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TMI Blog2020 (8) TMI 817X X X X Extracts X X X X X X X X Extracts X X X X ..... issues and grounds has been raised in Assessment Year 2006-07 and 2007-08 and facts are identical, therefore, same were heard together and are being disposed of by this consolidated order. 3. The facts in brief are that, a search and seizure action was carried out in the case of the assessee on 24.09.2009. Prior to the date of search, the return of income filed for the Assessment Years 2006-07 and 2007-08 had attained finality and assessment for these two Assessment Years were not pending and hence same are reckoned as unabated assessment in terms of 2nd proviso to Section 153A. On a perusal of the assessment order, it is seen that the Assessing Officer, first of all, on perusal of balance-sheet noted that there are preliminary expenses have been debited and observed that the assessee company since incorporation was claiming deduction of an amount equal to 1/10 of incorporation expenses u/s.35D which was Rs. 123 per year. He noted that the assessee company has wrongly claimed deduction of Rs. 12,508 including the amount of expenses incurred during later years which is not allowable in terms of provision of Section 35D. Accordingly, he has disallowed sum of Rs. 11,085 in both the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Years 2009-10 and 2010-11 and there is no whisper about any incriminating material or documents found during the course of search that purchases made during the year from the parties are bogus. It is a well settled law by the Hon'ble Jurisdictional High Court in the case of CIT vs. Kabul Chawla, 380 ITR 573 (Del.), and PCIT vs. Meeta Gutgutia, (2017) 325 ITR 526, that where the assessment has attained finality before the date of search and which are not pending at the time of search, the addition can be made on the basis of incriminating material found during the course of search qua that assessment year. If no such incriminating material has been found then the additions cannot be made within the scope of Section 153/143(3). 7. On the other hand, ld. CIT-DR strongly relied upon the order of the Assessing Officer and Ld. CIT(A) and submitted that here in this case not only during the course of statement u/s 132(4) recorded during the course of search, the CMD of the group company admitted that he has taken accommodation entry of bogus purchases from various entities, but some of the entities were found to be non existence or not having business. Even though these inquiries and s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment Year framed u/s.153A/143(3). The relevant observation and the principle reiterated by the Hon'ble Jurisdictional High Court in the case of Meeta Gutgutia (supra) are reproduced hereunder: "53. At this stage, it is also to be noticed that an elaborate argument was made by Mr. Manchanda on the aspect of the security deposits accepted by the Assessee. These were of two kinds - one was of refundable security deposits and the other for non-refundable security deposits. As far as the refundable security deposits were concerned, the AO himself in his remand report accepted them as having been disclosed. This has been noticed by the CIT(A) in para 7.2.1 of his order for AY 2004-05. As regards non- refundable security deposit, the CIT(A) accepted the AO‟s findings that treating the sum as "goodwill written off on deferred basis‟ was not correct, hence the addition of Rs. 5,09,343 was held to be justified and correct. It was duly accounted for under "liabilities‟ and transferred to income in a phased manner. This was not done by manipulating the account books of the Assessee as alleged by the Revenue. This would have been evident had the return been picked up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 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 Section only on the basis of seized material." 58. In Kabul Chawla (supra), the Court discussed the decision in Filatex India Ltd. v. CIT (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. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evenue 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncriminating 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 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 Principal C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 subsection (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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect 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 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 sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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 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 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 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 purcha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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 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 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 justi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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