VIKRAM B TANNAN,MUMBAI vs. ASST CIT CEN CIR 3(2), MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “F” MUMBAI BEFORE SHRI S. RIFAUR RAHMAN (ACCOUNTANT MEMBER) AND SHRI PAVAN KUMAR GADALE (JUDICIAL MEMBER) ITA No. 7323/MUM/2016 Assessment Year: 2007-08 Mr. Vikram Bodhraj Tanna, Asst. Commissioner of Income Tax, M/s Capsulation Services Ltd., Vs. Central Circle-20, Capsulations Premises, 1st floor, Aayakar Bhavan, M.K. Road, New Sion Trombay Road, Deonar, Marine Lines Mumbai-400 088. Mumbai-20. PAN No. AABPT 3016 G Appellant Respondent ITA No. 5671/MUM/2017 Assessment Year: 2007-08 Mr. Vikram Bodhraj Tanna, Asst. Commissioner of Income Tax, M/s Capsulation Services Ltd., Vs. Central Circle-3(2), Capsulations Premises, 1st floor, Room No. 402, Aayakar Bhavan, M.K. Sion Trombay Road, Deonar, Road, New Marine Lines Mumbai-400088. Mumbai-20. PAN No. AABPT 3016 G Appellant Respondent ITA No. 5721/MUM/2017 Assessment Year: 2007-08 DCIT CC 3(2), Central Range-3, Mr. Vikram Bodhraj Tanna, Room No. 1913, 19th floor, Air Vs. M/s Capsulation Services Ltd., India Building, Nariman Point, Capsulations Premises, 1st floor, Mumbai-400020. Sion Trombay Road, Deonar, Mumbai-400088. PAN No. AABPT 3016 G Appellant Respondent Assessee by : Mr. J.D. Mistry, AR Revenue by : Mr. Jacinta, DR Date of Hearing : 30/09/2021 Date of pronouncement : 25/11/2021

Mr. Vikram Bodhraj Tanna 2 ITA Nos. 7323/M/2016 & ors ORDER PER S. RIFAUR RAHMAN, A.M. The captioned two appeals filed by the assessee and other cross appeal filed by the Revenue (5721/MUM/2017) are directed against the order of Commissioner of Income Tax (Appeals)-51, Mumbai [in short ‘CIT(A)’] for the assessment year 2007-08 dated 14.06.2017 and arise out of assessment completed u/s 143(3) r.w.s. 153A of the Income Tax Act, 1961 (in short the Act). As common issues are involved, we are proceeding to dispose them off by this consolidated order for the sake of convenience. 2. At the time of hearing, Ld. AR of the assessee made an elaborate submission on ground No. 1 that proceedings under section 153A of the Income Tax Act 1961 and addition made pursuant thereto are bad in law. Other grounds raised by the assessee are alternate remedies sought by the assessee against the order passed by CIT(A). Since Ld. AR raised the jurisdictional issue and not argued on merits, we deem it fit and proper to adjudicate only the jurisdictional issue. All other issues are kept open as of now. 3. The brief facts of the case relating to ground No. 1 are, a search under section 132 of the Act was conducted in Universal Medicare Group along with other group concerns and individual entities on 16.9.2011. The assessee is a director in Universal Group and was covered under the search and seizure action under section 132 (1) of the Act. Accordingly, notice under section 153A of the Act was issued and served on the assessee. In response, assessee filed return of income on 22.2.2013 declaring total income at ₹ 5,68,36,580/– and exempt income of ₹ 5 34, 51, 653/–. The assessing officer observed that the assessee filed original return of income under section 139 (1) of the Act which was revised on 30.8.2007 declaring

Mr. Vikram Bodhraj Tanna 3 ITA Nos. 7323/M/2016 & ors total income at ₹ 5 61,29,695/–. Notices under section 143(2) and 142(1) along with questionnaire were issued and served on the assessee. In response, authorised representatives of the assessee attended and furnish the information as called for. 3.1 The assessee is an individual and earned income from salary, house property, capital gain and other sources during the year under consideration. As per the information on record, revenue received information by government of India from the French government under DTAA in exercise of its sovereign powers that some Indian nationals and residents have foreign bank accounts in HSBC Bank, Geneva, Switzerland which were undisclosed from the Indian taxation department. This information is received in the form of a document (referred to as Base Note) wherein various details of account holders such as name, date of birth, place of birth, sex, residential address, profession, nationality along with the date of opening of the bank account in HSBC Bank, Geneva and balance in certain years etc., are mentioned. According to the revenue, the above said base note was also received in the case of assessee and the assessee’s account with BUP_SIFIC_PER_ID 5090155704 has linkages with code profile client 5091470841. 4. During the course of search proceedings, a statement of the assessee was recorded on 16.9.2011 and he was confronted with the base note, was asked to explain the same. The assesse in response to various questions, in particular question No. 15, 16 and 17, he denied that the account in the base note was not open by him and this account does not belong to him. Subsequently another statement recorded on 14.11.2011, again assessee was asked about the account detail and again assessee denied of having opened any such account. During assessment proceedings, assessee was

