ACIT CC 24 & 26 CEN RG 5, MUMBAI vs. SAMIR NARAIN BHOJWANI, MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL “E” BENCH, MUMBAI BEFORE SRI MAHAVIR SINGH, JM AND SRI ASHWANI TANEJA, AM ITA No.3814/Mum/2014 (A.Y:2006-07) Dy. Commissioner of Income Tax, Shri Samir Narain Bhojani 1st Floor, Samir Complex, CC-3(4), Central Range-3, Mumbai Vs. St.Andrews Road, Opp. Holy Family Hospital, Bandra(W), Mumbai-400050 .. Appellant Respondent CO No.189/Mum/2015 (In ITA No.3814/Mum/2014 A.Y. 2006-07) Shri Samir Narain Bhojani Dy. Commissioner of Income 1st Floor, Samir Complex, Tax, CC-3(4), Central Range-3, St.Andrews Road, Opp. Holy Family Mumbai Vs. Hospital, Bandra(W), Mumbai- 400050 PAN No.AABPB9150H Appellant .. Respondent

.. Shri. B.S. Bist, DR Revenue by Assessee by .. Shri. Yogesh Thar, AR .. Date of hearing 01-12-2016 Date of pronouncement .. 01-12-2016 O R D E R PER MAHAVIR SINGH, JM:

This appeal by the Revenue and Cross Objection by assessee are arising out of the order of CIT (A)-39, Mumbai in appeal No. CIT(A)-39/IT-122/2013-14 dated 10- 03-2014. The Assessment was framed by DCIT Central Circle-24&26, Mumbai for the A.Y. 2006-07 vide order dated 25-03-2013 u/s 143(3) r. w. s. 153 A of the Income Tax Act, 1961 (hereinafter ‘the Act’).

“1. Whether on the facts and in the circumstances of the case and in Law, the Ld. CIT(A) was justified in holding that no incriminating material was found when in fact incriminating material was found for A.Y. 2011-12.” 2. On the facts and circumstances of the case the Ld. CIT(A) has not appreciated that the Delhi H.C. in the case of CIT Vs. Anil K. Bhatia has stated that u/s 153A, both disclosed and undisclosed income can be re-assessed as it is total income that has to be assessed.”.

2 ITA No.3814/Mum/2014 CO. 189/Mum/2015 3. On the facts and in the circumstances of the case, the Ld. CIT(A) has incorrectly relied upon the fact that Delhi H.C. in the case of CIT Vs. Anil K. Bhatia has left the question open without looking into the entire fact of the case.” 3. At the outset, the learned Counsel for the assessee taken us through the order of CIT(A) wherein he has quoted original assessment order passed by AO u/s 143(3) of the Act dated 10-07-2008 in Para 6.4 and 6.5 as under: -

“6.4 It is pointed out by the appellant that in the order passed u/s 143(3) dated 10.7.2008, acting upon the return filed originally under s. 139(1), the A.O had stated as follows: - "The assessee also carries on significant activities as a landlord. He gives on leave and license basis flats which are fully furnished according to the specifications of the licensee. The flats are provided along with white-goods like refrigerators, colour televisions, washing machines, dish-washer, Jacuzzi, etc. At times, substantial changes are carried out at the request of the licensee. The flats are let out along with furniture, fixtures, facilities and amenities. The buildings in which the premises let out are situated have a swimming pool, gymnasium, health-club, etc. These facilities are available to the licensees. In addition to the above, various services are provided to the licensees in the form of watch & ward, plumbing, electrical, carpenters for carrying out regular repair & maintenance work, valet parking, etc. License fees in respect of this activity have regularly been assessed to tax under the head Income from Business. 6.5 It is also pointed out by the appellant that, the A.O in the assessment order passed under s. 143(3) dated 10.7.2008 had further stated as under: "Fully furnished fiats, held by the assessee as capital assets, which have been put to use for the composite letting business constitute part of block of assets qualifying for depreciation @ 5%. The assessee follows the practice of including a particular building in the block only, after letting of all the flats in the building has commenced. Following this practice, during the previous year a building known as Om/Shirtüra has been included in the block and depreciation- has been claimed for full year. It has been verified that the flats in the said building were let out for a period of more than 180 days. However, it is seen from page 181 of attachments to return of income that the amount at which this has been included in the block is Rs.14,99,26,2 15 (Rs. 14,49,24,277 + Rs. 50,01,938 (being aggregate of expenditure incurred during the previous year on furnishing of flats) whereas on page 202 of the attachments the cost of Shimira is stated to be Rs. 14,92,78,4531-. Depreciation attributable to this extra amount. of Rs. 6,47,762 ('Rs. 14,99,26,215 minus Rs. 14,92,78,453) is reduced from the 'block since this sum of Rs. 67,47,762 does not qualify for depreciation. Therefore, claim for depreciation stands reduced by Rs. 32,3881-.

