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Income Tax Appellate Tribunal, HYDERABAD BENCH “B”, HYDERABAD
Before: SHRI C.N. PRASAD, HONBLE & SHRI M. BALAGANESH, HONBLESmt Indukuri Sundari v. Shri Indukuri Syam Prasad Reddy v.
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH “B”, HYDERABAD (THROUGH VIRTUAL COURT) BEFORE SHRI C.N. PRASAD, HON'BLE JUDICIAL MEMBER AND SHRI M. BALAGANESH, HON'BLE ACCOUNTANT MEMBER ITA NO. 645/HYD/2017 (A.Y: 2008-09) Smt Indukuri Sundari v. DCIT – Central Circle - 2(1) Plot No. 973/A, Road No. 49 Aayakar Bhavan Hyderabad Jubilee Hills Hyderabad – 500 033 PAN: AAKPI8049P (Appellant) (Respondent) ITA NO. 646/HYD/2017 (A.Y: 2008-09) Shri Indukuri Syam Prasad Reddy v. DCIT – Central Circle - 2(1) Plot No. 973/A, Road No. 49 Aayakar Bhavan Hyderabad Jubilee Hills Hyderabad – 500 033 PAN: AADPI1621C (Appellant) (Respondent) : Shri Mohammad Afzal Assessee by Department by : Shri M.V.S.T. Sai
Date of Hearing : 03.09.2020 Date of Pronouncement : 21.10.2020
2 ITA NO. 645 & 646/HYD/2017 (A.Y: 2008-09) Smt Indukuri Sundari Shri Indukuri Syam Prasad Reddy
O R D E R PER M. BALAGANESH (AM) 1. These two appeals are filed by wife and husband against different orders of the Learned Commissioner of Income Tax (Appeals)–12, Hyderabad [hereinafter in short “Ld.CIT(A)”] dated 11.11.2016 and 27.02.2017 for the A.Y.2008-09.
As the issues being almost identical and inter related, these appeals were heard together and disposed off by way of this common order.
ITA.No. 645/HYD/2017 (A.Y: 2008-09)
Assessee has raised following grounds in her appeal: - “1. The order of the learned Commissioner of Income Tax (Appeals) is against the law, weight of evidence and probabilities of case. 2. The learned Commissioner erred in confirming an order of the Assessing Officer passed u/s 143(3) r.w.s 153A r.w.s 263 on 27.02.2015, as the time limit for passing an order consequent to order u/s 263 dated 30.03.2012, expired on 31.03.2014. 3. The learned Commissioner erred in confirming the order of the Assessing Officer wherein, the income was determined at Rs.1,54,66,055/- as against the income admitted at Rs.60,13,760/- by issuing a notice u/s 153A, whereas, no incriminating material was found during the course of search in the case of assessee. 4. The learned Commissioner erred in confirming the order of the Assessing Officer, wherein, an addition of Rs.94,52,296/- is made merely on a difference of opinion as there is no fresh evidence found during the course of search or in post search enquiries.
3 ITA NO. 645 & 646/HYD/2017 (A.Y: 2008-09) Smt Indukuri Sundari Shri Indukuri Syam Prasad Reddy
The learned Commissioner ought to have appreciated that the order u/s 143(3) r.w.s 153A r.w.s 263 of the IT Act is bad in law as the time limit for completing the assessment as per the directions of CIT expired on 31.03.2014 and in respect of addition of Rs.94,52,295/- no seized material was found during the course of search, therefore, ought to have held that the original assessment made u/s 143(3) is a valid assessment and not to be disturbed. 6. The appellant craves leave to add to, amend or modify the above grounds of appeal either before or at the time of hearing of the appeal, if it is considered necessary.
Assessee has also raised additional grounds of appeal which is as under: - “The original order u/s 143(3), dt: 31.12.2009, is inconsequence of search u/s 132 of the IT Act on 06.11.2007, where, no incriminating material was found, therefore, the order passed accepting the income returned stands legally correct. Therefore, the order of the learned Commissioner u/s 263 is not legally correct, setting aside the order to make fresh enquiries in respect of facts and material which are not found during the course of search. Therefore, the addition made by the Assessing Officer following the directions of the Commissioner u/s 263 is legally not correct. Therefore, the additional ground is raised before the Hon’ble ITAT, questioning the validity of order u/s 263, which goes to the root of the matter in respect of order u/s 143(3) and subsequent order u/s 143(3) r.w.s 153A r.w.s 263 of the IT Act. No additional evidence/material is to be considered to adjudicate this issue, therefore, the Hon'ble Bench is request to admit the ground and to adjudicate the same.”
The Learned Counsel for the assessee submitted that the above additional ground raised by the assessee is purely a legal ground and going to the root of the matter as it challenged the very validity of the order passed u/s. 263 of the Act by the Ld. CIT, the same may be admitted for adjudication. On the other hand, Ld. DR submitted that the assessee
4 ITA NO. 645 & 646/HYD/2017 (A.Y: 2008-09) Smt Indukuri Sundari Shri Indukuri Syam Prasad Reddy had withdrawn the appeal filed against u/s. 263 of the Act before the Tribunal and therefore assessee now cannot question the validity of the proceedings u/s. 263 of the Act nor it is permissible to discuss the merits of the decision of the Ld. CIT, therefore, it is submitted that additional ground is not permissible.
On hearing both the parties, we are of the view that the additional ground raised by the assessee is only a legal ground without verification of the facts on record and therefore the same is admitted for adjudication.
Briefly stated the facts are that, assessee is an individual having income from property and capital gains. For the assessment year under consideration, the assessee admitted an income of ₹.60,13,760/-. A search and seizure operation was conducted in the case of M/s. Indu Group of Companies on 06.11.2007, as the assessee is one of the Directors in the M/s Indu Projects Ltd, the residential premises of the assessee were also searched. Notices u/s 153A were issued from assessment year 2002-03 to 2007-08. The assessments were completed u/s.143(3) r.w.s 153A for A.Y. 2002-03 to 2007-08 and assessment for the assessment year 2008-09 was made u/s 143(3) of the Act by
5 ITA NO. 645 & 646/HYD/2017 (A.Y: 2008-09) Smt Indukuri Sundari Shri Indukuri Syam Prasad Reddy accepting the income returned. During the period relevant to assessment year 2008-09, the assessee along with her husband Shri Shyam Prasad Reddy sold a property at 7th floor bearing Flat No. 17/7, Mantri Altius, Bangalore, admeasuring 4318 Sq feet for a consideration of ₹.7 crores. While admitting short term capital gains, the assessee claimed 50% of maintenance deposit of ₹.7,69,956/-, renovation and interior works expenses at ₹.1,01,97,894/- and furniture, electrical and other fittings at ₹.1,89,04,590/- aggregating to ₹.2,98,72,440/-. The claim of deduction relating to furniture, electrical and fittings was proposed to be disallowed by Assessing Officer in which assessee's share was of ₹.1,49,36,220/-. The Assessing Officer in the Draft Assessment Order while computing the short term capital gains in the case of assessee proposed to disallow this amount, on the ground that the sale deed does not mention about the interior works, renovation, furniture and fittings, as was claimed by the assessee in the agreement of sale. However, when the matter was referred to Addl. Commissioner of Income Tax, Central Range-2, u/s 153D for the approval of the assessment, the learned Addl. Commissioner, after considering the agreement of sale and its Annexure, opined that the claim is acceptable and approved the order of the Assessing Officer with a direction u/s 144A of the Act, to re-determine the capital gains after
6 ITA NO. 645 & 646/HYD/2017 (A.Y: 2008-09) Smt Indukuri Sundari Shri Indukuri Syam Prasad Reddy considering the claim of the assessee. The Assessing Officer completed the assessment accepting the claim of expenditure/improvement in the nature of furniture and fittings following the directions of the learned Addl. Commissioner issued u/s. 144A of the Act. Thus, both the assessees were allowed deduction of claim in respect of renovation works and also in respect of furniture, electrical and other fittings, aggregating to ₹.2,98,72,440/-. The assessee's claim being 50% i.e. ₹.1,49,36,220/- the same was allowed while computing the short term capital gains while completing the assessment u/s. 143(3) of the Act on 31.12.2009.
