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Income Tax Appellate Tribunal, “E” BENCH, MUMBAI
PER MAHAVIR SINGH, JM:
These four appeals filed by the assessee are arising out of the common order of Commissioner of Income Tax (Appeals)-37, Mumbai [in
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short CIT(A)], in appeal No. CIT(A)-37/IT-635-638/DCCC-12/11-12, dated 09.01.2014. The Assessments were framed by the Dy. Commissioner of Income Tax, Circle-12, Mumbai (in short ‘DCIT/ AO’) for the A.Ys. 2005- 06, 2006-07, 2007-08, 2008-09 vide even order date 30.12.2011 under section 153A read with section 143(3) of the Income Tax Act, 1961 (hereinafter ‘the Act’).
At the outset, it is noticed that these four appeals of assessee are time barred by 72 days. The learned Counsel for the assessee stated that the assessee has filed condonation petition supported by the affidavit of the Managing Director of the assessee, Shri Leelesh Hirji Mamniya, who has admitted that the CIT(A)’s order dated 09.01.2014 was received on 21.01.2014 and last date for filing of appeal before Tribunal was 22.03.2014 but actually the appeal was filed on 02.06.2014. According to the learned Counsel, there was delay of 72 days in filing of this appeal. The reason stated in the affidavit was that on receipt of the appellate order of CIT(A) dated 09.01.2014, which was received on 21.01.2014, was forwarded to the tax consultant of the assessee company in the second week of February for further action. According to the affidavit, the tax consultant finalized the appeal and forwarded the same for signing in the last week but the Managing Director Shri Leelesh Hirji Mamniya, who was looking after the finance and tax related matters, was out of the town and returned back to Mumbai on last week of May 2014 and after signing the same, the appeal was filed before the Tribunal on 02.06.2014 and therefore, the appeal was delayed by 72 days. The learned Counsel for the assessee pointed out the relevant clauses i.e. clause 1 to 7 as under: -
“1. That, the appellant order dated 09.01.2014 passed by the Ld. CIT(A)-37, Mumbai was received by us on 21.01.2014. Thus, the last date of filing the
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appeal before the Hon’ble Appellate Tribunal was 22.03.2014.
That, on receipt of Appellate Order dated 09.01.2014; I forwarded the same to our tax consultant in the 2nd week of the February for his opinion and further action.
That, the tax consultant after perusing the Appellate Order suggested us to file the appeal before the Hon'ble Appellate Tribunal against the said order.
That, I requested the tax consultant to prepare the draft of appeal to be filed before the Hon’ble Appellate Tribunal.
That, the tax Consultant finalized the appeal and forwarded the same for signing purpose in the last week of February. However, during that period I was out of town for finalizing some business deals.
That, as I am looking after the finance and tax related matters of the company, it's my responsibility to complete the requirements of assessment and appellate proceedings. However, I could not sign the appeal memo on time as I was out of town for business purposes
That, I returned back to Mumbai only in the last week of May. Immediately, after coming back I signed the appeal memo and send it to the tax consultant for filing the same before the Appellate Tribunal. Thereafter the appeal came to be filed before the Hon'ble Appellate Tribunal on
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02.06.2014. However, by that time the appeal was barred by the limitation period of 72 days. "
When this was pointed out to the learned CIT Departmental Representative, he opposed the condonation of delay and according to him, the Managing Director being out of town is no reason for condonation of delay.
After hearing both the sides and going through the facts and reasons stated for delay in filing of appeal and that also of 72 days, we are of the view that the cause stated is reasonable and hence, we condone the delay and admit the appeal.
The first common issue in these four appeals of assessee is as regards to the assumption of jurisdiction under section 153A read with section 143(3) of the Act despite the fact there was no incriminating material found during the course of search conducted on 10.03.2011 under section 132(1) of the Act relating to these four assessment years. For this, the assessee has raised the common ground which are identically worded and hence, the ground has taken in AY 2005-06 in ITA No. 4024/Mum/2014 reads as under: -
“2. Order passed under section 153A r.w.s. 143(3) of the Income Tax Act 1961 is bad in law
a. The Ld. CIT(A) erred in upholding the assessment order passed by Ld. AO under section 153A r.w.s. 143(3) of the Act on the basis of show cause notice issued by excise department. The Appellant, therefore, prays that the order passed under section 153A r.w.s. 143(3) of the Act is abinitio-void and the same may be quashed.