3 ITA No.3814/Mum/2014 CO. 189/Mum/2015 Further, the note stated on page 6 states that the amount at which Om/Shimira has been included in the block includes cost of land, cost of TDP, cost of construction, cost of furniture, fixtures and white goods provided in the said flats. In the course of assessment proceedings break up was called for as regards cost of land, amounts paid to tenants, cost of TDR and other costs. Cost of land amounting to Ps. 9,95,080/- does not qualify for depreciation. Therefore, depreciation attributable to the cost of land i.e. Rs. 49,754 (5% of Rs. 9,95,080)/- is being reduced from the total claim of depreciation. In respect of items forming part of the block which have been sold during the previous year, copies of sale agreements have been filed. Sale consideration far exceeds the market value assessed by the stamp valuation authorities. Profit on sale of flats forming part of block of assets is credited to capital account. In the course of assessment proceedings, the assessee has contended that during the previous year 10 flats in a building known as Rockuilla/Narain Terraces have been let out. This building has total 18 fiats. Balance 8 flats have not been let out till 31.3.2006. The assessee has made a claim for including cost of 10 flats in the block. The assessee contends that the law does not stipulate that all the flats should be let before the building qualifies for depreciation. While it is true that assessee is entitled to claim depreciation on 10 flats which have been put to use during the previous year since the claim has not been made while filing return of income the same cannot be entertained in the course of assessment proceedings. Details of flats forming part of this block as on 31.3.2906, have been filed and are on record. In the course of hearing, it was argued that the amounts incurred on furnishing the flats constitute a separate block viz. 'Furniture & Fittings' which qualify for depreciation @ 15%. Consequently, the assessee wanted to enhance the claim of depreciation. Such a contention has been made in earlier years as well but the same was not accepted since in the facts of the present case, the furniture and fixtures are tailor made for each flat and become embedded into the flat and therefore the claim of the assessee that they constitute a separate block is rejected. In fact, even in the accounts furniture & fixtures are regarded as forming an integral part of the flat. Since the Furniture & Fixtures in the flats become an integral part of the flat the same are regarded as part of the flat and will qualify for depreciation as 'Buildings'. Details of additions to fixed assets have been called for and seen. On additions to fixed assets during the previous year, assessee has claimed depreciation at 50% of the normal rates.” 4. The learned Counsel for the assessee stated a search and seizure action on the assessee that was conducted u/s 132 of the Act on the residence and business premises of the assessee on 30-11-2010. According to the learned Counsel for the assessee, assessment was already framed in assessee’s case for A.Y. 2006-07 vide order u/s

4 ITA No.3814/Mum/2014 CO. 189/Mum/2015 143(3) dated 10-07-2008 and AO has considered this very issue, wherein the income declared by assessee from house property was assessed as rental income and accordingly, the assessment was made. Now, the learned Counsel for the assessee stated that there is no incriminating material and qua the same Revenue has filed a letter from AO i.e. the DCIT center circle 3(4), Mumbai vide letter No. DCIT CC-3(4)/Revised form No. 36/2016-17 dated 13-12-2016 wherein, it is mentioned as under: -

“In the case mentioned above, as it is stated in the grounds of appeal, incriminating material was found for A.Y. 2011-12 for which additions have been made while assessing total income of A.Y. 2011-112 u/s 143(3) of the I.T. Act, 1961.” 5. According to the learned Counsel for the assessee once Revenue admitted that incriminating material was found for A.Y. 2011-12 but not for A.Y. 2006-07, no assessment u/s 153A of the Act can be framed. The learned DR also conceded the position.