Mr. Vikram Bodhraj Tanna 4 ITA Nos. 7323/M/2016 & ors asked to submit complete copy of the statement of all foreign bank accounts including bank account in HSBC Bank, Geneva and the assessee was asked to sign a consent waiver form in case he is not in possession of statement of his bank account. In response, assessee vide his letter dated 24.07.2013 has denied any involvement or banking relationship with HSBC Bank, Geneva. The assessing officer rejected the submissions made by the assessee and by relying on section 11 of Indian Evidence Act, 1872, interpreting the informations in Base Note and relying on case law proceeded to complete the assessment under section 143 (3) read with section 153A of the Act. The addition made by the assessing officer is wholly based on the information on Base Note to the extent of ₹ 88, 39, 424/–.

“8.3.2 I have carefully considered the assessment order as well as the contentions of the assessee. I have perused the copy of the Warrant of Authorization and the Panchnama. It is undisputed fact that the Warrant of Authorization contains the name of the assessee. It:is also undisputed that the Warrant of Authorization was served upon the assessee whose premises were being searched. During the search, a statement was recorded from the assessee. He was shown the base note and was asked regarding the account held in his name in HSBC, Geneva. No doubt, the assessee denied having any such account but the issue on which search was initiated and conducted is the Swiss Bank account held by the assessee. Assessee confirmed that all his

Mr. Vikram Bodhraj Tanna 5 ITA Nos. 7323/M/2016 & ors personal details as mentioned in the base note are correct. During search, it was found out that assessee did not reflect the said account or the amount therein in the regular books of accounts. Thus, it can be seen that prima facie the above bank account and the money therein is unaccounted. Based on these findings in the search, the assessment is completed. The decisions cited by the assessee have to be analysed. The decision stand on their own facts and in all of those cases, the additions made us. 153A are entirely unrelated to the basis of search, statements recorded during search and the issues emanating out of post search investigations. In the cases cited by assessee, the additions made were on legal issues like 801A (in the cases of All Cargo Logistics Ltd. and Continental Warehousing), 80HHC (in the case of Murli Agro Products). It is in that factual matrix that the Hon ble courts have held that the search assessment should be based on the issues/assets found in the course of search. In the light of above facts, The Hon'ble Special Bench in the case of All Cargo Logistics Ltd. held that in respect of non-abated assessments, the assessment will be made on the basis of incriminating material seized and undisclosed income or undisclosed property discovered in the course of search. The word used 'course of search' has a wider connotation than the word at the time of search' or in search' and would naturally extend to pre-search and post- search investigations. For example, if a property document is found during pre-search investigations which shows unaccounted investment over and above the stated value in the property and the said document formed the basis for search; during the search assessee was questioned on the said investment, it cannot be said that 153A assessment cannot be made on that basis only because the assessee denied having made any unaccounted investment and that no further material was found in the search. The Hon'ble Special Bench, while using the phrase 'in course of search' in Para 53 of the decision, made it clear that the intention of the lawmakers is to make the assessment based on the search and not to touch upon all the other issues. For argument sake, had the assessee accepted the ownership of the impugned bank account, the assessment u/s 153A would have become valid even if no incriminating material was found during the search. Therefore, denial of the ownership of the bank account itself won't make the proceedings us. 153A invalid. It is another issue as to whether the said addition would stand the test of judicial scrutiny or not. Coming to the case of Manish Sadhwani, NRI gifts were added in 153A assessment though the said gifts were already reflected in the original return. In the instant case, it is not the claim of the assessee that the above account is reflected in the books/returns and the sources thereof are explained. 8.3.3 In the above background, let us now examine in detail the ratio laid down by the Hon'ble jurisdictional High court as well as Hon 'ble special bench in the case of Continental ware housing/ All cargo. Pursuant to the judgment of the Special Bench of the ITAT in All Cargo Global Logistics 137 ITD 287 (SB) (Mum) the Bombay High Court considered following two Questions: (i) whether scope of assessment u/s 153A in respect of completed assessments is limited to only undisclosed income and undisclosed assets detected during search and

Mr. Vikram Bodhraj Tanna 6 ITA Nos. 7323/M/2016 & ors (ii) whether in view of the Circular of the CBDT No. 10/2005 the assessee was entitled to deduction us 80 IA(4). In the present case, the first question is relevant and hence let us see what the Hon ble court had to say in this context. After considering the arguments before it and the SB decision it was held by HC that : "Once it is held that the assessment has attained finality, then the AO 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. If there is nothing on record to suggest that any material was unearthed during the search or during the 153A proceedings, the A while passing order under Section 153A read with Section 143(3) cannot disturb the assessment order;" (Emphasis supplied) . Hon'ble HC in this regard confirmed the stand taken by the division bench in the case of Murali agro which held as under: Once it is held that the assessment finalized 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 IT. 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 Analysed assessment/reassessment were contrary to the facts unearthed during the course of 153A proceedings. (emphasis supplied) 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 80HHC 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 80HHC deduction and consequently the C.I.T. could not have invoked jurisdiction under Section 263 of the Act. (Emphasis supplied) 8.3.4 From the above observations of HC it is clear that in the non-abated assessments additions cannot be made if there is nothing on record to suggest

