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TMI Blog2022 (6) TMI 1011X X X X Extracts X X X X X X X X Extracts X X X X ..... r under section 132 nor under section 153A, the phraseology incriminating is used by the Parliament. Therefore, any material which was unearthed during search operations or any statement made during the course of search by the assessee is a valuable piece of evidence in order to invoke the provisions of Section 153A of the Income Tax Act, 1961. In the present case, no such admission is shown to have been made by the assessee. The revenue could not place any incriminating material before us which has led to the impugned additions / disallowances. So far as the decision of Hon ble Delhi High Court in Filatex India Ltd. [ 2014 (8) TMI 387 - DELHI HIGH COURT] is concerned, we find that 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 op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner of Income Tax (Appeals)-I, Chennai [in short CIT(A)] dated 30.11.2011 in the matter of assessment framed by the Ld. Assessing Officer [AO] u/s. 153A r.w.s. 143(3) of the Act vide separate orders. The assessee has filed concise grounds of appeal which are substantially the same for all the years. First, we take up appeal for AY 2001-02 wherein the grounds taken by the assessee read as under: - 1. The order of the Learned Commissioner of Income Tax (Appeals) is contrary to the law, facts and circumstances of the case. 2. For that the Learned Commissioner of Income Tax (Appeals) erred in upholding the assessment u/s 153A r.w.s 143(3) as valid, without appreciating the fact that there was no incriminating material found during search and the completed assessment u/s 143(3) prior to search u/s 132 cannot be reopened u/s.153A. 3. For that the Learned Commissioner of Income Tax (Appeals) erred in not considering the fact that Section 153A was introduced by Finance Act, 2012 and the said section provides that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this section pending ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s before lower authorities 3.1 The assessee being resident individual is stated to be engaged as costume designer. The assessee was subjected to search action u/s 132 on 23.01.2007 wherein certain cash and jewellery was found. Certain documents as per Annexure Ann/MM/LS/S dt. 23.01.2007 containing pages 1 to 34 were found and seized. The regular return of income as filed by the assessee was already scrutinized u/s 143(3) on 19.03.2004 determining total income of Rs.25.35 Lacs and Agricultural income of Rs.3.85 Lacs. 3.2 Subsequent to search, notice u/s 153A was issued. In response, the assessee filed return of income offering income of Rs.28.20 Lacs including agricultural income of Rs.3.85 Lacs. In other words, the income as determined u/s 143(3) was offered in response to notice u/s 153A. It is also evident that no assessment proceedings were pending against the assessee on the date of search and this year was a case of nonabated assessment year. 3.3 It transpired that the assessee had offered agricultural income from AYs 2001-02 to 2007-08 and the assessee was directed to file requisite details in support of the same. Pursuant to the directions of Hon ble High Court o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ural produce was sold. The details of agricultural expenses under various head were also furnished. It was also submitted that income from agricultural operations has been offered and accepted in earlier assessment years. 3.8 The Ld. CIT(A), while concurring with assessee s submissions regarding agricultural income, noted that assessee s land was contiguous with the land holdings of her husband Shri A.Vijaykant who had 103.19 acres of agricultural land as against 26.40 acres of land as possessed by the assessee which is approx. 1/4th of landholding of Shri A.Vijaykant. Therefore, the income of the assessee should logically be 1/4th of agricultural income shown by Shri A.Vijaykant. Accordingly, the probable agricultural income of the assessee was reworked by considering 1/4th of agricultural income as reflected by Shri A.Vijaykant. Out of this income, 20% was to be treated as income from other sources for lack of convincing proof. Accordingly, the ground was partly allowed. Aggrieved, as aforesaid the assessee is in further appeal before us. 3.9 We find that the assessee has assailed the quantum addition on a pertinent legal ground that the additions are not based on any inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) and the time limit for issuing notice u/s 143(2) had already expired. The Hon ble Court chose to follow its own decision rendered in CIT Vs. Continental Warehousing Corporation [2015 374 ITR 645]. Therefore, this argument would not hold much water which is also fortified by subsequent decision of Hon ble Bombay High Court in CIT V/s Deepak Kumar Agarwal (398 ITR 586 11/09/2017) which held as under:- 20. At the outset, and since heavy reliance is placed by the Revenue on the Supreme Court judgment in Rajesh Jhaveri Stock Brokers (P.) Ltd. (supra), it would be proper to note the facts in the same. 21. There, the Assistant Commissioner of Income Tax challenged the correctness of the decision rendered by a Division Bench of the Gujarat High Court. That Division Bench judgment allowed the Writ Petition/Special Civil Application of the assessee. 