5 ITA No.3814/Mum/2014 CO. 189/Mum/2015 reassessment final for assessment years covered u/s. 153A of the Act stands abated. Only the pending assessments get revived u/s 153A of the Act. Hon'ble High Court further held that once assessment has attained finality, then the AO while passing independent assessment order u/s 153A/143(3) of the Act could not disturb the assessment order which has attained finality unless the material gathered in the course of search u/s 132/153A of the Act established that the finality attained in the assessment were contrary to the facts unearthed during the course of search. The relevant portion of the judgment reads as under: -

“27. However, the Revenue's argument was that once proceedings under section 153A of the Act are initiated, then, the original assessment / reassessment order already passed in the assessment years covered under section 153A stand abated and the Assessing Officer is obliged to pass fresh assessment / reassessment orders and determine the total income afresh for those assessment years. Thus, earlier assessment orders abate as the proceedings in which they are passed have no legal consequence was the argument. Once the notice under section 153A was issued and an assessment order passed pursuant thereto, it is that order which was erroneous and prejudicial to the interest of the Revenue. 28. In dealing with those arguments, the Division Bench outlined the ambit and scope of the powers conferred by section 153A and observed thus: 8) We find it difficult to accept the above contention raised on behalf of the revenue. The object of inserting Sections 153A, 153B and 153C by Finance Act, 2003 by discarding the existing provisions relating to search cases contained in Chapter XIV B of the Income-tax Act, as stated in the Memorandum explaining the provisions in the Finance Bill 2003 (see 260 ITR (St) 191 at 219) was that under the existing provisions relating to search cases, often disputes were raised on the question, as to whether a particular income could be treated as `undisclosed income' or whether a particular income could be said to be relatable to the material found during the course of search, etc. which led to prolonged litigation. To overcome that difficulty, the legislature by Finance Act 2003, decided to discard Chapter XIV B provisions and introduce Sections 153A, 153B and 153C in the IT Act. 9) What Section 153A contemplates is that, notwithstanding the regular provisions for assessment/reassessment contained in the IT Act, where search is conducted under Section 132 or requisition is made under Section 132A on or after 31/5/2003 in the case of any person, the Assessing Officer shall issue notice to such person requiring him to furnish return of income within the time stipulated therein, in respect of six assessment years immediately preceding the assessment year relevant to the previous year in which the search is conducted or requisition is made and thereafter assess or reassess the total income for those assessment years. The second proviso to Section 153A provides for

