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TMI Blog2020 (3) TMI 948X X X X Extracts X X X X X X X X Extracts X X X X ..... .s. 153A of the Act. We note that as rightly argued by the Ld.AR the Hon ble High Court of Calcutta have been consistently held that the additions in the case of search assessment have to be made on the basis of incriminating material, supporting the same, the citation of which have been reproduced in the afore-mentioned paragraph. Therefore, considering the facts and circumstances of the case and submissions of ld. DR and AR along with the decisions relied on, we find no infirmity in the order of CIT(A) and it is justified. Thug ground nos. 1 to 6 raised by the revenue are dismissed. - ITA No. 2148/Kol/2017, C.O. No. 110/Kol/2018 (Arising out of ITA No. 2148/Kol/2017, IT(SS)A No. 139/Kol/2017, C.O. No. 09/Kol/2017 (Arising out of IT(SS)A No. 139/Kol/2017 - - - Dated:- 18-3-2020 - Shri P.M. Jagtap, Vice President And Shri S.S. Viswanethra Ravi, Judicial Member For the Assessee : Mr. R.P. Agarwal, Advocate And Mr. Nirav Seth, FCA For the Revenue : Mr. Imokaba Jamir, CIT DR ORDER PER S.S. VISWANETHRA RAVI, JM The aforesaid two appeals and cross-objections filed by the revenue and assessee respectively against the separate orders dated 14.07.2017 and 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are capital and share premium amount as unexplained cash credit is not justified. The CIT(A) found the submissions of the assessee acceptable and deleted the addition made by the AO u/s 68 of the Act. 8. We note that the CIT(A) held that there was no assessment pending on the date of search and no incriminating documents / papers were seized relevant to issue on hand and the assessment made u/s 153A/143(3) is not based on any incriminating documents. Further, the CIT(A) placed reliance on the decision of Hon ble High Court of Calcutta in the case of Veerprabhu Marketing Ltd. and having not preferring an SLP by the revenue before the Hon ble Supreme Court the CIT(A) held the assessment u/s 153A/143(3) of the Act is invalid. For ready reference relevant portion in page 31 and 32 of the CIT(A) is reproduced herein below: I have considered the findings of the AO in the assessment order, different case laws brought on record and appeal orders passed by my predecessors on this legal issue. I find from the assessment order that during the search and seizure operations conducted u/s 132 of the I.T. Act, 1961, incriminating documents / papers were not seized. At least, additions mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A is already deemed to be imported from the satisfaction recorded by PDIT(Inv). The existence of satisfaction recorded by PDIT(Inv) is liable to be challenged before courts and until such satisfaction is held invalid by any court, the satisfaction recorded by PDIT(Inv) shall continue to hold the fort for purposes of 153A also and it is for this reason there is no further requirement of recording any belief or satisfaction by AO for issue of notice u/s 153A. 11. The conditions of recording the satisfaction of PDIT(Inv), one of the conditions is regarding books or other documents which were not produced or would not have been produced on issue of summons. Thereby implying that post search, while the AO is making assessment, it has to examine the correctness of income disclosed not only based on what material has been gathered during search but also based on these books or documents which in the opinion of PDIT(Inv) would not have been produced upon issue of summons, whether or not such books of accounts or documents have been actually found during search. There are numerous instances when even the books of accounts as per audit reports are not found at any of the premises during s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... might also represent income wholly or partly, which has not been disclosed for the purposes of the Act and it may be contrary to the scheme of the provisions of 132(1) r/w 153A, if it were to be held that power of AO is restricted only to make assessment the evidence found during search. The provisions of 153A not only require assessment of undisclosed income but total income also and the expression total income would include the income emanating from disclosed items, income emanating from partly or wrongly disclosed items as well as income emanating from undisclosed items. U/s 153A, no distinction is made for assessment of total income in the cases which were earlier completed u/s 143(1), the cases which were earlier completed u/s 143(3)/147 or the cases where no return was filed prior to search and in all the three categories, it is as per the scheme of the Act that the total income of the assessee as defined u/s 2(45) needs to be assessed for all the six (6) AYs for which the AO is mandated to issue notice u/s 153A. 13. Further, he argued that u/s 153A, there is a provision for abatement of pending assessments whether or not any evidences were found for that year. There ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 147 to provide that assessing officer may examine, assess or reassess any issue relevant to income which comes to his notice subsequently in the course of proceedings under this section, notwithstanding that the reasons for such issue has not been included in the reasons recorded under subsection(2) of section 148 . 