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b. The Ld. CIT(A) failed to appreciate that no incriminating material was found during the course of search action conducted on 10.03.2011 under section 132(1) of the Act. The Appellant, therefore, prays that the order passed under section 153A r.w.s. 143(3) is without any basis and the same may be quashed. "
Brief facts relating to the above issue are that a search action u/s. 132(1) of Act was conducted in the case of Shri Arun Mohanlal Joshi on 10.03.2010. The office premises of the assessee firm at Shop no. 2, Suvart Apartments. Tembhi Naka. Thane(W) was also covered under this search. Consequently, notices under section 153A dated 06.04.11 were issued and served on assessee for AYs. 2005-06 to 2008-09. During the course of search as per the Panchnama dated 10/03/2010 drawn at the office of the assessee, a show cause notice issued by the Excise Authorities in respect of one of the units of the assessee company called M/s. Yogesh Associates having its factory address at 490/211, Village Galonda, Silvassa, D & NH was found. M/S. Yogesh Associates was searched by Central Excise Vapi on 18.09.07. During the course of Central Excise Search incriminating documents were seized and discrepancy in stock and raw material and finished goods was found and statement of company officials, directors, suppliers of raw material and transporters were recorded by the Central Excise Department. The finding of the search and post search investigation as per show cause notice by the Commissioner of Central Excise and Customs, Vapi dated 27/04/09 showed that unaccounted lamination material was received in the factory of M/s. Yogesh Associates (a division of the assessee company). The laminates are used for inner packing of the Gutkha. The Central Excise Department based on a formula, estimated the consumption of 1.2 kg of laminates for manufacture of 3315 pouches.
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Based on the total receipt of unaccounted laminates, the unaccounted packing material was estimated at Rs. 36.85 Crores. Similarly, unaccounted purchases of raw materials such as scented Supari, Katha, Cardamom, Tobacco and Perfume of the value of Rs. 16.73 Crores were estimated. Discrepancies in relation to unaccounted Woven Sacks valued at Rs. 68.53 lacs were noted. Excess stock of raw materials valued at Rs. 21.71 lacs and excess stock of finished goods valued at ₹ 56.85 crores were estimated. The unaccounted sale out of books was computed at Rs. 475.60 Crores. Central Excise Department estimated the possible production on the basis of speed of machines employed for this purpose. The total unaccounted production was based on the theoretical production minus the actual production recorded in the statutory records. It was also noted that the theoretical quantity of production was co- related to the actual consumption of laminations and other materials. The modus operandi noted was that the group concerns of the assessee company showed sales of the raw materials to fictitious buyers whereas the same were actually supplied to and used by the assessee company from which the unrecorded Gutkha was produced and sold. In the show cause notice, the Excise Department computed the unaccounted sales for the period F.Y. 2004-05 to 2007-08 at Rs. 475.60,41,349/-. Year wise breakup is as follows:
FY AY Unaccounted sales 2004-05 2005-06 1056238560 2005-06 2006-07 1194135930 2006-07 2007-08 1246128390 2007-08 2008-09 1176546540 Based on the show cause notice of the Central Excise Department, Vapi, the AO issued a show cause notice dated 05/12/11 to the assessee asking it as to why the income from undisclosed sales should not be added to its taxable income. The assessee submitted that the show cause notice is based on guess work, assumption and projected
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calculation of sales based on trial and error method as per ratio of raw material consumption for the finished goods produced by the company. There are no corroborating evidences for the same. Various objections were raised assailing the estimation made in the show cause notice issued by the Central Excise Department. The AO however, was not convinced by the arguments of the assessee. The assessee also made the arguments that based on unaccounted purchase of raw material tabulated by the Central Excise Department, the total estimated production is not possible. It was submitted by the assessee that only gross profit ratio can be used to arrive at the unrecorded income and not the gross sales receipts. The AO estimated the gross profit at 10% and computed the unaccounted income for the respective assessment years as follows:
Financial year Unaccounted No. of bags No. of Pouches Clandestinely Lamination (M.T) made (3315 clandestinely removed sales used for packing pouches/ Bags) cleared M.R.P. Value (Rs.) of inner 1.2 kg/ ₹1/- bag (inner Outer Ratio 87.13) 2004-05 439.49 318624 1056238560 1056238560 2005-06 496.87 360222 1194135930 1194135930 2006-07 518.50 375906 1246128390 1246128390 2007-8 489.54 354916 1176546540 1176546540 Total 1944.4 1409668 4673049420 4673049420 7. In view of the above, the AO estimated the income by taking an average gross profit of the company for the last four years at 10.29% and applied the gross profit for all these financial years and likewise for AY 2005-06 estimated the income at ₹ 10,86,86,948/-. Further, the AO also estimated the initial investment and made addition amounting to ₹ 5,28,11,940/-. Similarly, in other years also the AO made additions. Aggrieved assessee preferred the appeal before CIT(A) who confirmed the addition vide Para 5.1 to 5.7 as under: -
“I have given my careful consideration to the rival submissions, perused the material on record and
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duly considered the factual matrix of the case as also the applicable legal position.
5.2. In the appellate proceedings, the following arguments were made by the appellant: -
- The charges framed by the Excise Department is without any basis am therefore the income computed by the appellant is correct and final.
- The assessment order is based on the findings/fictitious allegation made by in Excise Department in the show cause notice and which is pending for the adjudication.
- The show cause notice issued by the Central Excise Department is under adjudication and has not yet been finalized.
- The appellant has not been provided an opportunity to cross verify the documents relied upon by the Central Excise Department and also has not been provided an opportunity to cross examine the department's witness.
- The conclusion of the Central Excise Department is based on statements giver by the third party, opportunity of cross examination has not been provided to them.
Certain case laws were cited in respect of natural justice and the necessity of providing opportunity for cross examination.
The additions in the assessment proceedings can be made only on the basis of material evidences found during the search action. In the instant case
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the A.O. has made addition on the basis of show cause notice issued by the Central Excise Department and not on the basis of material found during the course of search proceedings.
Reliance is placed on All Cargo Global Logistics Ltd Vs DCIT.
5.3. During the appellate proceedings. the appellant was asked to furnish the latest status of the proceedings before the Commissioner of Excise Authorities consequent to the show cause notice issued. At the hearing held on 02/09/13 no details were filed regarding the status of the proceedings. In the meanwhile, a remand report was called from the Assessing Officer vide this office letter dated 14/11/12, on the basis of the submissions of the appellant. The AO was also orally asked to ascertain the status of the action taken by Central Excise authorities in respect of the SCN in this case. The AO vide her letter dated 27/12/13 forwarded the copy of order dated 30/05113 of Commissioner of Central Excise and Service Tax, Vapi issued on 10/06/13 in this matter. She also informed that the appellant has sought cross examination of following parties:
Shri Krishna Kumar Bagi
Shri Bharatveer Singh Deora
Shri Sushil Kumar Upadhyaya. Erswhile partner of M/s. Balaji Flexipack
Shri Ramniwas Pareek. Authorised Signatory of M/s. Balaji Flexipack
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Mr. Tarun Kumar Mani, MIs. Montage Global Pvt. Ltd.
Shri Sunit Jam, Partner of M/s. Arihant Polysacks
Summons were issued to these six parties on 19/02/13 fixing the hearing on 22/02/13. None of the other parties attended nor had any representative of the appellant company attended. Summons were again issued to all these parties to attend on but nobody from the appellant company attended for cross examination when Shri Sunit Jain in partner of Arihant Polysacks attended. Summons were again issued to the parties to attend on 20112113 when Shri Sunit Jain and Shri Tarun Kumar Mani, MIs. Montage Global Pvt. Ltd. attended. However, nobody attended from the appellant company for cross examination. It was also submitted that the proceedings were initiated by Central Excise Department and the opportunity of cross examination was granted by them before passing the order dated 30/05/13 and therefore another opportunity in the income tax proceedings is not necessary.