Mr. Vikram Bodhraj Tanna 7 ITA Nos. 7323/M/2016 & ors that any material was gathered during search or during 153A proceedings. In the case on hand, information was received that assessee holds foreign accounts. Search was conducted with the sole intention of verifying whether these accounts/ amounts are disclosed in the books and during search it was gathered that no such account was reflected in the books of the assessee. As it was found to the contrary, the said amount is assessed as undisclosed income in the relevant year U/$ 153A. In the light of the specific facts of the case, the words used by Honble court which are the material gathered during search or in the course of proceedings u/s 153A assume importance. In the present case material was gathered during search that the assessee did not disclose the foreign bank account in the books and based on this material the proceedings u/s 153A are initiated. It is not disputed that the basis for search and the findings in the search are related to the undisclosed foreign bank account of the assessee and that is the core issue in the search on which the assessments are framed. It is not the argument of the assessee that the assessment is done making additions like 80IA / 14A etc which are neither related to the basis of search nor originating from the issues raised in the statements recorded during search. 8.3.5. In the cases of ALL CARGO and MURALI AGRO, the Hon'ble ITAT and Bombay HC were basically dealing with the additions which were in the nature of legal additions like 80IA/80HHC which have no relation with either the basis of search or the findings in search. It is in that context that the courts have held that the 153A assessment in unabated cases be linked to the findings of the search and the decisions have to be understood and analysed in that context. There is no quarrel with the decisions of Hon 'ble SB and H that in the search assessment for unabated assessment years, additions cannot be made on the issues which are totally unrelated to the search. However, these decisions cannot be so narrowly interpreted to mean that the additions will have to be based on incriminating material. In fact, the Hon 'ble ITAT itself held that the word incriminating material does not find any place in the act. That is precisely the reason for which the Hon'"ble ITAT explained the meaning of incriminating material as below while answering the questions raised before it 58. Thus, question No. I before us is answered as under : (a) In assessments that are abated, the AO retains 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; (b) In other cases, in addition to the income that has already been assessed, the assessment w/ 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) undisclosed Income or property discovered in the course of search. (Emphasis supplied)

Mr. Vikram Bodhraj Tanna 8 ITA Nos. 7323/M/2016 & ors 8.3.6 Hon'"ble SB, being aware of narrow interpretations with regard to the phrase incriminating material, tacitly sounded a word of caution in this regard. Commenting on the search proceedings the Hon'ble SB held as under 50. The provision contained in section 132 (I) empowers the officer to issue a warrant of search of the premises of a person where any one or more of conditions mentioned therein is or are satisfied, i.e. - a) summons or notice has been issued to produce books of account or other documents but such books of account or documents have not been produced, b) summons or notice has been hitp://www.itatonline.org ITA Nos. 5018 to 5022 & 5059/M/2010 58 or might be issued, he will not produce the books of account or other documents mentioned therein, or c) he is in possession of any money or bullion etc. which represents wholly or partly the income or property which has not been and which would not be disclosed for the purpose of assessment, called as undisclosed income or property. We find that the provision in section 132 (I) does not use the word "incriminating document". Clauses (a) and (b) of section 132(1) employ the words "books of account or other documents" For harmonious interpretation of this provision with provision contained in section 153A, all the three conditions on satisfaction of which a warrant of search can be issued will have to be taken into account. 51. Having held so. an assessment or reassessment ws 153A arises only when a search has been initianed and conducted. Therefore, such an assessment has a vital link with the initiation and conduct of the search. We have mentioned that a search can be authorised on satisfaction of one of the three conditions enumerated earlier. Therefore, while interpreting the provision contained in section 153A, all these conditions will have to be taken into accout. With his, we proceed two literally interpret to provision in 153A as it exists and read it alongside the provision contained in section 132(1). 8.3.7 As has been held by SB there is no dispute on the ratio that the assessment u/s 153A should have a vital link to the initiation / conduct of the search. The Hon'ble SB was cautious of the perils" of literal interpretation and held that in the case of ALL CARGO literal interpretation does not lead to absurd results. It is not out of place to reproduce the observations of Hon'ble SB hereunder. 56. Thus the interpretation placed by us takes in 1o account the principles of literal interpretation and reading the relevant provisions together. This interpretation does not in any manner give results which can be said to be ultra vires. It also does not give any absurd or unjust results. It is basically for this reason; the SB expanded the scope of the questions raised before it while answering the same. A perusal of the questions raised before

