METALIND PRIVATE LIMITED,KOLKATA vs. DCIT, CC-1(3), KOLKATA, KOLKATA

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA ‘B’ BENCH, KOLKATA [Before Sri J. Sudhakar Reddy, Accountant Member & Sri S.S. Viswanethra Ravi, Judicial Member] I.T.A. No. 1241/Kol/2017 Assessment Year: 2011-12 & I.T.A. No. 1242/Kol/2017 Assessment Year: 2012-13 Metalind Private Ltd...........……………………………………....…………………………………………Appellant 51, Canal East Road Kolkata – 700 085 [PAN : AACCM 2883 J] Deputy Commissioner of Income Tax, Central Circle-1(3), Kolkata.......…..…......Respondent Appearances by: Shri S.M. Surana, Advocate, appeared on behalf of the assessee. Shri A.K. Singh, CIT D/R, appearing on behalf of the Revenue. Date of concluding the hearing : February 12th, 2019 Date of pronouncing the order : April 10th , 2019 O R D E R Per J. Sudhakar Reddy, AM :- Both these appeals filed by the assessee are directed against the separate but identical orders of the Learned Principal Commissioner of Income Tax - 1, Kolkata, (ld. Pr. CIT) passed u/s. 263 of the Income Tax Act, 1961, (the ‘Act’), both dt. 22/03/2017, for the Assessment Years 2011-12 & 2012-13. 2. Both these appeals belong to the same assessee. Hence for the sake of convenience, they are heard together and disposed off by way of this common order. 3. The assessee is a company and is in the business of real estate and related activities. It filed its original return of income for the Assessment Year 2011-12 on 29/09/2011, declaring nil income and for the Assessment Year 2012-13 on 29/09/2012, declaring total income of Rs.5,48,59,970/-. A search and seizure operation was conducted u/s 132 of the Act on the assessee on 04/10/2012. Consequentially notice u/s 153A of the Act, were issued and the assessee filed its return of income in response thereto declaring the same income as that disclosed by it in the original return of income for both the Assessment Years. The Assessing

2 I.T.A. No. 1241/Kol/2017 Assessment Year: 2011-12 & I.T.A. No. 1242/Kol/2017 Assessment Year: 2012-13 Metalind Private Ltd Officer completed the assessment u/s 143(3) r.w.s. 153A of the Act, determining the total income of the assessee at Rs.3,84,75,109/- for the Assessment Year 2011- 12 and at Rs.6,39,46,570/-, for the Assessment Year 2012-13. 3.1. The ld. Pr. CIT issued a notice u/s 263 of the Act, proposing revision of the assessment orders passed by the Assessing Officer for both the Assessment Years. The ground for revision was that the order passed by the Assessing Officer, for both the Assessment Years was erroneous insofar as it is prejudicial to the interest of the revenue, as there was no enquiry made by the Assessing Officer with regard to (a) agreements for sale against which advance from customers was received (b) to ascertain the date of completion of construction (c) the huge work in the progress shown by the assessee at Rs.106.30 Crores (d) that the Assessing Officer failed to verify the genuineness of the source of advance from customers and (e) non deduction of T.D.S and consequent disallowance u/s 40(a)(ia) of the Act. These issues are the subject matter of the notice issued by the ld. Pr. CIT u/s 263 of the Act, to the assessee. In reply, the assessee objected by stating that the assessment was completed u/s 153A r.w.s. 143(3) of the Act and the assessment for the Assessment Year 2011-12 has not abated and as none of the issues on which the revisions were proposed by the ld. Pr. CIT u/s 263 of the Act, were based on any incriminating material found during the course of search no addition/disallowance could be made in the said assessment order and hence the proposed revision, as these issues are bad in law. For the Assessment Year 2012-13 it was submitted that what was paid was re-imbursement of costs and hence there was no requirement of deduction of tax at source and consequently there was no disallowance to be made u/s 40(a)(ia) of the Act. 3.2. The ld. Pr. CIT examined these records and referred to certain seized documents at para 6 a. of his order. This is extracted for ready reference:- “6 a. Perusal of the seized documents/records during the course of search operations u/s 132 revealed the following:-

