OLEANDER FARMS P.LTD,NAVI MUMBAI vs. DCIT CC 47, MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL “C”, BENCH MUMBAI BEFORE: SHRI R.C.SHARMA, AM & SHRI PAWAN SINGH, JM ITA No.4966/Mum/2014 (Assessment Year : 2005-2006) M/s. Oleander Farms Pvt. Vs. DCIT, CC-47, Mumbai Ltd., D-73/1, TTC Industrial Area, MIDC Road, Turbhe, Navi Mumbai – 400705 PAN/GIR No. : AAACO6556G (Appellant) ( Respondent) .. Assessee by : Shri J.P.Bairagra Revenue by : Shri Sanjay Bahadur Date of Hearing : 08/08/2016 Date of Pronouncement : 24/10/2016 आदेश / O R D E R PER R.C.SHARMA (A.M): This is an appeal filed by the assessee against the order of CIT(A) for the Assessment Year 2005-2006, in the matter of order passed under Section 153C read with section 143(3) of the IT Act. 2. In this appeal, the assessee is aggrieved for making addition u/s. 153C without finding any incriminating material during course of search, when assessment was already completed u/s.143(3) and nothing was pending as on the date of search. Assessee is also aggrieved for satisfaction having been not recorded in the file of searched person before transfer of file to the AO of the assessee. 3. Rival contentions have been heard and record perused.

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which was totally baseless, undisclosed and without support of any factual evidence. As a matter of fact, I state that: During the course of proceedings, the authorised officer recorded disclosure of additional income of Rs. 38.80 crores on account of unproved purchases. In this regard I state that the parties from whom the alleged purchases is said to have been made are totally known parties. The purchases in Bermaco Industries Ltd. were made on account of purchases of construction materials and electrical items in respect of the development of a property at New Mumbai. The purchases in Bermaco Energy Systems Ltd. were made on account of Subcontract charges in respect of various project services rendered by the company for its clients. Therefore, the disclosure on account of purchases from these parties is not supported by any factual evidence.” 5. While framing assessment u/s 153C read with section 143(3), AO made addition u/s 68 in respect of unexplained cash credit, agricultural income, addition on account of writeback of term loan and dividend income. By the impugned order CIT(A) deleted the part of the addition made on account of agricultural income and dividend income offered u/s 10(34). Assessee is in further appeal before us against the order of CIT(A). However, no appeal was filed before department against the relief given by CIT(A).

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section 143(3) of the Act accepting the income as returned by Assessee Company. The assessee had challenged that the assessment had been completed u/s.143(3) and therefore, the assessment had become final and was not pending and therefore, there was no question of abatement. In such a case, no addition could be made u/s.153C of the Act in case where assessment was not pending unless some incriminating material was found during the course of search.

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“ Whether in a case where pursuant to issue of notice under section 153A assessments are abated, Assessing Officer retains original jurisdiction as well as jurisdiction conferred on him under section 153A for which assessments shall be made for each of six assessment years separately - Held, yes - Whether no addition can be made in respect of unabated assessments which have become final if no incriminating material is found during search - Held, yes [Paras 28, 29 & 30] [ln favour of assessee]” 9. Further reliance was placed on the following decisions:-

 ITAT Mumbai Bench in the case of Gurinder Singh Bawa v / s. DCIT - [2012] 28 Taxmann.com 328 (Mumbai - Trib.).  Mumbai Tribunal in the case of Parag M. Sanghvi vs. ACIT in ITA No. 8027/Mum/2010 dated 30-09-2015.  Mumbai Tribunal in the case of Zeenat P. Sanghvi vs. DCIT in ITA No. 8026/Mum/2010 dated 19-12-2014.  Decision of Hon. Delhi Tribunal in the case of Jakson Enterprises vs. ACIT dated 27-05-2015 being ITA No. 383/DeI/2013.  lTAT Mumbai Bench in the case of Anil P. Khirnani vs. DCIT - ITA No. 2855 to 2860/Mum/2008 dated 23-02-2010.  ITAT .Jodhpur Bench in the case of Vishal Dembla vs. DCIT - 157 TTJ 189.  High Court of Bombay on the case of CIT v. Murli Agro Products Ltd. [2014] 49 Taxmann.com 172.  ITAT Mumbai Bench in case of ACIT v. Jayendra P. Jhaveri [2014] 65 SOT 118  Jodhpur ITAT in the case of Ayushi Builders & Developers vs. DCIT [2014] 166 TTJ 25.  ITAT Pune Bench incase of ACIT vs. SRJ Peety Steels P. Ltd. [2011] 137 TTJ 627.  Mumbai Tribunal in the case of Nikki Agarwal vs. ACIT dated 22-01- 2014 being ITA No. 879/M/2011.  Jaipur Tribunal in the case of Jadau Jewellers & Manufacturers (P) Ltd. vs. ACIT in ITA No. 686/JP/2014-[2016j 175 TTJ 344.  Delhi Tribunal in the case of M/ s Suncity Projects Pvt. Ltd Vs DCIT dated 21 March 2016 [ITA no 14/Del/2012] [2016-TIOL-643-ITAT.

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tribunal vide its order dated 31/05/2016 in ITA No.2198,2199 & 2202/13 deleted the addition by recording a finding that no incriminating material was found in course of search and the time limit for issue of notice under section 143(2) for the relevant assessment years had already been expired, therefore, no additions were warranted in the absence of incriminating materials.

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both the assessment years i.e. A.Y.2004-05 & 2005-06, had become final and was not pending, therefore, there was no question of abatement. We had carefully gone through the order of AO as well as CIT(A). We had also gone through the statement recorded u/s.132(4) and did not find any mention of incriminating material with regard to bogus share capital or unsecured loans having been received by assessee in these years. Whatever share capital and unsecured loans were received by the assessee, was duly recorded in the regular books of account and shown ITA No.2198,2199&2202/13 in the audited accounts filed along with the return of income for the respective years. Applying the proposition of law laid down by ITAT Special Bench in the case of All Cargo Logistics Ltd., 137 ITD 287, which was confirmed by Hon'ble Bombay High Court vide order dated 21-4- 2015, to the facts of the instant case, we can safely reach to the conclusion that in respect of the years for which assessment was not pending on the date of search and when no incriminating material was found during the course of search, the addition so made in the A.Y.2004- 05 & 2005-06 were not justified. Hon'ble Bombay High Court in the case of Continental Warehousing Corporation (Nhava Sheva) Ltd. [2015] 58 taxmann.com 78 held as under: Whether in a case where pursuant to issue of notice under section 153A assessments are abated, Assessing Officer retains original jurisdiction as well as jurisdiction conferred on him under section 153A for which assessments shall be made for each of six assessment years separately - Held, yes - Whether no addition can be made in respect of unabated assessments which have become final if no incriminating material is found during search. Held, yes. 21. In the instant case, the CIT(A) has dismissed the legal ground raised by the assessee by relying on the decision of Hon'ble Delhi High Court in the case of Anil Kumar Bhatia. The ITAT Delhi Bench in the case of Jakson Enterprises vs. ACIT dated 27-05-2015 being ITA No. 383/Del/2013, has dealt with the decision of Delhi HC in the case of CIT vs. Anil Kumar Bhatia which was relied by CIT(A) and it was held that in the absence of any incriminating material no addition u/s.153A can be made. ITA No.2198,2199&2202/13 22. The jurisdictional High Court in the case of Continental Warehousing Corporation (Nhava Sheva) 374 ITR 645, vide order