15. Further he adds that even in absence of any explanation u/s 153A also similar to the explanation 3 u/s 147, the intention of the legislature and the scheme of the Act for making assessment u/s 153A where search u/s 132 is initiated, is same i.e. in order to make assessment of total income, after having assumed the jurisdiction to assess total income, the powers of AO shall not remain restricted to mere those material which were seized during search but shall also include the assessment of income based on any entry already recorded prior to search or any claim/relief allowed prior to search, which has been found to be erroneous during the proceedings u/s 153A. There is divergence of judicial opinion on the question of whether assessment u/s 153A can be restricted to only the incriminating material seized during the search or whether the AO can also take a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e proceedings under section 153A Held, yes (f) CIT Vs Anil Kumar Bhatia 352 ITR 493(Delhi) Whether even if assessment order had already been passed in respect of all or any of those six assessment years, either under section 143(1)(a) or section 143(3) prior to initiation of search/requisition, still Assessing Officer is empowered to reopen those proceedings under section 153A without any fetters and reassess total income taking note of undisclosed income, if any, unearthed during search Held, yes (g) CIT-II Vs continental warehousing corporation 235 Taxman 568 (SC) The High Court by impugned order held that no addition can be made in respect of assessments which have become final if no incriminating material is found during search or during 153A proceeding Whether Special Leave Petition filed against impugned order was to be granted Held, yes (i) The dismissal of SLP by supreme court in case of PCIT vs Meeta Gutgutia wherein also the same views were expressed as in Kabul Chawla, would also not lead to conclusion that the question decided by Delhi High court against the revenue in Meeta Gutgutia is settled because the SLP has already been admitted b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment of total income as per the provisions of the I T Act. The word incriminating , as used by the courts in context of section 153C, needs to be applied in the context of section 153A also which has to be seen as something which can have a bearing on the assessment of correct total income u/s 2(45) as per provisions of the Act. 19. The expression have a bearing on determination as used u/s 153C also has a wide connotation which implies that the nexus of the seized documents/ assets to income should only be a logical nexus to the ultimate process of determination of total income and that such evidence need not be in the nature of direct hard evidence. Applying the same principles, the incriminating material for the purposes of section 153A also has to be necessarily construed to be in the nature of a prima facie evidence only (including a circumstantial evidence) and not a hard evidence. The use of the expression books of accounts u/s 153C again suggests that even the entries recorded in the books of accounts, which have not been correctly recorded or camouflaged would also partake the character of incriminating material, if the same has a bearing on the determinatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch is different from the real nature or source as appearing from the evidences found during a subsequent search, then such material/ facts coming to fore now will definitely constitute an incriminating material. In consequence of the same the earlier recorded entries/earlier admitted documents and evidence shall have no force as genuine evidence. If it were held not to be so, then the purpose of 153A would be defeated as it would fail to prevent the mischief, which it sought to prevent just because the entries were already recoded in the books or some documents had already been accepted. Applying the Hayden s rule of mischief, the mere fact that such entries are recorded in the books of accounts or some fabricated or colourful documents have already been accepted as correct, will not prevent such material or entry from being incriminating, if the circumstances suggest otherwise. The Hayden s rule of mischief has been judicially accepted and applied by Calcutta High Court in Reckitt Colman of India Ltd. vs. ACIT (2001) 252 ITR 550 (Cal). 21. The incriminating material can be from the search or even from subsequent surveys or any other enquiries. Recently in CIT Chennai vs Ajit S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whole conduct of the case had been fair . 