Mr. Vikram Bodhraj Tanna 9 ITA Nos. 7323/M/2016 & ors the SB and how the Hon'ble SB chose to answer them would make the intentions of S B clear Questions raised before SB 5. Under such circumstances, we propose the following two questions 1. Whether, on the facts and in law, the scope of assessment u/ s153A encompasses additions, not based on any incriminating material found during the course of search"? 2. Whether, on the facts and in the circumstances of the case, the Ld. CIT (Appeals) was justified in upholding the disallowance of deduction u/s 80LA(4) of the Act, on merits? SB's answer to the questions raised 57. The various Ld. Counsels for the intervening parties have listed or stated various scenarios regarding what constitutes pending assessment and what constitutes completed assessment. We find-that second proviso to section 153A uses the words "pending on the date of initiation of search" and provides that assessment so pending shall, abate. The provision does not use the words "completed assessment". Further, the question which has been referred to us is in respect of scope of assessment u/s 153A and whether it encompasses additions, not based on incriminating material found in the course of search. The question uses the words "incriminating material" which again find no mention either in section 132/1) or 153A. Thus, analysis of various scenarios regarding completed assessments does not fall within the ambit of the question posed to us. Therefore, this question may have to decided by the Division Benches in the respective cases depending on the facts of the case. We may however consider the cases cited by other Ld. Counsels in the aforesaid matter 58. Thus, question No. I before us is answered as under : (a) In assessments that are abated, the AO retains 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 ; (b) In other cases, in addition to the income that has already been assessed, the assessment us 153A will be made on the basis of

Mr. Vikram Bodhraj Tanna 10 ITA Nos. 7323/M/2016 & ors 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) undisclosed income or property discovered in the course of search. (Emphasis supplied) 8.3.8. From the above stand of the SB while answering the questions framed, it is clear that the SB never wanted to narrow down the scope of search assessments so as not to make to the legal provisions, related to search, unjust and absurd. In the present case, unaccounted income/ property in the nature of money lying in the undeclared foreign bank account is discovered during the search. Thus as per the SB, the lecision, proceedings in this case u/s 153A are välidly initiated and completed. Thus, it can be inferred that 153A assessment can be and shall be made on the basis of undisclosed income or property discovered in the course of search. At the cost of repetition, it is to observed that in the instant case, dept had certain information regarding foreign bank accounts of assessee for verification of which search was carried out. During search it was unearthed that the said accounts are not disclosed in the books of the assessee. When questioned, assessee naturally denied having any such accounts. To bring the amount of undisclosed money to tax, assessments us 153A are made. Only because assessee denied these accounts it does not mean that the accounts or money therein does not exist. Further, these accounts and the fact that they do not form part of regular accounts of the assessee was unearthed during the search. Therefore the issue of assessee accepting the same or not would not affect the applicability of 153A in the relevant A.Yr. The assessee by its arguments is trying to give the narrower interpretation to the SB decision against which the SB itself warned. The assessee's arguments in the present case are thus against the spirit of Hon'ble SB decision, High Court decisions and hence need to be summarily rejected. In view of the above, it is held that none of the decisions relied upon by the assessee would be of any help as the facts of the present case are entirely different as compared to the factual matrix of the cases relied upon. Therefore, I hold that the proceedings u/s. 153A have been validly initiated and the assessment made is legally valid.” 6. Aggrieved, assessee preferred an appeal before us and Ld. AR of the assessee submitted as under:

2.1 A search and seizure operation us 132(1) of the Act was carried out on the Appellant and his related entities on September 16, 2011. During the search action, the search party was carrying one computer printout of some purported foreign account. The Appellant denied its ownership completely. No incriminating material or any corroborative evidence whatsoever, was found during the search. The impugned addition is made in absence of any incriminating material found during search from the Appellant. 2.2 The Return of income was filed by the Appellant on August 30, 2007. [See Pg 1 of the Paper Book ("PB”)] Originally, the intimation w/ 143(1) was

Mr. Vikram Bodhraj Tanna 11 ITA Nos. 7323/M/2016 & ors received upon the Appellant for the captioned year on March 28, 2009 [See Pg 7 of the Paper Book ("PB")]. 2.3 The time limit for issue of notice under section 143(2) of the Act expired on August 31, 2008. It is, therefore, undisputed that the assessment for AY 2007-08 is unabated Treatment by AO: 2.4 The AO initiated proceedings under section 153A of the Act and made an addition of Rs88,39,424 based on a piece of paper, being a computer print- out, purportedly containing particulars of some overseas account in HSBC Bank (referred to in the Assessment order as "Base Note). Treatment by CIT(A): 2.5 The Ld. CIT(A) upheld the order passed under section 153A in absence of incriminating material after making several factually and legally incorrect and untenable references. Appellant's Submission: 2.6 The search operation was carried out on the Appellant and his related entities on September 11, 2014. It may be noted that during the search operation, all transactions were found to be genuine and nothing was found to the contrary. However, at the time of search, a piece of paper (referred to in the Assessment order as Base Note) was brought by the search party and was shown to the Appellant. It was contended that the said Base Note contained particulars of certain alleged overseas bank accounts, told to the Appellant to be in HSBC Bank, Geneva. It was alleged that the Appellant is the beneficiary of the said accounts in HSBC Bank, Geneva, and explanation was sought whether the said accounts belong to the Appellant. 2.7 The entire assessment under section 153A of the Act and addition made in relation to the alleged bank account of Rs 88,39,424/- was on the basis of the alleged Base Note. Further, there was no document or any other corroborative material whatsoever that was found during the search conducted, that could support the allegation that any of the said overseas accounts belonged to the Appellant. However, subsequent to the search, when the assessment was made u/s143(3) r.w.s. 153A of the Act, the impugned addition was made. 2.8 In light of the fact that no incriminating material in this behalf is found at the time of search, the Appellant, at the outset, most humbly submits that no addition can be made in the course of assessment us.153A of the Act. In this behalf. Your Honour's kind attention is drawn initially to the decision of the Special Bench of the Tribunal in the case of All Cargo Logistics Ltd. v. DCIT (ITA no. 5018 to 5022 & 5059/M/2010). The relevant extracts of the Special Bench decision are reproduced below:-