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dated 21-4-2015 have considered the decision of Special Bench in the case of All Cargo and also the decision of Delhi High Court in the case of Anil Bhatia (supra), on which CIT(A) has relied for dismissing legal ground raised by assessee. After elaborate discussion the Hon'ble High Court held, Head Note, reads as under :- A bare perusal of section 153A would indicate as to how a non- obstante clause has been inserted and with a defined intent. Where search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132Aafter 31-5- 2003, that the Assessing Officer is in a position to and mandated to issue notice within the meaning of sub-section (1) of section 153A. That is because, Chapter XIII within which the powers of search and seizure and powers to requisition books of account are spelt out enable the revenue to take care of cases where it effects a search and seizure. That search and seizure is effected and after the same is effected, books of account, other documents, money, bullion, jewellery or other valuable article or thing is found as a result thereof that notwithstanding anything and within the meaning of the above provisions having been concluded, it is open for the revenue to make an assessment. It is also open to the revenue to make a reassessment in cases where it exercises the powers to requisition books of account etc. This is because it is of the view that the books of account are required to be summoned or taken into custody. It, therefore, issues a summons in that regard. It may also requisition the books of account or other documents for that might be useful and or any assets representing withholding or part income or property which has not been or would not have been disclosed for the purpose of the Indian Income-tax Act, 1922 or theIncome-tax Act of 1961 by any person from whose possession or control they have been taken into custody. This is when the authorities have reason to believe that such powers need to be exercised. Therefore, the fetters and which are to be found in other provisions are removed and a notice of assessment in such cases is then issued. That is mandated by sub- section (1) of section 153A. It is not only the issuance of the notice but assessment or reassessment of total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition has to be made. ■ There is much substance in the contentions of the assessee that ITA No.2198,2199&2202/13 the provisions such as section 153A enabling assessment in case of search or requisition making specific reference to the provisions which enable carrying out of search or exercise of power of requisition that the assessment in furtherance thereof is contemplated.

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■ Assessee's reliance upon the Division Bench judgment of this Court rendered in CIT v. Murli Agro Products Ltd. [2014] 49 taxmann.com 172 in that context is, therefore, well placed. ■ The Division Bench outlined the ambit and scope of the powers conferred by section 153A and observed that on a plain reading of section 153A, it becomes clear that on initiation of the proceedings under section 153A, it is only the assessment/reassessment proceedings that are pending on the date of conducting search under section 132 or making requisition under section 132A stand abated and not the assessments/reassessments already finalised for those assessment years covered under section 153A. 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 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). ■ Once it is held that the assessment has attained finality, then the Assessing Officer while passing the independent assessment order under section 153A read with section 143 (3) 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 establish that the reliefs granted under the finalised assessment/reassessment were contrary to the facts unearthed during the course of 153A proceedings. If there is nothing on record to suggest that any material was unearthed during the search or during the 153A proceedings, the Assessing Officer while passing order under section 153A read with section 143(3) cannot disturb the assessment order ■ The stand of revenue that these observations are made in passing or that they are not binding on instant Court is not agreeable because the essential controversy before the Bench was somewhat different. Revenue urged that was only in relation to the legality and validity of the order of the Commissioner under ITA No.2198,2199&2202/13 section 263. Had that been the case, the

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Division Bench was not required to trace out the history of section 153A and the power that is conferred thereunder. When the revenue argued before the Division Bench that the power undersection 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) ofsection 153A were pending. If they were pending on the date of the initiation of the search undersection 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 , then, each of the above conclusions rendered by the Division Bench would bind the instant Court. ■ Even otherwise, Court is in agreement with the Division Bench when it observes as above with regard to the ambit and scope of the powers conferred under section 153A . Even if the exercise of power under section 153A is permissible still the provision cannot be read in the manner suggested by the revenue. 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 undersection 132A after 31-3- 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). These are the conclusions which can be reached and upon reading of the legal provisions in question. ■ Therefore, 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. ■ Further, revenue would submit that the above observations and conclusions of the Special Bench are specifically disapproved in CIT v. Anil Kumar Bhatia [2012] 24 taxmann.com 98/211 Taxman 453

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(Delhi). However, this argument is not found to be accurate. Upon reading of the observations of the Delhi High ITA No.2198,2199&2202/13 Court as a whole and in entirety, it is not possible to agree with revenue that the High Court of Delhi reached a conclusion different than the view taken by the Division Bench. 23. ITAT Delhi Bench in the case of Jakson Enterprises, ITA No.383/Del/2013, order dated 27-5-2015, held as under :- 9. Having gone through the orders of the authorities below, we find that the Learned CIT(Appeals) has rejected the contentions of the assessee on the issue of validity of assessment framed under sec. 153A read with sec. 143(3) of the Income-tax Act, 1961 in absence of incriminating material found during the course of search and in the absence of the pendency of the assessment as on the date of search on the basis that for framing assessment under sec. 153A, no such requirement is there and the only requirement is that search has been conducted under sec. 132 of the Act. 10. Having gone through the decisions cited by the learned AR including the decision of Special Bench of the ITAT in the case of AL Cargo Global Logestic Ltd. vs. CIT (supra), we find that the ratio laid down therein, supports the contentions of the assessee on the issue. It reads as under: "58. 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 year 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 8 assessment, and (ii) undisclosed income or property discovered in the course of search." 11. The issue raised before the Special Bench was as to whether scope of assessment u/s 153A encompasses additions not based on any incriminating material found during the course of search? 12. In the case of Kusum Gupta (supra) also the return was processed u/s 143(1) of the Act and time limit for issuance of notice u/s 143(2) had expired on the date of search and it was held that no assessment was pending in that case and thus there was no question of abatement of assessment. Therefore, the addition in the assessment u/s 153A would be made only on the basis of ITA No.2198,2199&2202/13 incriminating material found during the search. The Delhi Bench of the Tribunal in its recent decision on the

