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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
आयकर अपीलीय अधिकरण “A” न्यायपीठ म ुंबई में। IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, MUMBAI श्री महावीर स िंह, न्याययक दस्य एविं श्री एम बालगणेश, लेखा दस्य के मक्ष । BEFORE SRI MAHAVIR SINGH, JM AND SRI M BALAGANESH, AM आयकर अपील सुं./ (यिर्ाारण वर्ा / Assessment Year 2003-04) आयकर अपील सुं./ (यिर्ाारण वर्ा / Assessment Year 2005-06) आयकर अपील सुं./ ITA No. 2418/Mum/2012 (यिर्ाारण वर्ा / Assessment Year 2006-07) आयकर अपील सुं./ ITA No. 2419/Mum/2012 (यिर्ाारण वर्ा / Assessment Year 2007-08) Arch Phytochemicals Pvt. Ltd. The Asst. Commissioner H-Wing, 4th Floor, Tex Centre, Income Tax, Central Circle-32 बनाम/ Narayan Properties, Chandivali, Vs. Andher(E), Mumbai (अपीलार्थी / Appellant) (प्रत्यर्थी/ Respondent) स्र्थायी लेखा सुं./PAN No. AACCA8994L अपीलार्थी की ओर े / Appellant by : Shri Rajeev Khandelwal, AR प्रत्यर्थी की ओर े / Respondent by : Shri Rajeev Harit, CIT DR ुिवाई की तारीख / Date of hearing: 06.01.2020 घोर्णा की तारीख / Date of pronouncement : 06.01.2020 आदेश / O R D E R महावीर ससुंह, न्याययक सदस्य/ PER MAHAVIR SINGH, JM:
These appeals by assessee are arising out of common order of the Commissioner of Income Tax (Appeals)]-37, 2 | P a g e to 2419/Mum/2012 Arch Phytochemicals Pvt. Ltd. Mumbai [in short CIT(A)], in Appeal No. CIT(A)- 37/I.T.297,298,299 & 300/ACCC-32/11-12 vide dated 13.02.2012. The Assessments were framed by the Asst. Commissioner of Income Tax, Central Circle-32, Mumbai (in short ACIT/ AO) for the A.Ys. 2003-04, 2005-06, 2006-07, 2007-08 vide order dated 20.12.2010 under section 143(3) read with section 153A of the Income-tax Act, 1961 (hereinafter ‘the Act’).
The first common issue in these three appeals of assessee is as regards to the order of CIT(A) confirming the action of the AO in making addition without any seized material despite the fact that these are search assessments. The assessee’s grounds states that the Principal condition is that there should have been seized material and only then assessment can be framed under section 153A of the Act. The facts and circumstances are identical in these three years. The first ground raised as under: - “2003-04
On the facts and circumstances of the appellant’s case and in the law the Ld. CIT(A) erred in confirming the additions made by the AO despite the fact that the additions are not based on any seized material.
2005-06 3 | P a g e to 2419/Mum/2012 Arch Phytochemicals Pvt. Ltd. 1. On the facts and circumstances of the appellant’s case and in the law the Ld. CIT(A) erred in confirming the additions made by the AO despite the fact that the additions are not based on any seized material.
2006-07 1. On the facts and circumstances of the appellant’s case and in the law the Ld. CIT(A) erred in confirming the additions made by the AO despite the fact that the additions are not based on any seized material.
The learned Counsel for the assessee stated that in AY 2003-04, the addition was on account of salary and professional fee amounting to ₹7,63,537/- and claimed in the profit and loss account and disclosed in the regular assessment. In AY 2005- 06, the addition was on account of financial charges debited to profit and loss account to ₹56,17,035/-. Similarly, in AY 2006- 07, the disputed amount was under the head financial charges debited to the profit and loss account amounting to ₹26,63,006/-. The learned Counsel for the assessee stated that the CIT(A) confirmed the addition by this common order on the basis that the assessee is unable to prove or substantiate the genuineness of the expenses by observing in Para 2.4.15 as under: - 4 | P a g e to 2419/Mum/2012 Arch Phytochemicals Pvt. Ltd. “2.4.15 Thus in view of the above judicial pronouncements, I am unable to agree with the contentions of the Ld. AR that Ld. AO should have confined himself only to the seized documents and because there were no such documents, he could not have made any assessment under section 153A. Having held so, I fould that the Ld. AR has not made any submissions in merits regarding the claim of salary and other professional expenses and finance charges. It is trite law that the onus is always on assessee to substantiate the claim made by it in its return of income. Not having done so, and in view of finding of fact recorded by the Ld AO that there was no business carried out in the assessment years in question, I have no hesitation in confirming the additions made by the Ld. AO.”
