DCIT CEN CIR 7(3), MUMBAI vs. MADAHU PRAKASH KAPOOR, MUMBAI

Per Manoj Kumar Aggarwal (Accountant Member)

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.

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.

"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.