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issue in the case of Shri Kabul Chawla (supra) and others vide order dated 23.5.2014 has expressed the similar view. It has also discussed the decision of Hon‟ble Jurisdictional Delhi High Court in the case of CIT vs. Anil Kumar Bhatia(2012) 211 Taxmann 453 (Del.), while deciding the issue. The relevant para No. 8 & 9 in this regard is being reproduced as under :- "8. We are unable to accept the contention advanced on behalf of the Revenue for the reason that if both the pending and completed assessment were to be taken on same pedestal, then there was no need to enshrine second proviso to sec. 153A( 1) providing that the pending assessments within the period of six assessment years shall abate. The Hon'ble Delhi High Court in the case of Anil Kumar Bhatia (supra) dealt with a situation in which some incriminating material was found in respect of a non-pending assessment. It was in that background that the Hon'ble High Court held that sec. 153A applies if incriminating material is found even if assessments are completed. The question as to whether any addition can be made in respect of completed assessments when no incriminating material was found, was apparently left open. However, we find that there are sufficient indirect hints given by the Hon 'ble Delhi High Court in the case of Anil Kumar Bhatia (supra) about not making of any addition in respect of an assessment year for which the assessment is already completed unless some incriminating material is found during the course of search. This can be seen from the following observations of the Hon'ble High Court :- "20. A question may arise as to how this is sought to be achieved where an assessment order had already been passed in respect of all or any of those six assessment years, either under Section 143(1)(a) or Section 143(3) of the Act. If such an order is already in existence, having obviously been passed prior to the initiation of the search/requisition, 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." 9. The above extracted observations of the Hon'ble High Court, which are though obiter dicta, make the point clear that where an assessment order has already been passed for a year(s) within the relevant six assessment years, then also the A.O is duty bound to reopen those proceedings and reassess the total income but by 'taking note of the undisclosed income if any, unearthed during the search'. The expression 'unearthed during the search' is quite significant to denote that in respect of completed or non-pending assessments, the Assessing Officer is albeit duty bound toITA No.2198,2199&2202/13 assess or reassess the total income but there is a cap on the scope of additions in such assessment, being the items of income 'unearthed during the search'. In other words, the determination of 'total income' in respect of the assessment years for which the assessments are

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already completed on the date of search, shall not be influenced by the items of income other than those based on the material unearthed during the course of search. There is not and cannot be any quarrel over the proposition that the Assessing Officer has no option but to determine the total income of the assessee in respect of the relevant six assessment years. However, the scope of such determination of total income is different in respect of the years for which the assessments are pending vis-a-vis the years for which assessments are non-pending. In respect to the assessment years for which the original assessments have already been completed on the date of search, the total income shall be determined by restricting additions only to those which flow from incriminating material found during the course of search. If no incriminating material is found in respect of such completed assessment, then the total income in the proceedings u/s 153A shall be computed by considering the originally determined income. If some incriminating material is found in respect of 11 such assessment years for which the assessment is not pending, then the 'total income' would be determined by considering the originally determined income plus income emanating from the incriminating material found during the course of search. In the other scenario of the assessments pending on the date of search which would abate in terms of second proviso to sec. 153A( 1), the total income shall be computed afresh uninfluenced by the fact whether or not there is any incriminating material. In fact, this is the position which follows when we read the judgment of the Hon'ble Delhi High Court in Anil Kumar Bhatia (supra) in juxtaposition to the special bench order in the case of All Cargo Global Logistics Ltd. (supra). The other judgment relied by the Ld. DR in the case of Madugulu Venu (supra) also talks about the need for making fresh assessment in respect of the assessment years for which the assessments are not pending on the date of search but does not set out the scope of such assessment, which is the issue before us." 13. We, thus, find that the decision of the Hon‟ble Jurisdictional Delhi High Court in the case of Anil Kr. Bhatia (supra) supports the case of the assessee that in absence of incriminating material found during the course of search an addition u/s 153A of the Act cannot be made in the assessment framed thereunder. The decisions relied upon by the ld. CIT, DR in the cases ofCanara Housing Development Company vs. DCIT (supra) of Hon‟ble Karnataka High Court andFilatex India P. Ltd. vs. CIT (supra) of Hon‟ble Delhi High Court having distinguishable facts are not applicable in the present case. In the case of Filatex India Pvt. 12 Ltd. (supra), the questionITA No.2198,2199&2202/13 raised on the applicability of provisions u/s 153A was that "whether the Tribunal erred on facts and in law in not holding that re- computation of book profit, de-hors any material found during the course of search in the order passed u/s 153A of the

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Act was without jurisdiction, being outside the scope of proceedings under that section?" The other question was, "whether on the facts and circumstances of the case, the Tribunal erred in law in upholding the action of the AO in denying set off, of book loss unabsorbed depreciation relatable to earlier assessment year in terms of clause (III) of Explanation 1 to section 115JB of the Act?" The relevant facts of that case noted in para no. 2 of the decision are that the AO in the proceedings u/s 153A of the Act, had made several additions, relying upon the incriminating material found in the course of search, which was conducted on 18.1.2006 and subsequent dates. In this paragraph of the decision it has been perused from the impugned order of the Tribunal that incriminating material including statement of Sanjay Agarwal, GM (Marketing) have resulted in additions, which have been upheld. The Hon‟ble High Court has been pleased to note in this paragraph as "it is not the case of the appellant - assessee that initiation of proceedings u/s 153A was bad or unwarranted in law as no incriminating material was found during the search. The contention raised by the appellant - assessee is that the addition, which is the subject matter of questions no. (II) and (III), was/is not justified in the assessment order u/s 153, as no incriminating material was found concerning the addition u/s 115JB of the Act." The Hon‟ble High Court has rejected this contention of the assessee with this finding that u/s 153A of the Act, the additions need not to be restricted or limited to the incriminating material, which was found during the course of search. Thus, it is clear from the facts of this case before the Hon‟ble High Court that several additions relying upon the incriminating material found in the course of search were made by the AO in the assessment proceedings u/s 153A of the Act and addition u/s 115JB was made by the AO in absence of incriminating material concerning this addition. This addition was questioned by the assessee on the basis that there was no incriminating material found concerning the addition made in the assessment u/s 153A of the Act, which has been rejected by the Hon‟ble High Court with the above finding. It was held by the Hon‟ble High Court that there cannot be multiple assessments, once sec. 153A of the Act is applicable. Section 153A(1)postulates one assessment; putting the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which search was conducted or requisition was made. 14. In para no. 3 of the judgment the Hon‟ble Delhi High Court while discussing the cited decisions in the cases CIT vs. Chetan Das (2012), 254 CTR (Del) 292 and CIT vs. Anil Kr. Bhatia(2012), 2010-11 Taxman 453 (Del) cited by the ld. AR of the assessee appellant, has noted certain observations made and findings given by the Hon‟ble Court therein. Thereafter in para no. 4 of the judgment, the Hon‟ble High Court has held as under: "The first ITA No.2198,2199&2202/13