Mr. Vikram Bodhraj Tanna 12 ITA Nos. 7323/M/2016 & ors "58. Thus, question No. I before us is answered as under: (a) In assessments that are abated, the AO retains the original jurisdiction as well as jurisdiction conferred on him ws 153A for which assessments shall be made for each of the six assessment years separately; (b) In other cases, in addition to the income that has already been assessed, the assessment us 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) undisclosed income or property discovered in the course of search. The above view has since been upheld by the Hon'"ble High Court of Bombay in the case of CIT v. Continental Warehousing Corporation (58 Taxmann.com 78) wherein it has been held that if there is nothing on record to suggest that any material was unearthed during the search or during the 153A proceedings, the AO while passing order under Section 153A read with Section 143(3) cannot disturb the assessment order. 2.9 Similar view was also taken by the Bombay High Court in the case of CIT v. Murli Agro Products Ltd (ITA No. 36 of 2009) wherein it was held that no addition can be made in respect of an assessment us 153A of the Act, if no incriminating material is found during the search. The Bombay High Court in Para 12 of the said judgement held as under : "'Once it is held that the assessment finalized on 29.12.2000 has attained finality, then the deduction allowed us 80HHC 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 AO, 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 finalized assessment were contrary to the facts unearthed during the course of 153 A proceedings. 2.10 This legal proposition is further reiterated by various High Courts, including the jurisdictional High Court in the case of CIT vs Gurinder Singh Bawa 386 ITR 483 (Bom), where it was held that once an assessment has attained finality for a particular year i.e., it is not pending, then the same cannot be subject to tax in proceedings u/s 153A of the Act. 2.11 Similarly, a view has been taken also by the Rajasthan High Court in the case of Jai Steel (India) v. ACIT (219 Taxman 223). The relevant portion of the said decision is reproduced below for ready reference:-

Mr. Vikram Bodhraj Tanna 13 ITA Nos. 7323/M/2016 & ors "26. The plea raised on behalf of the assessee that as the first proviso provides for assessment or reassessment of the total income in respect of each assessment year falling within the six assessment years, is merely reading the said provision in isolation and not in the context of the entire section. The words 'assess' or 'reassess' have been used at more than one place in the Section and a harmonious construction of the entire provision would lead to an irresistible conclusion that the word 'assess' has been used in the context of an abated proceedings and reassess has been used for completed assessment proceedings, which would not abate as they are not pending on the date of initiation of the search or making of requisition and which would also necessarily support the interpretation that for the completed assessments, the same can be tinkered only based on the incriminating material found during the course of search or requisition of documents.” 2.12 Reference may also be made to the decision of the Hon'ble Karnataka High Court in the case of CIT v. Manish Sadhwani (41 Taxmann 495) wherein the High Court has clearly held that conditions for exercising power under Chapter XIV-B are as under:- i) A search under Sec. 132 of the Act where incriminating evidence of undisclosed income is seized; ii) The said income, which was found in such search and is not reflected in the return filed under Sec. 139(1) or 139(4) before the date of search. The High Court categorically held that the existence of both these conditions is sine qua non for initiation of proceedings and passing of block assessment order under Chapter XIV-B of the Act. 2.13 Indeed, various High Courts and Tribunal Benches all over the country have been unanimously taking the view that in the absence of incriminating material found in the course of search addition cannot be made in the order passed under Sec. 153A of the Act. For ready reference citations of some of the decisions on this issue are as under:-  Jignesh P. Shah Vs. DCIT (ITAT Mumbai) (ITA No. 1553 & 3173/Mum/2010)  CIT v. Kabul Chawla (ITA No. 707/2014) (Del HC)  CIT v. Smt. Shaila Agarwal (346 ITR 130) (All.) 2.14 Thus, the addition made is completely contrary to the binding decision of the Jurisdictional High Court, as well as other decisions of various High Courts, and is liable to be struck down. 2.15 Further, on facts identical to the case of the Appellant, where addition was made on the basis of a similar Base Note' and no other incriminating