6 ITA No.3814/Mum/2014 CO. 189/Mum/2015 abatement of assessment/reassessment proceedings which are pending on the date of search/requisition. Section 153A (2) provides that when the assessment made under Section 153(A)(1) is annulled, the assessment or reassessment that stood abated shall stand revived. 10) Thus on a plain reading of Section 153A of the Income-tax Act, it becomes clear that on initiation of the proceedings under Section 153A, it is only the reassessment proceedings that are pending on the date of conducting search under Section 132 or making requisition under Section 132A of the Act stand abated and not the assessments/reassessments already finalised for those assessment years covered under Section 153A of the Act. By a circular No. 8 of 2003 dated 18-9-2003 (See 263 ITR (St) 61 at 107) the CBDT has clarified that on initiation of proceedings under Section 153A, the proceedings pending in appeal, revision or rectification proceedings against finalised assessment/reassessment shall not abate. It is only because, the finalised assessments/reassessments do not abate, the appeal revision or rectification pending against finalised assessment/reassessments would not abate. Therefore, the argument of the revenue, that on initiation of proceedings under Section 153A, the assessments/reassessments finalised for the assessment years covered under Section 153A of the Income-tax Act stand abated cannot be accepted. Similarly, on annulment of assessment made under Section 153A (1) what stands revived is the pending assessment / reassessment proceedings which stood abated as per section 153A (1). 11) In the present case, as contended by Shri Mani, learned counsel for the assessee, the assessment for assessment year 1998-99 was finalised on the 29- 12- 2000 and search was conducted thereafter on 3-12- 2003. Therefore, in the facts of the present case, initiation of proceedings under Section 153A would not affect the assessment finalised on 29-12-2000. 12) Once it is held that the assessment finalised on 29.12.2000 has attained finality, then the deduction allowed under section 80 HHC of the Income-tax Act as well as the loss computed under the assessment dated 29-12-2000 would attain finality. In such a case, the A.O. while passing the independent assessment order under Section 153A read with Section 143 (3) of the I.T. Act could not have disturbed the assessment / reassessment order which has attained finality, unless the materials gathered in the course of the proceedings under Section 153A of the Income-tax Act establish that the reliefs granted under the finalised assessment/ reassessment were contrary to the facts unearthed during the course of 153A proceedings. 13) In the present case, there is nothing on record to suggest that any material was unearthed during the search or during the 153A proceedings which would show that the relief under Section 80 HHC was erroneous. In such a case, the A.O. while passing order under Section 153A read with Section 143(3) could not have disturbed the assessment order finalised on 29.12.2000 relating to

7 ITA No.3814/Mum/2014 CO. 189/Mum/2015 Section 80 HHC deduction and consequently the C.I.T. could not have invoked jurisdiction under Section 263 of the Act.” 29. We are not in agreement with Mr. Pinto that these observations are made in passing or that they are not binding on us because the essential controversy before the Bench was somewhat different. He urges that was only in relation to the legality and validity of the order of the Commissioner under section 263 of the IT Act. Had that been the case, the Division Bench was not required to trace out the history of section 153A of the IT Act and the power that is conferred thereunder. When the Revenue argued before the Division Bench that the power under section 153A can be invoked and exercised even in cases where the second proviso to sub-section (1) is not applicable that the Division Bench was required to express a specific opinion. The provision deals with those cases where assessment or reassessment, if any, relating to the assessment years falling within the period of six assessment years referred to in sub-section (1) of section 153A were pending. If they were pending on the date of the initiation of the search under section 132 or making of requisition under section 132A, as the case may be, they abate. It is only pending proceedings that would abate and not where there are orders made of assessment or reassessment and which are in force on the date of initiation of the search or making of the requisition. As that specific argument was canvassed and dealt with by the Division Bench and that is how it was called upon to interpret section 153A of the IT Act, then, each of the above conclusions rendered by the Division Bench would bind us. 30. Even otherwise, we agree with the Division Bench when it observes as above with regard to the ambit and scope of the powers conferred under section 153A of the Act. Since we are not required to trace out the history and we can do nothing better than to reproduce the observations and conclusions as above that we are not repeating the same. Even if the exercise of power under section 153A is permissible still the provision cannot be read in the manner suggested by Mr. Pinto. Not only the finalised assessment cannot be touched by resorting to those provisions, but even while exercising the power can be exercised where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after 31st March, 2003. There is a mandate to issue notices under section 153(1)(a) and assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made. Thus, the crucial words “search” and “requisition” appear in the substantive provision and the provisos. That would throw light on the issue of applicability of the provision. It being enacted to a search or requisition that its construction would have to be accordingly. That is the conclusion reached by the Division Bench in Murli Agro (supra) with which we respectfully agree. These are the conclusions which can be reached and upon reading of the legal provisions in question. 31. We, therefore, hold that the Special Bench's understanding of the legal provision is not perverse nor does it suffer from any error of law apparent on the face of the record. The Special Bench in that regard held as under:

8 ITA No.3814/Mum/2014 CO. 189/Mum/2015 “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 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 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

