ANJALI JEWELLERS,KOLKATA vs. PCIT, CENTRAL-1, KOLKATA

1 ITA No140/Kol/2021, M/s Anjali Jewellers, AY 2014-15 आयकर अपील�य अधीकरण, �यायपीठ –“C” कोलकाता, IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH: KOLKATA [Before Shri P. M. Jagtap, Vice President (KZ) & Shri A. T. Varkey, Judicial Member] I.T.A. No. 140/Kol/2021 Assessment Year: 2014-15

M/s Anjali Jewellers Vs PCIT, Central-1, Kolkata (PAN: AAIFA 3096 J) . Appellant Respondent

Date of Hearing (Virtual) 02.09.2021 Date of Pronouncement 30.09.2021 For the Appellant Shri S. K. Tulsiyan, Adovate Smt. Puja Somani, CA For the Respondent Shri Devi Sharan Singh, CIT

ORDER Per Shri A. T. Varkey, JM: This is an appeal filed by the Assessee company against the order of Ld. PCIT, Central-1, Kolkata dated 25.03.2021 passed u/s 263 of Income Tax Act, 1961 ( hereinafter referred to as the Act) for Assessment year 2014-15.

2 ITA No140/Kol/2021, M/s Anjali Jewellers, AY 2014-15 4. Thereafter the search and seizure operation u/s 132(1) of the Act was conducted at the business premises of the assessee on 8th November, 2016 pursuant to which notice u/s 153A was initiated against it. The AO issued notice u/s 153A dated 22.05.2017 and in response the assessee filed the return of income by reiterating originally returned income at Rs. 11,56,94,090/-. Thereafter the AO issued statutory notices u/s 143(2) dated 25.07.2017 and 142(1) dated 10.01.2018. The AO noted that the assessee is engaged in the business of manufacturing and trading of jewelleries and that assessment originally was framed u/s 143(3) on 03.08.2016 determining total income of Rs. 11,69,65,820/- by making a disallowance of loss on sale on sale of fixed assets amounting to Rs. 5,59,038/-, disallowance of expense on surrender of tenancy right of Rs. 2,50,000/-, disallowance of capital expenditure to the tune of Rs. 31,448/- and disallowance of depreciation of Rs. 4,38,244/-. Thereafter the AO notes that the Ld. A.R. of the assessee had appeared along with accountant of the assessee and had produced books of accounts and supporting documents along with bank statement and finances as requisitioned by him. And the AO acknowledges that he has gone through the details and documents vis-à-vis the seized documents and after perusal of the same, he has kept it on record and thereafter the AO reiterated the income as assessed as per order u/s 143(3) of the Act dated 3.8.2016 i.e. at Rs. 11,69,65,820/-. This action of the AO dated 29.06.2018 passed u/s 153A/143(3) of the Act has been interdicted by the Ld. PCIT by passing impugned order dated 25.03.2021, which has been assailed before us on the legal issue that the AO had rightly not made any addition in the assessment year under consideration [AY 2014-15] which is an unabated assessment year because on the date of search [8th November, 2016], this assessment year was not pending before the AO; and therefore in the absence of any incriminating material unearthed during search qua the assessee qua the assessment year under consideration, as per the settled position of law, no addition/disallowance was legally permissible and so, the action of AO in not making any addition in this assessment year, cannot be held to be erroneous and therefore the Ld PCIT’s impugned action of invoking jurisdiction u/s 263 of the Act, was without jurisdiction.