Subsequently, the Ld. Commissioner of Income Tax passed order u/s.263 of the Act on 30.03.2012, setting aside the assessment order dated 31.12.2009 directing the Assessing Officer to re-compute the income of the assessee after examining in detail, the claim made by the assessee in the form of cost of improvement.
Assessee filed an appeal before the ITAT, against the order passed u/s.263 of the Act by the Ld. CIT. However, this appeal was allowed by ITAT to be withdrawn by the assessee on the submission that another search and seizure operation has taken place on 18.07.2012 in the case
7 ITA NO. 645 & 646/HYD/2017 (A.Y: 2008-09) Smt Indukuri Sundari Shri Indukuri Syam Prasad Reddy of assessee’s and the assessee's case for the A.Y. 2008-09 may also be covered by proceedings u/s 153A of the IT Act. The ITAT passed order in ITA No.858/Hyd/2012 on 20.01.2014 dismissing the appeal of the assessee as withdrawn.
Pursuant to second search taken place in assessee's cases on 18.07.2012, the assessee in response to notice u/s. 153A dated 25.06.2013 filed return of income on 29.08.2013 for A.Y. 2008-09 admitting an income of ₹.60,13,760/-. In the course of assessment proceedings, the assessee filed information in support of the return of income and also clarified the queries raised by Assessing Officer. The assessment is completed u/s 143(3) r.w.s 153A r.w.s 263 of the Act on 27.02.2015 determining the income at ₹.1,54,66,055/-. The Assessing Officer disallowed expenditure of ₹.94,52,295/- which is 50% of cost of furniture and fittings, based on the observations made by the learned Commissioner of Income Tax (Central) in the proceedings u/s. 263 of the Act dated 30.03.2012. Aggrieved by the order of the Assessing Officer an appeal was filed before the Learned Commissioner of Income Tax (Appeals)-12, Hyderabad, and the Ld.CIT(A) sustained the order of the Assessing Officer.
8 ITA NO. 645 & 646/HYD/2017 (A.Y: 2008-09) Smt Indukuri Sundari Shri Indukuri Syam Prasad Reddy 11. Before us, Learned Counsel for the assessee submitted that originally a search and seizure operation was taken place in the premises of assessee on 06.11.2007, consequent to search the case was notified to DCIT, Central Circle-3, Hyderabad, the assessee filed her return of income u/s 139(1) of the IT Act on 29.07.2008, admitting an income of ₹.60,13,760/-. The Assessing Officer proposed to disallow the expenditure claimed towards furniture and fittings, while making computation of capital gains. However, the learned Addl. Commissioner issued directions u/s 144A of the Act after examining the material submitted including copy of the agreement of sale dated 03.11.2007 and also considering the bills for items of furniture and electrical fittings which were filed before the Assessing Officer, directed the Assessing Officer to allow the claim of expenditure for renovation, interior work and furniture and fixtures. Therefore, following the directions of the Addl. Commissioner u/s 144A the learned Assessing Officer completed the assessment u/s. 143(3)/153A of the Act on 31.12.2009 accepting the income of ₹.60,13,760/- returned by the assessee and allowed the claim. However, the ld. CIT at Para 6.31 opined that the issue under reference was not subject matter of original assessment, therefore, according to the Ld. CIT, the Assessing Officer is within his limits to disallow the claim of
9 ITA NO. 645 & 646/HYD/2017 (A.Y: 2008-09) Smt Indukuri Sundari Shri Indukuri Syam Prasad Reddy expenditure incurred for furniture and fittings while computing the capital gains. Therefore, Ld. Counsel for the assessee submitted that when the issue was originally examined by the Assessing Officer and Assessing Officer opined that it is not allowable and when the Addl. Commissioner u/s 144A directed the Assessing Officer to consider the claim, after examining the facts and circumstances and also material on record, the learned CIT is totally incorrect to assume that the issue was not subject matter of original assessment. Therefore, the Ld. Counsel for the assessee submits that the claim for improvement in the form of furniture and fittings allowed by the Assessing Officer while completing the assessment is in order especially when evidences were examined by Addl. CIT and gave direction for allowing the same. As the addition is confirmed on incorrect assumption, therefore, it is respectfully pleaded to be deleted.
Ld. Counsel for the assessee submits that the Ld. CIT (Central) while setting aside the order of the Assessing Officer to re-compute the income of the assessee after examining in detail the claim made by the assessee in respect of cost of furniture and fittings, the Ld. CIT opined and pointed out the deficiencies in the order such as cross verification with the purchasers whether the flat purchased by them was received along with
10 ITA NO. 645 & 646/HYD/2017 (A.Y: 2008-09) Smt Indukuri Sundari Shri Indukuri Syam Prasad Reddy the costly furniture as claimed by the assessee or not and further according to the revisionary Authority the claim is allowed in haste. Ld. Counsel submits that in the reassessment proceedings u/s.143(3) r.w.s 153A r.w.s 263 of the Act, the Assessing Officer has not made any enquiries referred in the order u/s 263 of the Act but on the same set of facts disallowed the claim which was originally allowed. Therefore, it is submitted that the claim is disallowed only with difference of opinion on the same set of facts which were originally existing, without bringing any material on record as per the observations of the CIT(Central) to disprove the claim, thus it is submitted that the disallowance made by the Assessing Officer is to be struck down.
Learned Counsel for the assessee submitted that the order u/s.263 was passed on 30.03.2012, further, consequent to reopening of the assessment u/s 263, the Assessing Officer, Central Circle-3 issued notice u/s 143(2) on 30.03.2012, and same is served on the assessee on 31.03.2012, therefore, as per the 4th proviso under subsection (2A) of section 153 of the IT Act, the assessment consequent to order u/s.263 should have been made within two years from 31.03.2012, however, the reassessment u/s 263 is made on 27.02.2015, therefore, no reassessment
11 ITA NO. 645 & 646/HYD/2017 (A.Y: 2008-09) Smt Indukuri Sundari Shri Indukuri Syam Prasad Reddy can be made in consequent to order u/s 263 after 31.03.2014, therefore, the order made on 27.02.2015, u/s 143(3) r.w.s 263 is barred by limitation. Therefore, the same is to be held as null and void.