3 I.T.A. No. 1241/Kol/2017 Assessment Year: 2011-12 & I.T.A. No. 1242/Kol/2017 Assessment Year: 2012-13 Metalind Private Ltd From the Page-42 to 43 of the seized document marked as EMCO/8, it is observed that the assessee had shown the Profit and Loss Accounts and the Balance Sheet for the year ending 31.03.2011. From the Page No 24 of the seized document marked as EMCO/11, it is observed that the assessee had shown the details of Flat. From Page No 14 of seized document marked as EMCO/11, it is observed that the assessee had made various payments.” Thereafter at para 6 b., the ld. Pr. CIT for the Assessment Year 2011-12 held as follows:- a) The Assessing Officer has not made any enquiry of the agreement for sale against which advances from customers were received. b) No enquiry was made to ascertain the date of completion of construction and huge work in progress shown on part of the assessee at Rs.106.30 Crores. c) Assessing Officer has not verified the genuineness of the source of advances from customers. d) The assessee followed mercantile system of accounting and the Assessing Officer during the course of assessment proceedings u/s 143(3) r.w.s. 153A of the Act, had conducted no enquiry and summarily accepted the documents. e) The Assessing Officer allowed the claim of expenditure of the assessee in connection with the loss on sale of fixed assets, whereas the same should have been disallowed as the loss was in the capital field. f) Expenditure claimed on account of brokerage and real estate expenditure was allowed without enquiry by the Assessing Officer. Section 40(a)(ia) of the Act, was not applied. For the Assessment Year 2012-13, he held that the deduction of Real Estate expenditure was allowed without examining the applicability of Section 40(a)(ia) of the Act as no T.D.S. was made.

4 I.T.A. No. 1241/Kol/2017 Assessment Year: 2011-12 & I.T.A. No. 1242/Kol/2017 Assessment Year: 2012-13 Metalind Private Ltd 3.3. He relied on a number of case-law for the proposition that, an assessment order passed without making proper enquiries and proper examination of the claim made by the assessee renders the order erroneous insofar as it is prejudicial to the interest of the revenue. He set aside the assessment orders passed by the Assessing Officer for both the Assessment Years with a direction to pass a fresh assessment order after giving the assessee fair and reasonable opportunity of being heard. 4. Aggrieved the assessee is in appeal before us for both the Assessment Years. 5. The ld. Counsel for the assessee submitted that the ld. Pr. CIT, was wrong in exercising his powers u/s 263 of the Act, for the reason that, none of the issues taken up and set aside by him in the order u/s 263 of the Act, was connected to any incriminating paper or documents found during the course of search and as the assessments for the Assessment Year 2011-12 has not abated and no addition could have been made by the Assessing Officer on the issues and hence there is no error in the order of the Assessing Officer. He relied on a number of case-law for this proposition and we would be referring to them as and when necessary. 5.1. He further pointed out that the ld. Pr. CIT referred to certain seized documents at para 6 a, of his order and argued that none of these documents can be considered as incriminating material as these were, (a) profit and loss account and balance sheet of the assessee (b) details of flats and (c) various payments made by the assessee which are part of record. He vehemently contended that the ld. Pr. CIT, has not observed anywhere in his order that the said documents were incriminating documents nor could he state that any of the issues raised by him were connected with incriminating material. He relied on the decision of the Delhi Bench of the ITAT in the case of Pavitra Realcon Pvt. Ltd., New Delhi vs. ACIT, Central Circle-32, New Delhiin ITA.Nos. 3185, 3186 & 3253/Del./2015 dated 04.10.2017 and the judgment of the Hon’ble Delhi High Court in the case of CIT v. RRJ Securities Ltd. [2016] 380 ITR 612 (Delhi), for the proposition that seized

5 I.T.A. No. 1241/Kol/2017 Assessment Year: 2011-12 & I.T.A. No. 1242/Kol/2017 Assessment Year: 2012-13 Metalind Private Ltd documents which are part of regular books of account etc. cannot be considered as incriminating material. He relied on a number of decisions for the proposition that no addition can be made in an assessment framed u/s 153A r.w.s. 143(3) of the Act, when the assessment for that assessment year has not abated and when no incriminating material was found during the course of search. 5.2. The ld. Counsel for the assessee, further relied on the decision of the Kolkata B Bench of the ITAT in the case of M/s. D. D. Deposits and Advances Pvt. Ltd. vs. CIT in ITA No. 1214/Kol/2013, Assessment Year 2008-09, order dt. 11/05/2018, for the proposition that validity of an assessment can be disputed even in a proceedings u/s 263 of the Act and that the issue which goes into the root of the matter can be argued and is to be adjudicated. He took this bench through the order of the ld. Pr. CIT passed u/s 263 of the Act to point out that all the issues that have been raised therein were not based on any incriminating material/documents found during the course of search and argued that under those circumstances it cannot be said that the assessment order was erroneous and prejudicial to the interests of the revenue. He vehemently contended that the assessing officer could not have made any addition on any of the issues raised by the ld. Pr. CIT, in the original assessment order passed u/s 153A r.w.s. 143(3) of the Act, as no incriminating documents were found. He relied on the decision of this Bench of the Tribunal in the case of M/s. Rashmi Metaliks Ltd. v. A/D.C.I.T, in ITA No. 813 to 816/Kol/2017; Assessment Years:- 2009-10 to 2012-13, order dt. 02/05/2018, for the above proposition that no revision u/s 263 of the Act, can be done under these circumstances. He further relied on a number of decisions in support of his contentions which we would be referring to, as and when required. 6. The ld. D/R, on the other hand, submitted that it is wrong to argue that there was no incriminating material found during the course of search. He referred to para 6 a, of the order of the ld. Pr. CIT and submitted that seized documents marked as EMCO/8 and EMCO/11, were materials based on which the additions were required to be made by the Assessing Officer, which he did not do. Legally, he argued that it is not correct on behalf of the assessee to raise these arguments that

