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Income Tax Appellate Tribunal, ‘A‘ BENCH
Before: SHRI M.BALAGANESH & MS. KAVITHA RAJAGOPAL
आदेश / O R D E R PER M. BALAGANESH (A.M): This appeal in A.Y.2009-10 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-11, Pune in appeal No. Pn/CIT(A)-11/DCIT Cen. Cir.1, Thane/529/2014-15 dated 27/03/2017 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) r.w.s. 153A of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 25/03/2013 by the ld. Dy. Commissioner of Income Tax, Central Circle-I, Thane (hereinafter referred to as ld. AO).
M/s. Arihant Universal Realty Pvt. Ltd.,
Though the assessee had raised several grounds before us, we find that the preliminary ground to be decided in this appeal is as to whether the ld. CIT(A) was justified in confirming the disallowances / additions made by the ld AO without the existence of any incriminating material found during the course of search in respect of an unabated assessment.
We have heard the rival submissions and perused the materials available on record. We find that the assessee is engaged in the business of development of commercial and residential projects. There was a search in the premises of the Arihant group and Mahavir group on 18.10.2010. The assessee was also covered u/s 132 of the Act along with other group cases. We find that the assessee had originally filed its return of income for the Asst Year 2009-10 on 29.9.2009 declaring total income of Rs 3,48,67,680/-. The return was duly processed u/s 143(1) of the Act. The time limit for issuance of notice u/s 143(2) of the Act expired on 30.09.2010. Admittedly, no notice u/s 143(2) of the Act was issued and served on the assessee for the Asst Year 2009-10 on or before 30.09.2010. Consequent to the search, notice u/s 153A of the Act was served on 26.08.2011 and for the year under consideration, the assessee filed the return in response to notice u/s 153A of the Act on 26.09.2011 declaring total income of Rs 3,48,67,680/-. The assessee pleaded that as on the date of search (i.e on 18.10.2010), the assessment for the Asst Year 2009-10 had become an unabated assessment or a concluded assessment. Hence as per the decision of Hon’ble Jurisdictional High Court in the case of Continental Warehousing Corporation reported in 374 ITR 645 (Bom) and the decision of Hon’ble Delhi High Court in the case of Kabul Chawla reported in 380 ITR 573 (Del), the income originally assessed u/s 143(1) of the Act could not be disturbed unless there is any incriminating material found in the course of search relatable to such assessment year. The ld. AO however did not heed to the contentions of M/s. Arihant Universal Realty Pvt. Ltd., the assessee and proceeded to make the following disallowances / additions in the assessment framed u/s 143(3) r.w.s. 153A of the Act on 25.03.2013:- a) Interest income treated as income from other sources – Rs 77,95,481/- b) Addition on account of bogus purchases - Rs 15,77,250/- c) Disallowance u/s 40(a)(i) -Rs 7,00,234/-
The assessee pleaded that for making the aforesaid additions / disallowances, the ld AO had not referred to any single seized document found during the course of search and hence it could be safely concluded that there was absolutely no incriminating material found during the course of search for making the aforesaid additions / disallowances. However, this objection was dismissed by the ld. CIT(A) on the ground that the assessments to be framed u/s 153A of the Act clears all the decks and would enable the ld AO to assess or reassess the total income as per the provisions of the Act irrespective of incriminating materials found in the search. The ld. CIT(A) also confirmed the additions / disallowances made by the ld. AO on merits. Aggrieved, the assessee is in appeal before us both on technical ground as well as on merits.
We find that the ld DR argued that the expression ‘incriminating material’ is not found in the provisions of the Act and it is only the Hon’ble Courts which had imported those words while rendering the decisions. He stated that the Hon’ble Courts are divided on this issue and placed reliance on the decision of Hon’ble Delhi High Court in the case of Smt Dayawanti vs CIT reported in 390 ITR 496 (Del) wherein they had held that addition could be made based on the statements recorded during search.
M/s. Arihant Universal Realty Pvt. Ltd., 5.1. The ld DR argued that the basic foundation for conducting the search is governed by the provisions of section 132 of the Act which has to be read harmoniously with section 153A of the Act. There are three conditions based on which a search action could be initiated u/s 132 of the Act on an assessee. They are :-
Section 132(1) - If the concerned authority has in consequence of information in his possession, has reason to believe that - (a) where a person fails to produce the books of accounts and other documents in response to notice u/s 142(1) or summons issued u/s 131(1) of the Act ; or (b) where a person fails to comply with the requirements of summons issued u/s 131(1) of the Act ; or (c) where a person is in possession of any money, bullion, jewellery or other valuable article or thing and such assets represents either wholly or partly income or property which has not been , or would not be, disclosed for the purposes of the Act (hereinafter referred to as the undisclosed income or property) ; then the officer , so authorized could conduct a search and proceed as per the requirements laid down in the said section. He argued that the aforesaid three primary conditions for invoking search proceedings cannot be given a go by while framing section 153A assessments and the instant case falls under section 132(1)(c ) of the Act.