3 ITA No140/Kol/2021, M/s Anjali Jewellers, AY 2014-15 153A of the Act, in an unabated assessment, the AO can make the addition/disallowance only on the strength /aid of incriminating material seized during search proceedings as held by the Hon’ble Delhi High Court in the case of CIT vs.. Kabul Chawla reported in 380 ITR 573 (Del) which decision has not been disturbed by the Hon’ble Supreme Court and the SLP preferred by the revenue has been dismissed. Therefore according to Ld. A.R, when the AO could not have made any addition in the unabated assessment year in the absence of incriminating material unearthed during search qua the assessee qua the assessment year, then the Ld. PCIT could not have in the first place hold the action of AO to be erroneous as well as prejudicial to the revenue, since the AO’s action was in line with the settled position of law as discussed supra. And secondly, when there was no incriminating material found/un-earthed during search qua the assessee qua the assessment year, then when the AO could not make any other additions/disallowances, or when it was legally impermissible for AO to do so directly, then the question is whether the Ld PCIT can do indirectly what the AO could not have done directly. According to Ld. A.R. admittedly AY 2014-15 is an unabated assessment because there was no assessment proceedings in respect of AY 2014-15 pending before the AO on the date of search on 8th November, 2016 because the scrutiny assessment for AY 2014-15 was completed by the AO on 3.8.2016, so therefore the assessment of the assessee for AY 2014-15 was not pending before the AO on the date of search on 08.11.2016. Since the assessment for AY 2014-15 was not pending before the AO on the date of search i.e. 8th November, 2016, in the absence of incriminating materials unearthed during search, qua assessee qua the assessment year 2014-15, the AO could not have made any addition as per the decision of Hon’ble Delhi High Court in CIT vs. Kabul Chawla (supra), PCIT vs. Kurele Paper Mills Pvt. Ltd. in 380 ITR 571, Hon’ble Calcutta High Court decision in CIT vs. Veerprabhu Marketing Ltd. in 388 ITR 574 (Cal), wherein the Calcutta High Court approved and agreed with the view expressed by the Hon’ble Karnataka High court in the case of CIT vs. IBC Knowledge Park Pvt. Ltd. reported in 385 ITR 346 and held that ‘ we are in agreement in the views expressed by the Hon’ble High Court that incriminating material is a pre-requisite power could have been exercised u/s 153C read with Section 153A of the Act. Further, according to Ld. A.R. the Hon’ble Calcutta High Court

4 ITA No140/Kol/2021, M/s Anjali Jewellers, AY 2014-15 followed the same decision in Veerprabhu Marketing Ltd. (supra) in the case of PCIT vs. Salasar Stock Broking Ltd. GA No. 1929 of 2016/ITAT No. 264 of 2016 dated 24.08.2018. Thereafter he brought to our notice similar view was taken by the Hon’ble Rajasthan High Court in Jai Steel (India) vs. ACIT reported in 259 CTR 281 (Raj) and the decision of Hon’ble Kerala High Court in the case of CIT vs. Paul John, Delicious Cashew Co. reported in 200 Taxman 154 (Ker) and the decision of the Hon’ble Delhi High Court in CIT vs. Software Consultants, reported in 341 ITR 240 (Del). Thus according to Ld AR, when the AO has taken the same view which were up-held by the aforesaid binding judicial precedents, the Ld. PCIT could not have invoked his revisional jurisdiction without validly holding that the AO’s order as erroneous as well as prejudicial to the revenue. And according to him, even if the Ld. PCIT had different view he could not have exercised his revisional jurisdiction unless he could hold on the facts of the case that the AO’s order is unsustainable in law. Therefore, according to Ld AR, since the Ld. PCIT could not hold so in the impugned order, he could not have exercised the revisional jurisdiction and therefore the impugned order passed by the Ld. PCIT is without jurisdiction and therefore need to be quashed.

Before we advert to the facts and law involved in this lis before us, let us revisit 7. the law governing the legal issue before us. The assessee has challenged in the first place, the very usurpation of jurisdiction by Ld. Principal CIT to invoke his revisional

5 ITA No140/Kol/2021, M/s Anjali Jewellers, AY 2014-15 powers enjoyed u/s 263 of the Act. Therefore, first we have to see whether the requisite jurisdiction necessary to assume revisional jurisdiction is existing in this case before the Pr. CIT rightfully exercised his revisional power. For that, we have to examine as to whether in the first place the order of the Assessing Officer found fault by the Principal CIT is erroneous as well as prejudicial to the interest of the Revenue. For that, let us take the guidance of judicial precedence laid down by the Hon’ble Apex Court in Malabar Industries Ltd. vs. CIT [2000] 243 ITR 83(SC) wherein their Lordship have held that twin conditions needs to be satisfied before exercising revisional jurisdiction u/s 263 of the Act by the CIT. The twin conditions are that the order of the Assessing Officer must be erroneous and so far as prejudicial to the interest of the Revenue. In the following circumstances, the order of the AO can be held to be erroneous order, that is (i) if the Assessing Officer’s order was passed on incorrect assumption of fact; or (ii) incorrect application of law; or (iii)Assessing Officer’s order is in violation of the principle of natural justice; or (iv) if the order is passed by the Assessing Officer without application of mind; (v) if the AO has not investigated the issue before him; [ because AO has to discharge dual role of an investigator as well as that of an adjudicator ] then in aforesaid any event, the order passed by the Assessing Officer can be termed as erroneous order. Coming next to the second limb, which is required to be examined as to whether the actions of the AO can be termed as prejudicial to the interest of Revenue. When this aspect is examined one has to understand what is prejudicial to the interest of the revenue. The Hon’ble Supreme Court in the case of Malabar Industries (supra) held that this phrase i.e. “prejudicial to the interest of the revenue’’ has to be read in conjunction with an erroneous order passed by the Assessing Officer. Their Lordship held that it has to be remembered that every loss of revenue as a consequence of an order of Assessing Officer cannot be treated as prejudicial to the interest of the revenue. When the Assessing Officer adopted one of the courses permissible in law and it has resulted in loss to the revenue, or where two views are possible and the Assessing Officer has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the revenue “unless the view taken by the Assessing Officer is unsustainable in law”.