The learned Counsel for the assessee stated that this issue is squarely covered by the decision of Hon’ble Bombay High Court in the case of CIT vs. Continental Warehousing Corporation (Nhava Sheva) Ltd. (2015) 374 ITR 645 (Bom), wherein Hon’ble Bombay High Court held as under: - 5 | P a g e to 2419/Mum/2012 Arch Phytochemicals Pvt. Ltd. “31. We, therefore, hold that the Special Bench's understanding of the legal provision is not perverse nor does it suffer from any error of law apparent on the face of the record. The Special Bench in that regard held as under:-
“The provision under section 153A is applicable where a search or requisition is initiated after 31.5.2003. In such a case the AO is obliged to issue notice u/s 153A in respect of 6 preceding years, preceding the year in which search etc. has been initiated. Thereafter he has to assess or reassess the total income of these six years. It is obligatory on the part of the AO to assess or reassess total income of the six years as provided in section 153A(1)(b) and reiterated in the 1st proviso to this section. The second proviso states that the assessment or reassessment pending on the date of initiation of the search or requisition shall abate. We find that there is no divergence of views in so far as the provision contained in section 153A till the 1st proviso. The divergence starts from the second proviso which states that pending 6 | P a g e to 2419/Mum/2012 Arch Phytochemicals Pvt. Ltd. assessment or reassessment on the date of initiation of search shall abate. This means that an assessment or reassessment pending on the date of initiation of search shall cease to exist and no further action shall be taken thereon. The assessment shall now be made u/s 153A. The case of Ld. Counsel for the assessee is that necessary corollary to this provision is that completed assessment shall not abate. These assessments become final except in so far and to the extent as undisclosed income is found in the course of search. On the other hand, it has been argued by the Ld. Standing Counsel that abatement of pending assessment is only for the purpose of avoiding two assessments for the same year, one being regular assessment and the other being assessment u/s 153A. In other words these two assessments coalesce into one assessment. The second proviso does not contain any word or words to the effect that no reassessment shall be made in respect of a completed assessment. The language is clear in this behalf and 7 | P a g e to 2419/Mum/2012 Arch Phytochemicals Pvt. Ltd. therefore literal interpretation should be followed. Such interpretation does not produce manifestly absurd or unjust results as section 153A (i)(b) and the first proviso clearly provide for assessment or reassessment of all six years. It may cause hardship to some assesses where one or more of such assessments has or have been completed before the date of initiation of search. This is hardly of any relevance in view of clear and unambiguous words used by the legislature. This interpretation does not cause any absurd etc. results. There is no casus omissus and supplying any would be against the legislative intent and against the very rule in this behalf that it should be supplied for the purpose of achieving legislative intent. The submissions of the Ld. Counsels are manifold, the foremost being that the provision u/s 153A should be read in conjunction with the provision contained in section 132(1), the reason being that the latter deals with search and seizure and the former deals with assessment in 8 | P a g e ITA Nos.2416 to 2419/Mum/2012 Arch Phytochemicals Pvt. Ltd. case of search etc, thus, the two are inextricably linked with each other.