5.2. The provisions of section 153A of the Act use the expression ‘assess or reassess total income’ and hence the search assessment could be framed u/s 153A of the Act irrespective of any incriminating materials.
M/s. Arihant Universal Realty Pvt. Ltd.,
In response to this, the ld AR stated that the assessment for the Asst Year 2009-10 was originally completed u/s 143(1) of the Act as the case was not selected for scrutiny by issuance of notice u/s 143(2) of the Act on or before 30.9.2010. Hence the assessment for the Asst Year 2009-10 would fall under the category of completed / unabated assessment. He reiterated the submissions made before the lower authorities with regard to framing of additions in section 153A assessments without any incriminating material found thereon. The ld AR stated that the decision relied upon by the ld DR in the case of Smt Dayawanti by Hon’ble Delhi High Court supra had been duly distinguished by the Hon’ble Delhi High Court in its subsequent decision rendered in the case of PCIT vs Best Infrastructure (India) Pvt Ltd and Others reported in 397 ITR 82 (Del). In the said decision, it was specifically held that the statements recorded u/s 132(4) of the Act does not constitute incriminating material for the purpose of section 153A of the Act. The said decision duly followed the decision of Hon’ble Jurisdictional High Court in the case of CIT vs Continental Warehousing Corporation (Nhava Sheva) Ltd reported in 374 ITR 645 (Bom), among other decisions.
6. We find it would be necessary to address the preliminary issue of whether the addition could be framed u/s 153A of the Act in respect of a concluded proceeding without the existence of any incriminating materials found in the course of search. The scheme of the act provides for abatement of pending proceedings as on the date of search. It is not in dispute that the assessment for the Asst Year 2009-10 was originally completed u/s 143(1)of the Act andhence it falls under concluded proceeding , as on the date of search. We hold that the legislature does not differentiate whether the assessments originally were framed u/s 143(1) or 143(3) or 147 of the Act. Hence unless there is any M/s. Arihant Universal Realty Pvt. Ltd., incriminating material found during the course of search relatable to such concluded year, the statute does not confer any power on the ld AO to disturb the findings given thereon and income determined thereon, as finality had already been reached thereon, and such proceeding was not pending on the date of search to get itself abated. It is not in dispute that both the ld AO and the ld CITA had admittedly not made any reference to any seized material found during the course of search in their orders relatable to the completed assessment year with regard to the items that were subject matter of disallowances / addition. In this regard, we hold that the disallowances / additions that were made by the ld. AO in section 153A assessment were already forming part of the regular books of accounts and were duly recorded in the regular books of the assessee and cannot be construed as incriminating in nature. Every assessee would be having its regular books of accounts (where books are maintained) and would be filing his regular returns of income and assessments framed accordingly. If such person is subjected to search and the very same regular books of accounts were found at the time of search and if the ld AO tries to take a different view on the already recorded transactions in the said regular books of accounts in the search assessment u/s 153A of the Act which is contrary to the view taken by him in the original scrutiny assessments u/s 143(3) or intimation u/s 143(1) of the Act, then it would only result in giving another innings to the ld AO to review his own earlier decision on the very same set of facts and figures. This would make the entire scheme of the Act meaningless and the ld AO would be conferred with unfettered powers to review the earlier decisions taken either by him or by his predecessor on the very same issue , which in our considered opinion, cannot be the intention of the statute. That’s why the legislature had duly drawn a distinction between the completed and abated assessments. The provisions of M/s. Arihant Universal Realty Pvt. Ltd., section 153A of the Act are reproduced hereunder for the sake of convenience :- "[Assessment in case of search or requisition 153A. [(1)] Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003, the Assessing Officer shall— (a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139;
(b) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made : Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years:"
6.1. We find that the Co-ordinate Bench of Delhi Tribunal in the case of Dy. CIT v. Aggarwal Entertainment (P.) Ltd reported in [2016] 72 taxmann.com 340 (Delhi - Trib.) had addressed this aspect. The relevant headnotes is reproduced below:— "Section 153A, read with section 143, of the Income-tax Act, 1961-Search and seizure - Assessment in case of (in case of section 143(1) assessment)- Assessment year 2004-05- Whether assessment in respect of which return has been processed under section 143(1), cannot be regarded as pending for purpose of section 153A as Assessing Officer is not required to do anything further about such a return and, thus, said assessment cannot be reopened in exercise of power of section 153A-Held yes (Paras 10 and 12) (In favour of assessee)."
