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TMI Blog2023 (9) TMI 1420X X X X Extracts X X X X X X X X Extracts X X X X ..... income within 30 days from the date of receipt of notice. As the assessee has not filed the return of income within the stipulated time, the reminders were issued to the assessee on various dates. The assessee finally filed the return of income u/s 153A of the Act on 24.8.2016. The assessee has not paid the self-assessment tax on the same. Notice has been issued to the assessee as to why return should not be treated as defective return. The assessee paid the self- assessment tax on 14.12.2016 and filed the return on 20.12.2016 incorporating the same. Therefore, notice u/s 143(2) of the Act dated 21.12.2016 was issued and served on the assessee. Finally, assessment has been completed u/s 143(3) of the Act making additions of Rs. 1,04,57,255/- u/s 68 of the Act. 2.2. The common ground in all these appeals is that assessment passed u/s 143(3) r.w.s. 153A of the Income-tax Act,1961 ['the Act' for short] is bad in law and void-ab-initio since there was valid search conducted in the premises of the assessee. Consequently, the provisions of section 153A of the Act have no application and therefore, the assessment order passed deserve to be cancelled. The ld. A.R. also submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... impugned order aji 11.2.2015. Nonetheless, retrospective effect of the said amendment, will have its effect on the present case as well so long that the said Amendment holds the field Therefore, the Appellate Authorities of the Department cannot be expected to go into the said question. It is only for the Constitutional Courts to examine the vires and validity of such Amendment and for that, a separate writ petition is already said to be pending. However, no such challenge to the Amendment has been made in the present case. 11. In these circumstances, the impugned order Annexure-A dated 11.2.2015 passed by the learned CIT(A)cannot be faulted and it stands to the reason for the learned CIT(A) to have followed the Chhattisgarh High Court's decision and refused to do so." 2.4. Being so, in our opinion, there is no merit in the argument of ld. A.R. regarding validity of search carried out by the department u/s 132 of the Act and consequently framing of assessment cannot be questioned on this reason. This ground of appeal of the assessee in ITA Nos.1108 to 1110/Bang/2022 is dismissed. ITA No.1108/Bang/2022 (AY 2009-10): 3. Next ground in this appeal is with regard to sustaining ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt u/s 153A of the Act by placing reliance on the judgement of Hon'ble Karnataka High Court in the case of Canara Housing Development Company (62 Taxmann.com 650) with regard to sustaining addition of Rs. 39,85,184/-, he observed that on merit of the addition of Rs. 39,85,184/- the claim of the assessee is that the same pertained to income already accrued in the AY 2008-09. However, this claim of the assessee is wholly unsubstantiated. In this regard the ld. CIT(A) observed that it is important to 'look into the reply dt. 24/11/2016 filed before AO during assessment proceedings. The same is reproduced as follows: 3.3. The ld. CIT(A) observed that on perusal of para 3 of this reply clearly shows that the assessee had admitted that she was not in a position to ascertain the exact year to which the amount of Rs. 39,85,184/- relates and in para 4 the assessee had voluntarily offered the amount of Rs. 39,85,184/- as her income for the year under consideration. Further, he observed that the total amount claimed to be income of AY 2008-09 is Rs. 1,04,57,255/-, however the assessee was not able to explain this amount of Rs. 39,85,184/- even on the basis of TDS certificate or the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... placed on this document too. 3.7. The ld. CIT(A) further observed that the above factors compounded with the fact that the assessee was not able to produce any service agreement with M/s. Embassy Services (a related party) pertaining to FY 2007-08, although huge amount of professional fee is being claimed to be involved; non availability of a bank account for receiving payments; falsely claiming that return of income was filed for AY 2008-09 but arguing during appellate proceedings that non-filing of return for AY 2008-09 could not make income of that year assessable in the year under consideration etc. lead to preponderance of probability being against the claim of the assessee that the amount of Rs. 64,72,071/- received by her during the year under consideration was the accrued income of earlier year. 3.8. The ld. CIT(A) observed that the argument of the assessee that she has always been following mercantile system of accounting and so income already accrued in FY 2007-08 cannot be taxed in AY 2009-10, is also devoid of any merit. It is a case where the assessee has filed return of income for the first time for the year under consideration. So it is not a case that the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r reassess the total income of six assessment years i.e., the income which was returned in the earlier return, the income which was unearthed during search and also any income which was not disclosed in the earlier return or which was not unearthed during the search by separate assessment orders but in our considered view the completed assessments should be subject to the safeguards provided in IBC Knowledge Park (P) Ltd. supra. "54. On a consideration of the relevant sections as well as judicial precedent referred to above, what emerges is that, Section 158BD of the Act deals with undisclosed income of a third party. However, insofar as the incriminating material of the searched person or other person detected during the course of search is concerned, the same can be considered during the course of assessment. Further, such incriminating material must relate to undisclosed income which would empower the Assessing Officer to upset or disturb a concluded assessment of the other person. Otherwise, a concluded assessment would be disturbed without there being any basis for doing so which is impermissible in law. Even in case of a searched person, the same reason would hold good as i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are not pressed by the Revenue. Appeals stand disposed of accordingly." 