6 I.T.A. No. 1241/Kol/2017 Assessment Year: 2011-12 & I.T.A. No. 1242/Kol/2017 Assessment Year: 2012-13 Metalind Private Ltd the additions should be passed only on incriminating material, in a proceedings u/s 263 of the Act. He took this bench through each of the issues pointed out by the ld. Pr. CIT and submitted that there was absolutely no application of mind by the Assessing Officer on these issue and hence the order passed is erroneous and prejudicial to the interests of the revenue. He submitted that the assessing officer has not called for any information nor had examined any of these claims and had allowed the same without any examination and hence the assessment order is erroneous insofar as it is prejudicial to the interest of the revenue. He relied on the order of the ld. Pr. CIT and also a number of case-law which we will refer to as and when required. He prayed that the order of the ld. Pr. CIT be upheld. 7. We have heard rival contentions. On careful consideration of the facts and circumstances of the case, perusal of the papers on record, orders of the authorities below as well as case law cited, we hold as follows:- 8. The first issue that arises for our adjudication is whether the validity of the assessment or the validity of the addition/disallowance is an assessment, can be disputed in a proceedings u/s 263 of the Act. The Kolkata ‘B’ Bench of the Tribunal in the case of M/s. D. D. Deposits and Advances Pvt. Ltd. (supra) had held that the assessment is in the nature of preliminary proceedings and whereas the revisionary proceedings u/s 263 of the Act, were in the nature of co-lateral proceedings and that in these proceedings the validity of preliminary proceedings can always be challenged. The Mumbai Bench of the Tribunal in the case of M/s Westlife Development Ltd. vs. Principal CIT in ITA No. 686/Mum/2016 applied the judgment of the Hon'ble Apex Court's judgment in Kiran Singh & Ors. vs. Chaman Paswan & Ors.(1955) 1 SCR 117 (SC), wherein it was held that a decree passed by a court without jurisdiction is a nullity and this can be put to challenge in co-lateral trial proceedings. The Hon’ble Court held that any defect of jurisdiction, pecuniary or territorial or in respect of subject matter of the action, strikes at the very authority of the court to pass any decree and the same would not be curable even by the consent of the parties. Hence applying the propositions of law discussed above to the facts of the case, we are of the considered opinion that the assessee

7 I.T.A. No. 1241/Kol/2017 Assessment Year: 2011-12 & I.T.A. No. 1242/Kol/2017 Assessment Year: 2012-13 Metalind Private Ltd can challenge the order of the ld. Pr. CIT on the legal ground that the issue raised by the ld. Pr. CIT in his order u/s 263 of the Act cannot be a subject matter of addition or disallowance in an assessment made u/s 153A r.w.s. 143(3) of the Act, when the assessment for the assessment year has not abated and when this addition/disallowance are not based on any incriminating material found during the course of search. This issue was raised by the assessee before the ld. Pr. CIT in reply to the showcause notice u/s 263 of the Act. Despite the propositions of law laid down by the Hon’ble Jurisdictional High Court, the ld. Pr. CIT issued directions to the Assessing Officer, which is contrary to the propositions of law laid down by the Jurisdictional High Court. 8.1. The ld. Pr. CIT at para 6 a, of his order held that, a perusal of the seized documents/record, during the course of search operation, reveals that at page 42 and 43, marked EMCO/8, consists of the assessee’s profit and loss account and balance sheet for the year ended 31/3/2011. This document can by no stretch of imagination be considered incriminating material. These are final accounts of the assessee and are on record. Further the ld. Pr. CIT observed that at page 24 of the seized documents marked EMCO/11, gives details of a flat. These details are also not incriminating material. This information is part of the official record. Similarly the ld. Pr. CIT refers to page 14 of the seized documents marked EMCO/11 and states that this document shows various payments made by the assessee. The case of the assessee is that all these payments are duly recorded in the books of accounts and are supported by vouchers. Hence these documents cannot be called incriminating material. We also observed that the ld. Pr. CIT has not stated in his order that these documents were incriminating documents or material. When it is not the case of the ld. Pr. CIT that these material referred in para 6 a, are incriminating material, no additions can been made based on these documents in the assessment. In the decision in the case of Pavitra Realcon Pvt. Ltd., New Delhi vs. ACIT (supra), and the judgment in the case of CIT v. RRJ Securities Ltd.(supra), it has been held that seized documents which are part of record/books of accounts are not incriminating material. Hence the material brought out by the ld. Pr. CIT at