Before proceeding further, we may now examine the provision contained in sub- section (2) of section 153, which has been dealt with by Ld. Counsel. It provides that if any assessment made under subsection (1) is annulled in appeal etc., then the abated assessment revives. However, if such annulment is further nullified, the assessment again abates. The case of the Ld. Counsel is that this provision further shows that completed assessments stand on a different footing from the pending assessments because appeals etc. proceedings continue to remain in force in case of completed assessments and their fate depends upon subsequent orders in appeal. On consideration of the provision and the submissions, we find that this provision also makes it clear that the abatement of pending proceedings is not of such permanent nature that they cease to exist for all times to come. The interpretation of the Ld. Counsel, though not specifically stated, would be that on annulment of the assessment made u/s 9 | P a g e to 2419/Mum/2012 Arch Phytochemicals Pvt. Ltd. 153(1), the AO gets the jurisdiction to assess the total income which was vested in him earlier independent of the search and which came to an end due to initiation of the search. The provision contained in section 132 (1) 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 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 (1) does not use the word "incriminating document". Clauses (a) and (b) of section 132(1) employ the words 10 | P a g e to 2419/Mum/2012 Arch Phytochemicals Pvt. Ltd. "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. Having held so, an assessment or reassessment u/s 153A arises only when a search has been initiated 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 account. With this, we proceed to literally interpret to provision in 153A as it exists and read it alongside the provision contained in section 132(1). The provision comes into operation if a search or requisition is initiated after 31.5.2003. On satisfaction of this 11 | P a g e ITA Nos.2416 to 2419/Mum/2012 Arch Phytochemicals Pvt. Ltd. condition, the AO is under obligation to issue notice to the person requiring him to furnish the return of income of six years immediately preceding the year of search. The word used is "shall" and, thus, there is no option but to issue such a notice. Thereafter he has to assess or reassess total income of these six years. In this respect also, the word used is "shall" and, therefore, the AO has no option but to assess or reassess the total income of these six years. The pending proceedings shall abate. This means that out of six years, if any assessment or reassessment is pending on the date of initiation of the search, it shall abate. In other words pending proceedings will not be proceeded with thereafter. The assessment has now to be made u/s 153A (1)(b) and the first proviso. It also means that only one assessment will be made under the aforesaid provisions as the two proceedings i.e. assessment or reassessment proceedings and proceedings under this provision merge into one. If assessment made under sub- section (1) is annulled in appeal or other 12 | P a g e ITA Nos.2416 to 2419/Mum/2012 Arch Phytochemicals Pvt. Ltd. legal proceedings, then the abated assessment or reassessment shall revive. This means that the assessment or reassessment, which had abated, shall be made, for which extension of time has been provided under section 153B.
The question now is - what is the scope of assessment or reassessment of total income u/s 153A (1) (b) and the first proviso? We are of the view that for answering this question, guidance will have to be sought from section 132(1). If any books of account or other documents relevant to the assessment had not been produced in the course of original assessment and found in the course of search in our humble opinion such books of account or other documents have to be taken into account while making assessment or reassessment of total income under the aforesaid provision. Similar position will obtain in a case where undisclosed income or undisclosed property has been found as a consequence of search. In other words, harmonious interpretation will produce the following results: - 13 | P a g e to 2419/Mum/2012 Arch Phytochemicals Pvt. Ltd. a) In so far as pending assessments are concerned, the jurisdiction to make original assessment and assessment u/s 153A merge into one and only one assessment for each assessment year shall be made separately on the basis of the findings of the search and any other material existing or brought on the record of the AO, (b) in respect of non-abated assessments, the assessment will be made on the basis of books of account or other documents not produced in the course of original assessment but found in the course of search, and undisclosed income or undisclosed property discovered in the course of search.”
The learned Counsel for the assessee has filed the details as on the date of search by the department under section 132 of the Act dated 24.04.2008 and filing of returns in regular course vis-à-vis returns filed under section 153A of the Act, which read as under: - 2003-04 2005-06 2006-07 Date of filing of original return 22.09.2003 01.10.2005 26.10.2006 Income/ (loss) declared (2,96,744) (56,42,018) (26,77,705) Date of filing return u/s 153A 06.08.2010 06.08.2010 06.08.2010 14 | P a g e to 2419/Mum/2012 Arch Phytochemicals Pvt. Ltd.
The learned Counsel for the assessee stated that in these three years no action whatsoever was pending as on the date and assessment was unabated. Hence, the learned Counsel for the assessee stated that this issue is fully covered by the decision of Hon’ble Bombay High court in the case of Continental Warehousing Corporation (Nhava Sheva) Ltd. (supra). On the other hand, the learned Sr. Departmental Representative Rajeev Harit, has not disputed the legal position but he only relied on the decision of V.D. Vachhani (HUF) vs. ACIT (2003) 86 ITD 652 (AHD) ITAT, wherein he stated that Tribunal held as under: - “………..whether since no evidence whatsoever with regard to agricultural activities carried out by assessee as well as details of sale bill of agricultural products and particulars of agricultural expenses had been produced, estimate of agricultural income of entire ‘V’ family during block period made by Assessing Officer was to be upheld along with addition on account of inflation- Held, yes……………….”