Learned Counsel for the assessee further submitted that the Central Board of Direct Taxes in the circular No.7 of 2003, dated 05.09.2003, in the explanatory notes on provisions relating to direct taxes, (reported in ITR statutes 62 to 119 at page 107) explained the provisions of section 153A of the IT Act, in respect of abatement on search it was clarified that the appeal, revision or rectification proceedings pending on the date of initiation of search u/s.132 or requisition shall not abate. Therefore, it is submitted that the assessment proceedings germinated from the order u/s 263 of the Act shall not abate and the same should have been completed on or before 31.03.2014. The assessment proceedings completed on 27.02.2015, considering the directions of the Commissioner by making an addition of ₹.94,52,295/- is bad in law.
Learned Counsel for the assessee submitted that, the Ld.CIT(A) in his order at Para 5.1 observed that the assessment proceedings are made u/s 143(3) r.w.s 153A and not u/s 143(3) r.w.s 263 of the Act. According
12 ITA NO. 645 & 646/HYD/2017 (A.Y: 2008-09) Smt Indukuri Sundari Shri Indukuri Syam Prasad Reddy to Ld.CIT(A), the word section 263 was appended to section 143(3) r.w.s 153A by oversight. Therefore, according to the Ld.CIT(A) the order passed by Assessing Officer u/s 143(3) r.w.s 153A is valid as the same is passed on 27.02.2015. In this regard Ld. Counsel for the assessee submitted that the second proviso to sub-section (1) of section 153A states that any assessment or reassessment relating to any assessment year falling within the period of six assessment years referred to in sub-section (1) pending on the date of initiation of search u/s 132 or making requisition u/s 132A shall abate. The sub-section (1) which is referred in the proviso refers only to sections 139, 147, 148, 149, 151 and section 153 and not referred to section 263. Therefore, it is submitted that the directions issued in section 263 will not abate, therefore, the order consequent to order u/s.263 should have been passed on or before 31.03.2014 only. Therefore, having passed the same on 27.02.2015 is barred by limitation. It is further submitted that as assumed by the Ld.CIT(A) if the order is only an order passed u/s 143(3) r.w.s 153A of the Act, no addition can be made in the absence of any incriminating seized material. It is submitted that the directions of the Ld. CIT (Central) in the order passed u/s 263 is only on surmises and conjectures and further no enquiries are made as directed in the order, the suspicion
13 ITA NO. 645 & 646/HYD/2017 (A.Y: 2008-09) Smt Indukuri Sundari Shri Indukuri Syam Prasad Reddy however strong it may be it cannot be turned into evidence. Therefore, the addition made on a difference of opinion, surmises and conjectures, suspicion deserves to be deleted.
Coming to the addition made without any seized material, Learned Counsel for the assessee submitted that, originally during the course of proceedings u/s 143(3) r.w.s. 153A consequent to search on 06.11.2007, assessment was completed by accepting the income returned, no additions were made as no incriminating material was seized in the case of assessee. However, during the course of proceedings u/s 143(3) r.w.s 153A r.w.s 263 of the Act, an addition of ₹.94,52,295/- was made based only on the observations of the Ld. CIT in the proceedings u/s. 263 of the Act. It is submitted that original assessment u/s 143(3) dated 31.12.2009, had been completed without making any addition attained finality. Learned Counsel for the assessee submitted that, subsequent to search action on 18.07.2012, a fresh assessment order was passed by the Assessing Officer u/s. 143(3) r.w.s. 153A r.w.s. 263 of the Act, in this order the Assessing Officer has made addition of ₹.94,52,295/- following the observations of the Ld.CIT in the proceedings u/s. 263 of the Act. Learned Counsel for the assessee submitted that admittedly, no
14 ITA NO. 645 & 646/HYD/2017 (A.Y: 2008-09) Smt Indukuri Sundari Shri Indukuri Syam Prasad Reddy
incriminating material during the search was found in relation to any of the issue, therefore, no additions are made, except disallowance of value of furniture and fittings which was allowed in the original assessment. Clearly independent of reassessment proceedings consequent to order u/s.263 the Assessing Officer could not have considered the issue of disallowance in the order u/s.143(3) r.w.s 153A proceedings as no incriminating material was found in the search on this issue.
Learned Counsel for the assessee submitted that it is settled position of law that the Assessing Officer cannot disturb the assessment order which has attained finality unless material gathered in the course of search against the reliefs already allowed. In support of the above proposition, Ld. Counsel for the assessee relied on the following decisions: 1. Sri Satyanarayana Agarwal v. ACIT Circle-6(1), Hyderabad, ITA No. 1746/Hyd/2013. 2. CIT (Central)-3 v. Kabul Chawla and vice versa in ITA No. 707 & 709 of 2014. 3. Sri Satyanarayana Agarwal v. ACIT-6(1) in ITA No.1764/Hyd/2013, dt: 08.01.2016. 4. Principal CIT v. Best Infrastructure (India) Pvt Ltd & Vice versa, in ITA No. 11 to 22 of 2017, Delhi High Court, dated 01.08.2017. 5 Principal CIT v. Meeta Gutgutia in ITA No.306 to 310, dated 25.05.2017.
15 ITA NO. 645 & 646/HYD/2017 (A.Y: 2008-09) Smt Indukuri Sundari Shri Indukuri Syam Prasad Reddy 18. Coming to validity of proceedings u/s 263 of the Act, Learned Counsel for the assessee submitted that, original assessment u/s 143(3) of the Act was made on 31.12.2009 consequent to search and seizure operation at assessee's premises on 06.11.2007 and no incriminating material was found during the course of search. Therefore, income returned was accepted. It is submitted that the Ld. CIT passed an order u/s.263 of the Act setting aside the order of the Assessing Officer dated 31.12.2009 with a direction to make enquiries in respect of cost of improvement to the asset sold. As the order u/s 143(3)/153A is consequent to search u/s 132 and no additions were made in the absence of any seized material, it was contended that the order of the Ld. CIT passed u/s 263 is an invalid order. It is submitted that any addition made in subsequent order dated 27.02.2015, u/s.143(3) r.w.s 153A r.w.s 263 obliging the directions of the Ld. CIT has no legs to stand as the order of the Ld. CIT itself an invalid order. Learned Counsel for the assessee submitted that due to circumstances prevailing after the search on 18.07.2012, the assessee opined that the assessment made u/s.143(3)/153A will abate even though no incriminating material was found, therefore, the appeal before the ITAT was withdrawn. However, considering the legal position developed over a period that no addition
16 ITA NO. 645 & 646/HYD/2017 (A.Y: 2008-09) Smt Indukuri Sundari Shri Indukuri Syam Prasad Reddy can be made in the proceedings consequent to search without any seized material, the order u/s 143(3)/153A dated 31.12.2009, is legally correct since to disallow the cost of fittings and furnishings while computing capital gains no incriminating material was found during the search. Therefore, the Ld. CIT (Central) should not have disturbed the order merely on suspicion and to make further enquiries. Therefore, the order u/s.263 of the Act is an invalid order without any fresh material brought on record. The subsequent addition germinated through an invalid order is also invalid and has no legs to stand.