8 I.T.A. No. 1241/Kol/2017 Assessment Year: 2011-12 & I.T.A. No. 1242/Kol/2017 Assessment Year: 2012-13 Metalind Private Ltd para 6 a, of his order passed the section 263 of the Act, is not incriminating material. In this order passed by the ld. Pr. CIT, he has set aside the order passed u/s 143(3) r.w.s. 153A of the Act, by the assessing officer, with the direction to examine the following: – a) The claim of loss incurred on sale of fixed assets. b) Claim of expenditure incurred under the head brokerage. c) Claim of real estate expenditure, on the ground that no deduction of tax has been made and also to examine the claim of the assessee as to whether this expenditure was in fact reimbursement of expenses. The assessing officer was also directed to examine the sale agreements, work in progress, sundry creditors and advanced from customers as disclosed by the assessee in the books of accounts. From the above directions it is clear that whatever issue the ld. Pr. CIT directed the assessing officer to examine is part of entries in the regular books of accounts and other regular vouchers and documents. None of these are connected with any incriminating material found during the course of search. Hence it is beyond the jurisdiction of the Assessing Officer to make any disallowance/addition on these issues in the assessment in question. It is also not the case of the ld. Pr. CIT at the assessing officer has failed to examine the material found during the course of search and that these issues that were set aside by him for fresh adjudication are connected with any of the incriminating material found during the course of search. Under the circumstances, we are of the considered opinion that the exercise of jurisdiction u/s 263 of the Act, was wrong, when the assessment for the Assessment Year 2011-12 had abated. 8.2. The assessee in this case has filed his return of income originally on 20/09/2011 u/s 139 of the Act. The last date for issual of notice u/s 143(2) of the Act, expired on 30/09/2012. No such notice u/s 143(2) of the Act, was issued. Hence the assessment for Assessment Year 2011-12 has not abated. We have also

9 I.T.A. No. 1241/Kol/2017 Assessment Year: 2011-12 & I.T.A. No. 1242/Kol/2017 Assessment Year: 2012-13 Metalind Private Ltd stated that there is no incriminating paper/documents found during the course of search, based on which the ld. Pr. CIT has proposed revision of the assessment order. The case law on this issue as to whether an addition/disallowance can be made in an assessment framed under section 143 (3) r.w.s. 153A of the Act, where the assessment has not abated and when no incriminating material is found during the course of search is well settled. We rely on the following case-law:-

(i) CIT, Kolkata-III Vs. Veerprabhu Marketing Limited [2016] 73 taxmann.com 149 (Calcutta): In this case The Honourable Calcutta High Court expressed the following views: “We are in agreement with the views of the Karnataka High Court that incriminating material is a pre-requisite before power could have been exercised under section 153C 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.”

(ii) PCIT-2, Kolkata Vs. Salasar Stock Broking Limited (ITAT No. 264 of 2016) dated 24.08.2016 : (Calcutta) In this case, the Honorable High Court observed that the Ld. ITAT, Kolkata was of the opinion that the assessing officer had no jurisdiction u/s 153A of the I.T. Act to reopen the concluded cases when the search & seizure did not disclose any incriminating material. In taking the aforesaid view, the Ld. ITAT relied upon the judgments of Delhi High Court in the case of CIT(A) Vs. Kabul Chawla in ITA No. 707/2014 dated 28.08.2014. The Court also observed that more or less an identical view has been taken by this Bench in ITA No. 661/2008 in the case of CIT Vs. Veerprabhu Marketing Limited. Considering the above facts, the Honorable High Court did not admit the appeal filed by the Department.

(iii) The ‘A’ Bench of the Delhi ITAT, in the case of Anurag Dalmia vs. DCIT in ITA Nos. 5395 & 5396/DEL/2017; Assessment Years: 2006-07 & 2007-08, dt. 15/02/2018 held as follows:- “12. We have heard the rival submissions, perused the relevant material placed on record and the finding given in the impugned order with respect to legal issue raised vide ground no.5 by the assessee that the additions made in this year are beyond the scope of assessment u/s.153A, as no

