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TMI Blog2022 (1) TMI 75X X X X Extracts X X X X X X X X Extracts X X X X ..... overnment and Indian government under the provisions of DTAA. The investigation wing and the assessing officer heavily relied on the information contained in the Base Note which they have confronted with the expectation that assessee will accept the information contained in the Base Note. However, the assessee has denied the ownership of any bank account opened in the HSBC Bank, Geneva and denied the information on the base note except the personal informations. It is fact on record that the addition was made in the assessment under section 143(3) read with section 153A only based on the information contained in the base note, which was not the material found, during search, in the possession of the assessee or in the places where search were conducted. The addition made by the assessing officer wholly based on the information contained in Base Note which was not the material found during the search proceedings either in possession of the assessee or found in the premises were search conducted. The information obtained from outside agencies which was confronted with the assessee during the search cannot be considered as incriminating material found during search proceedings. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icare Group along with other group concerns and individual entities on 16.9.2011. The assessee is a director in Universal Group and was covered under the search and seizure action under section 132 (1) of the Act. Accordingly, notice under section 153A of the Act was issued and served on the assessee. In response, assessee filed return of income on 22.2.2013 declaring total income at ₹ 5,68,36,580/ and exempt income of ₹ 5 34, 51, 653/ . The assessing officer observed that the assessee filed original return of income under section 139 (1) of the Act which was revised on 30.8.2007 declaring total income at ₹ 5 61,29,695/ . Notices under section 143(2) and 142(1) along with questionnaire were issued and served on the assessee. In response, authorised representatives of the assessee attended and furnish the information as called for. 3.1 The assessee is an individual and earned income from salary, house property, capital gain and other sources during the year under consideration. As per the information on record, revenue received information by government of India from the French government under DTAA in exercise of its sovereign powers that some Indian nationals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made in the absence of any incriminating material found in the course of search, no addition could be made and proceedings under section 153A of the Act cannot be initiated. The assessee submitted a detailed submissions and after considering the assessee s submission, Ld CIT(A) rejected the plea of the assessee with the following observations: 8.3.2 I have carefully considered the assessment order as well as the contentions of the assessee. I have perused the copy of the Warrant of Authorization and the Panchnama. It is undisputed fact that the Warrant of Authorization contains the name of the assessee. It:is also undisputed that the Warrant of Authorization was served upon the assessee whose premises were being searched. During the search, a statement was recorded from the assessee. He was shown the base note and was asked regarding the account held in his name in HSBC, Geneva. No doubt, the assessee denied having any such account but the issue on which search was initiated and conducted is the Swiss Bank account held by the assessee. Assessee confirmed that all his personal details as mentioned in the base note are correct. During search, it was found out that assessee did n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the proceedings us. 153A invalid. It is another issue as to whether the said addition would stand the test of judicial scrutiny or not. Coming to the case of Manish Sadhwani, NRI gifts were added in 153A assessment though the said gifts were already reflected in the original return. In the instant case, it is not the claim of the assessee that the above account is reflected in the books/returns and the sources thereof are explained. 8.3.3 In the above background, let us now examine in detail the ratio laid down by the Hon'ble jurisdictional High court as well as Hon 'ble special bench in the case of Continental ware housing/ All cargo. Pursuant to the judgment of the Special Bench of the ITAT in All Cargo Global Logistics 137 ITD 287 (SB) (Mum) the Bombay High Court considered following two Questions: (i) whether scope of assessment u/s 153A in respect of completed assessments is limited to only undisclosed income and undisclosed assets detected during search and (ii) whether in view of the Circular of the CBDT No. 10/2005 the assessee was entitled to deduction us 80 IA(4). In the present case, the first question is relevant and hence let us see what the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the non-abated assessments additions cannot be made if there is nothing on record to suggest that any material was gathered during search or during 153A proceedings. In the case on hand, information was received that assessee holds foreign accounts. Search was conducted with the sole intention of verifying whether these accounts/ amounts are disclosed in the books and during search it was gathered that no such account was reflected in the books of the assessee. As it was found to the contrary, the said amount is assessed as undisclosed income in the relevant year U/$ 153A. In the light of the specific facts of the case, the words used by Honble court which are the material gathered during search or in the course of proceedings u/s 153A assume importance. In the present case material was gathered during search that the assessee did not disclose the foreign bank account in the books and based on this material the proceedings u/s 153A are initiated. It is not disputed that the basis for search and the findings in the search are related to the undisclosed foreign bank account of the assessee and that is the core issue in the search