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TMI Blog2022 (4) TMI 492X X X X Extracts X X X X X X X X Extracts X X X X ..... r is contrary to law, facts, and in the circumstances of the case. 2. The CIT (Appeals) erred in sustaining the validity of the search assessment upon rejecting the technical issues raised including lack of search/seized materials in para 7.25 of the impugned order without assigning proper reasons and justification. 3. The CIT (Appeals) failed to appreciate that the order of search assessment was passed out of time, invalid, passed without jurisdiction and not sustainable both on facts and in law on various grounds. 4. The CIT (Appeals) failed to appreciate that the cleavage of judicial opinion on the jurisdictional issue would fortify the plea for adopting the view favourable to the tax payer and ought to have appreciated further that the analysis of the decisions on the said technical issue was completely erroneous and tangentpial in nature while vitiating the related findings. 5. The CIT (Appeals) erred in rejecting the grounds challenging the validity of the assessment order in para 5.6 of the impugned order without assigning proper reasons and justification and ought to have appreciated that the perversity in recording the facts relating to the dispatch of the assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ched u/s 132 on 11.05.2012. In response to notice u/s 153A, the assessee offered return of income declaring income of Rs. 35.30 Lacs. The assessee offered rental income of Rs. 32.72 Lacs and claimed interest on borrowed capital for Rs. 8.51 Lacs. Upon perusal of documents, it was noted that the loan was given to the assessee against future rental rather than for construction of building. Accordingly, the interest as claimed under the head 'income from house property' was disallowed. The assessee was saddled with another addition of Rs. 0.38 Lacs under the head 'income from other sources', being amenities & others charges received from tenants. The last addition of Rs. 25.84 Lacs represents unexplained investment in gold jewellery, silver and diamond. Though the assessee had filed wealth tax return and submitted that there were no fresh purchases during the year, however, it was found that the returns were filed after due date and hence, it was an invalid return. Accordingly, the amount was added to assessee's income as unexplained investments. Appellate Proceedings 6.1 During appellate proceedings, the assessee raised various legal grounds. One of the grounds was that in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld have been made by Ld. AO was to be strictly based on incriminating material found during the course of search operations as held by Hon'ble Bombay High Court in CIT V/s Continental Warehousing Corporation [2015; 374 ITR 645]. In other words, unless any incriminating material was unearthed, no additions could be sustained in the hands of the assessee. 8. We find that similar view has been expressed by Hon'ble Delhi High Court in CIT Vs. Kabul Chawla (380 ITR 573) which has summarized the legal position as under: - 37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: i. Once a search takes place under Section 132 of the Act, notice under Section 153A(1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. iii. The AO will exer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by Hon'ble Supreme Court on 02.07.2018 which is reported at 96 Taxmann.com 468. The decision of Hon'ble Court was as under: - 1. Delay condoned. 2. We do not find any merit in this petition. The special leave petition is, accordingly, dismissed. 3. Pending application stands disposed of. 10. The Ld. CIT-DR has relied on the decision of Hon'ble Kerala High Court in the case of E.N. Gopakumar V/s CIT (75 Taxmann.com 215; 03.10.2016) which has taken contrary view by relying upon its earlier decision in CIT V/s St. Francis Clay Décor Tiles (70 Taxmann.com 234; 22.03.2016). However, upon perusal of decision of Hon'ble Court in CIT V/s St. Francis Clay Décor Tiles (supra), we find that the said case is factually distinguishable. In that case, the admitted facts were that the Managing Partner of the assessee had given voluntary statement to the Assessing Officer that there is a undisclosed income of Rs. 2.75 Crores. The admission was retracted by the Managing Partner subsequently. On the basis of these facts, it was concluded by Hon'ble Court that since there was a disclosure made by giving a statement during the course of search and therefore, the Assessing Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in that case Ld. AO, in the proceedings u/s 153A, had made several additions, relying upon the incriminating material found in the course of search. It was undisputed fact that there was incriminating material unearthed by the revenue including statement of Shri Sanjay Agrawal, GM (Marketing). It was never the case of the assessee that the initiation of proceedings u/s 153A was bad or unwarranted in law as no incriminating material was found during the search. Therefore, this decision, in our opinion, has no application to the present case before us. 13. The next decision as referred to be Ld. CIT-DR is the decision of Hon'ble Allahabad High Court in CIT V/s Rajkumar Arora (52 Taxman.com 172). Upon perusal, we find that incriminating material was found by the revenue during the course of search operations. It is in this context, Hon'ble Court held that Ld. AO had power to reassess returns of assessee not only for undisclosed income, which was found during search operation but also with regard to material that was available at time of original assessment. Similar is the case law of Hon'ble Karnataka High Court in Canara Housing Development Co. V/s DCIT (49 Taxmann.com 98) wherei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. Aggrieved, the assessee is in further appeal before us. 17.2 Facts being pari-materia the same as in AY 2007-08, our findings as well as adjudication as contained therein shall apply with full force to AYs 2008-09, 2009-10 & 2010-11. All these years are non-abated years and the time limit to scrutinize the returns of income had already expired. Accordingly, the legal grounds raised in AYs 2008-09 to 2010-11 stands allowed. The issues, on merits, have been rendered academic in nature. All these appeals stand allowed in terms of our above order. Assessee's Appeal, ITA No.1686/Chny/2019, AY 2011-12 18. In this year, the time limit to issue notice u/s 143(2) had not expired. The original return of income was filed by the assessee on 14.03.2012 at Rs. 30.97 Lacs and search took place on 11.05.2012. Therefore, the ratio of earlier years would not apply to this year. 19. In response to notice u/s 153A, the assessee filed return on 26.03.2013 and admitted income of Rs. 30.58 Lacs. The issue which forms subject matter of appeal before us are adjudicated as under: - (i) Interest on borrowed capital The assessee claimed interest in borrowed capital for Rs. 8.74 under the head 'Incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rounds are concerned, we find that the assessee was subjected to search action on 11.05.2012. The assessee had already filed return of income on 14.03.2012. However, the time limit to issue notice u/s 143(2) had not expired and Ld. AO could have issued said notice by 30.09.2012. Therefore, it is not a case of concluded assessment. Rather Ld. AO was well within his right to make any addition after examination of assessee's books of account. The legal proposition laid down by Hon'ble Delhi High Court in Kabul Chawla (supra) also supports this view. No infirmity has been shown to us in the jurisdiction acquired by Ld. AO. Therefore, the legal grounds urged by the assessee stand dismissed for this year as well as for AY 2012-13. The appeal stands partly allowed in terms of our above order. Assessee's Appeal, ITA No.1687/Chny/2019, AY 2012-13 21. In this year, the subject matter of appeal is disallowance of interest on borrowed capital and notional rental income on three properties which is on same line as in AY 2011-12. Another notional addition of interest of Rs. 0.40 Lacs has been made since the assessee advanced interest free loans. Upon further appeal, Ld. CIT(A) rendered its dec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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