24. The Madras High Court in case of L. Mohanam vs Mohamed Idris on 24 June, 2011 in O.S.A.No.310 of 2010 has observed as under: 19. In support of his contention, the learned senior counsel for the appellant/plaintiff relied on the decision of the Hon ble Supreme Court in Hamza Haji V. State of Kerala and another reported in (2006) 7 SCC 416, wherein it has been observed that a decision obtained by playing a fraud on Court is liable to be set aside on the basic principle that the party who secured such a decision by fraud cannot be allowed to enjoy its fruits. The learned senior counsel also relied on the observation of the Hon ble Supreme Court in State of Andhra Pradesh and another Vs. T.Suryachandra Rao reported in (2005) 6 SCC 149 to the effect that the fraud vitiates every solemn Act and fraud and justice never dwell together. In A.V.Papayya Sastry and Others Vs. Govt. Of Andhra Pradesh and others reported in (2007) 4 Supreme Court Cases 221 also, the Hon ble Supreme Court has observed that fraud vitiates all judicial acts whether in rem or in personam and that a judgment, decree or order obtained by fraud has to be treated as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tervention on an assumed change of opinion even in cases where order of assessment does not address itself to a given aspect sought to be examined in re-assessment proceedings Held, yes 27. Applying the above principle in the present context also, it can be safely concluded that in the absence of any categorical finding on the genuineness of a claim in an earlier assessment having being accepted on make belief documents/evidences only, it cannot be said that the A.O. has expressed any opinion on the correctness or otherwise of the items/entries disclosed in the return of income already filed prior to the search. The judicial view is very clear wherein it has been held that the mere submission of some documents proving identity or bank account, affidavits in contrast to the other evidences suggesting the transaction to be suspicious cannot be accepted to have established the genuineness of transaction. If any earlier finding has been found to be vitiated or incorrect based on material found subsequently, the AO shall have powers to review such findings based on any tangible material coming to his notice, while exercising power of assessment of total income u/s 153A. 28. He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e should be issued. Once the notice is issued u/s. 153A and assessee s file its return of income for six years then the earlier returns became non est and the returns filed in response to notice u/s. 153A becomes the final return and the A.O. has power to assess or reassess the case for entire six years. The earlier assessment also becomes non est as the earlier return filed by the assessee became non est. 31. The Delhi High Court decision of Pr. Commissioner of Income Tax vs. Niraj Jindal dated February 9, 2017 wherein it is held that once the assessing officer accepts the returns filed u/s. 153A the original return filed u/s. 153A becomes non est which means there was no such return in the eyes of law and action taken over such assessment also becomes non est which shows that Section 153A empowers assessee to file its disclosed and undisclosed return both and similarly it empowers to the A.O. also to assess or reassess the income accordingly. The decision of Pr. Commissioner of Income Tax vs. Niraj Jindal of Delhi High Court which has been affirmed by the Hon ble Supreme Court, has also interpreted the same and holds that once notice under section 153A is issued and appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso can not start doing a fresh assessment that had already been completed either u/s 143(3) or u/s 143 (l) under the Act without having any incriminating material on record. 34. Further in proceedings u/s l53A/153C to reopen the completed assessment is restricted only to the extent of incriminating documents if any. The various High Courts including the jurisdictional Calcutta High Court and jurisdictional ITAT have already held that issues forming part of the items of the regular assessment, are beyond the scope of the search assessment u/s l53Al153C and the AO has no jurisdiction to make additions otherwise than on the basis of the incriminating material found in the course of search. During the course of search, no incriminating document relating to the addition made u/s 68 in respect of share capital was found and seized which is evident from the assessment order as the Ld AO is silent about any incriminating documents found in the course of search. 