6 ITA No140/Kol/2021, M/s Anjali Jewellers, AY 2014-15 8. When tested on the touchstone of the aforesaid judicial precedent as discussed supra, when we examine the legal issue as to whether the Ld. PCIT had jurisdiction to exercise revisional jurisdiction u/s 263 of the Act. We note that in this case the original assessment under scrutiny u/s 143(3) of the Act was framed on 3rd September, 2016 making the addition of [Rs.11,69,65,820 – Rs. 11,56,94,090] Rs. 12,71,730/- (refer page 1 to 6 of PB). Thereafter pursuant to a search conducted on 8th November, 2016 proceedings u/s 153A of the Act was initiated against the assessee and thereafter the AO framed the assessment order u/s 153A/143(3) of the Act dated 29.06.2016 wherein the AO reiterated the total income assessed u/s 143(3) of the Act dated 3rd August, 2016 at Rs. 11,69,65,820/- (refer page no. 7 to 12 of PB). Thereafter show cause notice (SCN) u/s 263 of the Act was issued by the Ld. PCIT dated 5th March, 2020 (refer page 13 to 16 of PB) wherein the Ld. PCIT has conveyed his desire to interfere with the assessment order passed by the AO dated 29.6.2018 u/s 143(3)/153A of the Act wherein he observes that while going through the assessment records of the assessee it was found that while computing the total income, interest paid/payable on loan taken in respect of two of the properties (Lovelock property and Mandevilla garden property) which was shown as ‘capital work-in-progress’ and which were not put to use till 31.3.2017, the assessee’s claim of interest expenditure was erroneously allowed by the AO, so he issued SCN u/s 263 of the Act. Pursuant to SCN of the Ld. PCIT, the assessee objected to the exercise of revisional jurisdiction by pointing out that since AY 2014-15 was an unabated assessment year, the AO while framing the assessment u/s 153A/143(3) of the Act, noticing that there was no incriminating materials unearthed against the assessee qua AY 2014-15, so the AO has rightly not made any addition and reiterated the assessment framed in the original scrutiny proceeding framed on 3rdSeptember, 2016. Therefore, according to assessee, the AO has rightly not made any addition as held by various Hon’ble High Courts including the jurisdictional High Court and therefore it was contented that Ld PCIT could not held the view of AO to be erroneous; and further it was pointed out that the Ld. PCIT could not have done indirectly, what the AO could not do directly in an assessment order framed u/s 153A of the Act. However, the Ld. PCIT not satisfied with the contention of the assessee, went ahead and was pleased to set aside the order of the AO passed u/s 153A/143(3) dated 29.6.2018 and directed the

7 ITA No140/Kol/2021, M/s Anjali Jewellers, AY 2014-15 AO to frame fresh assessment after giving opportunity of hearing to the assessee. This impugned action of Ld PCIT is under challenge before us on the legal issue that Ld PCIT without making out a valid ground that AO’s order framed u/s 143A/143(3) of the Act dated 29.6.2018, was erroneous as well as prejudicial to the Revenue, could not have invoked revisional jurisdiction u/s 263 of the Act, and therefore his action is ab- initio void.

