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TMI Blog2020 (8) TMI 558X X X X Extracts X X X X X X X X Extracts X X X X ..... error in the findings recorded by the Ld.CIT(A) to delete additions made by the Ld. AO towards disallowances of deductions claimed u/s 80IA(4) - Decided against revenue. - ITA No’s.502 & 503/Mum/2019 - - - Dated:- 20-5-2020 - Shri G. Manjunatha, Accountant Member And Shri Ravish Sood, Judicial Member For the Assessee : None For the Revenue : Ms.Anupama D.Shukla, DR ORDER PER G.MANJUNATHA, ACCOUNTANT MEMBER: These two appeals filed by the revenue are directed against separate, but identical orders of the Ld. Commissioner of Income Tax (Appeals)-47, Mumbai, both dated 01/11/2018 for the Asst. Years 2005-06 2006-07. Since, facts are identical and issues are common, for the sake of convenience, these appeals were heard together and are disposed-off by this consolidated order. ITA.No.502/Mum/2019 for AY 2005-06:- 2. The revenue has, more or less raised common grounds of appeal for both assessment years. Therefore, for the sake of brevity, grounds of appeal filed for the AY 2005-06 are reproduced as under:- 1. On the facts and the circumstances of the case and in law the Ld. CIT(A) erred in granting relief of ₹ 1 ,59,75,951 /- to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gly, notice u/s 153A of the I.T.Act, 1961 was issued. In response to notice, the assessee had filed the return of income on 22/01/2010, declaring total income of ₹ 4,55,05,830/- Thereafter, the case has been selected for scrutiny and notice u/s 143(2) of the I.T.Act, 1961, dated 27/08/2010 along with questionnaire was issued and duly served on the assessee. Meanwhile, the assessee had challenged notice issued u/s 153A, dated 23/12/2009 by way of writ with Hon ble Bombay High court and challenged the validity of the search in absence of incriminating evidence found as a result of search. However, the writ petition filed before the Hon ble Bombay High Court has been, subsequently withdrawn and accordingly, the Hon ble Court has not expressed any opinion on the validity of search proceedings. Thereafter, the Ld. AO has completed u/s 143(3) r.w.s. 153A of the I.T.Act, 1961 on 25/06/2015 and determined total income at ₹ 6,14,81,780/-, after making additions towards disallowances of deductions claimed u/s 80IA(4) of the I.T.Act, 1961 by reallocating certain expenses from non eligible business to eligible business. 5. Aggrieved by the assessment order, the assessee ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s M/s. AEG Infraloaistics Ltd. - A.Yrs 2005-06 2006-07 - Remand Report- Reg. - Please refer to the above. 2. In the appeals filed by the above mentioned assessee for assessment years 2005-06 2006-07, the appellant has claimed that no incriminating documents have been found during the course of search operation carried out on the appellant on 07.10.2009. Accordingly, it has been stated that no disallowance can be made u/s 80IA(4) in an assessment made u/s 153A r.w.s 143(3) of the Income Tax Act 1961, in view of the judgment of the Hon'ble Bombay High Court in the case of CIT Vs. Continental Warehousing Corporation 2015) 279 CTR 0389 (Bom). 3. In view of the above facts and circumstances, you are hereby directed to furnish the incriminating documents/statements recorded on the basis of which disallowance u/s 80 IA (4) has been made in the assessment order passed u/s 153A r.w.s 143(3) of the Act. 4. Your remand report in the matter should reach this office through the Addl.CIT, Range-1, Mumbai, latest by 10.08.2018 . (RAJESHWAR YADAV) Commissioner of Income Tax (A)-47, Encl. as above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a-vis the years in which no 80IA claimed. 4. Details of properties purchased and the source of the same. 5. Details of sale and lease back transactions. 5. Copy of the Annexure 6E containing aforesaid information in the Appraisal Report is enclosed for kind perusal. Submitted. Yours faithfully, (Rajgopal K. Parthasarathy) DCIT, Central Circle -1(2), Mumbai. 10.3 A perusal of the Remand Report, as also the assessment order reveals has failed to brine on record any incriminating material or adverse statement in relation to the disallowance made u/s 80IA(4) of the Act in the impugned assessment order. It is pertinent to note here that in this case the original assessment u/s 143(3) of the Act was already completed u/s 143(3) of the Act on 26.12.2007, before the search operation was conducted on the Appellant on 07.10.2009. Thus, this is a case of completed assessment and hence the assessment has not abated in the present case. In the case of the completed assessments, the AO can make addition, only on the basis of incriminating material found during the course of the search operation in the assessment order passed u/s 153 A. In the present case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uments. Thus, the AO is not empowered to disturb the claim of deduction u/s 80IA of the Act by apportioning common expenses in the case of a completed assessment, specifically when there is no incriminating material on record. In the absence of incriminating documents, the action of the A.O. in making a disallowance u/s 80IA of the Act, while making an assessment u/s 153A of the Act is totally against the various judicial pronouncements and legal precedents on the issue. 