22. The respondent-assessee, a private limited company, filed its return of income for the assessment year 2001-2002 on October 30, 2001, declaring total loss of Rs.2,70,85,105/-. That return was proposed under Section 143(1) of the IT Act accepting the loss returned by the respondent. A notice was issued under Section 148 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ange of opinion did not arise. A reference to Section 147 therefore, was made in the context of the Assessing Officer being authorized and permitted to assess or reassess income chargeable to tax if he has reason to believe that income for any assessment year has escaped assessment. Before us, such is not the position, and even if this judgment of the High Court had been brought to the notice of the Division Bench deciding the Continental Warehousing Corpn. and All Cargo Global Logistics (supra), there would not have been any difference. It was finally held by Hon ble Court as under: - 31. We, therefore, hold that the Special Bench's understanding of the legal provision is not perverse nor does it suffer from any error of law apparent on the face of the record. The Special Bench in that regard held as under:- 48. The provision under section 153A is applicable where a search or requisition is initiated after 31.5.2003. In such a case the AO is obliged to issue notice u/s 153A in respect of 6 preceding years, preceding the year in which search etc. has been initiated. Thereafter he has to assess or reassess the total income of these six years. It is obligator ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntained in section 132(1), the reason being that the latter deals with search and seizure and the former deals with assessment in case of search etc, thus, the two are inextricably linked with each other. 49. Before proceeding further, we may now examine the provision contained in subsection (2) of section 153, which has been dealt with by Ld. Counsel. It provides that if any assessment made under subsection (1) is annulled in appeal etc., then the abated assessment revives. However, if such annulment is further nullified, the assessment again abates. The case of the Ld. Counsel is that this provision further shows that completed assessments stand on a different footing from the pending assessments because appeals etc. proceedings continue to remain in force in case of completed assessments and their fate depends upon subsequent orders in appeal. On consideration of the provision and the submissions, we find that this provision also makes it clear that the abatement of pending proceedings is not of such permanent nature that they cease to exist for all times to come. The interpretation of the Ld. Counsel, though not specifically stated, would be that on annulment of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the word used is shall and, therefore, the AO has no option but to assess or reassess the total income of these six years. The pending proceedings shall abate. This means that out of six years, if any assessment or reassessment is pending on the date of initiation of the search, it shall abate. In other words pending proceedings will not be proceeded with thereafter. The assessment has now to be made u/s 153A (1)(b) and the first proviso. It also means that only one assessment will be made under the aforesaid provisions as the two proceedings i.e. assessment or reassessment proceedings and proceedings under this provision merge into one. If assessment made under subsection (1) is annulled in appeal or other legal proceedings, then the abated assessment or reassessment shall revive. This means that the assessment or reassessment, which had abated, shall be made, for which extension of time has been provided under section 153B. 53. The question now is - what is the scope of assessment or reassessment of total income u/s 153A (1) (b) and the first proviso? We are of the view that for answering this question, guidance will have to be sought from section 132(1). If any books of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs in which both the disclosed and the undisclosed income would be brought to tax. iv. Although Section 153A does not say 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 AO which can be related to the evidence found, it does not mean that the assessment 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. v. In absence of