Learned Counsel for the assessee further submitted that, can the assessee question the validity of order u/s. 263 of the Act in the Appellate Proceedings either without filing or by withdrawing the appeal before the Appellate Tribunal is an issue to be considered. Learned Counsel for the assessee submitted that the ITAT Mumbai in the case of Valiant Glass works Pvt Ltd Mumbai v. ACIT in ITA.No. 1612/Mum/2013 dated 27.07.2016, has considered a similar issue. It is submitted that in view of the rationale of the ITAT Mumbai Bench in the case of Valiant Glass Works (P) Ltd (supra) it is requested to adjudicate the validity of the order u/s 263, the same may kindly be declared bad in law, as there was no
17 ITA NO. 645 & 646/HYD/2017 (A.Y: 2008-09) Smt Indukuri Sundari Shri Indukuri Syam Prasad Reddy incriminating material to disallow the cost of fittings and therefore the order passed u/s 143(3), dated 31.12.2009 is in order. Ld. Counsel for the assessee further submits that, the order u/s 143(3) r.w.s 153A r.w.s 263 of the Act, wherein the expenditure was disallowed on the directions of the Ld. CIT in 263 proceedings is also invalid as the order u/s.263 itself is an invalid order.
Ld.DR submitted that the order passed by the Addl. CIT u/s. 153D is merged with the Assessment Order passed by the Assessing Officer u/s.143(3) r.w.s. 153A of the Act and by virtue of the proceedings u/s.263 of the Act and also the search action on 18.07.2012 the initial assessment which was made u/s. 143(3) r.w.s. 153A on 31.12.2009 got abated and therefore the Assessing Officer has rightly disallowed the expenditure towards furniture and fittings based on the observations and enquiries of the Commissioner made in the proceedings u/s. 263 of the Act. Ld. DR referring to the Para No. 2.2 of the order of the Ld. CIT passed u/s. 263 of the Act submits that the bill of entry was mentioned as Inland Depot at Hyderabad for transportation of furniture which was imported by the assessee, however, it is not known as to how such furniture was transported to Bangalore and this is not proved by the assessee. Ld. DR
18 ITA NO. 645 & 646/HYD/2017 (A.Y: 2008-09) Smt Indukuri Sundari Shri Indukuri Syam Prasad Reddy further submitted that assessee has not shown any reimbursement of money to her husband and assessee has failed to furnish evidences to establish her contentions that the furniture got transported to Bangalore. Ld. DR relying on the decision in the case of Gopal Lal Bhadruka v. DCIT [346 ITR 106 (AP)] submits that the evidences not only unearthed during the course of search but other evidences emanating from the records can be considered for the purpose of making additions in search assessments. Ld. DR vehemently supported the order of the Ld.CIT(A). In reply Ld. Counsel for the assessee submits that assessee is a Director in number of companies and the goods were transported in vehicle belonging to the assessee companies and therefore the transportation of furniture to Bangalore cannot be doubted.
We have heard the rival submissions, perused the orders of the authorities below. In this case the search and seizure operations were initially taken place in the premises of assessee on 06.11.2007 and the assessment u/s. 143(3) r.w.s. 153A was completed on 31.12.2009 accepting the income of ₹.60,13,760/- returned by the assessee. In the course of the assessment proceedings the Assessing Officer proposed to disallow the expenditure incurred by the assessee towards furniture and
19 ITA NO. 645 & 646/HYD/2017 (A.Y: 2008-09) Smt Indukuri Sundari Shri Indukuri Syam Prasad Reddy fittings as an improvement for the property at Bangalore while computing the capital gains on account of sale of such property on the ground that the furniture and fittings were not shown in the sale deed submitted by the assessee. In fact, the Assessing Officer referred the matter to Addl. CIT u/s. 153D for approval of Draft Assessment Order proposing the disallowance before completion of assessment. The Addl. Commissioner of Income-tax by order dated 31.12.2009 after examining the evidences furnished by the assessee i.e. Agreement of sale, sale deed, invoices etc., and analyzing those evidences was of the view that the claim made by the assessee with regard to allowance for renovation interior work and furniture and fittings is acceptable. Thus, he approved Draft Assessment Order subject to redetermination of capital gain accepting the claim of the assessee. This order of the Addl. CIT is placed at Page No. 51 of the Paper Book.
As the things stood thus, the Ld. CIT(Central) passed order u/s.263 of the Act on 30.03.2012 setting aside the Assessment Order dated 31.12.2009 made u/s. 143(3) /153A of the Act to examine the claim of the assessee for improvements for the purpose of computing the capital gains in respect of property at Bangalore. Subsequently, another search
20 ITA NO. 645 & 646/HYD/2017 (A.Y: 2008-09) Smt Indukuri Sundari Shri Indukuri Syam Prasad Reddy took place in the case of assessee and the group concerns on 18.07.2012 and consequent to this search assessee has withdrawn the appeal filed by her in the ITAT against the order passed by the Commissioner u/s. 263 of the Act. Consequent to the second search the assessment was completed u/s. 143(3) r.w.s. 153A r.w.s. 263 of the Act on 27.02.2015 by the Assessing Officer disallowing the expenditure claimed on furniture and fittings towards improvement of the property while computing the capital gains which was confirmed by the Ld.CIT(A).
Admittedly in this case no incriminating material was found in the search proceedings leading to disallowance of expenditure incurred on furniture and fittings. When there is no incriminating material found in the course of the search either originally when the search took place on 06.11.2007 or on 18.07.2012 whether addition/disallowance can be made based on the findings of the Ld. CIT in the proceedings u/s. 263 of the Act is the issue to be decided.