9 ITA No.3814/Mum/2014 CO. 189/Mum/2015 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 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. 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 proviso. It also means that only one assessment will be made under the aforesaid provisions as the two proceedings i.e. assessment

10 ITA No.3814/Mum/2014 CO. 189/Mum/2015 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: - 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.” 54. 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 additional ground. He also wanted the additional ground to be retained in case of any future contingency.” 32. We would be failing in our duty if we do not note the reliance placed by Mr. Pinto on the judgments rendered by the High Court of Delhi at New Delhi and the High Court of Karnataka. Mr. Pinto would submit that the above observations and conclusions of the Special Bench and reproduced by us are specifically disapproved in Commissioner of Income Tax vs. Anil Kumar Bhatia by the Delhi High Court. We do not find this argument to be accurate. In Anil Kumar Bhatia as well the

11 ITA No.3814/Mum/2014 CO. 189/Mum/2015 assessment involved the years 2000-01, 2002-03 and 2005-06. One of the questions and which was termed as substantial question of law was the correctness of the Tribunal's order holding that the Assessing Officer wrongly invoked section 153A of the IT Act. The facts as noted were that in the case of an individual assessee and who was carrying on business in the name and style of M/s. A.K. Traders, there was a search of his residence and business premises on 13th December, 2005 under section 132 of the Act. Pursuant to the search, the Assessing Officer issued notice under section 153A of the IT Act and called upon the assessee to file the return of income for the six years as envisaged in that section. Notices under section 142(1) and 143(2) alongwith a detailed questionnaire were issued in response to which the assessee submitted an explanation. After consideration thereof, the Assessing Officer made additions to the income returned in respect of the assessment years under consideration which included an amount of Rs.1,50,000/- given by the assessee as a loan to Smt. Mohini Sharma on 10th December, 2003. This information was made available but the loan was not reflected in the return of income filed by the assessee for the assessment year 2003-04. The Assessing Officer, therefore, concluded that this loan was given out of unaccounted income of the assessee. Accordingly, the same was added in the income of the assessee for the assessment year 2003-04 and an order was made to that effect. Against this addition, the appeal was preferred before the Commissioner of Income Tax contending, inter alia, that the seized paper on the basis of which the addition was made did not contain the signature of the assessee; that no loan was given to Mohini Sharma. There was no admission of the statement of Mohini Sharma to that effect and there was only a proposal. The Commissioner of Income Tax confirmed this addition in the Assessing Officer's order. In respect of assessment years 2004-05 and 2005-06 there were appeals before the Commissioner of Income Tax (Appeals) questioning the additions made in the assessment orders for those years. While disposing of these appeals, the Commissioner of Income Tax directed the Assessing Officer to assess the notional interest on the loan given to Mohini Sharma which addition he confirmed in his appellate order. These two orders of the Commissioner were carried in appeal to the Tribunal and thereafter the Delhi High Court noted the Tribunal's conclusions. It noted the arguments before the Tribunal and thereupon the Tribunal having deleted these additions and the notional interest, the matter was taken in appeal to the High Court of Delhi under section 260A of the IT Act by the Revenue. 33. The arguments, therefore, have been noted and from paragraphs 16, section 153A was analysed. 34. Mr. Pinto heavily relied on paragraphs 18, 19 and 20 of the judgment of the Hon'ble High Court of Delhi. He also relied on paragraph 21 to contend that the Special Bench decision has not been approved by the High Court of Delhi. 35. The Delhi High Court's judgment must be seen in the context of the essential controversy before it. Pertinently, that controversy arose because of a search being conducted at the residence and business premises of the assessee. Foundation of the action under section 153A being the search that the High Court of Delhi was required to consider the ambit and scope of the powers. Further, pertinently the