5.4. At the hearing held on 07/01/14 the authorized representative of the appellant company was asked why they had not submitted the adjudication by the Commissioner of Central Excise following the show cause notice, even though the same was available and could have been produced by the appellant at the hearing held on 02/09/13 before me. No satisfactory reply was given. The AR merely stated that he is not aware, which I find hard to believe.
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5.5. On perusal of the order of Commissioner of Central Excise dated 30/05/13 it is seen that detailed facts relating to the investigation, verifications made, statements recorded are narrated in this order. The basis for the show cause notice is set out at length including the narration of the facts gathered. The submissions of the appellant including the argument that opportunity for cross examination was not given had been dealt with on page 164 onwards in this order of Commissioner of Central Excise. It elaborately records the opportunity for cross examination granted and the personal hearing given to the appellant. This order clearly shows that all the objections of the appellant have been considered including opportunity for cross examination. Finally on page 198 onwards of this order, the Commissioner of Central Excise has discussed and narrated his findings in respect of show cause notice. He has appraised the evidences and confirmed that MIs. Yogesh Associates procured raw materials and packing material illicitly with the appellate firms with close nexus with MIs. Yogesh for production and clandestine production and sale of GOA 1000 Gutkha. The arguments of the appellant in respect of the objections to the statements recorded and evidence covered has also been dealt with. Since then computation of the clandestine production and removal of Gutkha produced has been confirmed in this order of the Commissioner of Central Excise, the same is accepted as valid basis for the computation of unaccounted income of the appellant by the Assessing Officer. Though the appellant submitted
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that they have flied appeal to the Customs. Excise & Service Tax Appellate Tribunal (CESTAT). the same is still pending and the order of the Commissioner of Excise currently holds as far as facts are concerned. Thus, the position as it stands now is different than that prevailing at the time of assessment when only show cause notice had been issued by the Central Excise Authority. Now the matter has been adjudicated. The fads considered in the income tax proceedings cannot be different that that concluded by another government department, when there is no patent infirmity in the conclusion of facts by the other authority. No doubt an appeal has been filed against the adjudication by the Commissioner of Excise, but till the time the same is not upturned or modified, the facts to be considered in income tax assessment is correctly appreciated by the assessing officer. lithe AO were to reappraise each and every evidence unearthed by the central excise authority in their search and post search investigation, not only will this be a wastage of resources, but also counterproductive when two sister departments work against each other.
5.6. I have perused the order of the Learned Commissioner of Central Excise, Customs and Service Tax, Vapi which is very elaborate and runs into 245 pages. In this order, the evidences found, the investigations carried out and the statements recorded are elaborately recorded. The statements were recorded of various employees, directors, of the assessee group of concerns, of third parties such as transporters, and they were questioned regarding discrepancies in stock of material found
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and unaccounted movement of raw materials and finished products. In the statements recorded, the modus operandi with regard to clandestine production and removal of Gutkha was revealed. Evidence of interception of trucks carrying illicitly produced Gutkha by appellant company is discussed. Incriminating documents indicating suppression of production is discussed. The contentions and arguments of appellant has been dealt with including the argument that opportunity for cross examination was not given and that evidences found were not confronted to the appellant in pages 164 onwards. The opportunity for cross examination given is recorded. The defence arguments are dealt with on pages 205 onwards. The references to the relevant portions in this regard has been mentioned earlier in this appellate order. It will be a repetition to quote from the adjudication order.
5.7. To conclude, the main plank of the appellant's argument that the action of AO is based on SCN of Central Excise department where the proceedings are not concluded fails since an order has been passed. The statements were recorded by the Excise Authorities over a long period of investigation. In the adjudication, the Commissioner has recorded his conclusions on the issue of natural justice. Further, the AO in the remand proceedings has also to a limited extent allowed opportunity of cross examination. Estimation of income based on material found in investigation is not an alien concept in Income Tax assessments (refer Commissioner of Sales Tax vs /Esufali H M Abdulali (SC) 90 ITR 271). In light of the discussion in the
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earlier paragraphs, I do not find any reason to interfere in the order of the assessing officer and Ground of appeal no 1 is dismissed."
