BIKASH KUMAR KEDIA ,HYDERABAD vs. ASST. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-3(1), HYDERABAD

After hearing both the sides, we are of the considered opinion that the primary question that arises for consideration in this appeal is, in the absence of any incriminating material found during the search, whether any interference could be made with the concluded assessments while assessing the income under section 153A of the Income Tax Act, 1961 (‘the Act’).

Brief facts of the case are that the return of income filed by the assessee for the assessment year 2014-15 was processed under section 143(1) of the Act and no notice under section 143(2) of the Act was issued before the permissible time under proviso to section 143(2) of the Act, namely, 30/9/2015, and thereby, as on the date of the search on 29/10/2015, no assessment proceedings were pending.

Learned Assessing Officer, however, after considering the return of income filed in response to the notice issued notice under section 153A of the Act, completed the assessment under section 143(3) read with section 153A of the Act by making various additions.

Aggrieved thereby, the assessee preferred appeal before the learned CIT(A) and, among other things, argued that there was no incriminating material relevant to the matter on the issue pertaining to assessment year 2014-15 and since no assessment was pending for the assessment year 2014-15 as on the date of search in this matter, in terms of the decision of the Hon'ble Delhi High Court in the case of CIT vs. Kabul Chawla, 380 ITR 573 / (2015) 61 taxmann.com 412 (Delhi), no interference could be made with the concluded assessment, while making assessment under section 153A of the Act.

Learned CIT(A) did not agree with the contentions raised by the assessee and recorded that the material in the form of statements recorded from various entry operators, especially Mr. Rajesh Kumar Kedia, Kolkata and others as to the modus operandi was already on record and the assessee was confronted with the same, but the assessee had given evasive replies and no justification is to the genuineness of the transaction. He, therefore, concluded such material which was already on record and the statement of the assessee constitute incriminating material warranting proceedings under section 153A of the Act. On this premise, learned CIT(A) dismissed the appeal.

Assessee, therefore, preferred this appeal on many grounds, but the main plank of argument of the learned AR is that when there is no incriminating material found during the search in case of a concluded assessment, no addition could be made. According to him, authorities below failed to appreciate the difference between the abated and un-abated assessments and the well settled principle under section 153A of the Act that the jurisdiction to make assessment for a concluded assessment is limited to incriminating material found during the course of search. In support of his contentions, he placed reliance on the latest decision of the Hon'ble Apex Court in the case of PCIT vs. Abhisar Buildwell P. Ltd. [2023] 149 taxmann.com 399 (SC).

Per contra, learned DR submits on behalf of the Revenue that section 153A of the Act does not limit the jurisdiction of the learned Assessing Officer to make the addition to the seized material alone and on the other hand, it is the bounding duty of the learned Assessing Officer to initiate proceedings under section 153A of the Act, the moment the search warrant is executed. According to the learned DR, there is no room from interpretation of this aspect and no discretion is left with the learned Assessing Officer to initiate or not initiate proceedings under section 153A of the Act in case of a search or, to limit his power to assess basing on the incriminating material alone. Learned DR placed reliance on several decisions reported in support of his contentions, namely, Gopal Lal Bhadruka vs. DICT (2012) 27 taxmann.com 167 (AP), E.N. Gopakumar vs. CIT (2016) 75 taxmann.com 215 (Ker), CIT vs. Raj Kumar Arora (2014) 52 taxmann.com 172 (All), Suman Poddar vs. ITO, SLP No. 26864/2019, dt. 22/11/2019 (SC), Suman Poddar vs. ITO, dt. 17/09/2019 (Del), Suman Poddar vs. ITO, ITA No. 1006/Del/2019, dt. 25/07/2019 (ITAT, New Delhi), Krishna Devi vs. ITO, ITA No. 6356/Del/2019, dt. 04/01/2022, SEBI vs. Rakhi Trading Pvt. Ltd., Civil Appeal No. 1969 of 2011, 08/02/2018 (SC), Anandtex International P. Ltd., vs. ACIT, ITA No. 2476/Del/2018, dt. 24/02/2022. Learned DR tried to make a distinction between the assessments concluded under section 143(3) of the Act and 143(1) of the Act, to say that the concluded assessment means only such assessment which is terminated by the order passed under section 143(3) of the Act. he further submitted that there is incriminating material available in this case in the form of the statements made by various entry operators and also the statement of the assessee in this case.

We have gone through the record in the light of the submissions made on either side. Insofar as the facts and figures are concerned, there is not much dispute. The return of income filed by the assessee for the assessment year 2014-15 on 23/07/2014 was processed under section 143(1) of the Act, no notice under section 143(2) of the Act was issued by 30/09/2015 the last date for issuance of notice under section 143(2) of the Act, in this case. It is also not the case of the Revenue that any incriminating material was found during the search that was considered by the learned Assessing Officer but made the assessment. The statement recorded under section 132 (4) of the Act has no evidentiary value in view of the decision of the Hon’ble jurisdictional High Court in the case of CIT vs. Shri Ramdass motor transport (1999) 12 Taxman 300 (Andhra Pradesh).

As stated earlier, the return of income filed by the assessee for the assessment year 2014-15 on 23/07/2014 was processed under section 143(1) of the Act. Neither notice under section 143(2) of the Act was issued nor any proceedings were pending as on the date of search. Though the divergent views taken on this aspect are brought to our notice by both the counsel, the Hon'ble Supreme Court put a quietus to the issue by the decision in the case of PCIT vs. Abhisar Buildwell P. Ltd. (supra). While in complete agreement with the view taken by the Hon'ble Delhi High Court in the case of CIT vs. Kabul Chawla, (2015) 61 taxmann.com 412 (Delhi) and the Hon'ble Gujarat High Court in the case of PCIT Vs. Saumya Construction (2016) 387 ITR 529 and the decisions of the other Hon'ble High Courts taking the view that no addition can be made in respect of the completed assessments in absence of any incriminating material, Hon’ble Apex Court concluded that-

“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; a. ii) all pending assessments/reassessments shall stand abated; b. 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 c. 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 assessments/unabated assessments. Meaning thereby, in respect of completed/unabated assessments, no addition can be made by the AO in absence of any incriminating material found during the course of search under Section 132 or requisition under Section 132A of the Act, 1961. However, the completed/unabated assessments can be re-opened by the AO in exercise of powers under Sections 147/148 of the Act, subject to fulfilment of the conditions as envisaged/mentioned under sections 147/148 of the Act and those powers are saved.”

This decision applies to the facts of the case on all fours and respectfully following the same, we hold that since no incriminating material found in the case of assessee for the assessment year 2014-15, the concluded assessment cannot be disturbed, and the addition made by the learned Assessing Officer and sustained by the learned CIT(A) cannot be upheld. We accordingly allow the grounds raised by assessee.

In the result, appeal of assessee is allowed.