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TMI Blog2017 (12) TMI 1756X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) has grossly erred in confirming the assessment completed u/s 143(3) r.w.s. 153A of the Income Tax Act, 1961 when no incriminating paper whatsoever was found as a result of search pertaining to the year under appeal, and the additions were made by ld. AO without referring to any single material found during search, thus the consequent order passed deserves to be quashed. 1.1 On the facts and in the circumstances of the case the ld. CIT(A) has grossly erred in sustaining the additions made to the income which already stood assessed u/s 143(1)(a) of the Income Tax Act, 1961 and the time limit to issue notice u/s 143(2) stood expired. Thus, the order passed without referring to a single paper/incriminating material seized during the course of search, when no assessment proceeding was pending as on the date of survey, deserves to be held bad in law and the consequent additions deserve to be deleted. 2. The assessee is a company and engaged in the business of manufacturing and trading of marble blocks. The assessee filed its return of income for the year under consideration on 24.09.2010 declaring a total income of ₹ 57,09,210 and agricultural income of ₹ 1,84,9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AR has relied upon the following decisions:- Jai Steel India v. ACIT 259 CTR 281 ( Raj. H.C.) CIT vs. Kabul Chawla 380 ITR 573 (Del. H.C.) Pr. CIT vs. Meeta Gutgutia 395 ITR 526 (Del. H.C.) Hence, the ld. AR has pleaded that in view of the binding precedent the AO was not having any jurisdiction to make assessment u/s 153A without referring to any incriminating document found or seized during course of search. 4. On the other hand, ld. DR has relied upon the orders of the authorities below and submitted that once the action u/s 132 of the Act was carried out in the case of the assessee the Assessing Officer shall have no option but to assessee or reassee the income of the assessee u/s 153A for 6 years immediately preceding assessment years relevant the previous year in which search is conducted or requisition made. 5. We have considered the rival submissions as well as relevant material on record. The assessee filed its return of income for the year under consideration on 24.09.2010 and therefore, undisputedly the time limit for issuing the notice u/s 143(2) on the return of income filed u/s 139(1) expired on 30.09.2011. A search in the case of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 Section only on the basis of seized material. 58. In Kabul Chawla (supra), the Court discussed the decision in Filatex India Ltd. (supra) as well as the above two decisions and observed as under: 31. What distinguishes the decisions both in CIT v. Chetan Das Lachman Das (supra), and Filatex India Ltd. v. CIT-IV (supra) in their application to the present case is that in both the said cases there was some material unearthed during the search, whereas in the present case there admittedly was none. Secondly, it is plain from a careful reading of the said two . decisions that they do not h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inating 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 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 findings of the search and any other material existing or brought on the record of the AO. vii. Completed assessments 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. 61. It appears that a number of High Courts have concurred with the decision of this Court in Kabul Chawla (supra) beginning with the Gujarat High Court in Saumya Construction (P.) Ltd. (supra). There, a search and s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 assessment or reassessment falling within the six assessment years prior to the search or requisition stands abated and the total income of the assessee is required to be determined under section 153A of the Act. Similarly, sub-section (2) provides for revival of any assessment or reassessment which stood abated, if any proceeding or any order of assessment or reassessment made under section 153A of the Act is annulled in appeal or any other proceeding. 16. Section 153A bears the heading Assessment in case of search or requisition . It is well settled as held by the Supreme Court in a catena of decisions that the heading or the Section can be regarded as a key to the interpretation of the operative portion of the section and if there is no ambiguity in the langua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 reiterated. In this regard, this court is in complete agreement with the view adopted by the Rajasthan High Court in the case of Jai Steel (India) v. Asst. CIT (supra). Besides, as rightly pointed out by the learned counsel for the respondent, the controversy involved in the present case stands concluded by the decision of this court In the case of CIT v. Jayaben Ratilal Sorathia (supra) wherein it has been held that while it cannot be disputed that considering section 153A of the Act, the Assessing Officer can reopen and/or assess the return with respect to six preceding years ; however, there must be some incriminating material available with the Assessing Officer with respect to the sale transactions in the particular assessment year.' 62. Subsequently, in Devangi alias ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... am 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 to some factors like inability of accountant, our busy schedule and some family problems, various purchases and sales of Supari, Gutka and other items dealt by our firms is not entered and shown in the regular books of accounts maintained by our firms. 65. Therefore, there was a clear admission by the Assessees in Smt. Dayawanti Gupta (supra) there that they were not maintaining regular books of accounts and the transactions were not recorded therein. 66. Further, in answer to Question No. 11, the Assessee in Smt. Dayawanti Gupta (supra) was confronted with certain documents seized during the search. The answer was categorical and reads thus: Ans:- I hereby admit that these papers also contend details of various transactions include purchase/sales/manufacturing trading of Gutkha, Supari made in cash outside Books of accounts and these are actually unaccounted transactions made by our two firms namely M/s. Asom Trading and M/s. Balaji Perfumes. 67. By contrast, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the habitual concealing of income and indulging in clandestine operations and that a person indulging in such activities can hardly be accepted to maintain meticulous books or records for long. These factors are absent in the present case. There was no justification at all for the AO to proceed on surmises and estimates without there being any incriminating material qua the AY for which he sought to make additions of franchisee commission. 70. The above distinguishing factors in Smt. Dayawanti Gupta (supra), therefore, do not detract from the settled legal position in Kabul Chawla(supra) which has been followed not only by this Court in its subsequent decisions but also by several other High Courts. 71. For all of the aforementioned reasons, the Court is of the view that the ITAT was justified in holding that the invocation of Section 153A by the Revenue for the AYs 2000-01 to 2003-04 was without any legal basis as there was no incriminating material qua each of those AYs. Conclusion ..... X X X X Extracts X X X X X X X X Extracts X X X X
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