Similarly, the CIT(A) also confirmed the assumption of jurisdiction by the AO for framing search assessment under section 153A r.w.s 143(3) of the Act by relying on the decision of Hon’ble Delhi High Court in the case of CIT vs. Anil Kumar Bhatia (2013) 352 ITR 493 (Del) and Tribunal’s decision in the case of Pratibha Industries in ITA No. 2197 to 2199/Mum/2008, ITA No. 2200 to 2201/Mum/2008 and ITA No. 2202/Mum/2008 vide order dated 19.12.2012 by observing as under: -
“In the case of Pratibha Industries ITA 2197 to 2199/Mum/2008, ITA no 2200 2201/Mum/2008 and ITA no 2202/MumI2008 decided vide order dated 19-12-2012, (hi Hon'ble Mumbai Bench in Para 54 held that:
"When we read section 153A along with the observations made in Anil Kurnar Bhatia (supra) and in All Cargo (supra) we are of the opinion that the AO was correct in law to issue the notices under section 153A for the years in consideration, as he was bound to in respect of all the concerned assessment years We cannot agree with the arguments of the AR that the proceedings under section 153A have to be quashed. because there was no material found in the search, indicating, that the assessee had concealed any part of its income."
5.9. In the present case the show cause notice of the excise department in respect of clandestine production and removal of Gutkha was found, which
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certainly is a document found during search. The investigation during search and the assessment
consequent to search draws oil show cause notice. I am therefore unable to accept the contention of the appellant that the AO had no jurisdiction and I therefore dismiss the ground of appeal no 2."
Aggrieved, now assessee is in second appeal before Tribunal.
We have heard the rival contentions and gone through the facts and circumstances of the case. We find from the facts that the assessee is a Private Limited Company engaged in the business of manufacturing and trading of Gutkha and other Perfumatory items. The assessment for all the assessment years, under consideration before us, are completed under section 153A read with section 143(3) of the Act and the grounds and issues raised are identical in all the four appeals as under: -
Sr. Appeal No. AY Grounds of Appeal No. 1. 4024/M/2014 2005-06 1. Order passed u/s 153A r.w.s. 143(3) of the 2. 4025/M/2014 2006-07 Act is without any jurisdiction and the same is bad in law. 3. 4026/M/2014 2007-08 2. Ad-hoc addition made by calculating gross 4. 4027/M/2014 2008-09 profit on alleged unrecorded sale. 3. Addition on account of undisclosed initial investment 10. For all the assessment years i.e. AY 2005-06 to 2008-09 returns originally filed much before the date of search under section 132 of the Act i.e. 10.03.2010 and the details filed by assessee under section 139(1) of the Act and returns of income filed in response to notices issued under section 153A of the Act and income assessed as a result of notice under section 153A read with section 143(3) of the Act is summarized as under: -
Sr. AY Gross Total Income No. income u/s declared u/s
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139(1)/ Date 153A/Date of of filing of filing of return of return of income income 1. 2005-06 47,71,915/ 47,71,915/ 31.10.2006 05.07.2011 2. 2006-07 40,07,185/ 40,07,185/ 28.10.2007 05.07.2011 3. 2007-08 88,26,324 88,26,324/ 30.09.2008 05.07.2011 4. 2008-09 173,779,788 173,779,788/ 30.09.2008 05.07.2011
The assessee before the DDIT Investigation filed a letter dated 12.05.2010 explaining the contents of item A-1 of inventory on loose paper folder seized during the course of search on 10.03.2010 which contains show case notice bearing No. Thane/ ADIT (Investigation)-2/09- 10 dated 31.08.2009 issued by ADIT(Investigation)-2, Thane towards unexplained expenditure and suppression of sales as per show cause notice issued by Central Excise Department, Vapi Commissionerate and the copy of the same was forwarded to the investigation department of the Income Tax, Thane. The relevant letter mentioned as under: -
“This page contains a Show-Cause Notice bearing No. Thn/ADIT (Inv.) 2/09-10 dated 31.08.2009 issued by the Asst. Director of Income-tax, (Investigation)2, Thane towards unexplained expenditure and suppression of Sales as per Central Excise Show cause notice issued by Vapi Commissionerate and the copy of the same forwarded to the Investigation Department of Income Tax, Thane."