any incriminating 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 procee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of the assessee had given voluntary statement to the Assessing Officer that there was 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 Officer, by virtue of the power conferred on him under section 153A, was competent to issue notice under the said provision and require the assessee firm to furnish the returns as provided there-under. It was further held that neither under section 132 nor under section 153A, the phraseology incriminating is used by the Parliament. Therefore, any material which was unearthed during search operations or any statement made during the course of search by the assessee is a valuable piece of evidence in order to invoke the provisions of Section 153A of the Income Tax Act, 1961. In the present case, no such admission is shown to have been made by the assessee. The revenue could not place any incriminating material before us which has led to the impugned additions / disallowances. Therefore, these case laws are distingui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... return filed by the assessee. The Ld. AO, on similar lines as in AY 2001-02, estimated disallowance of 20% against various expenditure claimed by the assessee. The agricultural income was considered as income from other sources . The adjudication of Ld. CIT(A), on both the issues, is common for AYs 2001-02 to 2005-06. Aggrieved, the assessee is in further appeal before us with similar grounds of appeal. 13. In AY 2003-04, the regular return of income was scrutinized u/s 143(3) on 28.03.2006 determining income of Rs.48.20 Lacs and agricultural income of Rs.9.15 Lacs. The same income was offered in response to notice u/s 153A. The Ld. AO, on similar lines as in AY 2001- 02, estimated disallowance of 20% against various expenditure claimed by the assessee. The agricultural income was considered as income from other sources . In this year, Ld. AO also disallowed Mandram expenses of Rs.10.75 Lacs. The assessee submitted that this issue was already a subject matter of disallowance in original assessment proceedings as decided by Ld. CIT(A). However, rejecting the same, Ld. AO held that the expenditure was related to Pemlatha Peravai where the Mandram was run in individual capac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iminating material as unearthed during the search operations. The Ld. AO has not referred to any incriminating material while making impugned additions / disallowances. Therefore, these are unsustainable in law. We order so. All these appeals stand partly allowed on same lines. ITA No. 26/Chny/2012, AY 2006-07 17. In this year, the assessee has raised similar legal ground as in earlier years. However, the same would not hold good in view of the fact that the assessee was subjected to search action on 23.01.2007 and the time limit to issue notice u/s 143(2) had not expired. Therefore, Ld. AO was well within his statutory right to examine and verify the income declared by the assessee. 18. In this year, the regular return of income was filed by the assessee on 06.07.2006 declaring income of Rs.2.38 Lacs. However, in subsequent return filed on 30.10.2006, the assessee offered taxable income of Rs.1.14 Lacs. In response to notice u/s 153A, the assessee offered return of income on 09.10.2007 declaring income from salary for Rs.1.44 Lacs and agricultural income of Rs.7.25 Lacs. The business loss was shown as Rs.1.09 Lacs. 19. Since the assessee was stated to be residing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o not emanate from the return of income filed by the assessee. No such expenditure or income has been admitted. We find that there is no basis to make this addition and therefore, the same stand deleted. The appeal stand partly allowed. ITA No. 27/Chny/2012, AY 2007-08 23. In this year also, the assessee has raised similar legal ground as in earlier years. However, the same would not hold good for the reasons as stated on para-17. Further, the assessment of this year has been framed u/s 143(3) of the Act. 24. The assessee claimed agricultural expenses of Rs.73,624/- which were disallowed since the same were not related to agricultural income. The business loss was taken as nil since the same was set-off from agricultural income. The agricultural income of Rs.1.75 Lacs was treated as income from other sources . Upon further appeal, Ld. CIT(A) directed Ld. AO to take agricultural income as Rs.0.50 Lacs. Aggrieved, the assessee is in further appeal before us. 25. The issue of agricultural income has already been adjudicated by us for AY 2006-07. Taking the same view, we direct Ld. AO to take agricultural income as Rs.1.75 Lacs. No other ground has been urged before ..... X X X X Extracts X X X X X X X X Extracts X X X X
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