on which the assessments are framed. It is not the ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny one or more of conditions mentioned therein is or are satisfied, i.e. - a) summons or notice has been issued to produce books of account or other documents but such books of account or documents have not been produced, b) summons or notice has been hitp://www.itatonline.org ITA Nos. 5018 to 5022 5059/M/2010 58 or might be issued, he will not produce the books of account or other documents mentioned therein, or c) he is in possession of any money or bullion etc. which represents wholly or partly the income or property which has not been and which would not be disclosed for the purpose of assessment, called as undisclosed income or property. We find that the provision in section 132 (I) does not use the word incriminating document . Clauses (a) and (b) of section 132(1) employ the words books of account or other documents For harmonious interpretation of this provision with provision contained in section 153A, all the three conditions on satisfaction of which a warrant of search can be issued will have to be taken into account. 51. Having held so. an assessment or reassessment ws 153A arises only when a search has been initianed and conducted. Therefore, such an assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of scope of assessment u/s 153A and whether it encompasses additions, not based on incriminating material found in the course of search. The question uses the words incriminating material which again find no mention either in section 132/1) or 153A. Thus, analysis of various scenarios regarding completed assessments does not fall within the ambit of the question posed to us. Therefore, this question may have to decided by the Division Benches in the respective cases depending on the facts of the case. We may however consider the cases cited by other Ld. Counsels in the aforesaid matter 58. Thus, question No. I before us is answered as under : (a) In assessments that are abated, the AO retains the original jurisdiction as well as jurisdiction conferred on him u/s 153A for which assessments shall be made for each of the six assessment years separately ; (b) In other cases, in addition to the income that has already been assessed, the assessment us 153A will be made on the basis of incriminating material, which in the context of relevant provisions means - (i) books of account, other documents, found in the course of search but not produced in the course of o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed out on the Appellant and his related entities on September 16, 2011. During the search action, the search party was carrying one computer printout of some purported foreign account. The Appellant denied its ownership completely. No incriminating material or any corroborative evidence whatsoever, was found during the search. The impugned addition is made in absence of any incriminating material found during search from the Appellant. 2.2 The Return of income was filed by the Appellant on August 30, 2007. [See Pg 1 of the Paper Book ( PB )] Originally, the intimation w/ 143(1) was received upon the Appellant for the captioned year on March 28, 2009 [See Pg 7 of the Paper Book ( PB )]. 2.3 The time limit for issue of notice under section 143(2) of the Act expired on August 31, 2008. It is, therefore, undisputed that the assessment for AY 2007-08 is unabated Treatment by AO: 2.4 The AO initiated proceedings under section 153A of the Act and made an addition of ₹ 88,39,424 based on a piece of paper, being a computer printout, purportedly containing particulars of some overseas account in HSBC Bank (referred to in the Assessment order as Base Note). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment us 153A will be made on the basis of incriminating material, which in the context of relevant provisions means - (i) books of account, other documents, found in the course of search but not produced in the course of original assessment, and (ii) undisclosed income or property discovered in the course of search. The above view has since been upheld by the Hon' ble High Court of Bombay in the case of CIT v. Continental Warehousing Corporation (58 Taxmann.com 78) wherein it has been held that if there is nothing on record to suggest that any material was unearthed during the search or during the 153A proceedings, the AO while passing order under Section 153A read with Section 143(3) cannot disturb the assessment order. 2.9 Similar view was also taken by the Bombay High Court in the case of CIT v. Murli Agro Products Ltd (ITA No. 36 of 2009) wherein it was held that no addition can be made in respect of an assessment us 153A of the Act, if no incriminating material is found during the search. The Bombay High Court in Para 12 of the said judgement held as under : 'Once it is held that the assessment finalized on 29.12.2000 has attained finality, then ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xercising power under Chapter XIV-B are as under:- i) A search under Sec. 132 of the Act where incriminating evidence of undisclosed income is seized; ii) The said income, which was found in such search and is not reflected in the return filed under Sec. 139(1) or 139(4) before the date of search. The High Court categorically held that the existence of both these conditions is sine qua non for initiation of proceedings and passing of block assessment order under Chapter XIV-B of the Act. 2.13 Indeed, various High Courts and Tribunal Benches all over the country have been unanimously taking the view that in the absence of incriminating material found in the course of search addition cannot be made in the order passed under Sec. 153A of the Act. For ready reference citations of some of the decisions on this issue are as under:- Jignesh P. Shah Vs. DCIT (ITAT Mumbai) (ITA No. 1553 3173/Mum/2010) CIT v. Kabul Chawla (ITA No. 707/2014) (Del HC) CIT v. Smt. Shaila Agarwal (346 ITR 130) (All.) 2.14 Thus, the addition made is completely contrary to the binding decision of the Jurisdictional High Court, as well as other decisions of various Hig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... course