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question, we notice was not raised by the appellant before the AO, CIT(A) and before the Tribunal. The appellant claims that the contention being legal can be raised at any stage. We have examined sec. 153A of the Act and find that the submission/contention has no merit". 15. When we peruse the facts of the case in the case of Filatax India Ltd. and the question raised therein it comes out that in that case admittedly during the course of search incriminating material including statements were found and resulted in additions and the addition made u/s 115JB of the Act was not based upon any incriminating material. Thus, the question raised before the Hon‟ble High Court was as to whether the Tribunal has erred in law in not upholding that recomputation of book profit, de-hors any material found during the course of search in the order based u/s 153A of the Act was without jurisdiction, being outside the scope of proceedings under that section. The Hon‟ble High Court after discussing the issue in detail has been pleased to decide the question against the assessee and has upheld the addition made u/s 115JB of the Act. Thus, having distinguishable facts this cited the decision in the case of Filatax India Ltd. (supra) is not helpful to the revenue. 16. So far as, the decision of Hon‟ble Karnataka High Court in the case of Canara Housing Development Company (supra) relied upon by the ld. CIT DR is concerned, the issue raised before the Hon‟ble High Court was regarding validity of revisional order passed u/s 263 of the Act by the ld. CIT partly upheld by the Tribunal and during that course the Hon‟ble High Court has also been pleased to discuss the decision in the cases of Anil Kumar Bhatia (supra) and the decision of Special Bench of the Tribunal in the case of All Cargo Global Logistic Ltd. (supra). It has been observed by the Hon‟ble High Court that the condition precedent for application of sec. 153A is that there should be a search u/s 132 and initiation of proceedings u/s 153A is not dependent on any undisclosed income being unearth during the such search. The Hon‟ble Rajasthan High Court in the case of Jai Steel (supra) has been pleased to hold that if any books of accounts or other documents relevant to the assessment had not been produced in the course of original assessment and found in the course of search, such books of accounts or other documents have to be taken into consideration while assessing or re-assessing the total income under the provisions of sec. 153A of the Act. Even any undisclosed income or undisclosed property has been found after the conclusions of the search, same would also be taken into consideration. The requirement of assessment or re-assessment under the said section has to be read in the context of sections 132 or 132A of the Act, in much as, in case nothing incriminating is found on account of such search or requisition, then the question of re-assessment of the

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concluded assessment does not arise, which would require more reiteration and it is only in the context of the abated ITA No.2198,2199&2202/13 assessment under second proviso which is required to be assessed. 17. In the case of SSP Aviation Ltd. vs. DCIT (supra) where the validity of assessment framed u/s 153C was challenged it was held that if the AO is satisfied that any money, bullion, Jewellery or other valuable article or thing or books of account or documents seized in the course of the search belongs to a person other than the person who was searched, then such assets or books of accounts or documents shall be handed over by him to the AO having jurisdiction over such other person. Once, that is done, the AO having jurisdiction over such other person shall proceed against him for making an assessment or reassessment of his income in accordance with the provisions of sec. 153A. The petitioner therein was not searched u/s 132 of the Act, however, some documents belonging to it were found during the search carried out in the premises of Puri Group of Companies. 18. We, thus, find that the ratio laid down by the Hon‟ble Delhi High Court and Hon‟ble Rajasthan High Court in the above cited and discussed decisions supports the case of the assessee that in absence of incriminating material found during the course of search no addition can be made u/s 153A of the Act where the original assessment was already framed on the date of search. The Hon‟ble Karnataka High Court in the case of Canara Housing Development Company (supra) has, however, been pleased to express different view, however, as per the established proposition of law, we are bound to follow the decision of Hon‟ble Jurisdictional Delhi High Court and since, the Hon‟ble Karnataka High Court and the Hon‟ble Rajasthan High Court have expressed different views on the issue, the view favourable to the assessee is to be followed. We, thus, reiterate that in absence of incriminating material found during the course of search no addition can be made in a case where original assessment was already framed on the date when search took place. 19. In absence of rebuttal of this material fact by the Revenue in the present case before us that no incriminating material was found during the course of search relating to the assessee for the assessment year under consideration to justify the additions made in the year by the Assessing Officer and assessment based on the original return of income filed under sec. 139 of the Act was not pending as on the date of search, we following the above cited decisions by the learned AR, discussed above, hold that the assessment framed under sec. 153A read with sec. 143(3) of theIncome-tax Act, 1961 for the assessment year under consideration is not valid and the same is accordingly

18 M/s. Oleander Farms Pvt. Ltd.,

held as null and void. The related ground nos. 2 to 6 on the issue is thus allowed. 20. In view of the above findings, whereby the assessment itself has been held null and void, the other issues raised in other ground nos. 7 and 8 questioning the validity of the disallowance ofITA No.2198,2199&2202/13 deduction u/s 80IB on scrap sales (ground no.7) and disallowance made u/s 14A (ground no.8) have become infructuous and academic only. These grounds thus do not require any adjudication. The same are being disposed off as such. 24. Similar view has been taken by ITAT Jodhpur in the case of Vishal Dembla, 40 taxmann.com 134, wherein it was held that where the assessee has already submitted his return prior to search which has attained finality and no incriminating document was found during the search, gifts already disclosed by the assessee in the return of income which has attained finality, could not be disturbed u/s.153A. 25. The Hon'ble jurisdictional High Court in the case of Murli Agro Products Ltd., 49 taxmann.com 172, held as under :- Held : 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 Act, as stated in the Memorandum explaining the provisions in the Finance Bill 2003 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 Act. What section 153A contemplates is that, notwithstanding the regular provisions for assessment/reassessment contained in the Act, where search is conducted undersection 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 abatement of assessment/reassessment proceedings which are pending on the date of search/requisition. Section 153A(2) provides that when the

