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TMI Blog2023 (3) TMI 285X X X X Extracts X X X X X X X X Extracts X X X X ..... ial precedents, additions are not liable to be sustained. Additions for Unabated assessment year can only be made on the basis of incriminating material found during the course of search - We observe that Ld. CIT(Appeals) while disposing of the objections raised by the in respect of initiation of proceedings under section 153C of the Act, has categorically held that there was no incriminating material which formed the basis of assessment framed under section 153C of the Act. The same is evident from the relevant paragraphs of Ld. CIT(Appeals) order disposing of the objections raised by the assessee in respect of initiation of proceedings under section 153C. In the instant set of facts, no incriminating materials was found during the course of search which formed the basis of initiation of proceedings under section 153C of the Act. We also observe that the instant year is an unabated assessment year where the time limit of completing the assessment proceedings have already been concluded. It is well-settled law that in absence of any incriminating material found during the course of search, proceedings under section 153A/153C of the Act cannot be initiated in case of unabat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bove extent. (7) It is further prayed that the tax effect of this case is Rs. 88,03,410/-,which is more than the monetary limit specified in the Instruction No. of CBDT Circular No. 3/2018, F. No. 279/Misc. 142/2007-ITJ(Pt) dated 11.07.2018 recently issued Circular No. 17/2019 dated 08/08/2019, hence the appeal be decided on merits. 3. The brief facts of the case are that the search action under section 132 of the Act was carried out in the Suraj Group of cases on 18-12-2013. During the course of search, certain incriminating documents were found, which as per the assessing Officer belonged to the assessee. Accordingly, proceedings under section 153C of the Act were initiated by the assessing Officer. During the course of assessment, the AO observed that on verification of the bank statement of M/s Kuntal Investment and Shri Mahesh P. Gandhi, it was seen that there were transfers from the assessee to the aforesaid parties and the assessee has given a total sum of ₹ 2,57,00,000/- and received back a sum of ₹ 1,47,00,000/-. Accordingly, the AO held that the entire credit of ₹ 2,57,00,000/- given to M/s Kuntal Investment and Shri Mahesh P. Gandhi is the u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d law. I have considered the facts of the case, remand report of the AO and the submission and rejoinder of the appellant carefully. Since the initiation of proceedings u/s. 153C is held to be not in accordance with the provisions of law and accordingly no addition was justified as has been held in the first ground of appeal. Thus, this ground of appeal is not required to be decided on merits. The grounds of appeal are allowed. 5. The Department is in appeal before us against the aforesaid order passed by Ld. CIT(Appeals) setting aside the assessment order on the ground of jurisdiction itself. Before us, the DR relied upon the observations made by the Ld. A.O. in the assessment order. In response, the counsel for the assessee reiterated the submissions made before Ld. CIT(Appeals) and submitted that it is a settled law that addition under section 153C of the Act can be made only on the basis of incriminating material found during the course of search. In the instant case, admittedly the additions were made on the basis of bank statements of the assessee examined by the A.O. during the course of assessment proceedings. Accordingly, Ld. CIT(Appeals) has correctly set aside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from 1.6.2015, the controversy in the present case arises because the searches in all these case had been conducted prior to 1.6.2015, whereas the proceedings under section 153C of the Act have been initiated after that date and it is in this backdrop that the validity of the impugned notices has been called in question. It is the case of the petitioners that the proceedings under section 153C of the Act are triggered by the search, and hence the provisions of law as existing on the date of the search have to be followed, while it is the case the respondents that the provisions of law as existing on the date of recording of satisfaction by the Assessing Officer of the person searched and the date of issuance of notice under section 153C of the Act have to be followed. 19.8 While it is true that section 153C of the Act is also a machinery provision for assessment of income of a person other than the person searched, in the opinion of this court, this is not a case where by virtue of the amendment, there is merely a change in the procedural provisions affecting the assessees who were covered by the unamended provision. By the amendment, a new class of assessees are sought to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer of the searched person could have formed the requisite belief that the books of account or documents seized or requisitioned pertain to or the information contained therein relates to the petitioners. 6.2 In the case of Index Securities (P.) Ltd[2017] 86 taxmann.com 84 (Delhi) , the Delhi High Court held that the essential jurisdictional requirement for assumption of jurisdiction under section 153C (prior to its amendment with effect from 1-6-2015) qua other person is that seized documents forming basis of satisfaction note must not merely pertain to other person but must belong to other person . During course of assessment proceedings, in case of a company, a number of documents were found and seized which contained trial balance and balance sheet of assessee company for period 1-4-2010 to 13-9-2010. Though seized documents might pertain to assessee, same was not proved to belong to assessee . Hence, since essential requirements for assumption of jurisdiction under section 153C were not met, issuance of notice was unjustified. 6.3 Again, the Delhi High Court in the case of Pepsico India Holdings (P.) Ltd.2014] 50 taxmann.com 299 (Delhi) held that unles ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 153C of the Act, has categorically held that there was no incriminating material which formed the basis of assessment framed under section 153C of the Act. The same is evident from the relevant paragraphs of Ld. CIT(Appeals) order disposing of the objections raised by the assessee in respect of initiation of proceedings under section 153C of the Act. The relevant extracts of the order passed by Ld. CIT(Appeals) are reproduced below for reference: 26 It is an undisputed fact that on the date of initiation of the search no assessment proceedings were pending in this assessment year. Therefore, the proceedings were not abated in the case as mentioned in the second proviso to section 153A of the Act. It seems that the A.O. lost sight of the fact that he was not making an assessment under section 153(A)(1) of the Act read with its second proviso. As discussed hereinabove, there is no indication in the contents of the assessment order that the addition was made on the basis of any incriminating material found and seized in search at the place of appellant. 6.9 In the instant set of facts, no incriminating materials was found during the course of search which form ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 153A of the Act. 6.15 In the case of PCIT v. Devangi [2017] 88 taxmann.com 610 (Gujarat) , after the search conducted at the assessee's premises, the Assessing Officer initiated proceedings under section 153A of the Act on the basis of the incriminating material seized for the period of the assessment year 2004-05 onwards, and made the addition for the assessment years 2000- 01 to 2004-05. The Tribunal deleted the addition holding that only undisclosed income and undisclosed assets detected during the search could be brought to tax and in assessee's case no incriminating material was found with respect to the assessment years 2000-01 to 2004-05, at the time of search. The Gujarat High Court held that the Tribunal was correct in law in holding that the scope of section 153A was limited to assessing only search related income. 6.16 The Delhi High Court in the case of CIT v. Kabul Chawla[2015] 61 taxmann.com 412 (Delhi) held that completed assessments can be interfered with by Assessing Officer while making assessment under section 153A only on basis of some incriminating material unearthed during course of search which was not produced or not already disclosed or mad ..... X X X X Extracts X X X X X X X X Extracts X X X X
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