A situation wherein the order passed by the Assessing Officer on the directions of the Addl. CIT whether can be held to be erroneous, prejudicial to the interest of the revenue has been considered by the
21 ITA NO. 645 & 646/HYD/2017 (A.Y: 2008-09) Smt Indukuri Sundari Shri Indukuri Syam Prasad Reddy
Hyderabad Bench of the Tribunal in the case of Shri CH Krishna Murthy v. ACIT in ITA.No. 766/HYD/2012 dated 13.02.2015 and the Tribunal held as under: “23. At this stage, one has to remember, the settled position of law is, for invoking jurisdiction u/s 263 of the Act, two conditions have to be satisfied cumulatively. Firstly, order must be erroneous and secondly it must be prejudicial to the interests of revenue. In absence of any one of the two conditions, the power conferred u/s 263 cannot be exercised. On a perusal of the assessment order as a whole, specifically, para 17, it is very much evident that Assessing Officer was conscious about the fact that Barium Division was having outstanding liability of the advance given by Chrome Division at the time of demerger. He was also aware of the fact that outstanding liability was converted as advance given to assessee against which shares of newly formed company i.e. VBCPL were allotted to assessee and his associates. Therefore, it is clear from the assessment order that Assessing Officer has examined the issue of conversion of the outstanding liability of Barium Division to advance in the name of assessee through journal entries as well as allotment of shares against such advance to assessee and his family members. Furthermore, from para 2.3 of impugned order of learned CIT, it becomes clear that Assessing Officer while forwarding the draft assessment order for approval, after considering appraisal report has proposed to treat the conversion of outstanding liability of Barium Division as advance to assessee in the books of VCPL as deemed dividend u/s 2(22)(e). However, while according his approval in terms with section 153D, Addl. CIT, who is range head directed Assessing Officer not to make addition u/s 2(22)(e). The reasoning of the Addl. CIT is, advance created in the name of assessee was only through book entry and no payment was made and secondly, there was no accumulated profits of the company, which is a prerequisite for invoking provisions of section 2(22)(e). Therefore, from the aforesaid discussion, it becomes clear that not only Assessing Officer has examined the issue, but, he has also passed the order in consequence to the directions of his higher authority in terms with section 153D of the Act. ITAT, Pune Bench in case of Akil
22 ITA NO. 645 & 646/HYD/2017 (A.Y: 2008-09) Smt Indukuri Sundari Shri Indukuri Syam Prasad Reddy
Gulamali Somji Vs. ITO in ITA Nos. 455 to 458/PN/2010 dt. 30/03/2012 while holding the conditions imposed u/s 153D to be of mandatory nature, referred to clause 9 of Manual of Office Procedure, Volume II (Technical) February 2003 issued by Directorate of Income-tax on behalf of CBDT, which reads as under:
“9. Approval for assessment: An assessment order under Chapter XIV-B can be passed only with the previous approval of the range JCIT/ADDL.CIT. (For the period from 30-6-1995 to 31-1 2-1996 the approving authority was the CIT.) The Assessing Officer should submit the draft assessment order for such approval well in time. The submission of the draft order must be docketed in the order-sheet and a copy of the draft order and covering letter filed in the relevant miscellaneous records folder. Due opportunity of being heard should be given to the assessee by the supervisory officer giving approval to the proposed block assessment, at least one month before the time barring date. Finally, once such approval is granted, it must be in writing and filed in the relevant folder indicated above after making a due entry in the order-sheet. The assessment order can be passed only after the receipt of such approval. The fact that such approval has been obtained should also be mentioned in the body of the assessment order itself.”
Thus, from the aforesaid facts it becomes clear, the Assessing Officer while exercising power u/s 153A has to pass the assessment order as per the approval granted by addl. CIT u/s 153D. In these circumstances, Assessing Officer having examined the issue and applied his mind to the facts and having passed the order in terms with the directions of the Range Head as per the statutory provisions contained u/s 153D, the assessment order cannot be held to be erroneous. In fact ld. CIT has blamed the range head for the directions given by him while approving the draft assessment order. Therefore, if at all, there is any error, it is in the order of the range head and not in the assessment order. Without revising the directions of addl. CIT, assessment order could not be revised.”
23 ITA NO. 645 & 646/HYD/2017 (A.Y: 2008-09) Smt Indukuri Sundari Shri Indukuri Syam Prasad Reddy
In the assessee’s case the Assessing Officer proposed to disallow the expenditure claimed by the assessee towards furniture and fittings and the Addl. CIT by order dated 31.12.2009 u/s. 153D accepted the claim of the assessee with the following observations: - “In the case of Sri I. Syam Prasad REDDY and Sundari for the A.Y. 2008-09: The AO in the draft assessment order proposed for the A.Y. 2008-09 in the case of Sri I.Syam Prasad Reddy and Smt. Sundari did not accept the plea that the assessee's flat sold at Bangalore in 'MANTRI ALTIUS'. Accordingly, the expenditure claimed for such renovation and electrical. fittings was not permitted as deduction. Since it was noticed from the record that the bills for items of furniture and electrical fittings have been filed before the AO. The assessee was asked to clarify this issue and as to what the Sale Deed is. It is not mentioned that such a furnishing can 'part of the sale and how the claim made by the assessee is considered. Responding to this, the assessee has filed Agreement of Sale dt. 3. 11. 2007 which interalia had part 1 of the page mention that the schedule property being Apartment bearing No. 78/2/3/7/7 alongwith furniture and electrical fitting is proposed to be sold. The same is also found in Schedule B mentioned in the documents. The documents has also Annexures of list of furniture and fixtures. Looking at this, that the claim made by the assessee with regard to allowance for renovation interior work and furniture and fixtures is acceptable. The draft order passed is approved subject to redetermination of capital gain taking into account the above claim of the assessee. Copy of the Agreement of Sale filed before me is enclosed herewith.”
From the above order of the Addl. CIT it can be seen that the claim of the assessee was accepted after examining the relevant documents, invoices etc., by making an observation that the claim made by the
24 ITA NO. 645 & 646/HYD/2017 (A.Y: 2008-09) Smt Indukuri Sundari Shri Indukuri Syam Prasad Reddy assessee with regard to allowance for renovation of interior work and furniture and fittings is acceptable based on these directions of the Addl. CIT u/s. 153D/144A the Assessing Officer completed the assessment u/s.143(3)/153A of the Act accepting the claim of the assessee.
When once the Assessing Officer passed Assessment Order based on the directions of the Addl. CIT who has examined the issue with reference to the documents and evidences furnished by the assessee such Assessment Order cannot be held to be erroneous. The commissioner while passing the order u/s. 263 of the Act in fact made an observation that “it can be inferred that the Range Head had failed to cause any enquiry in this regard” blaming the Range Head for not conducting proper enquiry. The Ld. CIT is inferring that Addl. CIT has not conducted proper enquiry. This is only an inference. The order passed by the Ld. Addl. CIT u/s. 153D clearly states that he has looked into the documents and annexures thereon and on satisfying himself of the evidences directed the Assessing Officer that the claim of the assessee is acceptable. Therefore, when the view taken by the Addl. CIT and the Assessing Officer can be accepted as one of the possible views, Assessment Order cannot be treated as erroneous even though some prejudice caused to the revenue.
25 ITA NO. 645 & 646/HYD/2017 (A.Y: 2008-09) Smt Indukuri Sundari Shri Indukuri Syam Prasad Reddy In such circumstances, if at all if there is any error it is in the order passed by the Range Head i.e., the Addl. CIT, and not in the Assessment Order passed by the Assessing Officer on the directions of the Addl. CIT. Therefore, when the assessment order passed by the Assessing Officer u/s. 143(3)/153A is not erroneous, the findings of the Ld.CIT(Central) in his order passed u/s. 263 has no relevance and such order of the Ld.CIT is not sustainable in law. In that scenario one has to look at what is the incriminating material found in the course of search leading to the disallowance/addition. Admittedly no incriminating material was found in search proceedings leading to disallowance of expenditure incurred on furniture and fittings. The only basis on which the disallowance was made is the findings of the Ld.CIT in the proceedings u/s. 263 of the Act. Since the Assessment Order in this case was passed by the Assessing Officer u/s. 143(3)/153A of the Act after granting approval by the Addl. CIT not to disallow the expenditure, such assessment order is not an erroneous order and the findings of the Ld. CIT in 263 proceedings cannot be the basis for disallowing expenses, without there being any incriminating materials. The decision relied on by the Ld. DR in the case of Gopal Lal Bhadruka v. DCIT (supra) is distinguishable on facts. Thus, following the above decision we hold that the disallowance of expenditure incurred
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towards furniture and fittings cannot be made and therefore we direct the Assessing Officer to delete the disallowance made. Various other contentions raised by the assessee are not dealt with at this stage and they are kept open.