19 M/s. Oleander Farms Pvt. Ltd.,

assessment made undersection 153(A)(1) is annulled, the assessment or reassessment that stood abated shall stand revived. ITA No.2198,2199&2202/13 Thus, on a plain reading of section 153A, it becomes clear that on initiation of proceedings under section 153A, it is only the assessment/reassessment proceedings that are pending on the date of conducting search under section 132 or making requisition under section 132A stand abated and not the assessment/reassessments already finalised for those assessment years covered under section 153A. By a circular No. 8, dated 18-9-2003 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 assessments/reassessments would not abate. Therefore, the argument of the revenue, that on initiation of proceedings undersection 153A, the assessments/reassessments finalised for the assessments years covered under section 153A 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). [Para 10] In the instant case, the Assessing Officer while passing the independent assessment order under section 153A read with section 143(3) 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 establish that the reliefs granted under the finalised assessment/reassessment were contrary to the facts unearthed during the course of 153A proceedings. In the present case there was nothing on record to suggest that any material was unearthed during the search or during the 153A proceedings which would show that relief under section 80HHC was erroneous. In such a case, the Assessing Officer while passing the assessment order under section 153A read with section 143(3) could not have disturbed original assessment order relating to section 80HHC deduction and consequently the Commissioner could not have invoked jurisdiction under section 263of the Act. 26. The ITAT Mumbai bench in the case of Jayendra P. Jhaveri, 46 taxmann.com 457 observed as under :- Head Note : So far as the question as to the processing of return under section 143(1) vis-à-vis assessment made under section 143(3) is concerned, it may further be observed that after processing of ITA

20 M/s. Oleander Farms Pvt. Ltd.,

No.2198,2199&2202/13 return under section 143(1) the same can be assessed under section 143(3) by issue of notice under section 143(2) subject to its issuance within the limitation period of 12 months from the end of the month in which return is furnished as per the proviso to clause (ii) of section 143(2) [as was existing at the time of relevant assessment year]. Once the limitation period as prescribed vide proviso to clause (ii) of sub-section (2) of section 143 is expired, it is not open to the Assessing Officer to assess the income under section 143(3) and the return filed by the assessee under section 139 is deemed to be accepted, which however, can be re-opened undersection 147 subject to the fulfilment of ingredients of section 147 and within the time period as prescribed under section 149. So under such circumstances if the return is processed undersection 143(1) and not under section 143(3) after the prescribed period of limitation, the same cannot be assessed under section 143(3) though it may be interpreted as mere intimation assessment or otherwise, but the same shall be deemed to be accepted by the Assessing Officer and it will not have any different colour other than the return which is processed under section 143(3). Admittedly, in the case in hand, the return was processed under section 143(1) but the same has attained finality due to the expiry of limitation period of twelve months from the end of the month in which the return was filed. Hence, the assessment is deemed to be completed and not pending on the date of search on 14-8-2008. Admittedly, no incriminating material was found from the premises of the assessee during the search under section 132. Once assessment under section 143(3) had been annulled by higher authorities on the ground of legality of notice under section 143(2), re-opening under section 147 on that very ground would mean nothing else but abuse of process of law. Hence, the contention of the revenue that as the return was processed under section 143(1), it was a mere intimation and the Assessing Officer had reason to believe that income had escaped assessment and it was open to the Assessing Officer to re-assess the income under section 153A, even without any incriminating material found during the search action, is not tenable. The next argument of the revenue has been that since in the case in hand, no books of account were found during the search action that itself is the incriminating material against the assessee, has no force of law. Though the revenue may not be satisfied with the explanation of the assessee that the books of account were lost in flood, still the assessment or addition cannot be made on this ground. Such an

21 M/s. Oleander Farms Pvt. Ltd.,

inference of concealment of income cannot be made just on mere assumptions, presumptions or suspicion. The next limb of argument of the revenue, while relying upon the authority of Supreme Court has been that the Court should not place reliance on the decisions without discussing as to how the factual situation fits to the factual situation of the decision on which ITA No.2198,2199&2202/13 reliance is placed. His contention is that one additional or different fact may make a world of difference between conclusions in two cases. There is no doubt about the above said proposition of law laid down by the Supreme Court. The Court must observe the facts and circumstances of the case under which a certain proposition of law is laid down by the Supreme Court and then to compare the same with the facts and circumstances of the case under adjudication before it. However, this proposition of law, put by the revenue, is of no help to the revenue but to the assessee only. In view of above, it is accordingly held that the reassessments made by Assessing Officer undersection 153A, without any incriminating material being found during the search action are not in accordance with law and consequential result is that the return/original assessments which have acquired finality are to be reiterated. 27. Similar view has been taken by ITAT Jodhpur Bench in the case of IOC Builders and Developers, 50 taxmann.com 396, Pune Tribunal in the case of SRJ Peety Steels (P) Ltd., 20 taxmann.com 101, Mumbai Tribunal in the case of Nikki Agarwal, ITA No.879/Mum/2011, order dated 22-1- 2014, Mumbai Tribunal in the case of Shri Parag M. Sanghvi, ITA No.8027/Mum/2010, order dated 30-9-2015, Jaipur Tribunal in the case of M/s Jadau Jewellers & Manufacturers Pvt. Ltd., ITA No.686/JP/2014, order dated 14-12-2015, ITAT Delhi Bench in the case of M/s Rakam Money Matters Pvt. Ltd., ITA No.2821/Del/2011, order dated 10-16-2014. 28. Our view is also supported by following decisions :- i) ITAT Mumbai Bench in the case of Shri Gurinder Singh Bawa vs. DCIT - 28 taxmann.com 328 ii) ITAT Mumbai Bench in the case of Anil P. Khimani vs. DCIT - No. 2855 to 2860/Mum/2008 dated 23-02-2010 ii) ITAT Jodhpur Bench in the case of Vishal Dembla vs. DCIT - 157 TTJ 189 iv) High Court of Bombay on the case of CIT v. Murli Agro Products Ltd. [2014] 49 Taxmann.com 172 ITA No.2198,2199&2202/13

22 M/s. Oleander Farms Pvt. Ltd.,

v) ITAT Mumbai Bench in case of ACIT v. Jayendra P. Jhaveri [2014] 65 SOT 118 vi) Jodhpur ITAT in the case of Ayushi Builders & Developers vs. DCIT [2014] 166 TTJ 25 vii) ITAT Pune Bench in case of ACIT vs. SRJ Peety Steels P. Ltd. [2011] 137 TTJ 627 viii) Mumbai Tribunal in the case of Nikki Agarwal vs. ACIT dated 22-01-2014 being ITA No. 879jMj2011 [20 14-TIOL- 75-ITAT-MUM] ix) Mumbai Tribunal in the case of Parag M. Sanghvi vs. ACIT in ITA No. 8027/Mum/2010 dated 30-09-2015 x) Mumbai Tribunal in the case of Zeenat P. Sanghvi vs. DCIT in ITA No. 8026/Mum/2010 dated 19-12-2014 xi) Jaipur Tribunal in the case of Jadau Jewellers & Manufacturers (P) Ltd. vs. ACIT in ITA No. 686/JP/2014- [2016] 175 TTJ 344 29. The ITAT Delhi Bench in the case of M/s Suncity Projects Pvt. Ltd., 2016-TIOL-643-ITAT-Del, held as under:- 13. We have carefully considered the arguments of both the sides and have perused the material placed before us. In the case of Kabul Chawla (supra), Hon'ble Jurisdictional High Court has considered all earlier decisions of Hon'ble Delhi High Court and has also considered the decisions of other High Courts and Tribunals and summarized the legal position in paragraph 37 and at the conclusion of the case in paragraph 38, which are reproduced below:- "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 AYs immediately preceding the previous year relevant to the AY in which the search takes place. ITA No.2198,2199&2202/13 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".