10 I.T.A. No. 1241/Kol/2017 Assessment Year: 2011-12 & I.T.A. No. 1242/Kol/2017 Assessment Year: 2012-13 Metalind Private Ltd incriminating material was found during the course of search for the impugned Assessment Year; and the assessment had attained finality and was not abated in terms of 2nd Proviso to Section 153A. As stated above, the original return of income was filed in July, 2006 and said return was duly accepted and processed u/s. 143(1) vide intimation dated 25.05.2007. Since no notice u/s. 143(2) was issued thereafter or any other proceedings have been commenced to disturb said return of income, accordingly, it had attained finality much prior to the date of search which was on 20.01.2012. Hence in terms of 2nd Proviso to Section 153A the assessment for the Assessment Year 2006-07 was not pending and accordingly, has to be reckoned as unabated assessment. Under the jurisdiction of Hon'ble Delhi High Court, the law is well settled that in case of unabated assessment, the additions which can be roped-in, in the assessments framed u/s.153A, would only be with regard to any incriminating material or evidence unearthed or found during the course of search. If no incriminating material has been found during the course of search, then no addition can be made in the assessment years where assessments had attained finality. The relevant observations and the ratio laid down would be discussed in the later part of this order. 8.3. The Hon’ble Calcutta High Court applied the proposition of law laid down by the Hon’ble Delhi High Court in the case of CIT vs. Kabul Chawla CIT vs. Kabul Chawla (2016) 380 ITR 573 (Del) . The Hon’ble Delhi High Court at Para 37 & 38 held as follows:

“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 153 A (1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs "in which both the disclosed and the undisclosed income would be brought to tax". iv. Although Section 153 A 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 AO which can be related to the

11 I.T.A. No. 1241/Kol/2017 Assessment Year: 2011-12 & I.T.A. No. 1242/Kol/2017 Assessment Year: 2012-13 Metalind Private Ltd evidence found, it does not mean that the assessment "can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material." v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153 A 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.” 38. The present appeals concern AYs, 2002-03, 2005-06 and 2006-07.On the date of the search the said assessments already stood completed. Since no incriminating material was unearthed during the search, no additions could have been made to the income already assessed.”

8.4. This Bench of the Tribunal in the case of M/s. Rashmi Metaliks Ltd. vs. A/D.CIT, CC-2(2) in ITA No.s 813 to 816/Kol/2017; Assessment Years: 2009-10 to 2012-13, order dt. 02/05/2018, held as follows:-

“15. Thus, the propositions of law extracted by us that no addition or disallowance can be made in an assessment order passed u/s 153A r.w.s. 143(3) of the Act, without any incriminating material found during the course of search u/s 132 of the Act, when applied to the facts of the case, takes us to a conclusion that the A.O. could not have made a disallowance of the claim of the assessee u/s 80- IA(4) of the Act in the assessment order passed by him u/s 153A r.w.s. 143(3) of the Act and hence the ld. Pr. CIT's impugned order is not in accordance with law. 15.1. What the Assessing Officer could have done in an order passed u/s 153A r.w.s. 143(3) of the Act, cannot be done by the ld. Pr. CIT, in exercise of his powers u/s 263 of the Act. The claim of deduction u/s 80-IA of the Act, forms part of the regular books of the assessee and also forms part of the orders passed originally u/s 143(3) of the Act, prior to the search and seizure operation. The VAT details, the TDS certificates in Form No. 16A and the fact that the assessee is a registered contractor and had claimed deduction u/s 80-IA of the Act, were very much part of the record prior to the search & seizure operations. The Assessing Officer had considered them in his original

12 I.T.A. No. 1241/Kol/2017 Assessment Year: 2011-12 & I.T.A. No. 1242/Kol/2017 Assessment Year: 2012-13 Metalind Private Ltd assessment order passed u/s 143(3) of the Act, as well as the latter assessment order passed u/s 153(A) r.w.s. 143(3) of the Act. The Hon'ble Calcutta Tribunal in the following cases held as follows:- a) M/s. Sona Vets Pvt. Ltd. vs. DCIT, ITAT Kolkata in ITA No.947/Kol/2017, dt. 17/10/2017 "6. We have heard the rival submissions and perused the materials available on record including the paper books filed by the assessee containing the seized documents and explanations given by the assessee thereon before the Id AO and the Id CFT. It is not in dispute that as on the date of search the original assessment for Asst Year 2010-11 was completed u/s 143(3) of the Act and hence stood unabated. It is now well settled by various high courts including the Hon'ble Jurisdictional High Courts relied upon supra that the concluded assessments could be disturbed only in the event of presence of any incriminating materials found in the course of search. We find from the above explanation of various seized documents found in the course of search, there was absolutely no material much less any incriminatingmaterial, so as to disturb the earlier concluded assessment for the Asst Year 2010-1 1. Hence the Id AO had rightly not considered the aspect of deemed dividend and claim of depreciation on motor lorries at 30% while framing the search assessment u/s 153A of the Act. Moreover, we find that the assessee had given proper explanations regarding these items before the lower authorities as reproduced above. We find that the assessee had also duly explained the complete contents of the seized documents relied upon by the Id CIT in his order. In our considered opinion, those materials are not incriminating at all and are forming part of regular books of accounts of the assessee. These explanations have been completely ignored by the Id CIT while directing the Id AO to frame the assessment afresh. We hold that when an addition could not be made as per law in section 153A proceedings, then the said order cannot be construed as erroneous warranting revisionary jurisdiction UIS 263 of the Act by the Id CIT. We hold that even on merits, there is no case made out by the Id CTT for making any addition towards deemed dividend or disallowance of excess depreciation on motor lorries. In these facts and circumstances, we find that the order of the Id CIT u/s 263 of the Act deserves to be quashed Accordingly, the preliminary ground raised by the assessee on the issue of assumption of jurisdiction u/s 263 of the Act is allowed.” b) M/s Shalimar Pellet Feeds Ltd. vs DCIT, ITAT Kolkata in ITA No. 948 to 952/Kol/2017 dated 17.10.2017; "9. We have heard the rival submissions and perused the materials available on record including the paper books filed by the assessee containing the seized documents and explanations given by the assesee thereon before the Id. AD and the Ld. CIT. It is not in dispute that as on the date of search the original assessments for Asst Years 2008-09 to 2011-12 were completed u/s 143(3) of the Act and hence stood unabated. It is now well settled by various high courts including the Hon'ble Jurisdictional High Courts relied upon supra that the concluded assessments could be disturbed only in the event ofpresence of my incriminating materials found in the course of search. We find that there are no incriminating materials found during the course of search for the Asst Years 2008-09, 2010-11 and 2011-12 as the issues addressed by the Id CIT are only interpretation of law and based on any materials found in the search. With regard to the Asst Year 2009-10, we find from the above explanation of