6.2. We find that the Co-ordinate Bench of Kolkata Tribunal in the case of ACIT vs Kanchan Oil Industries Ltd in dated
M/s. Arihant Universal Realty Pvt. Ltd., 9.12.2015 reported in 2016-TIOL-167-ITAT-KOL had explained the aforesaid provisions as below:- "6.4 In our opinion, the scheme of assessment proceedings should be understood in the following manner pursuant to the search conducted u/s. 132 of the Act :- (a) Notice u/s. 153A of the Act would be issued on the person on whom the warrant of authorization u/s. 132 of the Act was issued for the six assessment years preceding the year of search and assessments thereon would be completed u/s. 153A of the Act for those six assessment years. (b) In respect of the year of search, notice u/s. 143(2) of the Act would be issued and assessment thereon would be completed u/s. 143(3) of the Act. (c) In respect of concluded assessments prior to the year of search, no addition could be made in the relevant assessment year unless any incriminating material is found during the course of search with respect to the relevant assessment year. (d) Pursuant to the search u/s. 132 of the Act, the pending proceedings would get abated. In respect of abated assessments, the total income needs to be determined afresh in accordance with the provisions of section 153A and other provisions of the Act.
6.4.1 The concluded assessments for the purpose of section 153A of the Act shall be - (i) assessment years where assessments are already completed u/s. 143(1) and time limit for issuance of notice u/s. 143(2) of the Act has expired or; (ii) assessment years where assessments are already completed u/s. 143(3) of the Act ; unless they are reopened u/s. 147 of the Act for some other purpose in both the scenarios stated above.
6.4.2 The scheme of assessment proceedings contemplated u/s. 153A of the Act are totally different and distinct from the proceedings contemplated u/s. 147 of the Act and these procedures of assessment operate in different fields and have different purposes to be fulfilled altogether. 6.4.3 The expression 'assess or reassess' stated in section 153A(1)(b) has to be understood as below:- 'assess' means assessments to be framed in respect of abated assessment years irrespective of the fact whether there are any incriminating materials found during the course of search with respect to relevant assessment years ; 'reassess' means assessments to be framed in respect of concluded assessment years where incriminating materials were found during the course of search in respect of the relevant assessment year."
M/s. Arihant Universal Realty Pvt. Ltd., 6.3. We also find that recently the Hon’ble Delhi High Court in the case of CIT vs Kabul Chawla reported in (2016) 380 ITR 573 (Del) held as under:- '37. On a conspectus of section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: (i) Once a search takes place under section 132 of the Act, notice under section 153A(1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs 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 AYs will have to be computed by the Ld AOs as a fresh exercise. (iii) The Ld AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The Ld 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 does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the Ld 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 Section only on the basis of seized material." (v) In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. (vi) Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the Ld AO. (vii) Completed assessments can be interfered with by the Ld AO while making the assessment under section 153A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment."
The present appeals concern AYs 2002-03, 2005-06 and 2006-07, on the date of the search the said assessments already stood completed. Since no incriminating material was unearthed during the search, no additions could have been made to the income already assessed.
M/s. Arihant Universal Realty Pvt. Ltd., 6.4. At this juncture, it would be pertinent to address the decision of Hon’ble Delhi High Court in the case of CIT vs Anil Kumar Bhatia reported in (2013) 352 ITR 493 (Del) which is normally relied upon by the revenue on the impugned issue before us. In our considered opinion, the reliance on the said decision does not in any manner advance the case of the revenue as admittedly the Hon’ble Delhi High Court in para 24 of its order had held as under:- “24. We are not concerned with a case where no incriminating material was found during the search conducted under section 132 of the Act. We, therefore, express no opinion as to whether Section 153A can be invoked even in such a situation. That question is therefore left open.”
