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Income Tax Appellate Tribunal, “B” BENCH, MUMBAI
Before: SHRI MAHAVIR SINGH, JM & SHRI MANOJ KUMAR AGGARWAL, AM
Per Manoj Kumar Aggarwal (Accountant Member)
The captioned appeal by revenue for Assessment Year [AY] 2010- 11 assails the order of the Ld. Commissioner of Income-Tax (Appeals)- 49 [CIT(A)], Mumbai dated 21/12/2015 qua deletion of addition of Rs.2,30,66,654/- relying on the decision of Hon’ble Bombay High Court in the case of All Cargo Global Logistics Ltd. 2.1 Briefly stated the assessee being resident individual was subjected to an assessment u/s 153A read with section 143(3) of the Income Tax Act, 1961 on 26/03/2014 at Rs. 2,51,89,060/-. Pursuant to search and seizure action u/s 132(1) on 24/11/2011 on Bharti Shipyard group of companies, the assessee being connected entity was also covered under the same. Consequently notice u/s 153A was issued on 31/03/2013 which was followed by statutory notices u/s 143(2) & 142(1). The original return of income was filed on 31/07/2010 at Rs.9,80,274/-. The return, pursuant to Section 153A, was filed on 19/06/2013 at Rs.10,16,407/- which was later revised at the same figures on 31/12/2013.
2.2 During assessment proceedings, it was noted that the assessee, jointly with her daughter, sold a flat at Pallonji Mansion for Rs.9.48 Crores and after claiming deduction u/s 54 reflected ‘Nil’ Long Term Capital Gains [LTCG]. However, Ld. AO, after perusing the details / documents re-worked LTCG against the same at Rs.2,30,66,654/-. The Madhu Prakash Kapoor Assessment Year 2010-11 Ld. AO also estimated deemed rental value from the sold property for five months since assessee declared another property as self occupied property during the impugned AY which led to net addition of Rs.9.56 Lacs under the head Income from House Property.
Aggrieved the assessee contested the same with success before Ld. CIT(A) vide impugned order dated 21/12/2015 where the assessee contested the proceedings on legal ground and additions on merits. The assessee drew attention to the fact that no incriminating material was found in the search operations qua the assessee and therefore, the additions were bad in law since the assessment for impugned year had not abated. In other words, the assessee contended that where assessment had already been completed and no incriminating material were found by the search team, no addition could be made u/s 153A as per the ratio of Tribunal Special Bench in All Cargo Global Logistics Ltd. as confirmed by Hon’ble Bombay High Court along with CIT Vs. Continental Warehousing Corporation (Nhava Sheva) [58 taxmann.com 78]. The Ld.CIT(A) agreed with assessee’s submission and concluded the matter as follows:- 9.2 I find that the appellant has filed return of income u/s 139 for A.Y 2009-10 on 27.08.2009 declaring NIL total income and current year loss at Rs.15,56,964/- and for A.Y 2010-11 on 31.07.2010 declaring total income at Rs.980274/-. No notice u/s 143(2) has been issued till the expiry of the time prescribed u/s.143 to issue such notice i.e. up to 30.09.2010 for A.Y 2009-10 and up to 30.09.2011 for A.Y.2010-11. Search was conducted u/s.132(1) in the case of the appellant on 24/11/2011. Thus, the return of income of the appellant can be treated as having been accepted and attained finality. As a result, no assessment would be pending on the date of search i.e. 24/11/2011 and therefore, the assessment for both the assessment years had not abated. Reliance is placed on the decision of the ITAT Delhi ’F’ Bench in the case of PACL India Ltd vs ACIT, Central Circle-4 Delhi in ITA No.2637/Del/2010, wherein it was held that “ the time period for issuing notice u/s 143(2) was already expired prior to the date of search. Therefore, the proceedings do not get abated by virtue of proviso to section 153A”.