35. Referring to the Ld. DR s submissions, he submits that generalised allegations have been made which are completely irrelevant given the facts of the instant case. The Ld. DR in his submission has alleged that the term ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jected the books of accounts. There was a confirmation in response to Question No. 11 in Dayawanti Gupta (supra) that there was no year-wise recording of transactions. In the present case, however, there was no such admission; the books of accounts were accepted by the AO. In the present case, during the course of search operations u/s 132 of the Act which was conducted on 05-08-2014, since the assessee company were not able to instantly produce all the relevant documentation or paper works which may be required by the department, the assessee company had offered an additional income of ₹ 1,50,00,000/- to demonstrate co-operative attitude and to avoid unnecessary long drawn litigations with the department and to buy peace. Further the said income of ₹ 1,50,00,000/- formed part of return of income filed under section 153A of the Act. e. Further, that the case of Smt. Dayawanti (supra) has been considered and distinguished by the Hon'ble High Court of Delhi while passing the decision of PCIT vs Meeta Gutgutia (2017) 82 taxmann.com 287 (Delhi). The SLP filed by the department against the order passed by the Hon'ble Delhi High Court was dismissed by the Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hether SLP against said decision was to be dismissed - Held, yes [Para 2] [In favour of assessee] 39. Further referred to the Hon'ble Delhi High Court in the case of PCIT Vs. Kurele Paper Mills Pvt. Ltd. (2016) 380 ITR 571 (DEL) held that in case of search assessment, addition u/s 68 is not justified if no incriminating evidence relating to share capital found in the course of search. 40. The department had filed special leave petition before the Hon ble Apex Court against the above judgment of the Delhi High Court (Pr. CIT vs Kurule Paper Mills P. Ltd.): SLP(C) No. 34554 of 2015 [2016] 380 ITR (st) 64 Ed). The Hon ble Apex Court dismissed the special leave petition filed by the department; The relevant para as mentioned in the ITR is reproduced as under. Their Lordships Madan B. Lokur and SA. Bobde JJ dismissed the departments special leave petition against the judgment dated July 06, 2015 of the Delhi High Court in ITA No. 369 of 2015, whereby the High Court held that no substantial question of law arose since there was a factual finding that no incriminating evidence related to share capital issued was found during the course of search and that the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before issuance of notice u/s 153A. According to the ld. AR, the assessment in the present appeal was completed and unless there is any incriminating material, the AO as no jurisdiction to reopen the assessment which had already been completed. It means to say that without having any incriminating material said to have been found during the course of search that there cannot be any addition in the completed assessment if at all any addition that should be on the basis of incriminating material. 45. In support of its contention, the ld. DR placed the reliance in the case of Raj Kumar Arora 367 ITR 517 which held that there is no requirement of incriminating material for invoking provisions contained u/s 153A of the Act. The ld. AR submits that the decision of Hon ble High Court Allhabad in the case of Raj Kumar Arora (supra) has been considered in the case of Anil Kumar Bhatia reported in 352 ITR 493 by the Hon ble High Court of Delhi which also considered in the case of Kabul Chawla reported in 380 ITR 573. 46. It is pertinent to mention that the Hon ble Jurisdictional High Court of Calcutta considered the same in the case of Salasar Stock Broking Ltd. vide (ITAT No. 264 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 49. According to ld. AR that there was an admission in the case of Dayawanti Gupta regarding non-maintenance of regular books of account and a clear confirmation to a question that there was no recording of year-wise transaction. We note that no admission by the assessee brought on record during the course of search operation and in our opinion that the decision in the case of Dayawanti Gupta is distinguishable. 50. Further regarding that the decision of Hon ble High Court of Kerala in the case of Sunny Jacob Jewellers and Wedding Center which held that there is no requirement under the provisions of the Act requiring revenue department to collect information and evidence for each and every year in order to initiate proceedings u/s 153A of the Act. We find force in the arguments of the ld. AR that the facts of the present case are entirely different from the facts of Sunny Jacob Jewellers and Wedding Center wherein we note that the Hon ble High Court of Kerala found incriminating material against the assessee and was remanded to the file of AO for his consideration by giving an opportunity to the assessee. In the present case as held by the CIT(A) that no incriminating materi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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