13 I.T.A. No. 1241/Kol/2017 Assessment Year: 2011-12 & I.T.A. No. 1242/Kol/2017 Assessment Year: 2012-13 Metalind Private Ltd the assessee, there was absolutely no material much less any incriminating materials, so as to disturb the earlier concluded assessment for the Asst Year 2009-10. Hence the Id AO had rightly not considered these aspects in the assessments framed u/s 153A of the Act. Moreover, we find that the assessee had given proper explanations regarding these items before the ld CIT as reproduced above. We find that the assessee had also duly explained the complete contents of the seized documents relied upon by the Id CIT in his order. In our considered opinion, those material are not incriminating at all and are forming part of regular books of accounts of the assessee. These explanations have been completely ignored by the Id CIT while directing the Id AO to frame the assessment afresh. We hold that when an addition could not be made as per law in section 153A proceedings, then the said order cannot be construed as erroneous warranting revisionary jurisdiction u/s 263 of the Act by the Id CIT. We hold that even on merits, there is no case made out by the Id CIT for making any addition on the issues proposed in the show cause notice of, Id CIT. In these facts and circumstances, we find that the order of the Id CIT u/s 263 of the Act for the Asst Years 2008-09 to 2011-12 deserve to be quashed. Accordingly, the preliminary ground raised by the assessee on the issue of assumption of jurisdiction u/s 263 of the Act for the Asst Years 2008- 09 to 2011-12 are allowed." (c) M/s Tanui Holdings Pvt. Ltd. v/s DCIT in ITA No. 360 to 363/Kol/2015 dated 20.01.2016; "5.5. We also find that no incriminating materials were found during the search in respect of the issue of deemed dividend. Hence it cannot be the subject matter of addition in 153C proceedings in respect ofcompleted assessments. We hold that when an addition could not be made as per law in section 153C proceedings, then the said order cannot be construed as erroneous warranting revision jurisdiction u/s 263 of the Act. This addition was made based on audited accounts already available with the revenue. Hence on this count also, the addition contemplated by the Learned CIT in section 263 proceedings is not in accordance with law. Reliance in this regard placed by the Learned AR on the decision of the Bombay High Court in the case of CITvsMudi Agro Products Ltd ( ITA NO. 36 of 2009 dated 29.10.2010- Bombay HC) is very well placed In view of the aforesaid findings and judicial precedent relied upon, we hold that the addition towards deemed dividend u/s 2(22)(e) of the Act in the assessments framed u/s 153C of the Act for the Asst Years 2007-08 to 2010-11 without any incriminating materials found during the course of search with respect to those assessment years, is not warranted and held as not in accordance with law. 5.6. We hold that the Learned CIT had just entertained a belief that order passed by the Learned AO u/s 153 C of the Act is erroneous, which otherwise does not emanate from the provisions of the Act. Hence in this scenario, invoking jurisdiction under section 263 proceedings is not permissible. 5.7. Since we have decided the impugned issue of addition towards deemed dividend in favour of the assessee on facts as well as on law, we don't find it necessary to address the same issue on the ground of limitation of invoking jurisdiction u/s 263 of the Act. Hence we refrain to give our findings in this regard on the issue of limitation.