10.8 I have also noted that after the AO had issued a notice u/s 153A of the Act, the Appellant had filled a writ petition with the Hon'ble Bombay High Court. The Appellant had withdrawn the said writ petition and the Hon'ble Bombay High Court has disposed of the said writ petition, vide order dated 29,04.2015. Though, the Hon'ble Bombay High Court had refrained from expressing any opinion on merits, but in Para 3 of the said order have highlighted certain contentions of the Appellant, which needs special reference and hence, are reproduced hereunder:- (a) The notice u/s 153A is not legal and valid as the foundation for it is not any incriminating material found during the search whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt, if any, relating to any assessment year falling within the period of six assessment years and for the relevant assessment year or years referred to in this subsection pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate . 10.12 Further, in Para 65.5 of the CBDT Circular No. 7/2003 dated 05.09.2003 giving explanatory notes on the provisions relating to direct taxes in the Finance Act, 2003, the CBDT has clarified as under:- 65.5 The Assessing Officer shall assess or reassess the total income of each of these six assessment years. Assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years pending on the date of initiation of the search under section 132 or requisition under section 132A, as the case may be, shall abate. It is clarified that the appeal, revision or rectification proceedings pending on the date of initiation of search under section 132 or requisition shall not abate. Save as otherwise provided in the proposed section 153A, section 153B and section 153C, all other provisions of this Act shall apply to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... initiation of the search, it shall abate. In other words pending proceedings will not be proceeded with thereafter. 10.16 It has been categorically observed in the above mentioned judgment that only the pending proceedings, as on the date of search shall abate meaning thereby that the completed proceedings attains finality. 10.17 The use of the phrase 'so far as may been section 153A(l)(a) implies that all the provisions of the Act as contained under Chapter XIV prescribing the procedure for assessment or under any other Chapter of the Act with respect to the return of income filed U/s. 139 shall be applicable to the returns filed pursuant to notice issued U/s. 153A/153C of the Act. The applicability of those provisions which are inconsistent with the provisions of section 153A are restricted by the use of the phrase 'so far as may be'. 10.18 As such, for the assessments proceedings which are abated, the AO gets all the powers prescribed under the law, as if the assessment is being made for the first time. Thus, if the assessment is made for the first time, all the provisions of assessment, relevant for making of an assessment u/s. 143(3) shall be applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eassessments would not abate. iii, Therefore, the argument of the revenue, that on initiation of proceedings under Section 153A, the assessments/reassessments finalised for the assessment years covered under Section 153A of the Income-tax Act stand abated cannot be accepted. Similarly on annulment of assessment made under Section 153A(1) what stands revived is the pending assessment/reassessment proceedings which stood abated as per section 153A(1). 10.21 A similar view has been taken by the Hon'ble Bombay High Court (Nagpur Bench) in case of MurliAgro Products Ltd Vs. CIT49 Taxman.com 172in ITA No 36 of 2009, wherein it has been held that on initiation of proceedings U/s. 153A, it is only the assessment proceedings that are pending on the date of conducting search U/s. 132 or making requisition U/s. 132A of the Act that stand abated and not the assessments already finalised. The relevant excerpts of the judgment are reproduced hereunder:- 9. What Section 153 A contemplates is that, notwithstanding the regular provisions for assessment/ reassessment contained in the IT Act, where search is conducted under Section 132 or requisition is made under Section 132A on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment finalized on 29-12- 2000. 