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TMI Blog2023 (3) TMI 963X X X X Extracts X X X X X X X X Extracts X X X X ..... r consideration or no addition has been made in the assessment order in the hands of the assessee. The existence of any incriminating material is also not evident from the perusal of the assessment order. As respectfully following the decision of Continental Warehousing Corporation (Nhava Sheva) Ltd. ( 2015 (5) TMI 656 - BOMBAY HIGH COURT] in absence of any incriminating material in the present case, we direct the AO to delete the addition made in the assessment order passed under section 153C r/w section 143(3) - Decided in favour of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... ear under consideration. 4. In the facts and the circumstances of the case and in law, the Ld. CIT(A) erred in upholding the action of the Ld. AO in treating the short term capital gain of Rs. 2,06,55,197 /- as business income. The reasons given in this regard are patently erroneous and unjustified. 4.1. Without prejudice to the above, the Ld. CIT(A) has erred in relying upon certain judgments of the Courts without putting it to the assessee and which are in fact, not applicable to facts of the present case. 4.2. Without prejudice to the above, the Ld. CIT(A) has erred in not allowing deductions of various expenditure incurred like, portfolio management charges, STT and other expenses as deduction while computing the business income. 5. The Ld. CIT(A) erred in upholding the levy of interest under section 234B and 234C of the Act. 6. The Ld. CIT(A) erred in not setting aside the action of the Ld. AO in initiating penalty proceedings under section 271(1)(c) of the Act. 7. The appellant craves leave to add, to amend, alter/delete and/or modify the above grounds of appeal on or before the final hearing." 4. The brief facts of the case as emanating from the record are: The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as under: "6.2 Since the assessee had challenged the validity of the assessment completed under section 143(3) r.w.s. 153C on the ground that no incriminating material was unearthed at the time of the search action the matter was remanded to the AO vide this office letter dated 10.11.2018 for necessary clarification Moreover, the AO was also directed to inform as to whether the relevant search related assessments were abated assessments or non-abated assessments This information was sought since in respect of abated assessments additions/disallowances can also be made in respect of issues which are not backed with incriminating material unearthed at the time of search action. In response, the AO submitted a remand report vide letter dated 20 12 2018 In the said remand report, the AO informed that in the case of the assessee, his claim of Long Term Capital Gain on sale of Pune plot was examined in the post-search investigations prior to lifting of the last prohibitory order. It was further informed that such post-search investigations were also carried out in respect of the assessee's claim of Short Term Capital Gains and exempt Long Term Capital Gains on sale of shares. These ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iring him to file returns for six A. Ys. 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 A Ys will have to be computed by theAOS as a fresh exercise. iii. The AO will exercise normal assessment powers in respect of the six 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/C does not say that additions should be strictly made on the basis of evidence found in the course of 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 secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3C of the Act submitted that since on the date of recording of satisfaction under section 153C of the Act, no assessment proceedings were pending, therefore, the year under consideration is an unabated year and no addition can be made in absence of any incriminating material. The learned AR placed reliance upon the decision of the Hon'ble jurisdictional High Court in CIT Vs. Continental Warehousing Corporation (Nhava Sheva) Ltd., (2015) 374 ITR 645 (Bom.), wherein it was held that no addition can be made in respect of assessments which have become final if no incriminating material is found during the search pertaining to the same. 7. On the contrary, the learned Departmental Representative ("learned DR") by vehemently relying upon the orders passed by the lower authorities submitted that search action cannot be said to be over till the last prohibitory order is issued. The learned DR submitted that the assessee's claim of long-term capital gain on the sale of the Pune plot was examined in the aforesaid investigation prior to the lifting of the last prohibitory order and thus incriminating material was unearthed during the search proceedings. In his short rebuttal, the learned AR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proviso to section 153A(1) of the Act, any assessment or reassessment pending on the date of initiation of the search under section 132 of the Act or making of requisition under section 132A of the Act shall abate. In case of proceedings under section 153C of the Act, such a date is the date on which the books of account or documents or assets, seized or requisitioned, are received from the AO of searched person, as per the first proviso to section 153C(1) of the Act. 10. As noted above, in the present case, the satisfaction under section 153C of the Act was recorded by the AO of the searched entity on 03/10/2017 and on the very same date notice under section 153C of the Act was issued to the assessee, therefore, the cut-off date for the purpose of the first proviso to section 153C(1) r/w second proviso to section 153A(1) of the Act is undoubtedly on 03/10/2017. In the present case, it is an admitted fact that the assessee filed its return of income on 31/08/2015. Further, the time period for issuing notice under section 143(2) was also available till 30/09/2016, being six months from the end of the financial year in which the return was furnished. Since no proceedings under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order in the hands of the assessee. The existence of any incriminating material is also not evident from the perusal of the assessment order. Thus, in view of the above findings and respectfully following the decision of the Hon'ble jurisdictional High Court in Continental Warehousing Corporation (Nhava Sheva) Ltd. (supra), in absence of any incriminating material in the present case, we direct the AO to delete the addition made in the assessment order passed under section 153C r/w section 143(3) of the Act. As a result, grounds no. 3 and 3.1, raised in assessee's appeal are allowed. 12. Grounds no. 1, 1.1, and 2 were not pressed during the course of the hearing. Therefore, these grounds are dismissed as not pressed. 13. Grounds no. 4, 4.1, and 4.2 are rendered infructuous, in view of our findings in respect of grounds no. 3 and 3.1. 14. Ground no.5, raised in assessee's appeal, is pertaining to the levy of interest under sections 234B and 234C of the Act, which is consequential in nature. Therefore, ground no.5 is allowed for statistical purposes. 15. Ground no.6 is pertaining to the initiation of penalty proceedings, which is premature in nature and therefore is dismissed. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Ld. CIT(A) erred in upholding the action of the Ld. AO in treating the short term capital gain of Rs. 4,32,03,384/- as business income. The reasons given in this regard are patently erroneous and unjustified. 4.1. Without prejudice to the above, the Ld. CIT(A) has erred in relying upon certain judgments of the Courts without putting it to the assessee and which are in fact, not applicable to facts of the present case. 4.2. Without prejudice to the above, the Ld. CIT(A) has erred in not allowing deductions of various expenditure incurred like, portfolio management charges, STT and other expenses as deduction while computing the business income. 5. The Ld. CIT(A) erred in upholding the levy of interest under section 234B and 234C of the Act. 6. The Ld. CIT(A) erred in not setting aside the action of the Ld. AO in initiating penalty proceedings under section 271(1)(c) of the Act. 7. The appellant craves leave to add, to amend, alter/delete and/or modify the above grounds of appeal on or before the final hearing." 21. In the hands of Smt. Anjali A. Malpani, the addition was made by the AO on an identical factual basis and even the satisfaction note dated 03/10/2017 is also i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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