14 I.T.A. No. 1241/Kol/2017 Assessment Year: 2011-12 & I.T.A. No. 1242/Kol/2017 Assessment Year: 2012-13 Metalind Private Ltd 5.8. In view of the aforesaid findings, we quash the order passed u/s 263 of the Act by the Learned CIT and allow the grounds and additional grounds raised by the assessee for all the asst years. 6. In the result, the appeals of the assessee are allowed.” 16. Applying the propositions of law laid down by the Co-ordinate Benches of the ITAT to the facts of the case, we have to hold that the order passed by the ld. Pr. CIT, for all the three Assessment Year 2008-09, 2009-10 & 2010-11, is bad in law.” 32. Respectfully following the propositions of law as discussed and applied in the above case law, we uphold the contentions of the assessee that order passed u/s 263 of the Act for A.Y.2009-10, 2010-11 and 2011-12 are bad in law as no incriminating material relatable to the claim of deduction u/s 80IA(4) of the Act was found during the course of search and as the assessments have not abated and are completed assessments.” 8.5. Applying the propositions of law laid down in the above referred case laws to the facts of the case on hand, we quash the order passed u/s 263 of the Act, for the Assessment Year 2011-12 as the issues which the ld. Pr. CIT has raised and directed the Assessing Officer to examine, are beyond the ken of an assessment made u/s 143(3) r.w.s. 153A of the Act.

15 I.T.A. No. 1241/Kol/2017 Assessment Year: 2011-12 & I.T.A. No. 1242/Kol/2017 Assessment Year: 2012-13 Metalind Private Ltd ITR 329, has held that mere setting aside the matter to the file of the assessing officer for verification without the ld. Pr. CIT coming to a conclusion that the order of the assessing officer was erroneous is bad in law. He also relied on many other case laws in support of these submissions.

10.1. The ld. D/R, on the other hand, submitted that it is a case where the ld. Pr. CIT has restored the issue to the file of the assessing officer for fresh adjudication after allowing the assessee fair and reasonable opportunity of being heard and hence the assessee should not have any grievance in a matter. He relied on the order of the ld. Pr. CIT.

“Section 263 has been enacted to empower the Commissioner to exercise power of revision and revise any order passed by the Assessing Officer, if two cumulative conditions are satisfied. Firstly, the order sought to be revised should be erroneous and secondly, it should be prejudicial to the interest of the revenue. The expression 'prejudicial to the interest of the revenue' is of wide import and is not confined to merely loss of tax. The term 'erroneous' means a wrong/incorrect decision deviating from law. This expression postulates an error which makes an order unsustainable in law. [Para 10] The Assessing Officer is both an investigator and an adjudicator. If the Assessing Officer as an adjudicator decides a question or aspect and makes a wrong assessment which is unsustainable in law, it can be corrected by the Commissioner in exercise of revisionary power. As an investigator, it is incumbent upon the Assessing Officer to investigate the facts required to be examined and verified to compute the taxable income. If the Assessing Officer fails to conduct the said investigation, he commits an error and the word 'erroneous' includes failure to make the enquiry. In such cases, the order becomes erroneous because enquiry or verification has not been made and not because a wrong order has been passed on merits. [Para 11] In cases of wrong opinion or finding on merits, the Commissioner has to come to the conclusion and himself decide that the order is erroneous, by conducting necessary enquiry, if required and necessary, before the order under section 263 is passed. In such cases, the order of the Assessing Officer will be erroneous because the order passed is not sustainable in law and the said finding must be

16 I.T.A. No. 1241/Kol/2017 Assessment Year: 2011-12 & I.T.A. No. 1242/Kol/2017 Assessment Year: 2012-13 Metalind Private Ltd recorded. The Commissioner cannot remand the matter to the Assessing Officer to decide whether the findings recorded are erroneous. In cases where there is inadequate enquiry but not lack of enquiry, again the Commissioner must give and record a finding that the order/inquiry made is erroneous. This can happen if an enquiry and verification is conducted by the Commissioner and he is able to establish and show the error or mistake made by the Assessing Officer, making the order unsustainable in Law. In some cases possibly though rarely, the Commissioner can also show and establish that the facts on record or inferences drawn from facts on record per se justified and mandated further enquiry or investigation but the Assessing Officer had erroneously not undertaken the same. However, the said finding must be clear, unambiguous and not debatable. The matter cannot be remitted for a fresh decision to the Assessing Officer to conduct further enquiries without a finding that the order is erroneous. Finding that the order is erroneous is a condition or requirement which must be satisfied for exercise of jurisdiction under section 263. In such matters, to remand the matter/issue to the Assessing Officer would imply and mean the Commissioner has not examined and decided whether or not the order is erroneous but has directed the Assessing Officer to decide the aspect/question. [Para 16] This distinction must be kept in mind by the Commissioner while exercising jurisdiction under section 263 and in the absence of the finding that the order is erroneous and prejudicial to the interest of revenue, exercise of jurisdiction under section 263 is not sustainable. In most cases of alleged 'inadequate investigation', it will be difficult to hold that the order of the Assessing Officer, who had conducted enquiries and had acted as an investigator, is erroneous, without Commissioner conducting verification/inquiry. The order of the Assessing Officer may be or may not be wrong. Commissioner cannot direct reconsideration on this ground but only when the order is erroneous. An order of remit cannot be passed by the Commissioner to ask the Assessing Officer to decide whether the order was erroneous. This is not permissible. An order is not erroneous, unless the Commissioner hold and records reasons why it is erroneous. An order will not become erroneous because on remit, the Assessing Officer may decide that the order is erroneous. Therefore, the Commissioner must after recording reasons hold that the order is erroneous. The jurisdictional precondition stipulated is that the Commissioner must come to the conclusion that the order is erroneous and is unsustainable in law. It may be noticed that the material which the Commissioner can rely includes not only the record as it stands at the time when the order in question was passed by the Assessing Officer but also the record. Nothing bars/prohibits the Commissioner for collecting and relying upon new/additional material/evidence to show and state that the order of the Assessing Officer is erroneous. [Para 17] In the instant case, the findings recorded by the Tribunal are correct as the Commissioner has not gone into and has not given any reason for observing that the order passed by the Assessing Officer was erroneous. The finding recorded by the Commissioner is that 'order passed by Assessing Officer may be erroneous'. The Commissioner had doubts about the valuation and sale consideration received but the Commissioner should have examined the said aspect himself and given a finding that the order passed by the Assessing Officer was erroneous. He came to the conclusion and finding that the Assessing Officer had examined the said aspect and accepted the assessee computation figures but he had