We note that the search was conducted on the assessee on 8th November, 2016. It 9. is an admitted facts that the original scrutiny assessment in respect of assessee for AY 2014-15 was framed on 3rdSeptember, 2016, which means the assessment in respect of the assessee for AY 2014-15 was not pending before the AO on the date of search (8th November, 2016). The settled position of law is that when an assessment pertaining to an assessment year which falls in the ken of section 153A of the Act, was not pending for assessment before the AO on the date of search, then, the assessment for such year is not abated [i.e, un-abated assessment] by virtue of second proviso to section 153A of the Act. Consequently, for an un-abated assessment year like that of this assessee i.e, AY 2014-15, the AO could not have made any addition/disallowances, without the aid of incriminating materials un-earthed during search qua the assessee qua the assessment year i.e, AY 2014-15. For that we rely on the following judgments:

i) Hon’ble Delhi High Court in the case of CIT vs.. Kabul Chawla reported in 380 ITR 573 (Del)

(ii) PCIT vs. Kurele Paper Mills Pvt. Ltd. in 380 ITR 571,

(iii) Hon’ble Calcutta High Court decision in CIT vs. Veerprabhu Marketing Ltd. in 388 ITR 574 (Cal),

(iv) PCIT vs. Salasar Stock Broking Ltd. GA No. 1929 of 2016/ITAT No. 264 of 2016 dated 24.08.2018.

8 ITA No140/Kol/2021, M/s Anjali Jewellers, AY 2014-15 10. The Hon’ble Delhi High Court in the case of Kabul Chawla (supra) has summed up the legal position in para 37 of it’s order. For ready reference the same is re- produced as under:-

Summary of the legal position 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 assessment years immediately preceding the previous year relevant to the assessment year in which the search takes place.

(ii) Assessments and reassessments pending on the date of the search shall abate. The total income for such assessment years will have to be computed by the Assessing Officers as a fresh exercise.

(iii) The Assessing Officer will exercise normal assessment powers in respect of the six years previous to the relevant assessment year in which the search takes place. The Assessing Officer 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 assessment years "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 Assessing Officer 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 the seized material."

(v) In the 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 153A is relatable to abated proceedings (i.e., those pending on the date of search) and the word "reassess" to the completed assessment proceedings.

(vi) In so far as the 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 assessment year on the basis of the findings of the search and any other material existing or brought on the record of the Assessing Officer.

9 ITA No140/Kol/2021, M/s Anjali Jewellers, AY 2014-15 (vii) Completed assessments can be interfered with by the Assessing Officer 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.

Conclusion

Jai Steel (India) vs. ACIT (2013) 259 CTR 281 (Raj) “The provisions of Sections 153A to 153C cannot be interpreted to be a further innings for the AO and/or assessee beyond provisions of Sections 139 (return of income), 139(5) (revised return of income), 147 (income escaping assessment) and 263 (revision of orders) of the Act.

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. ” [Emphasis supplied] CIT Vs. Paul John, Delicious Cashew Co. (2011) 200 Taxman 154 (Ker.) In this case the question raised by the department was whether the Tribunal was justified in cancelling the order passed by the C.I.T. u/s. 263 of the Act directing the A.O. to disallow and to bring to tax expenditure wrongly claimed by the assessee and allowed in original assessment. The said departmental appeal was dismissed on the proposition that the bar which applies to the assessing officer equally applies to the CIT, for the purposes of section 263 of the Act. The Hon’ble Delhi High Court in the case of CIT vs. Software Consultants reported in (2012) 341ITR 240 (Del) held the following: In this case, the AO initiated proceedings u/s 147 on the issue of taxability of certain FDRs, which were found in possession of a director of the company.