ITA.No. 646/HYD/2017 (A.Y. 2008-09)
Facts in this case are almost identical. However, the only the major differentiating fact is that in this assessee’s case no action was initiated u/s. 263 of the Act by the CIT. However, in the assessment made u/s.143(3) r.w.s. 153A the findings of the Ld.CIT in the order passed u/s.263 in assessee’s wife’s case were relied on. Admittedly no incriminating materials were found in this assessee’s case also. At this stage it is pertinent to look at the second proviso to section 153A of Act, which reads as under: - “provided further that assessment or re-assessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this [sub-section] pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate.”
A plain reading of the second proviso to section 153A suggests that only assessment or re-assessment proceedings pending on the date of
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initiation of search u/s. 132 or making of requisition u/s. 132A shall be abated. As on the date of search on 18.07.2012 no proceedings for either assessment or re-assessment were pending and the assessment made on 31.12.2009 u/s. 143(3)/153A is not abated. Once the assessment is not abated the only course left for the Assessing Officer is to restrict the additions/disallowances based on the incriminating material seized during the search proceedings. As we have already observed that no incriminating materials were found during search leading to disallowance of expenses claimed while computing the capital gains, we hold that no disallowance can be made without search materials.
In the case of CIT v. M/s. Murali Agro Products Ltd., in Income Tax Appeal No. 36 of 2009 dated 29.10.2010, the Hon'ble Bombay High Court held as under: - “12) Once it is held that the assessment finalised on 29.12.2000 has attained finality, then the deduction allowed under section 80 HHC of the Income-tax Act as well as the loss computed under the assessment dated 29-12-2000 would attain finality. In such a case, the A.O. while passing the independent assessment order under Section 153A read with Section 143 (3) of the I.T. Act could not have disturbed the assessment/ reassessment order which has attained finality, unless the materials gathered in the course of the proceedings under Section 153A of the Income-tax Act establish that the reliefs granted under the finalised assessment/reassessment were contrary to the facts unearthed during the course of 153A proceedings.
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13) In the present case, there is nothing on record to suggest that any material was unearthed during the search or during the 153A proceedings which would show that the relief under Section 80 HHC was erroneous. In such a case, the A.O. while passing the assessment order under Section 153A read with Section 143(3) could not have disturbed the assessment order finalised on 29.12.2000 relating to Section 80 HHC deduction and consequently the C.I.T. could not have invoked jurisdiction under Section 263 of the Act.”
In the case of CIT v. Continental Warehousing Corporation (Nhava Sheva) Ltd., [374 ITR 645] it was held that if there was no incriminating material found during the search then the Tribunal was right in holding that the power u/s. 153A being not expected to be exercised routinely, should be exercised if the search revealed any incriminating material and if that was not found then there was no warrant for making an order within the meaning of this provision. The ratio of the above decisions of the Hon'ble Bombay High Court is squarely applicable to the facts of this case.
We further noticed that in the case of Y.V. Anjaneyulu v. DCIT in ITA.Nos. 513 & 514 /Vizag/2013 dated 09.06.2017, Visakhapatnam Bench of the Tribunal considering the decision of the Hon'ble Andhra Pradesh High Court in the case of Gopal Lal Bhadruka v. DCIT (supra) observed as under: -
29 ITA NO. 645 & 646/HYD/2017 (A.Y: 2008-09) Smt Indukuri Sundari Shri Indukuri Syam Prasad Reddy
“11. We have heard both the parties, perused the materials available on record and gone through the orders of the authorities below. The only issue that arises for our consideration is whether on the facts and in the circumstances of the case, the A.O. is right in making additions without any seized materials in respect of assessment years for which the assessment proceedings have been concluded as on the date of search. The Ld. A.R. for the assessee, submitted that the issue has been already considered by the coordinate bench of Visakhapatnam ITAT in the case of Sri Hari Prasad Bhararia Vs. DCIT in ITA Nos.435 to 441/Vizag/2014, wherein it has been observed that the A.O. has no jurisdiction to make additions in the absence of any seized materials in the assessments made u/s 143(3) r.w.s. 153A of the Act, for the assessment years which are concluded and no proceedings are pending as on the date of search. The relevant portion of the order is extracted below: 12. We have heard both the parties, perused the materials available on record and gone through the orders of the authorities below. The factual matrix of the case is that there was a search action u/s 132 of the Act. Consequent to the search, the assessee case was centralized and accordingly, notice u/s 153A of the Act was issued requiring assessee to file return for 6 assessment years immediately preceding the assessment year in which search is conducted. The assessee filed returns in response to notice u/s 153A of the Act. The A.O. completed the assessment u/s 143(3) r.w.s. 153A of the Act and made additions towards deemed dividend under the provisions of section 2(22)(e) of the Act. The A.O. was of the opinion that transactions between the assessee and his company is coming within the definition of deemed dividend under the provisions of section 2(22)(e) of the Act. It is the contention of the assessee that the assessment order passed by the A.O. u/s 143(3) r.w.s. 153A of the Act, for the assessment years 2005-06 to 2009-10 is null and void as the A.O. has made additions towards deemed dividend u/s 2(22)(e) of the Act without any incriminating materials. The assessee further contended that as per section 153A of the Act, de-novo assessment can be made only in respect of assessment year for which the assessment proceedings has been abated and that in respect of assessment years for which the assessment had already been completed, no additions can be made u/s 153A of the Act unless there was incriminating material found during the course of search. 13. The A.O. has passed assessment orders u/s 153A of the Act, for all the six assessment years, immediately preceding
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the year in which the search was conducted. According to the A.O., as per the provisions of section 153A of the Act, there is no limitation or restriction provided in the new procedure of search assessment on the powers of the A.O. for making assessment/re-assessment and the A.O. is not required to confine his assessments on the materials found during the course of search as was the case in the old procedure of block assessments. It is the contention of the assessee that the A.O. cannot disturb the completed assessment unless there was a seized material. The assessee further contended that where assessments are not pending as on the date of search and time limit for issue of notice u/s 143(2) of the Act has been expired, irrespective of the fact that those assessments have been completed u/s 143(1) or 143(3) of the Act, then the A.O. has no power to re-assess the income of those completed assessment years. We find force in the arguments of the assessee, for the reason that the coordinate bench of this Tribunal in ITA Nos.300 to 305/Vizag/2012, in case of L. Suryakantham Vs. ACIT, has considered similar issue and held that the A.O. had no jurisdiction to make additions u/s 153A of the Act, for the assessments which are not pending as on the date of search and also the time limit for issue of notice u/s 143(2) of the Act has been expired. The relevant portion of the order is extracted below: 19. We have heard both the parties, perused the materials available on record and gone through the orders of the authorities below. The factual matrix of the case is that there was a search action u/s 132 of the Act. During the course of search, incriminating documents found reveals that the assessee has inflated labour charges for the assessment years 2008-09 & 2009- 10. Based on the documents found during search, the assessee has accepted that he has inflated 10% labour charges and which is common in this line of business. Consequent to search action u/s 132 of the Act, the assessee case has been centralized and accordingly fresh assessment proceedings have been initiated by issuing notice u/s 153A/153C of the Act for the six assessment years immediately preceding the assessment year in which search was conducted. The assessee has filed revised returns in response to notice u/s 153A of the Act and admitted the additional income disclosed during the course of search. The case has been selected for scrutiny. During the course of assessment proceedings, the assessee was asked to
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produce books of accounts and relevant bills & vouchers in support of expenditure claimed. In response, the assessee filed written submission and stated that the books of accounts are not available and hence cannot be furnished. Therefore, the A.O. issued a show cause notice and asked to explain why the net profit from the business shall not be estimated. In response to show cause notice, the assessee has filed a written reply and contended that the income for the assessment year 2004-05, 2005-06 and 2007-08 cannot be tinkered with, as there was no incriminating material found during the course of search for the above assessment years and as such no additions can be made to the returned income. It is further submitted that as per sec. 153A of the Act, de-novo assessment can be made only in respect of the assessment year for which the assessment proceedings had been abated and that in respect of assessment years for which the assessment had already been reached a finality, such assessment could not be made u/s 153A of the Act unless there was seized materials. 20. The A.O. has passed reassessment orders u/s 153A/153C of the Act for all the six assessment years immediately preceding the year in which search was conducted. According to the A.O., as per the provisions of section 153A of the Act, there is no limitation or restriction provided in the new procedure of search assessments on the powers of A.O. for making assessment/reassessment and the A.O. is not required to confine his assessments on the material found during the course of search as was the case in the old procedure of block assessments. The new procedure of block assessment was explained by way of provisions of section 153A of the Act. As per section 153A of the Act, the A.O. shall assess or reassess the total income of the specified six assessment years irrespective of the fact that the assessment of the said years were completed or pending as on the date of search. Therefore, the A.O. has reassessed the income of six assessment years and recomputed the profits afresh after considering the relevant facts available on record.