17 I.T.A. No. 1241/Kol/2017 Assessment Year: 2011-12 & I.T.A. No. 1242/Kol/2017 Assessment Year: 2012-13 Metalind Private Ltd reservations. The Commissioner in the order has recorded that the consideration receivable was examined by the Assessing Officer but was not properly examined and, therefore, the assessment order is 'erroneous'. The said finding will be correct, if the Commissioner had examined and verified the said transaction himself and given a finding on merits. As held above, a distinction must be drawn in the cases where the Assessing Officer does not conduct an enquiry; as lack of enquiry by itself renders the order being erroneous and prejudicial to the interest of the revenue and cases where the Assessing Officer conducts enquiry but finding recorded is erroneous and which is also prejudicial to the interest of revenue. In latter cases, the Commissioner has to examine the order of the Assessing Officer on merits or the decision taken by the Assessing Officer on merits and then hold and form an opinion on merits that the order passed by the Assessing Officer is erroneous and prejudicial to the interest of the revenue. In the second set of cases, the Commissioner cannot direct the Assessing Officer to conduct further enquiry to verify and find out whether the order passed is erroneous or not. [Para 19] 12.1. The Hon’ble Delhi High Court in the case of DIT vs. Jyoti Foundation [2013] 357 ITR 388 (Delhi) has held as follows:-

“Revisionary power under section 263 is conferred by the Act on the Commissioner/Director of Income-tax when an order passed by the lower authority is erroneous and prejudicial to the interest of the revenue. Orders which are passed without inquiry or investigation are treated as erroneous and prejudicial to the interest of the revenue, but orders which are passed after inquiry/investigation on the question /issue are not per se or normally treated as erroneous and prejudicial to the interest of the revenue because the revisionary authority feels and opines that further inquiry/investigation was required or deeper or further scrutiny should be undertaken. [Para 4]” 13. Applying the provisions of law laid down in the above referred case to the facts of the case, we are of the considered opinion that the ld. Pr. CIT should have made at least a preliminary enquiry with regard to the claim of the assessee that the payment in question is reimbursement of expenditure to its joint-venture partner, and hence no TDS needs to be made. According to the judgement of the Hon’ble Supreme Court in the case of G.E. India Technology Centre vs. CIT reported in 327 ITR 456 (SC) held that when there is no element of income in the remittance, no deduction of ta at source need be made. In the case on hand when both the parties are assessed by the same assessing officer under the ld. Pr. CIT’s jurisdiction, come enquiry had to be made. By not doing so, the ld. Pr. CIT has, in our opinion, not come to a conclusion as to how the assessment order in question is erroneous in so far as it is prejudicial to the interests of the revenue. Hence we

18 I.T.A. No. 1241/Kol/2017 Assessment Year: 2011-12 & I.T.A. No. 1242/Kol/2017 Assessment Year: 2012-13 Metalind Private Ltd have to necessarily hold that the revision of the assessment u/s 263 of the Act, by the ld. Pr. CIT, is bad in law in this Assessment Year 2012-13.

Copy of the order forwarded to: 1. Metalind Private Ltd 51, Canal East Road Kolkata – 700 085 2. Deputy Commissioner of Income Tax, Central Circle-1(3), Kolkata 3. CIT(A)- 4. CIT- , 5. CIT(DR), Kolkata Benches, Kolkata.