12 ITA No.3814/Mum/2014 CO. 189/Mum/2015 Delhi High Court did not ignore any of the provisions. Those are correctly understood by the Delhi High Court. We do not see how and where the Delhi High Court disapproves the view taken by the Tribunal that its observations can be read torn from the context. Once these observations and noted by us from the paragraphs cited by Mr. Pinto are read as a whole and in entirety, it is not possible to agree with Mr. Pinto that the High Court of Delhi reached a conclusion different than the view taken by our Division Bench. 36. Similar is the case with the Division Bench judgment of the High Court of Karnataka at Bangalore. There as well a real estate firm was the assessee. A return of income was filed and when an order under section 143(3) of the Act came to be passed on 31st December, 2010, for assessment year 2008-09 that a search took place in the premises of the assessee on 12th April, 2011. In the course of search, incriminating material leading to undisclosed income was seized. Therefore, the proceedings under section 153A of the Act calling upon the assessee to file return of income under section 153A(1)(a) came to be initiated by a notice dated 13th January, 2012. Return of income was filed pursuant to receipt of such notice and for six years as required by the provision. When this return was under consideration on 14th March, 2013, the Commissioner of Income Tax initiated proceedings under section 263 of the Act on the ground that the order dated 31st December, 2010 in relation to the return of income for assessment year 2008-09 and holding that the same is erroneous and prejudicial to the interest of the Revenue came to be passed. The assessee filed his objection but the Commissioner maintained his action under section 263. That is how the aggrieved assessee carried the matter in appeal to the Tribunal and before the Tribunal it was contended that once section 263 of the Act has been invoked during the pendency of proceedings under section 153A of the Act, then, that was impermissible. That was impermissible for the assessments including for the assessment year 2008-09 stand reopened. Once they are reopened, then, there is no order of assessment in force and in regard to which any action under section 263 of the IT Act can be initiated. It is in dealing with this argument and which was negatived by the Tribunal that all the observations of the High Court of Karnataka have been made. In paragraphs 5 and 6, the arguments have been noted and thereafter the provision has been reproduced. In paragraph 9, extensive reference has been made to the judgment in Anil Kumar Bhatia of the High Court of Delhi (supra) and then the following observations in paragraphs 10 and 11 are made: “10. Section 153A of the Acts start with a non obstante clause. The fetters imposed upon the Assessing Officer by the strict procedure to assume jurisdiction to reopen the assessment under Sections 147 and 148, have been removed by the non obstante clause with which sub section (1) of Section 153A opens. The time-limit within which the notice under Section 148 can be issued, as provided in Section 149 has also been made inapplicable by the non obstante clause. Section 151 which requires sanction to be obtained by the Assessing Officer by issue of notice to reopen the assessment under Section 148 has also been excluded in a case covered by Section 153A. The time-limit prescribed for completion of an assessment or reassessment by Section 153A

13 ITA No.3814/Mum/2014 CO. 189/Mum/2015 has also been done away with in a case covered by Section 153A. With all the stops having been pulled out, the Assessing Officer under Section 153A has been entrusted with the duty of bringing to tax the total income of an assessee whose case is covered by Section 153A, by even making reassessments without any fetters, if need be. Therefore, it is clear even if an assessment order is passed under Section 143(1) or 143(3) of the Act, the Assessing Officer is empowered to reopen those proceedings and reassess the total income taking note of the undisclosed income, if any, unearthed during the search. After such reopening of the assessment, the Assessing Officer is empowered to assess or reassess the total income of the aforesaid years. The condition precedent for application of Section 153A is there should be a search under Section 132. Initiation of proceedings under Section 153A is not dependent on any undisclosed income being unearthed during such search. The proviso to the aforesaid section makes it clear the assessing officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years. If any assessment proceedings are pending within the period of six assessment years referred to in the aforesaid sub-section on the date of initiation of the search under Section 132, the said proceeding shall abate. If such proceedings are already concluded by the assessing officer by initiation of proceedings under Section 153A, the legal effect is the assessment gets reopened. The block assessment roped in only the undisclosed income and the regular assessment proceedings were preserved, resulting in multiple assessments. Under Section 153A, however, the Assessing Officer has been given the power to assess or reassess the “total income” of the six assessment years in question in separate assessment orders. The Assessing Officer is empowered to reopen those proceedings and reassess the total income, taking note of the undisclosed income, if any, unearthed during the search. He has been entrusted with the duty of bringing to tax the total income of an assessee whose case is covered by Section 153A, by even making reassessments without any fetters. This means that there can be only one assessment order in respect of each of the six assessment years, in which both the disclosed and the undisclosed income would be brought to tax. When once the proceedings are initiated under Section 153A of the Act, the legal effect is even in case where the assessment order is passed it stands reopened. In the eye of law there is no order of assessment. Re-opened means to deal with or begin with again. It means the Assessing Officer shall assess or reassess the total income of six assessment years. Once the assessment is reopened, the assessing authority can take note of the income disclosed in the earlier return, any undisclosed income found during search or and also any other income which is not disclosed in the earlier return or which is not unearthed during the search, in order to find out what is the “total income” of each year and then pass the assessment order. Therefore, the Commissioner by virtue of the power conferred under Section 263 of the Act gets no jurisdiction to initiate proceedings under the said provision because the condition precedent for initiating proceedings under Section 263 is any order passed under the Act by the Assessing Officer is erroneous insofar as it is prejudicial to the interest of