Mr. Vikram Bodhraj Tanna 14 ITA Nos. 7323/M/2016 & ors material was found during the course of search in respect of assessment which were unabated, it has been held by various co-Ordinate Benches that no addition could be made in an assessment framed under section 153A of the Act. 2.16 In this regard, attention is invited towards decision of the Mumbai Bench of the Hon'ble ITAT in Mr. Arunkumar Ramniklal Mehta v. DCIT (ITA No:3712/Mum/2017) where similar addition based on Base Note' was deleted. The Hon'ble ITAT held as under: 18. In the above legal background, if you examine the facts of the present case, we found that the assessment for the impugned assessment year is unabated as on the date of search, which is because the assessment for the impugned year has been completed u/s 143 (1)of the Act, and the time limit for issue of notice u/s 143(2) was expired much before the date of search i.e. 25/08/2011. It is also an admitted fact that the addition made by the AO is not supported by any incriminating material found as a result of search. In fact, the AO made additions on the basis of 'Base Note' received by the government of India under exchange of information between French Government and Indian Government under the provisions of DTAA, and said Base Note was received prior to search. The sole reason for conducting search in the case of the assessee is information received from French Government in the form of Base Note with regard to undisclosed bank account in HSBC Bank Geneva. Therefore, we are of the considered view that the additions made by the AO is merely based on Base Note which is not found as a result of search or requisition and consequently the additions made by the AO in assessment order passed u/s 153A of the Act, consequent to search, in absence of any incriminating material found as a result of search is bad in law and liable to be deleted. This legal proposition is supported by the decision of the jurisdictional High Court of Bombay in the case of Continental Warehousing Corporation (Nhava Sheva) Ltd vs CIT (supra), where the court held that no additions can be made in respect of assessments which have become final if no incriminating material is found during the course of search. This legal proposition is further supported by the decision of division bench of the Hon'ble Bombay High Court in the case of Murali Agro Products Ltd vs CIT (2014) 49 taxman.com 72, wherein it was held that no additions can be made in respect of unabated assessment which have become final, if no incriminating material is found during the course of search. This legal proposition is further reiterated by various High Courts, including the jurisdictional High Court in the case of CIT vs Gurinder Singh Bawa 386 ITR 483(Bom), where it was held that once an assessment has attained finality for a particular year i.e. it is not pending, then the same cannot be subject to tax in proceedings u/s 153A of the Act.

Mr. Vikram Bodhraj Tanna 15 ITA Nos. 7323/M/2016 & ors 2.17 On identical facts, the Hon'ble ITAT in Bishwanath Garodia v.DCIT (76 taxmann.com 81) (Kolkata - Trib.) held as under: "11. Keeping in view the discussion made above, we hold that the additions as finally made to the total income of the assessee on account of transactions reflected in the Bank account of the assessee with HSBC, Geneva, Switzerland and income relating thereto for both the years under consideration are beyond the scope of section 153A as the assessments for the said years had become final prior to the date of search and there was no incriminating material found during the course of search to support and substantiate the said addition. The said additions made for both the ears under consideration are, therefore, deleted allowing the relevant grounds of the assessee's appeals. 2.18 In Smt. Yamini Agarwal v.DCIT (83 taxmann.com 209) (Kolkata - Trib.), the Hon'ble ITAT was faced with identical facts with respect to the additions made during the course of assessment proceedings u/s.153A of the Act, where there was no incriminating material found at the time of search and the AO while concluding the assessment u/s.153A of the Act dealt with the HSBC Bank Account at Geneva, Switzerland on receipt of specific information from sources, which are not disclosed but admittedly not found or discovered as a result of search conducted u/s.132 of the Act on the Assessee. The Hon'ble ITAT observed as under: It is also not disputed that for A.Y.2006-07 the assessee filed her return of income u/s 139 of the Act on 12.12.2006 declaring total income of Rs.1,18,266/-. No notice u/s 143(2) of the Act was issued for making the assessment u/s 143(3) of the Act within the period laid down in the proviso to section 143 (2) of the Act namely 30.09.2007. As far as A.Y.2007-08 is concerned the assessee filed her return of income on 27.02.2008 declaring total income of Rs.1,27,820/- u/s 139 of the Act. Admittedly no notice u/s 143(2) of the Act was issued for making the assessment u/s 143(3) of the Act within the period laid down in the proviso to section 143 (2) of the Act namely 30.09.2008. Therefore, assessment proceedings stood completed and that in any case on the date of search i.e. on 28.07.2011 and 23.09.2011, the assessment for the impugned assessment years 2006-07 & 2007- 08 were not pending. Therefore the acceptance of the return of income amounts to an assessment and such assessment did not abate in terms of the Second Proviso to section 153A(1) of the Act. It is the plea of the learned counsel for the Assessee that the impugned additions made by the Assessing Officer could not have been made in the impugned assessment proceedings as they are not based on any material seized or found during the course of search at the business premises of the assessee. 24. We are of the view that the proposition canvassed by the learned counsel for the Assessee finds support from the various decisions cited by him. The proposition