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It was the contention of the assessee that the A.O. cannot disturb the completed assessments unless there was a seized material. The assessee further contended that where assessments are not pending as on the date of search and time limit for issue of notices u/s 143(2) of the Act has been expired, irrespective of the fact that those assessments have been completed u/s 143(1) or 143(3) of the Act, then the A.O. has no power to reassess the income of those completed assessment years. 21. We find force in the arguments of the assessee for the reason that the issue no longer res integra, as the issue has been already decided by the ITAT, special bench and held that where the assessments are not pending as on the date of search, the A.O. losses jurisdiction u/s 153A of the Act to reassess the income of those completed assessments. Though the provisions of section 153A of the Act does not specify abated and completed assessments, the natural meaning assigned to it should be given to interpret the provisions in such a way that which shall not cause undue hardship to the tax payers. The provisions of section 153A of the Act explained the procedure of assessments, abated assessments and the manner in which the assessment should be framed, which was further supported by circular no.7 of 2003 issued by the CBDT. When the law has explained the position of abated assessments, then the same way the completed assessment should be treated so as to understand that those assessments are reached finality and which cannot be tinkered with unless there was a seized document. Therefore, we are of the considered opinion that where search is initiated, all pending assessments are merge into one and only one assessment for each assessment year shall be made separately on the basis of findings of search and other material existing or brought on record by the A.O. In respect of non abated or completed assessments, the assessment will be made on the basis of books of accounts or other
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relevant documents found during the course of search, but not produced in the course of original assessment. 22. In the present case on hand, on perusal of the document available on record, we find that the assessment for the assessment year 2004-05 to 2007- 08 were not pending as on the date of search. The fact that the assessment has been completed u/s 143(1) & 143(3) of the Act are not material. The time limit for issue of notice u/s 143(2) of the Act has been expired. On further verification of the documents available on record, we find that there was no incriminating documents found during the course of search in respect of assessment year 2004-05 to 2007-08. Therefore, we are of the opinion that the A.O. was not correct in reassessing the total income of the assessment year 2004-05 to 2007-08 in the absence of any seized materials. Accordingly, we direct the A.O. to delete the additions made for the assessment year 2004-05, 2005-06 & 2007-08. 23. It is pertinent to discuss herein the case laws relied upon by the assessee. The assessee has relied upon the ITAT, special bench decision in the case of All Cargo Global Logistics Ltd. Vs. DCIT (2012) 137 ITD 287. The coordinate bench of this Tribunal, while deciding the issue in favour of the assessee held as under: “In assessments that are abated, the AO aretains the original jurisdiction as well as jurisdiction conferred on him u/s 153A for which assessments shall be made for each of the six assessment years separately. In other cases, in addition to the income that has already been assessed, the assessment u/s 153A will be made on the basis of incriminating material, which in the context of relevant provisions means – (i) books of account, other documents, found in the course of search but not produced in the course of original assessment, and (ii)
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undisclosed income or property discovered in the course of search.” 24. The assessee relied upon, A.P. High Court decision in the case of CIT Vs. M/s. AMR India Ltd. in ITTA No.354 of 2014 dated 12.6.2014. The Hon’ble High Court held that the A.O. has no jurisdiction to re- agitate the assessments which were already completed and subsiding. The relevant portion is extracted below: “We have heard Sri J.V. Prasad, learned counsel for the appellant, and gone through the impugned judgement and order of the learned Tribunal. It appears that the learned Tribunal found on fact that after completion of assessment proceedings and after reaching finality thereon, the Assessing Officer tried to reagitate the assessments. According to us, the learned Tribunal has rightly held that the Assessing Officer has no jurisdiction to reagitate the assessments which were already completed and subsisting. We therefore do not find any element of law to be decided in this appeal. Hence, the appeal is dismissed. There will be no order as to costs.” 25. The assessee has relied upon the coordinate bench decision of ITAT, Visakhapatnam in the case of A.T. Rayudu in ITA No.373 to 379/Vizag/2014. The coordinate bench, under similar circumstances held the issue in favour of the assessee. The relevant portion is reproduced hereunder: “22. In this regard, it is also pertinent to refer to the following observations made by the Special bench in the case of All Cargo Global logistics Ltd (supra):- “57 (f) In the case of Parashuram Pottery works co. Ltd Vs. ITO (106 JTR 57)(SC), it has been mentioned in the last paragraph of the judgment that the court has to bear in mind that the policy of law is that there must be a point of finality in all
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legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi judicial controversies as it must in other spheres of human activity. Our decision is in consonance with this observation”. The decision rendered by the Special bench that the assessing officer can make additions in the case of concluded assessments on the basis of incriminating materials is also based upon the decision rendered by Honble supreme Court in the case of Parashuram Pottery works Co. Ltd (supra). 23. We have earlier noticed that the Hon'ble jurisdictional Andhra Pradesh High Court has also upheld by the orders passed by the Tribunal by following the decision rendered by the Special bench in the case of All Cargo Global logistics Ltd (supra) in the following cases: - (a) Sree Lalitha Constructions (J1TA No 368 of 2014) (b) M/s. Hyderabad House Pvt Ltd (ITTA No. 266 of 2013) (c) M/s. AMR India ltd (FITA No.357 /v/2014) Further we agree with the contentions of the assessee that the decision rendered by the jurisdictional High Court in the case of Gopal Das Bhadruka (supra) have been rendered on the facts prevailing in those cases, since the issue relating to concluded assessments and pending assessments was not before the I1on'ble Andhra Pradesh High Court On the contrary, the above said three decisions of the jurisdictional High Court comes to the support of the assessee's contentions with regard to the legal proposition agitated before us, besides the decisions rendered by various other High Courts. Accordingly, we are of the view that the scope of enquiry in the case of unabated assessments, i.e., the assessment years in which proceedings are not pending, is that the undisclosed income should be ascertained only on the basis of materials found during the course of