4.1. Same view was taken by the Hon'ble Delhi High Court in case of CIT Vs. Kabul Chawla (380 ITR 573) (Del.). Even Hon'ble Supreme Court in case of Principal CIT Vs. Abhisar Buildwell Pvt. Ltd. (116 CCH 307) (SC) has reiterated the same proposition as follows: "14. In view of the above and for the reasons stated ab e, it is concluded as under: i) that in case of search under Section 132 or requisition under Section 132A, the AO assumes the jurisdiction for block assessment under section 153A; ii) all pending assessments/reassessments shall stand abated; iii) in case any incriminating material is found/unearthed, even, in case of unabated/completed assessments, the AO would assume the jurisdiction to assess or reassess the 'total income' taking into consideration the incriminating material unearthed during the search and the other material available with the AO including the income declared in the returns; and iv) in case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of completed ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee in ITA No.1108/Bang/2022 for the AY 2009-10 is partly allowed. ITA No.1109/Bang/2022 (AY 2010-11): 6. The assessee is in appeal before us with regard to sustaining addition of Rs. 55,10,000/-. 6.1. Facts of the case are that this ground relates to the action of the AO in making a disallowance of Rs. 55,15,000/-. In brief, this was observed by the AO that the assessee had claimed payment of consultancy charges of Rs. 55,15,000/-. The assessee was asked to substantiate her claim and to furnish copy of the service agreement. In response to the same the assessee submitted that there wasn't any written agreement and that the consultant was hired for making a detailed project (including feasibility report) as she wanted to develop a big residential project by entering into a joint development agreement with Manyata Developers. The assessee submitted that tax at source was duly deducted on the payments so made. However, the assessee failed to produce copy of such project report also. The AO rejected the claim of the assessee by giving following reasons: * The invoices provided by the assessee do not indicate the nature of services availed. * The invoices have been raise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o.1110/Bang/2022 (AY 2013-14): 8. In this appeal, the assessee has raised a ground with regard to sustaining addition of Rs. 34,80,353/-, though there was no incriminating material found during the course of search action. 8.1. Facts of the case are that the ld. AO during the course of assessment proceedings noticed that assessee had claimed a sum of Rs. 34,80,353/- as interest u/s 36(1)(iii) of the Act. The assessee explained that the said claim was made as the borrowed funds were used for the purpose of business. However, the ld. AO noticed that the assessee has given huge advances to sister concerns and related parties and the assessee has not explained the need for borrowed funds and held that assessee is not entitled for deduction u/s 36(1)(iii) of the Act. 8.2. On appeal, the ld. CIT(A) observed that there was no incriminating material to sustain this addition and addition is to be deleted. On the merit also submitted that the assessee is having own funds to advance to sister concerns. The ld. CIT(A) not agreeing with the contention of the ld. A.R., dismissed the appeal of the assessee. Against this assessee is in appeal before us. 8.3. The ld. A.R. submitted that the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to various parties, namely M/s. Embassy Services Pvt. Ltd., Manyata Developer Pvt. Ltd., Reddy Veeranna, Reddy Snehalata and Sundry advances. The assessee is not able to explain the sources to make interest free advance to these parties. Hence, it should be considered that assessee has used the borrowed funds from Vysya Co-operative Bank to advance these parties on which assessee claimed interest in its profit & loss account in the assessment yar under consideration at Rs. 34,80,353/-, which cannot be allowed u/s 36(1)(iii) of the Act, since the loan has been borrowed for the purpose of business and not satisfy the conditions laid down in section 36(1)(iii) of the Act. Accordingly, the disallowance made by the lower authorities is justified. This ground of appeal of the assessee is dismissed. 9.3. The assessee has raised ground no.5 that assessee is not liable to be charged interest u/s 234A & 234B of the Act. In our opinion, this ground is consequential and mandatory in nature and is to be charged accordingly. This ground is dismissed. However, the assessee is at liberty to seek waiver before DG/CCIT, if so advised. 9.4. In the result, the assessee's appeal in ITA No.1110/B ..... 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