23 M/s. Oleander Farms Pvt. Ltd.,

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 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 underSection 153A 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. 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." 14. In clause (iv) above, their Lordships held "Obviously an assessment has to be made under this Section only on the basis of seized material". In clause (v), the same is reiterated by holding "InITA No.2198,2199&2202/13 absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made". In clause (vii), it is stated "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".

24 M/s. Oleander Farms Pvt. Ltd.,

Hon'ble Delhi High Court in the case of RRJ Securities Ltd., 2015- TIOL- 2539-HC-DEL-IT, held as under :- "In respect of such assessments which have abated, the AO would have the jurisdiction to proceed and make an assessment. However, in respect of concluded assessments, the AO would assume jurisidciton to reassess provided that the assets/documents received by the AO represent or indicate any undisclosed income or possibility of any income that may be remained undisclosed in the relevant assessment years. This Court in Commissioner of Income Tax (Central)-III v. Kabul Chawla : ITA 707/2014, decided on 28 th August, 2015 = 2015-TIOL-2006-HC-DEL-IT has held that completed assessments could only be interfered with by the AO on the basis of any incriminating material unearthed during the course of the search or requisition of the documents. In absence of any incriminating material, the AO does not have any jurisdiction to interfere in concluded assessments." Respectfully following the proposition of law discussed in the above judicial pronouncements, we do not find any merit for the addition made by the AO with respect to share capital and unsecured loans. The disallowance made by the AO on account of personal use of vehicles was on estimate basis, no incriminating material was found to indicate that directors of the company have used the vehicles for their personal purpose. Accordingly, disallowance made by estimating personal elements in respect of expenditure on vehicle is not justified u/s.153A when no incriminating materials in respect to personal use of vehicle were found during the course of search. Since we have already decided the legal issues in favour of the assessee, we are not going into merit of the addition so made. ITA No.2198,2199&2202/13 30. In the result, appeal for the assessment year 2004-05 & 2005-06 are allowed in terms indicated hereinabove. 15. After going through the order of the AO and CIT(A), we found that the assessee is in appeal against the additions confirmed by the CIT(A) and the order framed u/s 153C, AO made addition on account of unexplained cash credit, agricultural income, writing back of term loan and dividend income assessee

25 M/s. Oleander Farms Pvt. Ltd.,

challenged legality of addition made u/s. 153C before the CIT(A). CIT(A) has summarised the submissions of the assessee including judgements relied on this issue in para 5.2 and 5.3 of the order. In para 7.4 the Ld CIT(A) held that “Further it may also be mentioned that the books of account and documents seized are incriminating in nature. The authorised officer on the basis of findings during the course of search showed that the share capital introduced in the books of account are not genuine and this led the AO to raise a question regarding the genuineness of the same in terms of section 68 of the Act. In light of the above legal and factual position and other materials in possession of the AO, it is hereby held that initiation of proceedings u/ s 153C of the Act and assuming the jurisdiction by the AO in terms of section 153C of the Act in respect of the assessee are valid.” During appellate proceedings, CIT(A) has called for a remand report wherein AO has stated regarding satisfaction note. 16. From a perusal of the satisfaction note it can be observed that the AO mentions the following supposedly "incriminating documents" based on which it was proposed to assess the case of the assessee as per provisions of section 153C. o Annexure A/1: In pages 24 to 28 containing trial balance of the assessee company for AY 2008-09 o Annexure A/2 :- In pages 29 to 35 containing P/L & B/s of assessee company for AY 2006-07

26 M/s. Oleander Farms Pvt. Ltd.,

o Annexure A/1 :- In pages 36 containing copy of share application of Bhaskar Management Ltd for 14000 equity shares of assessee company o Annexure A/1 :- In pages 40 & 41 gives details of allotment of share of assessee company o At the residential premises of Shri Vini Ahuja Cash Memo book of assessee company (A-1 to A-9).

27 M/s. Oleander Farms Pvt. Ltd.,

Management Ltd. Further it has been mentioned that in search and seizure conducted on Om Sai group on 20 August 2009 wherein Om Sai Group has surrendered amounts invested by the same shareholder companies as that of the assessee as their own money. However none of these alleged materials were provided to the assessee even after requests made by the assessee vide letter dated 19.11.2012. Also when these alleged facts were known to the AO, there is no mention of this in the satisfaction note and the same only appears in showcause notice dated 2.11.2011 which is at least 18 months after issue of notice under section 153C. Further till date these materials have not been provided to the assessee so that he could verify the same.

28 M/s. Oleander Farms Pvt. Ltd.,

assessment completed pursuant to the notice issued u/s.153C of the Act is bad in law.

29 M/s. Oleander Farms Pvt. Ltd.,

30 M/s. Oleander Farms Pvt. Ltd.,

“The appellant also submitted that the AO instead of recording satisfaction in the case of 153A person recorded the satisfaction only in the case of 153C person and therefore then entire proceedings is vitiated. The contention of the appellant is not acceptable. There is nothing on record to say that the satisfaction is recorded only in the file of 153C person and not in the file of 153A person. On verification of assessment records, it is seen that the satisfaction note in this case is a separate loose sheet and it is kept in a separate folder including the satisfaction note of other cases in the group. I am of the opinion that it does not matter whether the satisfaction note is kept in a separate folder or in the assessment records of the searched person. It is learnt from. the AO that since joint warrant of authorization was issued in the case of 153A persons, there was difficulty in choosing a particular case wherein the satisfaction note should be placed and therefore, the satisfaction notes were kept in a separate folder. I do not find any infirmity in the action of the AO. In view of the above, the contention of the appellant is found to be untenable.”

31 M/s. Oleander Farms Pvt. Ltd.,

153C of the Act for the purposes of assessment of income of other than the searched person.