Now before us, the learned Counsel for the assessee drew our attention to assessee’s paper book at pages 19-26 which contains show
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cause notice issued for AY 2005-06 and stated that in the said show cause notice no incriminating material whatsoever was referred to or identified for making any addition under section 153A of the Act. The assessee filed details and explanation in response to the show cause notice which is enclosed at pages 27-34 of the assessee’s paper book. The assessee also filed further details at pages 35-45 of the assessee’s paper book. It was explained by the learned Counsel for the assessee as this show cause notice was received from the Income Tax department prior to the date of search and actually received on 31.08.2009 and ultimately which was shown to have been seized during the course of search on 10.03.2010. The assessee during the course of assessment proceedings, according to the learned Counsel, strongly objected to the AO’s proposal to estimate the income on the basis of alleged turnover on the basis of show cause notice issued by Central Excise Department in response show cause notice issued by Income Tax Department on 31.08.2009. However, the learned Counsel for the assessee stated that there is no incriminating material available on record which was found as a result of search carried out by the Income Tax Department under section 132 of the Act on 10.03.2010. Mere alleged seized material is only the show cause notice issued by the Central Excise Department and which was again considered and show cause notice was issued by Income Tax Department on 31.08.2009 much prior to the date of search. How that can be the basis of search assessment under section 153A of the Act? The learned Counsel for the assessee stated that the show cause notice issued by Income Tax Thane dated 31.08.2009 and show cause notice issued by Central Excise Department Vapi Commissionerate do not constitute any incriminating material to make assessment under section 153A of the Act read with section 143(3) of the Act particularly when all the details were filed in the original return of income under section 139(1) on 31.10.2006 for the AY 2005-06 and no proceedings were pending as on the date of search. The learned Counsel
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for the assessee stated that at the time of search on 10.03.2010 by the Income Tax Department, the assessment proceedings for none of the above assessment years is in question is pending. The learned Counsel for the assessee stated that the AO’s assumption of jurisdiction to issue notice under section 153A of the Act and to frame the assessment under section 143(3) read with section 153A of the Act, the AO can assume jurisdiction only when there is incriminating material found during the course of search conducted by the Income Tax Department under section 132 of the Act. The learned Counsel explained that the entire assessment is based on show cause notice issued by Income Tax Department on 31.08.2010 which was issued before the date of search by the Income Tax Department on 10.03.2010.
We have gone through the case law of Hon’ble Bombay High Court in the case of CIT vs. Continental Warehousing Corporation (Nhava Sheva) Ltd. (2015) 374 ITR 645 (Bom). Despite a specific query raised by the Bench, the learned CIT Departmental Representative, could not produce or could not state that there is incriminating material was found during the search relating to these additions made by AO of Gross Profit estimated on alleged unrecorded sales and addition on account of undisclosed initial investment while completing the assessment under section 153A read with section 143(3) of the Act. On the other hand, the learned Counsel for the assessee relied on the decision of Continental Warehousing Corporation (supra) and CIT vs. Murli Agro Products Pvt. Ltd. [2014] 49 taxmann.com 172 (Bombay). The relevant Para’s of the Hon’ble Bombay High Court in the case of Continental Warehousing Corporation (Nhava Sheva) Ltd. (supra) reads as under: -
“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
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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 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
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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 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
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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 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 153(1), the AO gets the jurisdiction to assess the total income which was vested in
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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 "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.
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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 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
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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 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: -
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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.
It may be mentioned here that Ld. Counsel for All Cargo Global Logistics Ltd. was questioned about the scope of pending assessments as it was his contention that all six assessments are to be made, if necessary, on the basis of undisclosed income discovered in the course of search. He was specifically questioned about the jurisdiction of the AO to make original assessment along with assessment u/s 153A, merging into one. However he took an evasive view submitting that this question need not be decided in his case although the question of jurisdiction u/s 153A was vehemently pressed on account of which ground No.1 in the appeal for assessment year 2004-05 was admitted as
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additional ground. He also wanted the additional ground to be retained in case of any future contingency."