10 ITA No140/Kol/2021, M/s Anjali Jewellers, AY 2014-15 However, the director claimed that the FDRs, in her name, actually belonged to the assessee. This stand was accepted by CIT(A) in the appeal filed by the said director. Thereafter, the AO in the case of the assessee issued notice u/s 148 of the Act and passed assessment order accepting that the assessee had established and proved the source and their capacity to invest Rs. 20 lacs and, accordingly, no addition was made on this count. The return filed by the assessee, showing loss of Rs. 1,02,756/- was accepted. Subsequently, the Ld. CIT vide order u/s 263 directed the AO to conduct further enquiries in respect of share application money of Rs. 47 lacs. The ITAT quashed the order u/s 263, inter alia, on the ground that since no addition could have been made on the issue of share application money, the assessment order could not be regarded as erroneous. Affirming the decision of the ITAT, the Hon'ble Delhi High Court in the said case held as under by stating that since AO could not have made addition on account of share application money, the assessment order was not erroneous and CIT could not have exercised jurisdiction u/s 263 of the Act: “Held, dismissing the appeal, that the Tribunal had held that the order of the Assessing Officer could not be regarded as erroneous even if the Assessing Officer had failed to carry out necessary verification and required enquiries in respect of the share application money, as no addition had been made on account of the reasons for reopening, which were recorded before issue of notice under section 148 of the Act. It had held that the Assessing Officer could not have made an addition on account of the share application money as no addition had been made on account of fixed deposits of Rs. 20 lakhs. The Tribunal had noticed and recorded that in the reasons for reopening it was mentioned that the assessee had made investment in the form of fixed deposits of Rs. 20 lakhs but in the assessment order passed under section 147 /143(3) of the Act it had been held that the assessee had been able to show and establish the genuineness and capacity of the share applicants to make the investment. The Assessing Officer did not make any addition for the reasons recorded at the time of issue of notice under section 148 of the Act. This position was not disputed or disturbed by the Commissioner in his order under section 263 of the Act. The assessment order was not erroneous. Thus, the Commissioner could not have exercised jurisdiction under section 263 of the Act. ”

11 ITA No140/Kol/2021, M/s Anjali Jewellers, AY 2014-15 material seized/unearthed during search. On this finding of fact by us, we cannot term the assessment order passed by the AO u/s 153A/143(3) dated 31.03.2016 as erroneous. It is important here to note that revision u/s 263 of the Income Tax Act, 1961 has to be made within well-defined limits subject to satisfaction of pre- conditions, as explained by us above, and therefore, similar limitation may have to be read in the instant provision. In relation to the years whose assessment is completed, it is laid down by law that in such situations of completed assessment, assessment u/s 153A of the Income Tax Act, 1961 however shall be to the extent of undisclosed income which is found during the course of search with reference to the valuable articles or things found or documents seized during the search which are not disclosed in the original assessment. The power given by the 1st proviso of section 153A of the Income Tax Act, 1961 to 'assess' income for six assessment years has to be confined to the undisclosed income unearthed during search and cannot include items which are disclosed in the original assessment proceedings. Items of regular assessment cannot be added back in the proceedings u/s 153A when no incriminating documents were found in respect of the disallowed amounts in the search proceedings. A search assessment under section 153A should be evidence based. Therefore, we are of the view that assessment order passed by the AO u/s 153A/143(3) dated 31.03.2016 is neither erroneous nor prejudicial to the interest of the Revenue and therefore, Id. Pr. CIT erred in exercising his revisional jurisdiction u/s 263 of the Act and therefore, we quash the impugned order of Id. Pr. CIT passed under section 263 of the Act. ” (ii) M/s.Garg Brothers Pvt. Ltd. v DCIT, CC-3(2), Kolkata, ITA No- 2519/Kol/2017 & M/s.Cliff Trexirn Pvt. Ltd. v DCIT, CC-3(2), Kolkata, ITA No.2520/KoF2§17 & M/s.Span Foundation Pvt. Ltd. v DCIT, CC-3(2), Kolkata, ITA No.2521/Kol/2017 dated 18/04/2018:

In this case, this Tribunal held as under: “61. So from the aforesaid dictum of law laid by the Hon’ble High Court in the absence of any incriminating material unearthed during first search on 29/05/2012, we have no hesitations to hold that for A.Y. 2009-10, the AO could have only reiterated the assessment intimated u/s. 143(1) of the Act, because the time for issuance of scrutiny notice u/s. 143(2) expired on 30/09/2010 and the assessment for this relevant assessment year, therefore, was not pending before the AO on the date of search on 29/05/2012 and, therefore, is an unabated assessment. Therefore, as per the law laid down by the Hon ’ble High Court, the AO could not have disturbed the assessment already existing without the aid of incriminating materials seized during search on 29/05/2012 (first search). Therefore, the order of the AO cannot be held to be erroneous order. Therefore, without finding the order of the AO cannot be held to be erroneous order. Therefore, without finding the order of the AO to be erroneous, the Ld. Principal C1T lacks jurisdiction to usurp the revisional jurisdiction u/s. 263 of the Act. 65. In any event, we note that the Assessing Officer has adopted one of the courses permissible in law and even if it has resulted in loss to the revenue, the said decision of the Assessing Officer cannot be treated as erroneous and prejudicial to the interest of the revenue as held by Hon ’ble Supreme Court in Malabar Industries Ltd. vs. CIT (supra). Since the order of the Assessing Officer cannot be held to be erroneous as well as prejudicial to, the interest of the revenue, in the facts and circumstances narrated above, the usurpation of jurisdiction exercising revisional jurisdiction by the Principal CIT is “null” in the eyes of law and, therefore, we are inclined to quash the very assumption of jurisdiction to invoke revisional jurisdiction u/s. 263 by the Principal CIT. Therefore, we quash all the orders of the Principal CIT dated 15/03/2017 being ab initio void ” (iii) M/s.Ujjal Transport Agency Vs CIT , Central-II, ITA(SS) No.58/Kol/2013, dated 19-10-2016:

12 ITA No140/Kol/2021, M/s Anjali Jewellers, AY 2014-15

In the said case, this Tribunal held as under: “16. Having held 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.l53A of the Act, that the assessment will have to be confined to only incriminating material found as a result of search, the question to be decided is as to whether the proceedings u/s. 143(1) of the Act can be said to be assessment proceedings concluded that have not abated u/s.!53A of the Act. Section 153A of the Act, uses the expressing "pending assessment or reassessment". When a return is filed and acknowledgement or intimation issued u/s. 143(1), the proceedings initiated by filing the return are closed, unless a notice u/s 143(2) of the Act is issued. In the present case, the period for issuing the notice u/s 143(2) elapsed. 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 under section 143(1) of the Act, thereby resulting in non-abatement of such assessment in terms of the Second Proviso to section 153A(1) of the Act. 17. In the light of the discussion above, our conclusion is that in the present case, the issue with regard to additional depreciation 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 u/s. 143(1) of the Act 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 which time limit as per the law prevailing on the date when the Assessee filed return of income i.e., 30.10.2007, would expire on 31.12.2008. Such assessment u/s.143(1) of the Act did not abate on the date of search which took place on 15.1.2009. 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 question of allowing additional depreciation or not could not have been subject matter of proceedings u/s.l53A of the Act. Consequently, the CIT in exercise of his powers u/s.263 of the Act ought not to have or could not have directed examination of the said issue afresh by the AO. Thus ground No.I raised by the Assessee is allowed. The proceedings u/s.263 of the Act is accordingly quashed. In view of the above conclusion, the other ground of appeal raised by the Assessee does not require any consideration. 18. In the result, appeal of the assessee is allowed. “

Subject matter of challenge is a judgment and order dated 18th December, 2015 by which the learned Tribunal dismissed an appeal preferred by the Revenue registered as ITA N0.1775/K0I/2012 and allowed a cross-objection registered as CO-30/K0I/2013 both pertaining to the assessment year 2005-06. The learned Tribunal was of the opinion that the Assessing Officer had no jurisdiction under Section 153A of the Income Tax Act to reopen the concluded cases when the search and seizure did not

13 ITA No140/Kol/2021, M/s Anjali Jewellers, AY 2014-15 disclose any incriminating material. In taking the aforesaid view, the learned Tribunal relied upon a judgement of Delhi High Court in the case of CIT[A] vs. Kabul Chawla in ITA No,707/2014 dated 28th August, 2014. The aggrieved Revenue has come up in appeal. Mr. Bagaria, learned Advocate appearing for the assessee, submitted that more or less an identical view was taken by this Bench in ITA 661/2008 [CIT vs. Veerprabhu Marketing Ltd.] wherein the following views were expressed – "We are in agreement with the views expressed by the Karnataka High Court that incriminating material is a pre- requisite before power could have been exercised under sectioni53C read with section 153A. In the case before us, the assessing officer has made disallowances of the expenditure, which were already disclosed, for one reason or the other. But such disallowances were not contemplated by the provisions contained under section 153C read with section 153A. The disallowances made by the assessing officer were upheld-by the CIT(A) but the learned Tribunal deleted those disallowances." In that view of the matter, we are unable to admit the appeal. The appeal is, therefore, dismissed.” 13. In the light of the aforesaid binding judicial precedents on the issue of framing of assessment u/s. 153A/143(3) pursuant to a search u/s. 132 of the Act, we note that the AO while framing an assessment u/s. 153A in respect of a unabated assessment (like in this case) can make additions/disallowances only on the basis of incriminating material unearthed during search qua the assessee qua the relevant assessment year. Here in this case search u/s. 132 of the Act took place 8th November, 2016 and the original assessment u/s. 143(3) was already completed on 3rdSeptember, 2016 determining the total income of the assessee at Rs.11,69,65,820/-. Therefore, the assessment in respect of this relevant assessment year (AY 2014-15) was not pending before the AO on the date of search. Therefore, as per 2nd proviso to section 153A of the Act, this assessment year (AY 2014-15) is an unabated assessment and, therefore, the AO while framing the assessment u/s. 153A of the Act on 29.06.2018 taking note that there was no incriminating materials seized during search against assessee qua the relevant assessment year, rightly reiterated the assessment framed originally on 3rdSeptember, 2016 determining total income at Rs.11,69,65,820/- as held by the Hon’ble Delhi High Court in Kabul Chawla (supra) wherein the Hon’ble High Court held at para 37 “(vii) Completed assessments can be interfered with by the Assessing Officer while making the assessment under section 153A only on the basis of some incriminating material