6.5. We find that the decision of Hon’ble Delhi High Court in the case of CIT vs Kabul Chawla reported in (2016) 380 ITR 573 (Del) had duly considered the decisions of CIT vs Anil Kumar Bhatia reported in (2013) 352 ITR 493 (Del) ; CIT vs Chetan Das Lachman Das reported in (2012) 211 Taxman 61 (Del HC) ; Madugula Venu vs DIT reported in (2013) 215 Taxman 298 (Del HC) ; Canara Housing Development Co. vs DCIT reported in (2014) 49 taxmann.com 98 (Kar HC) ; Filatex India Ltd vs CIT reported in (2014) 229 Taxman 555 (Del HC) ; Jai Steel (India) vs ACIT reported in (2013) 219 Taxman 223 (Del HC) ; CIT vs Murli Agro Products Ltd reported in (2014) 49 taxmann.com 172 (Bom HC) ; CIT vs Continental Warehousing Corporation (Nhava Sheva) Ltd reported in (2015) 374 ITR 645 (Bom HC) and All Cargo Global Logistics Ltd vs DCIT reported in (2012) 137 ITD 287 (Mum ITAT) (SB). We also find that against the decision of the Hon’ble Delhi High Court in 380 ITR 573 (Del), the revenue preferred Special Leave Petition before the Hon’ble Supreme Court and the same was dismissed by the Hon’ble Apex Court which is reported in 380 ITR (St.) 4 (SC).
M/s. Arihant Universal Realty Pvt. Ltd., 6.6. We also find that the Hon’ble Calcutta High Court in the case of Principal CIT vs M/s Salasar Stock Broking Ltd in G.A.No. 1929 of 2016 ITAT No. 264 of 2016 dated 24.8.2016 had endorsed the aforesaid view of Hon’ble Delhi High Court in Kabul Chawla’s case and also placed reliance on its own decision in the case of CIT vs Veerprabhu Marketing Ltd reported in (2016) 73 taxmann.com 149 (Cal HC).
6.7. We find that the provisions of section 132 of the Act relied upon by the revenue would be relevant only for the purpose of conducting the search action and initiating proceedings u/s 153A of the Act. Once the proceedings u/s 153A of the Act are initiated, which are special proceedings, the legislature in its wisdom bifurcates differential treatments for abated assessments and unabated assessments. At the cost of repetition, we state that in respect of abated assessments (i.e pending proceedings on the date of search) , fresh assessments are to be framed by the ld AO u/s 153A of the Act which would have a bearing on the determination of total income by considering all the aspects, wherein the existence of incriminating materials does not have any relevance. However, in respect of unabated assessments, the legislature had conferred powers on the ld AO to just follow the assessments already concluded unless there is an incriminating material found in the search to disturb the said concluded assessment. In our considered opinion, this would be the correct understanding of the provisions of section 153A of the Act , as otherwise, the necessity of bifurcation of abated and unabated assessments in section 153A of the Act would become redundant and would lose its relevance.
6.8. In any case, we find that this issue had been the subject matter of adjudication by the Hon’ble Jurisdictional High Court in the case of CIT vs
M/s. Arihant Universal Realty Pvt. Ltd., Continental Warehousing Corporation (Nhava Sheva) Ltd reported in 374 ITR 645 (Bom) which had been decided in favour of the assessee and accordingly would bind this tribunal. We also find yet another recent decision of the Hon’ble Jurisdictional High Court on the impugned issue in the case of CIT vs SKS Ispat & Power Ltd reported in 398 ITR 584 (Bom) which is also decided in favour of the assessee.
6.9. Moreover, we find that in the case of group concerns of the assessee wherein search assessments were framed by the ld. AO emanating out of the same search action on 18.10.2010, this tribunal had decided the very same issue in dispute before us on the technical ground in favour of the assessee in the following cases :- a) Arihant Enterprises and others vs DCIT in to 4353 /Mum/2017 and others dated 08.01.2019. b) Abhishek Enterprises vs DCIT in ITA Nos. 1008 to 1010/Mum/2016 dated 04.06.2018.
6.10. In view of the aforesaid findings and respectfully following the judicial precedents relied upon hereinabove, we hold that the assessment framed u/s 143(1) of the Act for the Asst Year 2009-10 , which was unabated / concluded assessment, on the date of search, deserves to be undisturbed in the absence of any incriminating material found in the course of search and accordingly the disallowances / additions made thereon are hereby directed to be deleted. Since the issue is addressed on preliminary ground of absence of incriminating materials, we refrain to give our findings on the merits of the disallowances /additions for the Asst Year 2009-10 and they are left open. Accordingly the grounds raised by the assessee in this regard are allowed.
M/s. Arihant Universal Realty Pvt. Ltd.,
In the result, the appeal of the assessee is allowed.
Order pronounced on 05/04/2022 by way of proper mentioning in the notice board.