Mr. Vikram Bodhraj Tanna 16 ITA Nos. 7323/M/2016 & ors IT(SS)A.Nos.97&98/Kol/2015 Smt. Yamini Agarwal A.Yr.2006- 07 & 2007-08 canvassed by the learned DR is supported by the decision of the Hon'ble Karnataka High Court in the case of Canara Housing (supra) in which the ruling of the Special Bench in the case of Alcargo logistics (supra) has not been accepted. The Hon'ble Bombay High Court in the case of CIT Vs. Continental Warehousing Corporation ITA No.523/2013 judgment dated 21.4.2015 after referring to the decision of the Hon'ble Delhi High Court in the case of Anil Kumar Bhatia (supra) and of the Hon'ble Karnataka High Court in the case of Canara Housing (supra) has taken the view that the decision rendered by the Special Bench is to be followed. In the subsequent decision rendered by the Hon'ble Delhi High Court in the case of Kabul Chawla (supra), the view expressed by the Special Bench of ITAT in the case of All Cargo Global Logistics (supra) has been accepted. There is no decision of the Hon'ble Calcutta High Court, which is the jurisdictional High Court on the issue. We are of the view that the view expressed by the Hon'ble Bombay High Court and the Hon'ble Delhi High Court has to be followed being views in favour of the Assessee, in the facts and circumstances of the present case. 25. We therefore hold that the scope of the proceedings u/s.153A in respect of assessment year for which assessment have already been concluded and which do not abate u/s.153A of the Act, that the assessment will have to be confined to only incriminating material found as a result of search. The next aspect to be considered is as to when returns of income filed u/s.139 of the Act are shown to have been accepted without an intimation u/s.143(1) of the Act or without any notice issued u/s.143(2) of the Act within the time limit contemplated by the proviso thereto, can be said to be assessment proceedings concluded that have not abated u/s.153A of the Act. Section 153A of the Act, uses the expressing "pending assessment or reassessment". When a return is filed and when neither an acknowledgement or intimation u/s.143(1)of the Act is issued nor a notice u/s.143(2) of the Act is issued within the time limit laid down in the proviso to Secc.143(2) of the Act, the proceedings initiated by filing the return are closed. In the present case, the period for issuing the notice u/s 143(2) elapsed. IT(SS)A.Nos.97&98/Kol/2015 Smt. Yamini Agarwal A.Yr.2006- 07 & 2007-08 Therefore the process has attained the finality which can only be assailed u/s 148 or 263 of the Act. It can thus be concluded that making of an addition in an assessment under section 153A of the Act, without the backing of incriminating material, is unsustainable even in a case where the original assessment on the date of search stood completed by absence of issue of intimation under section 143(1) of the Act or by not issuing notice u/s.143(2) of the Act within the time limit laid

Mr. Vikram Bodhraj Tanna 17 ITA Nos. 7323/M/2016 & ors down in the proviso to Sec.143(2) of the Act, results in an assessment proceedings and where such assessment proceedings are completed prior to the date of search then they do not abate in terms of the Second Proviso to section 153A(1) of the Act. The decision of the ITAT Kolkata Bench rendered in the case of Shri Bishwanath Garodia (supra) on identical facts of the case as that of the Assessee in the present case, clearly supports our conclusions as above. 26. In the light of the discussion above, our conclusion is that in the present case, the issue dealt with by the AO in the assessment order u/s.153A of the Act, could not and ought not to have been examined by the AO in the assessment proceedings u/s.153A of the Act as the said issue stood concluded with the assessee's return of income being accepted prior to the date of search and no notice having been issued u/s.143(2) of the Act within the time limit laid down in that section. Such assessment did not abate on the date of search which took place on 28.3.2008. In respect of assessments completed prior to the date of search that have not abated, the scope of proceedings u/s.153A of the Act has to be confined only to material found in the course of search. Since no material whatsoever was found in the course of search, the additions made by the AO in the order of assessment for both the Assessment years could not have been subject matter of proceedings u/.s.153A of the Act. Consequently, the said various additions made in the orders of Assessment ought not to have or could not be made by the AO. Gr.No.1 raised by the Assessee in both the appeals are accordingly allowed. 2.19 In Anurag Dalmia V. DCIT (ITA 5395 & 5396/Del/2017) (Del. Trib), on identical facts where assessment was processed under section 143(1) of the Act, it was held by the Hon'ble ITAT as under: "24. So far as the Assessment Year 2008-09 is concerned, the facts and material are pari materia and our finding given above would apply mutatis mutandis. Here in this case also, the return was fled on 27.07.2007 which was duly processed ws. 143(1) of 27.03.2009 and had attained finality. Such an assessment has to be reckoned as unabated assessment at the time of search and seizure action carried out on 20.01.2012. Here also the same material facts which was in the possession of the Department prior to the date of search has been referred and relied upon by the AO and the observation and the finding of the Assessing Officer as well as of Id. CIT (A) are exactly the same. Thus, in view of our finding given above, we delete the similar addition of Rs.14,79,99,198/- on the ground that, it is beyond the scope of Section 153A."