ITA No.1060/M/2016 Madhu Prakash Kapoor Assessment Year 2010-11 9.3 The appellant has submitted that no incriminating material has been found during the course of search to justify the additions made in the assessment order u/s.153A of the act. I find that the A.O has made addition of Rs. 23,55,388/- for A.Y.2009-10, as noted in para 6.2 above, without making reference to any incriminating material, found as a result of the search. Similarly, the A.O has made disallowances as noted in para 7.1, addition of Rs. 230,66,654/- as noted in para 7.2 and Rs. 11,06,000/- as noted in para 7.3 above for A.Y. 2010-11, without making reference to any incriminating material, found as a result of the search. The additions and disallowances have been worked out on the basis of details filed by the assesse and AIR information available with the A.O 9.4 I find that search was conducted u/s.132(1) in the case of the appellant on 24/11/2011 and the assessment in both the cases did not abate on the date of search as noted in para 9.2 above. In this regard, the Special Bench of ITAT, Mumbai, in the case of All Cargo Global Logistics Ltd. Vs DCIT (2012) 137 ITD 287(SB)(Mum) has given their decision as under: “Thus, question no.1 before us is answered as under: (a) In assessments that are abated, the AO retains the original jurisdiction as well as jurisdiction conferred on him u/s 153A for which assessments shall be made for each of the six assessment years separately; (b) In other cases, in addition to the income that has already been assessed, the assessment u/s 153A will be made on the basis of incriminating material, which in the context of relevant provisions means – (i)books of account, other documents, found in the course of search but not produced in the course of original assessment, and (ii) undisclosed income or property discovered in the course of search This decision has been further affirmed by the Hon’ble High Court of Bombay in of 2013 in the case of CIT vs All Cargo Global Logistics Ltd. Vide their order dated 21.04.2015 9.5 In view of the above said decision in the case of All cargo Global Logistics Ltd, cited by the appellant in her submission, the addition in this case for both the assessment years could have been made only on the basis of incriminating material found in the course of search. Therefore, I am of the considered opinion that the above said additions/disallowances for both the assessment years, as discussed in para 6.2,7.1,7.2 and 7.3, were not justified and the same are deleted.
Aggrieved, the revenue is in further appeal before us.
The Ld. Departmental Representative [DR] contended that the department’s special leave petition [SLP] against the cited order of Hon’ble Bombay High Court has been admitted by Hon’ble Supreme Court vide SLP No. 18560 of 2015 dated 12/10/2015 [64 taxmann.com 34] and therefore the issue is yet to attain finality. Per Contra, Ld. AR contended that at the moment the issue stood covered in assessee’s favor by jurisdictional High Court. Madhu Prakash Kapoor Assessment Year 2010-11 5. We have heard the rival contentions and perused relevant material on record including the cited case laws. So far as the facts are concerned, it is un-controverted position that no incriminating material was found in the search operations qua the assessee and the additions are based only on the return of income filed by the assessee. Secondly, the date of search is 24/11/2011 whereas the last date for issuance of regular scrutiny notice u/s 143(2) for impugned AY was 30/09/2011 as noted by Ld. CIT(A) and therefore, time limit for issuance of regular notice u/s 143(2) had already elapsed. Clearly, no assessment was pending on the date of search operations and no proceedings have abated on the date of search i.e. 24/11/2011. Therefore, we find that, at the moment, the issue stood squarely covered in assessee’s favor by the cited decision of jurisdictional High Court as rightly noted by Ld. CIT(A). Similar view has been taken by Hon’ble Delhi High Court in CIT Vs. Kabul Chawla [380 ITR 573]. Further, upon perusal of SLP No. 18560 of 2015 dated 12/10/2015 admitted by Hon’ble Supreme Court, we find that Hon’ble apex court has only granted SLP against the ruling of the Hon'ble Bombay High Court's finding that no addition can be made in respect of assessments which have become final if no incriminating material is found during search or during 153A proceedings. It is seen that the Hon'ble Apex Court has not stayed or suspended the operation of the decision of the Hon'ble Bombay High Court and therefore, at the moment, the decision of jurisdictional High Court is binding on us and we are bound to follow it. Madhu Prakash Kapoor Assessment Year 2010-11
Further, Hon'ble Delhi High Court in the case of Kabul Chawla (supra) and others dated 28/08/2015 has summarized the legal position on the issue as under :-
"Summary of the legal position: 37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under : i. Once a search takes place under Section 132 of the Act, notice under Section 153A(1) will have to be mandatorily issued to the person searched requiring him to file returns for six A.Ys immediately preceding the previous year relevant to the A Y 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 A.O. will exercise normal assessment powers in respect of the six years previous to the relevant A.Y. 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 153A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of 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 153A 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 A Y on the basis of the findings of the search and any other material existing or brought on the record of the A.O. vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or Madhu Prakash Kapoor Assessment Year 2010-11 undisclosed income or property discovered in the Course of search which were not produced or not already disclosed or made known in the course of original assessment. Conclusion 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.
The question framed by the Court is answered in favour of the Assessee and against the Revenue."
The facts of the present case are materially identical to the facts involved in the above cited decisions and therefore, respectfully following the above decisions, we are inclined to dismiss revenue’s appeal.
In nutshell, the revenue’s appeal stands dismissed. Order pronounced in the open court on 04th October, 2017.