12. Once it is held that the assessment finalized on 29.12.2000 has attained finality, then the deduction allowed under section 80HHC of the Income-tax Act as well as the loss computed under the assessment dated 29-12-2000 would attain finality. In such a case, the A.O. while passing the independent assessment order under Section 153A read with Section 143(3) of the IT. Act could not have disturbed the assessment/reassessment order which has attained finality, ^ ^Ti unless the materials gathered in the course of the proceedings under Section 153A of the Income-tax Act establish that the reliefs granted under the finalized assessment/reassessment were contrary to the facts unearthed during the course of 153A proceedings. 13. In the present case, there is nothing on record to suggest that any material was unearthed during the search or during the 153A proceedings which would show that the relief under Section 80 HHC was erroneous. In such a case, the A.O. while passing the assessment order under Section 153A read with Section 143(3) could not have disturbed the assessment order finalised on 29.12.2000 relating to Section 80 HHC deduction a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rial, the concluded assessments could not be interfered U/s. 153A of the Act. In the facts of that case, it was held that the documents seized have no reference to the income of the assessee for relevant assessment year and, thus, the AO has no jurisdiction to make the re-assessment U/s. 153A. 10.26 The Hon'ble Delhi High Court in the case of Pr. CIT vs. Lata Jain (ITA 274 and 276 of 2016), considering the ratio laid down in the case of CIT vs. Kabul Chawla [2016] 380 ITR 573, has held that section 153A assessment cannot be made for the assessment years in which incriminating material is not recovered even though incriminating material may be recovered for other years in the block of 6 years. 10.27 In case of MGF Automobiles Ltd, vs. ACIT (ITA No.4212/Del/2011), the Hon ble Delhi ITAT observed as under:- ...there are three possible circumstances that emerge on the date of initiation of search u/s 132(1): (a) proceedings are pending; (b) proceedings are not pending but some incriminating material found in the course of search indicating undisclosed income and/or assets and (c) proceedings are not pending and no incriminating material has been found. In circum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view that assessments which are completed U/s 143(3) do not abate. Further, proceedings U/s. 153A do not empower the AO to re-adjudicate the same issues again, unless fresh incriminating material is found during the course of search. The Assessing Authority cannot disturb the assessment order which has attained finality, unless the material gathered during the course of search, establishes that the income computed in the finalized assessment was not in accordance with the facts unearthed during the course of search. 10.32 In view of the above legal and factual position, the Ground No. 1 to Ground No. 3 of the present appeal are allowed. 6. The Ld. DR submitted that the Ld.CIT(A) has erred in granting relief to the assessee on account of deductions claimed u/s 80IA(4) of the I.T.Act, 1961 stating that no disallowances towards deductions claimed u/s 80IA(4) of the I.T.Act, 1961 is called for in the assessment framed u/s 153A of the I.T.Act, 1961, as there are no incriminating material found during the course of search and the assessment has reached its finality and was not abated at the time of initiation of proceedings u/s 132(1) of the I.T.Act, 1961. The Ld. DR, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, where the High Court has upheld the claim of deductions claimed u/s 80IA(4) of the I.T.Act, 1961. Therefore, we are of the considered view that in absence of any incriminating material found as a result of search, no additions could be made in the assessment framed u/s 143(3) r.w.s. 153A of the I.T.Act, 1961, when the assessment year in question was unabated as on the date of search. In this case, there is no doubts with regard to the fact that the assessment year in question was unabated as on the date of search. Therefore, we are of the considered view that there is no error in the findings recorded by the Ld.CIT(A) to delete additions made by the Ld. AO towards disallowances of deductions claimed u/s 80IA(4) of the I.T.Act, 1961. Hence, we are inclined to upheld the findings of the Ld.CIT(A) and reject ground taken by the revenue. 8. In the result, appeal filed by the revenue is dismissed. ITA No.503/Mum/2019 for AY 2006-07: 9. The facts and issues involved in this appeal are identical to the facts and issues, which we had considered in ITA No.502/Mum/2019 for AY 2005-06. The reasons given by us in preceding paragraph shall mutatis mutandis apply to this app ..... X X X X Extracts X X X X X X X X Extracts X X X X
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