14 ITA No140/Kol/2021, M/s Anjali Jewellers, AY 2014-15 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.” This decision of the Hon’ble Delhi High Court was challenged by the Revenue before the Hon’ble Supreme Court by preferring an SLP, which was dismissed. Further, we note that the view of the Hon’ble Delhi High Court has been approved by the jurisdictional High court in the case of M/s. Salasar Stock Broking Ltd. (supra). Therefore, the view taken by the AO in the assessment framed u/s. 153A/143(3) dated 29.06.2016 is a view taken in consonance with the decision of the Hon’ble Delhi High Court in Kabul Chawla which has been approved by the Hon’ble Calcutta High Court (supra). Therefore, this order cannot be branded by the Ld. Pr. CIT as erroneous as well as prejudicial to the interest of revenue. We further take note of the fact that it is not the case of Ld. Pr. CIT that AO failed to make any additions/disallowances based on incriminating material seized/unearthed during search. On this finding of fact of ours, we cannot term the assessment order passed by the AO u/s. 153A/143(3) dated 29.06.2018 as erroneous. Be it noted that revision u/s. 263 of the Act has to be made within the well defined limits subject to satisfaction of preconditions, as explained in the judicial precedents (supra) and this similar limitations have to be read in the instant provision. And even at the cost of repetition we reiterate that when an assessment is completed before the search (unabated assessment) then addition/disallowance can be made only to the extent of undisclosed income which is found during the course of search with reference to valuable, article or things found or documents seized during the search which are not disclosed in the original assessment. The power given by the 1st proviso to section 153 of the Act “to assess income for six assessment years’’ has to be confined to the undisclosed income unearthed during search and cannot include items which are disclosed in the original assessment proceedings except that of abated assessment years. In unabated assessment years, items of regular assessment cannot be added back in the proceedings u/s. 153A of the Act when no incriminating materials were found in respect of the fault/issue pointed out by the Ld. Pr. CIT. Except that of abated assessment years, a search assessment u/s. 153A of the Act should be evidence based of undisclosed income, therefore, we are of the view that assessment order passed by the AO u/s. 153A/143(3) dated 29.03.2016 is neither

15 ITA No140/Kol/2021, M/s Anjali Jewellers, AY 2014-15 erroneous nor prejudicial to the interest of the revenue and therefore, Ld. Pr. CIT erred in exercising his revisional jurisdiction u/s. 263 of the Act and therefore, we are of the view that he invoked revisional jurisdiction without satisfying the essential pre-condition as stipulated in sec. 263 of the Act. Therefore, the impugned action of the Ld. Pr. CIT lacks jurisdiction and therefore, ab initio void and thus assessee succeeds on the legal issue raised before us.

Order is pronounced in the open court on 30th September, 2021.

Sd/- Sd/- (P. M. Jagtap) (A. T. Varkey) Vice President Judicial Member Dated: 30th September, 2021

SB, Sr. PS

Copy of the order forwarded to: 1. Appellant- M/s Anjali Jewellers , 522-C, Diamond Harbour Road, Behala, Kolkata-700034. 2. Respondent – PCIT, Central-1, Kolkata 3. CIT(A)- Kolkata (sent through e-mail) 4. CIT, Kolkata. 5. DR, Kolkata Benches, Kolkata (sent through e-mail) True Copy By Order

Senior Private Secretary/DDO ITAT, Kolkata Benches, Kolkata