14 ITA No.3814/Mum/2014 CO. 189/Mum/2015 the revenue. Once the order passed by the Assessing Officer gets reopened, there is no order which can be said to be erroneous insofar as it is prejudicial to the interest of the revenue which confers jurisdiction on the Commissioner to exercise the power of the jurisdiction.” 11. The Tribunal has proceeded on the assumption by virtue of the judgment of the special bench of the Mumbai, the scope of enquiry under Section 153A is to be confined only to the undisclosed income unearthed during search and if there is any other income which is not the subject matter of search, the same cannot be taken into consideration. Therefore, the revisional authority can exercise the power under Section 263. In the entire scheme of 153A of the Act, there is no prohibition for the assessing authority to take note of such income. On the contrary, it is expressly provided under Section 153A of the Act the Assessing Officer shall assess or reassess the “total income” of six assessment years which means the said total income includes income which was returned in the earlier return, the income which was unearthed during search and income which is not the subject matter of aforesaid two income. If the commissioner has come across any income that the assessing authority has not taken note of while passing the earlier order, the said material can be furnished to the assessing authority and the assessing authority shall take note of the said income also in determining the total income of the assessee when the earlier proceedings are reopened and that income also shall become the subject matter of said proceedings. In that view of the matter the reasoning given by the Tribunal is not justified. The Commissioner did not have jurisdiction to initiate any proceedings under Section 263 of the Act.” 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 requires reconsideration or does not lay down a correct principle of law. We cannot, therefore, accede to the submissions of Mr. Pinto and revisit any of the conclusions rendered by the Division Bench of this Court.” 7. In view of the facts in entirety and the legal principles enunciated by Hon'ble Bombay High Court in the case of Continental Warehousing Corporation (Nhava Sheva) Ltd., supra, and Mumbai Special Bench decision in the case of All Cargo Global Logistics, supra, we are of the view that there is no incriminating material found during

15 ITA No.3814/Mum/2014 CO. 189/Mum/2015 the course of search in the present case for this assessment year, as admitted by the AO in his letter dated 30.11.2016 and despite number of opportunities revenue could not produce any incriminating material before the Bench and the assessment is already completed for this assessment year originally, the assessment framed u/s. 153A of the Act is in valid and hence, quashed. The appeal of Revenue is dismissed.

Sd/- Sd/- (ASHWANI TANEJA) (MAHAVIR SINGH) ACCOUNTANT MEMEBR JUDICIAL MEMBER Mumbai, Dated: 01-12-2016 Sudip Sarkar /Sr.PS Copy of the Order forwarded to: 1. The Appellant 2. The Respondent. 3. The CIT (A), Mumbai. 4. CIT 5. DR, ITAT, Mumbai 6. Guard file.//True Copy// BY ORDER,

Assistant Registrar ITAT, MUMBAI