of search. This legal proposition is further supported by the decision of division bench of the Hon'ble Bombay High Court in the case of Murali Agro Products Ltd vs CIT (2014) 49 taxman.com 72, wherein it was held that no additions can be made in respect of unabated assessment which have become final, if no incriminating material is found during the course of search. This legal proposition is further reiterated by various High Courts, including the jurisdictional High Court in the case of CIT vs Gurinder Singh Bawa 386 ITR 483(Bom), where it was held that once an assessment has attained finality for a particular year i.e. it is not pending, then the same cannot be subject to tax in proceedings u/s 153A of the Act. 2.17 On identical facts, the Hon'ble ITAT in Bishwanath Garodia v.DCIT (76 taxmann.com 81) (Kolkata - Trib.) held as under: 11. Keeping in view the discussion made above, we hold that the additions as finally made to the total income of the assessee on account of transactions reflected in the Bank account of the assessee with HSBC, Geneva, Switzerland and income relating thereto for both the years under consideration are beyond the scope of sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the view that the proposition canvassed by the learned counsel for the Assessee finds support from the various decisions cited by him. The proposition IT(SS)A.Nos.97 98/Kol/2015 Smt. Yamini Agarwal A.Yr.2006- 07 2007-08 canvassed by the learned DR is supported by the decision of the Hon'ble Karnataka High Court in the case of Canara Housing (supra) in which the ruling of the Special Bench in the case of Alcargo logistics (supra) has not been accepted. The Hon'ble Bombay High Court in the case of CIT Vs. Continental Warehousing Corporation ITA No.523/2013 judgment dated 21.4.2015 after referring to the decision of the Hon'ble Delhi High Court in the case of Anil Kumar Bhatia (supra) and of the Hon'ble Karnataka High Court in the case of Canara Housing (supra) has taken the view that the decision rendered by the Special Bench is to be followed. In the subsequent decision rendered by the Hon'ble Delhi High Court in the case of Kabul Chawla (supra), the view expressed by the Special Bench of ITAT in the case of All Cargo Global Logistics (supra) has been accepted. There is no decision of the Hon'ble Calcutta High Court, which is the jurisdictional High Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the discussion above, our conclusion is that in the present case, the issue dealt with by the AO in the assessment order u/s.153A of the Act, could not and ought not to have been examined by the AO in the assessment proceedings u/s.153A of the Act as the said issue stood concluded with the assessee's return of income being accepted prior to the date of search and no notice having been issued u/s.143(2) of the Act within the time limit laid down in that section. Such assessment did not abate on the date of search which took place on 28.3.2008. In respect of assessments completed prior to the date of search that have not abated, the scope of proceedings u/s.153A of the Act has to be confined only to material found in the course of search. Since no material whatsoever was found in the course of search, the additions made by the AO in the order of assessment for both the Assessment years could not have been subject matter of proceedings u/.s.153A of the Act. Consequently, the said various additions made in the orders of Assessment ought not to have or could not be made by the AO. Gr.No.1 raised by the Assessee in both the appeals are accordingly allowed. 2.19 In Anurag Dal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s relevant to collect the information from the foreign bank by the Department. He prayed that the submissions of the Ld AR be set aside. 8. Considered the rival submissions and material placed on record. We observe from the record that a search and seizure operation under section 132 (1) of the Act was conducted on the assessee and his related entities. Accordingly notice under section 153A of the Act was issued and served on the assessee and in response assessee filed his return of income. We observe from the record that the addition was made by the assessing officer during this assessment year pertains to a bank account in HSBC, Geneva. The relevant information on the bank account was not found during search proceedings nor found in the possession of the assessee. However, during search proceedings, the assessee was confronted with the Base Note which the Income Tax Department obtained under exchange of information between French government and Indian government under the provisions of DTAA. The investigation wing and the assessing officer heavily relied on the information contained in the Base Note which they have confronted with the expectation that assessee will accept the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ised by the assessee is allowed. The other grounds raised by the assessee are kept open and not adjudicated at this point of time since we have allowed the jurisdictional ground raised by the assessee. Accordingly, appeal filed by the assessee for this assessment year is allowed. 8.2 With regard to other appeals filed by both Department as well as assessee on penalty levied under section 271 (1) (c) of the Act, the relevant facts are, the penalty levied wholly based on the assessment completed under section 143 (3) read with section 153A of the Act. The assessing officer levied the penalty 300% of the tax sought to be evaded and levied to the extent of ₹ 96,67,680/ . In appeal, Ld. CIT(A) reduced the penalty to hundred percent of the tax sought to be evaded. Aggrieved both revenue as well as assessee are in appeal before us. Since we already held the assessment made under section 143 (3) read with section 153 A is bad in law in para no. 8.1 above and the assessing officer has not found any incriminating material during search, he cannot make any addition in the proceedings under section 153A of the Act, therefore, penalty cannot be levied in this case. Accordingly, w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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