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search. If no incriminating material showing any undisclosed income was found in the case of concluded proceedings, then the question of making any addition does not arise. in that case, the assessing officer should complete the assessment of those years by determining the very same total income that was assessed in the earlier proceeding. 24. In view of the above, We are unable to agree with the contentions of Ld Standing Counsel that the assessing officer would get unfettered powers in the case of unabated assessments, once they were reopened us 153A of the Act. In our view, in the case of unabated assessments, the total income should be determined by the assessing officer by combining the income already assessed/disclosed in the return of income and the undisclosed income, if any, found during the course of search proceeding. Even otherwise, it is settled proposition of law that the assessee is entitled to take support of the decision in his favour, when two contradictory views have been expressed by the High Courts. In the instant case the Hon’ble jurisdictional High Court comes to the support of the assessee in respect of the legal proposition in addition to the decision rendered by the Hon'ble Bombay High Court. Accordingly, we find merit in the contentions 26. Considering the facts and circumstances of the case and also respectfully following the coordinate bench decision in the case of All Cargo Logistics Pvt. Ltd. (supra), we are of the opinion that the A.O. has made reassessment u/s 153A/153C of the Act on the basis of information/material available in the return of income, without referring to any seized material. Therefore, following the special bench decision (supra) we hold that the A.O. had no jurisdiction to make additions u/s 153A of the Act for the assessments
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which are not pending as on the date of search. In this case, the search was conducted on 14.7.2009. The assessment for the assessment years 2004-05 to 2007- 08, were not pending as on the date of search. The time limit for issue of notice under sec. 143(2) has been expired. Therefore, the A.O. has no jurisdiction to reassess the income for the assessment year 2004-05 to 2007-08 in the absence of any incriminating materials. Hence, we delete the additions made by the A.O. for the assessment year 2004-05, 2005-06 & 2007-08. Accordingly, the ground raised by the assessee is allowed. 14. In this view of the matter and considering facts and circumstances of this case and also respectfully following the decision of co-ordinate bench of Visakhapatnam, in the case of L. Suryakantham Vs. ACIT, in ITA Nos. 300 to 305/Vizag/2012, we are of the view that the A.O. has made reassessment u/s 153A/153C of the Act, on the basis of information/material available in the return of income, without referring to any seized material. Therefore, following the special bench decision (supra) we hold that the A.O. had no jurisdiction to make additions u/s 153A of the Act, for the assessments which are not pending as on the date of search. The assessment for the assessment years 2005-06 to 2009- 10 were not pending as on the date of search. The time limit for issue of notice under sec. 143(2) has been expired. Therefore, the A.O. has no jurisdiction to reassess the income for the assessment year 2005- 06 to 2009-10 in the absence of any incriminating materials. The CIT(A) has rightly deleted the additions. We do not see any reason to interfere with the order of CIT(A). Hence, we inclined to uphold CIT(A) order and direct the A.O. to delete the additions made towards deemed dividend for the assessment year 2005-06 to 2009-10. 12. In this case, search was taken place on 24.7.2008. As on the date of search, the assessments for the assessment years 2004-05 & 2005-06 are already concluded and there is no pending proceeding for those assessment years. The time limit for issue of notice u/s 143(2) of the Act, for the assessment years 2004-05 & 2005-06 has been expired.
38 ITA NO. 645 & 646/HYD/2017 (A.Y: 2008-09) Smt Indukuri Sundari Shri Indukuri Syam Prasad Reddy
The A.O. made additions towards deemed dividend u/s 2(22)(e) of the Act without any incriminating materials and also based on the books of accounts and financial statements, which were already part of regular return of income filed by the assessee u/s 139(1) of the Act, for those assessment years. Therefore, considering the facts and circumstances of the case and also respectfully following the decision of coordinate bench of ITAT, Visakhapatnam in the case of Sri Hari Prasad Bhararia Vs. DCIT (supra), we are of the view that the A.O. has no jurisdiction to make additions in respect of concluded assessments in the absence of any incriminating materials found during the course of search. In this case, undoubtedly the A.O. has made additions towards deemed dividend on the basis of financial statements filed by the assessee along with regular return of income without any material found during the course of search. Therefore, we direct the A.O. to delete additions made towards deemed dividend u/s 2(22)(e) of the Act for the assessment years 2004-05 & 2005-06.”
As could be seen from the above, the Tribunal observed that the Hon'ble Jurisdictional High Court has upheld the orders of the Tribunal following the decision of the All-Cargo Global Logistics Ltd., v. DCIT in following Judgments: - a. Sree Lalitha Constructions (ITTA No. 368 of 2014) b. M/s. Hyderabad House Pvt. Ltd., (ITTA No. 266 of 2013) c. M/s. AMR India Ltd (ITTA No. 357 of 2014)
It was also observed by the Tribunal that the decision rendered by the Hon'ble Jurisdictional High Court in the case of Gopal Das Bhadruka (supra) has been rendered on the facts prevailing in that case, since the issue relating to concluded assessments and pending assessments was not before the Hon'ble High Court and on the contrary, the above three
39 ITA NO. 645 & 646/HYD/2017 (A.Y: 2008-09) Smt Indukuri Sundari Shri Indukuri Syam Prasad Reddy decisions of the Hon'ble Jurisdictional High Court supports the contentions of the assessee with regard to the legal proposition that addition/disallowance should be made based only on the materials seized/unearthed during the course of search proceedings. Thus, respectfully following the above decisions we direct the Assessing Officer to delete the disallowance of expenditure incurred towards furniture and fittings and compute the income accordingly. Grounds raised by the assessee are allowed.
In the result, appeals of both assessee’s are allowed as indicated above.
Order pronounced on 21.10.2020 as per Rule 34(4) of ITAT Rules by placing the pronouncement list in the notice board.
Sd/- Sd/- (C.N. PRASAD) (M. BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai / Dated 21/10/2020 Giridhar, Sr.PS
40 ITA NO. 645 & 646/HYD/2017 (A.Y: 2008-09) Smt Indukuri Sundari Shri Indukuri Syam Prasad Reddy
Copy of the Order forwarded to: 1. The Appellant 2. The Respondent. 3. The CIT(A), Hyderabad 4. CIT 5. DR, ITAT, Hyderabad 6. Guard file.
//True Copy// BY ORDER
(Asstt. Registrar) ITAT, Hyd