iv) above is in the positive and against the appellant assessee, the other three questions consequently do not arise, and, as such, the appeal fails and is, therefore, dismissed. No costs. Therefore, no addition can be made to the income of the assessee that has already been assessed except on the basis of some any incriminating material. In the absence of any incriminating material the completed the assessment can be reiterated while framing U/s 153A of the Act. Thus the AO is not permitted to disturb the income has finalized in the completed assessment dehors incriminating material while making the assessment U/s 153A of the Act. The reassessment U/s 153A shall have connection with something found during the search i.e. incriminating material revealing undisclosed income. Therefore, any addition or disallowance can be made only on the basis of material gathered during the search and requisition and in case has no incriminating material is found the earlier assessment would have to be reiterated while completed U/s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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