Further, we also find from the observations of Hon’ble High Court in the case of Continental Warehousing Corporation (Nhava Sheva) Ltd. (supra) that the assessment can be made on the basis of search material and relevant para reads as under: -
“37. We do not see as to how while allowing the appeal of the assessee and setting aside the order of the Commissioner under section 263 could the judgment be said to be laying down a proposition and as canvassed by Mr. Pinto. True it is that the assessment which has to be made in pursuance of the notice is in relation to the six years. An order will have to be made in that regard. While making the order the income or the return of income filed for all these assessment years is to be taken into account. A reference will have to be made to the income disclosed therein. However, the scope of enquiry, though not confined as held by the High Court of Karnataka, it essentially revolves around the search or the requisition under section 132A as the case may be. We do not find anything in these observations and reproduced above which would enable us to conclude that the Division Bench judgment of this Court in the case of Murli Agro Products Ltd. (supra) requires reconsideration or does not lay down a correct principle of law. We cannot,
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therefore, accede to the submissions of Mr. Pinto and revisit any of the conclusions rendered by the Division Bench of this Court."
From the above, it is clear that the search assessment or assessment under section 153A read with section 143(3) of the Act the scope of enquiry essentially revolves around the search under section 132 of the Act or the requisition made under section 132A of the Act as the case may be. In the present case before us, during the course of search in the assessee’s group of cases under section 132 of the Act dated 10.03.2010, the material seized was the same material which was seized by the Central Excise Department in their search on assessee’s group of cases on 18.09.2007. The material seized by the Central Excise Department during the search was contained in a show cause notice dated 18.09.2007, which was the subject matter of investigation by the Income Tax Department by the ADIT(inv)- Thane, and the relevant show cause notice was issued to the assessee as under:-
“This page contains a Show-Cause Notice bearing No. Thn/ADIT (Inv.) 2/09-10 dated 31.08.2009 issued by the Asst. Director of Income-tax, (Investigation)2, Thane towards unexplained expenditure and suppression of Sales as per Central Excise Show cause notice issued by Vapi Commissionerate and the copy of the same forwarded to the Investigation Department of Income Tax, Thane."
These show cause notice of Central Excise Department dated 18.09.2007, which was in the possession of the Department before the date of search conducted under section 132 of the Act on 10.03.2010. It means that nothing new incriminating material was found during the course of search under section 132 of the Act and even now, the learned CIT DR, could not produce any incriminating material found during the course of search under section 132 of the Act on the assessee’s group of
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cases. Hence, in view of the given facts and the case law relied on the by the learned Counsel of the assessee in the case of Continental Warehousing Corporation (Nhava Sheva) Ltd. (supra), we quash the assessment in all the four years and allow the appeal of the assessee. 17. In the result, the appeals of assessee are allowed. Order pronounced in the open court on 28-09-2018.
Sd/- Sd/- (राजेश कुमार / RAJESH KUMAR) (महावीर स िंह /MAHAVIR SINGH) (लेखा दस्य / ACCOUNTANT MEMBER) (न्याययक दस्य/ JUDICIAL MEMBER) मुिंबई, ददनािंक/ Mumbai, Dated: 28-09-2018 स दीप सरकार, व.निजी सधिव / Sudip Sarkar, Sr.PS आदेश की प्रनिललपप अग्रेपिि/Copy of the Order forwarded to : अपीलाथी / The Appellant 1. प्रत्यथी / The Respondent. 2. आयकर आयुक्त(अपील) / The CIT(A) 3. आयकर आयुक्त / CIT 4. ववभागीय प्रयतयनधि, आयकर अपीलीय अधिकरण, मुिंबई / DR, ITAT, 5. Mumbai गार्ड फाईल / Guard file. 6.
आदेशाि सार/ BY ORDER, त्यावपत प्रयत //True Copy// उप/सहायक पुंजीकार (Asstt. Registrar) आयकर अपीलीय अधिकरण, मुिंबई / ITAT, Mumbai