Section 153C of the Income-tax Act, 196] - Assessment - In case of search or requisition - Other person (Recording of satisfaction) - Assessment year 2009-10 - Assessing Officer framed assessment under section 153C only on basis that search operation was conducted in case of group of TYG and others and during search documents belonging to assessee were seize - Tribunal quashed said assessment on ground that there was no satisfaction recorded by Assessing Officer who had jurisdiction over both searched person and assessee - Whether recording of satisfaction is a pre-condition for invoking jurisdiction under section 153C and, therefore, Tribunal had correctly followed principle in quashing assessment framed under section 153C - Held, yes [Paras 6 to 9) [In favour of assessee]. 29. As per learned AR, this view has also been accepted by the CBDT which is clarified in Circular No 24/2015. As per para 4 of CBDT Circular No 24/2015 dated 31.12.2015, relying on judgment given by the Supreme Court in the case of M/s Calcutta Knitwears (362 ITR 673) the satisfaction note could be prepared at any of the following stages :

(a) at the time of or along with the initiation of proceedings against the searched person under section 158BC of the Act; or (b) in the course of the assessment proceedings under section 158BC of the Act; or

32 M/s. Oleander Farms Pvt. Ltd.,

(c) immediately after the assessment proceedings are completed under section 158BC of the Act of the searched person. 30. It was vehemently argued by learned AR that even if the AO of searched person and the "other person" is one and the same, then also he is required to record his satisfaction. This view has also been accepted by the CBDT and CBDT has also clarified in Circular No 24/2015 dated 31.12.2015.

Section 153C of the Income-tax Act, 1961 - Search and seizure- Assessment of income of any other person (Condition precedent) - Assessment years 2004-05 to 2007-08 - Whether recording of satisfaction by Assessing Officer of person searched that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized belong to person other than person searched is a sine qua non for initiating action under section 153C - Held, yes - Whether where Assessing Officer of person searched and such other person is same, then also, first while making assessment in case of person searched, Assessing Officer has to record such satisfaction, then, copy of this satisfaction note is to be placed in file of such other person and relevant document should also be transferred from file of person searched to file of such other person and thereafter, in capacity of Assessing Officer of such other person, he has to issue notice under section 153A, read with section 153C - Held, yes - Whether where exercise of recording satisfaction during assessment proceedings of person searched has not been carried out, recording of satisfaction in case of such other person would not satisfy condition of assuming jurisdiction under section 153C - Held, yes [Paras 9 to 11].

33 M/s. Oleander Farms Pvt. Ltd.,

Whether merely because Assessing Officer of person searched and Assessing Officer of assessee were same, this would not mean that Assessing Officer of person searched should not have recorded satisfaction before notice was issued under section l58BD read with section l58BC - Held, yes [Para 4][In favour of assessee]” 34. In view of the above judicial pronouncements it was argued that the satisfaction note has not been recorded before the issue of notice u/s 153C and the same is not in accordance with the guidelines laid down by the Supreme Court in the case of M/s Calcutta Knitwears (Civil Appeal No 3958 of 2014). It was accordingly submitted that in view of the Circular No 24/2015 dated 31.12.2015 the order passed u/s. 153C rws 143(3) of the Act is bad in law and the same should be quashed on this ground.

34 M/s. Oleander Farms Pvt. Ltd.,

has not given to the assessee the material relied upon by him nor he has given any opportunity to cross examine the parties relied upon by him. Therefore, it is submitted that the addition made by the Assessing Officer is in gross violation of principles of natural justice. It is submitted that the Assessing Officer has relied upon the material that has not been given to the assessee and therefore, the addition made to the income of the assessee is required to be deleted in view of the following judgments:

(i) Kishinchand Chellaram v CIT [125 lTR 713 (SC) (ii) CIT v. Ashwani Gupta [322 lTR 396 (Del) (iii) ClT v. SMC Share Brokers Ltd. [288 lTR 345 (Del) (iv) Tin Box Co. v. ClT [249 lTR 216 (SC) (v) Gargi Mall Mohata & Co. v. A. V. Vishwanath Sastri [96 lTR 97 (All) (vi) ClT v. Dharam Pal Prem Chand Ltd. [295 ITR 105 (Del)] (vii) Rakesh Kapadia v. DClT [48 lTD 283, 289 (Ahd) 36. It was vehemently argued by learned A.R. that on making enquiries with ROC, it was found that these companies have been regularly filing their returns, reports, etc. which clearly indicate that these companies are not defunct. Thus, the report of ADIT(lnv) relied upon by the Assessing Officer does not represent correct status and as such, not reliable. Therefore, the addition made on this basis is required to be deleted.

35 M/s. Oleander Farms Pvt. Ltd.,

i) MOA/AOA of the investing companies ii) PAN Details iii) Balance sheet of those companies; and iv) Copy of Income-tax returns filed by the share applicant companies for Assessment Year

(i) Status of the shareholder companies as obtained from the website of Ministry of Corporate Affairs. (ii) Copy of Memorandum and Articles of Association of companies. (iii) Copy of share application form, copy of resolution of Board of Directors of shareholder parties authorizing investment in the Appellant Company. (iv) Copy of certificate of incorporation, certificate of commencement of business (v) Copy of audited financials and return of income filed by these companies for AY 2005-06.

36 M/s. Oleander Farms Pvt. Ltd.,

(vi) Copy of extract of bank statement of Appellant Company evidencing receipt of share application money from the respective parties. 39. In view of the above documentary evidence filed before the lower authorities, learned AR contended that assessee has discharged its onus to prove that the companies are in existence. Further in case the Assessing Officer could not locate the Company they could have approached the auditors of the Company which have certified in their audit report the activities carried out and state of affairs of these companies.

37 M/s. Oleander Farms Pvt. Ltd.,

dated 27.12.2011, the AO required the assessee to explain and justify the agricultural income declared in the return of income. The explanation furnished by the assessee was not found satisfactory by the AO. In the assessment order, the AO has also referred to the enquiry conducted by him deputing his Inspector. On the basis of the result of his verification exercise, the AO concluded that the assessee appeared to have carried out agricultural activities on its farm but the scale of agricultural operations did not match with the agricultural income declared by the assessee.

On the basis of the discussion in the respective orders of the income tax authorities and other material placed on record, salient features of the controversy can be understood as follows. The appellant company is incorporated on 10.06.1992 and in the past as well as in the captioned assessment years, it had declared agricultural income from sale of nursery plants. The appellant company is possessing agricultural lands situated in Karjat area which is approximately 100 acres. It has also been pointed out, on the basis of the Balance- sheet available in the Paper Book, that the assessee company has necessary agricultural equipments. In the written statement filed, it has been pointed out that assessee is own six umper and Trippers, one Refrigerated Van, Cutting Machineries & Equipment, Sowing Machineries, two JCB, BEML Escavator etc., Assessee is also owning three Water Reservoirs for rain harvesting purpose, having adequate storage capacity, nine Borewells with submersible water pump on its agricultural land. It has also been pointed out that assessee company has employed 70-80 employees, which includes 5 administrative staff, 18-20 Security & Supervisors and 55-57 daily wages labour. In the farm land, there are two Bungalows and 25