Mr. Vikram Bodhraj Tanna 18 ITA Nos. 7323/M/2016 & ors 2.20 The facts of the Appellant's case are identical to the judicial precedents cited above. In view of the foregoing facts and judicial precedents, the Appellant prays that the impugned addition should be deleted and the proceedings under section 153A of the Act should be struck down as bad in law. 7. On the other hand, Ld. DR submitted that search was conducted in the case of Universal Group and assessee was also covered. He objected to the submissions made by the Ld AR that no incremental material found during the search, he submitted that in the course of search based on the warrant the assessee was enquired about bank account held by the assessee in HSBC Bank, Geneva. He submitted that the Department received Base Note from the government of France and the information contained in base note are not simple and contained valuable information. He brought to our notice page 3 of assessment order and submitted that assessee has accepted the details in base note but denied the account belongs to him. He submitted that we cannot ignore the base note and accept the submissions of the assessee that he is not accounted in his books or unaware. Therefore, the information in base note is proper accordingly the assessment completed under section 153 A is valid. Further he submitted that assessee has refused to sign the consent waiver form, which is relevant to collect the information from the foreign bank by the Department. He prayed that the submissions of the Ld AR be set aside. 8. Considered the rival submissions and material placed on record. We observe from the record that a search and seizure operation under section 132 (1) of the Act was conducted on the assessee and his related entities. Accordingly notice under section 153A of the Act was issued and served on the assessee and in response assessee filed his return of income. We observe from the record that the addition was made by the assessing officer during this assessment year pertains to a bank account in HSBC, Geneva. The

Mr. Vikram Bodhraj Tanna 19 ITA Nos. 7323/M/2016 & ors relevant information on the bank account was not found during search proceedings nor found in the possession of the assessee. However, during search proceedings, the assessee was confronted with the Base Note which the Income Tax Department obtained under exchange of information between French government and Indian government under the provisions of DTAA. The investigation wing and the assessing officer heavily relied on the information contained in the Base Note which they have confronted with the expectation that assessee will accept the information contained in the Base Note. However, the assessee has denied the ownership of any bank account opened in the HSBC Bank, Geneva and denied the information on the base note except the personal informations. It is fact on record that the addition was made in the assessment under section 143(3) read with section 153A only based on the information contained in the base note, which was not the material found, during search, in the possession of the assessee or in the places where search were conducted. Before us, the Ld. AR made a detailed submissions by heavily relying on decision of the special bench in the case of All Cargo logistics Ltd (supra) and decision of the honourable jurisdictional High Court in the case of Continental Warehousing Corporation (supra), made a plea that no incremental material found during search to make the addition in the assessment completed under section 153A whereas the assessing officer used the information obtained from the external agencies, which is not the information obtained from the possession of the assessee during search. 8.1 We observe from the decision of the coordinate bench in the case of Arunkumar Ramniklal Mehta (supra) and ITAT Kolkata bench in the case of Bishwanath Garodia (supra) held that no additions can be made in respect of unabated assessment which have become final, if no incriminating material is found during the course of search. The facts are similar in the

Mr. Vikram Bodhraj Tanna 20 ITA Nos. 7323/M/2016 & ors present case and it is fact on record that the addition made by the assessing officer wholly based on the information contained in Base Note which was not the material found during the search proceedings either in possession of the assessee or found in the premises were search conducted. The information obtained from outside agencies which was confronted with the assessee during the search cannot be considered as incriminating material found during search proceedings. It can only be considered as additional information in case it is found proper, can be used to make addition during assessment proceedings and cannot be used as the information found during search. There two aspects are completely different and gives different connotation. The information found during search alone can be considered for making addition u/s 153A of the Act. Therefore, we are inclined to accept the submissions of the Ld. AR and accordingly the ground No. 1 raised by the assessee is allowed. The other grounds raised by the assessee are kept open and not adjudicated at this point of time since we have allowed the jurisdictional ground raised by the assessee. Accordingly, appeal filed by the assessee for this assessment year is allowed. 8.2 With regard to other appeals filed by both Department as well as assessee on penalty levied under section 271 (1) (c) of the Act, the relevant facts are, the penalty levied wholly based on the assessment completed under section 143 (3) read with section 153A of the Act. The assessing officer levied the penalty 300% of the tax sought to be evaded and levied to the extent of ₹ 96,67,680/–. In appeal, Ld. CIT(A) reduced the penalty to hundred percent of the tax sought to be evaded. Aggrieved both revenue as well as assessee are in appeal before us. Since we already held the

Mr. Vikram Bodhraj Tanna 21 ITA Nos. 7323/M/2016 & ors assessment made under section 143 (3) read with section 153 A is bad in law in para no. 8.1 above and the assessing officer has not found any incriminating material during search, he cannot make any addition in the proceedings under section 153A of the Act, therefore, penalty cannot be levied in this case. Accordingly, we direct the AO to delete the penalty levied.

Order pronounced in the open Court on 25/11/2021. Sd/- Sd/- (PAVAN KUMAR GADALE) (S. RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 25/11/2021 Rahul Sharma, Sr. P.S. Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. The CIT(A)- 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. BY ORDER, //True Copy// (Dy./Assistant Registrar) ITAT, Mumbai