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TMI Blog2019 (11) TMI 1244X X X X Extracts X X X X X X X X Extracts X X X X ..... For the Assessee : Shri Salil kapoor, Adv. and Shri Samarth Choudhari, Adv. For the Revenue : Shri S.S. Rana, CIT(DR) ORDER PER ANADEE NATH MISSHRA, AM (A) This appeal has been filed by the Assessee against the impugned appellate order dated 01.04.2015 passed by Learned Commissioner of Income Tax (Appeals)-29, New Delhi, [ Ld. CIT(A) ,for short] pertaining to Assessment Year 2006-07, on the following grounds: 1. That the notice issued and assessment order passed U/s 153A /143(3) is illegal, bad in law and without jurisdiction. 2. That the addition made by the AO are not based on any incriminating material found during the course of search. Hence assessment order passed U/s 153A/143(3) and the additions/disallowances are illegal, bad in law and without jurisdiction. 3. That in view of the facts and circumstances of the case, CIT (A) has erred in law in upholding the addition U/s 153A made by the AO as no incriminating document was found at the premises of the assessee during the course of search. 4. That the addition/disallowance ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 7,77,649/- and deleted the remaining amount. This present appeal has been filed by the assessee against the aforesaid impugned appellate order dated 01.04.2015 of Ld. CIT(A). (C) At the time of hearing before us, the Ld. Counsel for the assessee contended that no incriminating materials were found / seized at the time of aforesaid search and seizure action under Section 132 of I.T. Act and therefore the AO had no jurisdiction under Section 153A of I.T. Act to make the assessment, whereby the aforesaid additions were made. He further submitted that the issue on this point is squarely covered in favour of the assessee by order of jurisdiction High court in the case of Kabul Chawla vs. CIT (2016) 380 ITR 573 (Delhi). (D) We have heard both sides. We have also perused the materials available on record. There is no dispute between two sides about the fact that no assessment proceedings were pending in the case of the assessee on 05.12.2007, the date of search and seizure action U/s 132 of I.T. Act. It is also a fact that time limit for service of notice under Section 143(2) of I.T. Act in respect of return filed on 22.07.2006. Thus, the Assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sments 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 incriminating material in the case of the assessee for any assessment year (s) (referred to in clause (b) of section 153A(1) of the Income-tax Act) is unearthed as a result of search u/s 132 of the IT Act whether by statement u/s 132(4) of the IT Act or by way of undisclosed investment or by way of incriminating documents or in any other manner. This is how, he held that the disallowance of loss claimed by the assessee for the assessment years 2004-05 and 2005-06 on the ground of claim of various expenses made by the assessee, not being fully verifiable, was in order. The ld. JM reiterated the fact that no incriminating material or document or evidence was found during the course of search in relation to such two assessment years and, hence, the loss so claimed for carry forward and set off should be allowed against the income for the A.Y. 2006-07. 7. It has been noticed above that search in this case was conducted on 20.11.2009. The assessment years under c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 passing of the assessment order except where a notice u/s 143(2) is issued for a scrutiny assessment u/s 143(3) of the Act. In a case, where notice u/s 143(2) is issued, the processing of return u/s 143(1) and the consequential issuance of Intimation does not amount to passing of the assessment order because the assessment order, in such circumstances, is passed after due scrutiny u/s 143(3) of the Act. There can be only one assessment order for one year. The crux of the matter is that where no notice u/s 143(2) is issued within the permissible maximum time, the issuance of Intimation on processing the return u/s 143(1) of the Act, is construed as completion of assessment. However, where such notice is issued, the intimation issued u/s 143(1)(a) loses the character of an assessment order, which in that case, is passed u/s 143(3) after thorough scrutiny. To sum up, an assessment is termed as completed on the passing of an order u/s 143(3) of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Tribunal. It summarized the legal position in para 37 of its judgment as under :- `On a conspectus of Section 153A(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 153 A (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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 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 Chawla (supra) by finding it more closer to the facts of the present case. In the case of Dayawanti (supra), a search and seizure operation was carried out on 22.03.2006. The assessee, along with other family members, surrendered ₹ 3.5 crore at the time of search as additional income in respect of `business carried on outside the books of account in connection with production and sale of gutka. She further admitted in her statement not to have any source of income or any bank account. She still further admitted to being proprietor only on record and, in fact, Shri Anup Gupta looked after all the operations along with the help of other family members. Notice u/s 153A was issued requiring the assessee to furnish returns. In response, she filed a photo copy of the return earlier filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 details in respect of the expenses incurred were not furnished by the assessee during the course of proceedings u/s 153A of the Act. Similar is the position for the assessment year 2005- 06 in which the assessee incurred expenses of ₹ 1.31 crore and claimed loss of ₹ 23.59 lac. The Assessing Officer, in the proceedings u/s 153A, reduced such loss to Rs. Nil, thereby implying that only a part of the expenses to the extent of the amount of loss, was disallowed for non-furnishing of necessary details in support of expenses. The crux of the matter is that only a part of the expenses representing loss for the assessment years 2004-05 and 2005-06 was disallowed and not allowed to be carried forward for set off against the income for assessment year 2006-07 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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, that the assessee was booking bogus expenses in its books of account for the succeeding years, so as to extrapolate the same to the years under consideration. The trump card of the Department s case is the ratio of Dayawanti (supra), which could have been applied only if the Revenue had established the recording of some bogus expenses by the assessee in later years, so as to enable it to draw an adverse inference for the current years. This is absent in the facts and circumstances of the case. Thus, it is vivid that the ratio decidendi in the case of Dayawanti (supra) does not apply to the facts of the case. In the absence of any material, the genuineness of expenses incurred by the assessee, and that too partly to the extent of lo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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