38 M/s. Oleander Farms Pvt. Ltd.,

servant" quarters and storage areas of around 10000 sq.ft. It has also been pointed out that 7/12 extracts of the agricultural land were furnished to the Assessing Officer, which evidenced agricultural activity. One of the important features of the verification exercise carried out by Assessing Officer was emphasized by the Ld. Representative before us. In this reference was made to the report of the Inspector, which has also been reproduced in the assessment order, which reveals that the farm of assessee was spread over around 100 acres. The Inspector found 300 to 400 saplings of different type of flowers. A Green House was also found which contained potted plants ranging from 7,000 to 8,000. The report also reveals existence of horticulture plantation and a half stage grown paddy field. Apart from the aforesaid, the report also reveals that the Inspector found around 20 laborers working on the farm, who confirmed that they were regular employees receiving wages from the assessee company. The aforesaid material definitely points out carrying on of agricultural activities, a factum which has been otherwise also accepted by the CIT(A). 13. In the context of the quantum of agricultural income, the declaration made by the assessee is based on its Books of Account, which are duly audited. It is also abundantly clear from the orders of the lower authorities that whatever details that were called for from the assessee, were duly furnished. The assessee has furnished the requisite sale bills i.e. cash memos, which were held to be unreliable by the Assessing Officer. The primary reasons weighing with the Assessing Officer were that all the sales were in cash and that the sale invoices did not contain names and addresses of the parties. In our considered opinion, the aforesaid point raised by the Assessing Officer is not fatal so as to reject the quantum of agricultural sales entered by the assessee in the Books of Accounts. In fact, at this stage, we may refer to the assertions of the assessee to the effect that in the course of search action on the Group, there is no material or evidence found which would prove that the scale of agricultural activity recorded by the assessee in the Books of Account was inappropriate or false. It would also be appropriate to refer to the statement recorded of Shri Viren Ahuja uls 132(4) of the Act in the course of search, wherein, he was put questions also about the activities of assessee company. The requisite copy of such statement is placed in the Paper Book at pages 3 to 4. By way of question no. 6 to 16, explanation has been sought on various aspects relating to the assessee company but there is no suggestion which shows that the Department was not satisfied with the amount

39 M/s. Oleander Farms Pvt. Ltd.,

of agricultural income recorded in the financial statements of the assessee company. In fact, questions were specifically put relating to the agricultural activities being carried by the assessed-company Including the assets, turnover and the products. By way of question no. 13, details pertaining to the sales for six year i.e., partywise sale bills, purchase bills for insecticides, pesticides, seeds and other inputs, etc were called for. The details regarding inward and outward register and Plant & Machinery were also called for. We find no dissatisfaction on the part of the Revenue on the depositions made by Shri Viren Ahuja in responseto such questions. Therefore, in our view, assessee has justifiably asserted that there was no material found in the course of search which would suggest that the scale of operation of agricultural activity recorded by assessee in the Books of Account was wrong or contrary to the factual position. 14. Furtherrnore, the assessee has also pointed out that in the scrutiny assessment made uls 143(3) of the Act for assessment years 2004-05 to 2006-07, the incomes declared from agricultural activity has been accepted as per the account books, though, such assessments were made prior to the search on the assessee group on 31.10.2009. Nevertheless, the search not having revealed any incriminating material to doubt the entries made in the Books of Account, we, therefore, find little justification for the CIT(A) not to have accepted the quantum of agricultural income as returned in the Books of Account. The verification carried out by the Assessing Officer in the course of assessment proceedings also does not reveal any evidence to support non acceptance of the agricultural income as per Books of Account. The action of CIT(A) in considering the income level for assessment years 2009-10 and 2010-11 and, thereafter,making a reverse computation and deducing incomes for earlier assessment 2006-07 to 2008-09 is also quite flawed. No reasons have been assigned CIT(A) for such a methodology which in any case does not operate as a good substitute to the income computed as per the Books of Account, especially where no clinching infirmity has been found in the Books of Account maintained. 15. In view of the aforesaid factual matrix, in our view the CIT(A) clearly erred. In not accepting the agricultural income as deducted by the assessee on the basis of books of Account maintained. Thus, we set aside the order of CIT(A) and direct the Assessing Officer to accept the agricultural income declared by the assessee as returned. As a consequence, assessee succeeds on this aspect of the matter.

40 M/s. Oleander Farms Pvt. Ltd.,

41 M/s. Oleander Farms Pvt. Ltd.,

Rs.1,72,55,164/- being one time settlement in respect of term loan taken from Canara Bank. The assessee company has taken term loan for acquiring the capital asset, i.e., namely floriculture and mushroom cultivation plants and other machineries. As the assessee company was not able to repay the said loan in the subsequent years and as per settlement arrived with the bank vide letter dated 28.01.2005, the assessee company has got the remission of the total amount of Rs. 1,71,64,933 /- from Canara Bank. Besides the above a sum of Rs 90,231 was written back on account of a payment due to a creditor for supply of equipments. Thus the total amount written back was Rs 1,72,55,164 which was disclosed in the Profit and Loss account under the head Extra ordinary Items as One time write back. This amount written back consists principal amount of Rs. 1,34,39,922 and interest of Rs 37,25,011.

The detailed break up is as under :-

Term loan outstanding as on 1.4.04 as per books - Rs 2,72,74,239 Add Interest payable outstanding - Rs 37,25,011 Total dues - Rs 3,09,99,250 Less Payment made as per terms of settlement - Rs 1,38,34,317 Amount written back - Rs 1,71,64,933 45. In the impugned order, AO has added back the one time settlement. By the impugned order CIT(A) confirmed the action of the AO.

42 M/s. Oleander Farms Pvt. Ltd.,

43 M/s. Oleander Farms Pvt. Ltd.,

Order pronounced in the open court on this 24/10/2016.

Sd/- Sd/- (PAWAN SINGH) (R.C.SHARMA) न्याययक सदस्य / JUDICIAL MEMBER ऱेखा सदस्य / ACCOUNTANT MEMBER भ ुंफई Mumbai; ददन ुंक Dated 24/10/2016 Karuna, Sr. PS आदेश की प्रयिलऱपि अग्रेपिि/Copy of the Order forwarded to : अऩीर थी / The Appellant 1. प्रत्मथी / The Respondent. 2. आमकय आम क्त(अऩीर) / The CIT(A), Mumbai. 3. आमकय आम क्त / CIT 4. विब गीम प्रतततनधध, आमकय अऩीरीम अधधकयण, भ ुंफई / DR, ITAT, Mumbai 5. आदेशानुसार/ BY ORDER, ग र्ड प ईर / Guard file. 6. सत्म वऩत प्रतत //True Copy// उि/सहायक िंजीकार (Asstt. Registrar) आयकर अिीऱीय अधिकरण, भ ुंफई / ITAT, Mumbai