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All these appeals are filed by different assessees of same group and since the issues in all the appeals are identical, they are clubbed and heard together and disposed of by this common order for the sake of convenience.
At the time of hearing, Authorized Representative of the assessee, at the outset, submitted that in all these cases no incriminating material was found during the course of search, based on which, the impugned addition was made and since the assessments in appeal are non-abated, additions cannot be made to the income in an assessment made under section 153A/153C without there being any material found during the course of search. He further invited our attention to the decision of Coordinate Bench of this Tribunal in one of the assessee’s case i.e. Narpath Mehta Vs. ACIT in dated 30/09/2016 for the Assessment Years 2005-06 & 2008-09, wherein a similar view was taken. He further submits that the ground raised therein was an identical ground which was raised in all these appeals now before us. He further submits that an additional ground was raised before the Tribunal contending that no addition can be made in respect of non-abated year in the absence of any incriminating material and the Tribunal after considering various decisions, set aside the additions. The Authorized Representative of the assessee placed reliance on the decision of the Coordinate Bench of this Tribunal in the case of DCIT Vs. Shri Rasesh B. Kanakia in ITA No.3192 to 3196/MUM/2014 and submitted that this decision was followed by the Coordinate Bench in assessee’s case (Narpath Mehta) for the Assessment Years 2005-06 & 2008-09. He also places reliance on the recent decision of the Jurisdictional High Court in the case of CIT vs. Gurinder Singh Bawa (386 ITR 483).
Departmental Representative vehemently submitted that in this case, the addition was made based on the seized material as was pointed out by the Assessing Officer and the ld. CIT(A) in their orders. He vehemently submitted that the order passed by the Coordinate Bench in Shri Rasesh B. Kanakia, which was followed in Narpath Mehta’s case is distinguishable on facts and has no application to the present assessees’s cases. Departmental Representative further submitted that the assessee himself has admitted disturbances in the books of accounts and admitted the additions in the course of search. He further submitted that the additions were also made based on the seized material by the Assessing Officer. Departmental Representative placed reliance on the decision of the Hon'ble Supreme Court in the case of CIT vs. Calcutta Knitwears, Ludhina 362 ITR 673 (SC) and submitted that satisfaction recorded by the Assessing Officer is based on seized materials and the additions were made based on the seized material.
We have heard the rival submissions and perused the orders of the authorities below and the case-laws relied on. The short point for consideration in all these appeals before going into the merits of the disallowance is whether there is any incriminating material found in the course of search and whether the assessments have been abated or not. On a specific query by the Bench to the Ld. Departmental Representative to show the kind of seized material found in the course of search, based on which the impugned addition in the appeal was made and to show whether these assessments have been abated and there is no pending proceedings, Departmental Representative could not bring any incriminating material on record to suggest that the additions/disallowances were made in the impugned assessments were based on incriminating material. The Revenue also did not dispute before us that all these assessments were non-abated assessments. The decision relied on by the Ld. Departmental Representative in the case of Calcutta Knitwears (supra) has no application to the facts of these cases. The question before the Hon'ble Supreme Court was whether the Assessing Officer has to record satisfaction that undisclosed income is involved before transferring the files to the concerned Assessing Officer and the time limit regarding such satisfaction was the issue, but in the cases on hand, the issue was whether any incriminating material was found and whether any disallowance was made based on which incriminating material and whether the assessments have abated by virtue of such incriminating materials or not is to be decided. The Revenue could not prove with evidences that the disallowances were made based on incriminating material seized in the course of search and the assessments have abated by virtue of such seized materials.
We find that an identical issue has been dealt with in assessee’s own case i.e. Narpat Mehta for the Assessment Years 2005-06 & 2008-09 and set aside the additions/ disallowances made in those two years. Recently, the Bombay High Court in the case of CIT Vs. Gurinder Singh Bawa (supra) considered the question as to whether the addition can be made in non- abated assessments without there being any seized incriminating material and by applying its decision in the case of CIT Vs. Continental Warehousing Corporation reported in 374 ITR 645 (Bom.) held that once an assessment was not pending but had attained finality for a particular year, it could not be subject to proceedings under section 153A of the Act, if no incriminating materials were found in the course of the search. While dealing with the issue, the Jurisdictional High Court also considered the Special Bench decision of the Tribunal in the case of All Cargo Global Logistics Ltd. Vs. DCIT [2012] 18 ITR (Trib.) 106 (Mum), which was affirmed by the Jurisdictional High Court in CIT vs. All Cargo Global Logistics [374 ITR 645]. The Hon'ble Bombay High Court in Gurinder Singh Bawas (supra) held as under:-
3) For the Assessment Year 2005 -06, the respondent - assessee had filed his return of income declaring an income of Rs. 9.61 lakhs. The return of income as filed by the respondent - assessee was processed under Sec. 143(1) of the Act. Admittedly, no notice under Sec. 143(2) of the Act has been issued. Thereafter on 5 January 2007, a search was conducted on the respondent -assessee under Sec. 132 of the Act. Consequent thereto, proceedings under Sec. 153A of the Act were initiated. During the assessment proceedings for A.Y. 2005 -06, the Assessing Officer added an amount of Rs. 93.72 lakhs (declared as gifts) as being covered by Sec. 68 of the Act and an amount of Rs. 43.67 lakhs (accumulated profits of the lender) out of Rs. 1.5 crores received as loan from one K.P. Developers Pvt. Ltd. as deemed dividend under Sec. 2(22)(e) of the Act. Undisputedly, respondent -assessee was a shareholder in M/s K.P. Developers (P) Ltd. The aforesaid additions are reflected in an assessment order dated 31 December 2008 passed under Sec. 143(3) r/w 153A of the Act determining the respondent -assessee's total income at Rs.1.47 crores.
In appeal, the Commissioner of Income-tax (Appeals) held that the addition of an amount of Rs. 43.67 lakhs as deemed dividend has to be deleted. This on the ground that there were no accumulated profits available with M/s. K. P. Developers (P.) Ltd. to distribute amongst it's shareholders. However, so far as the addition in respect of the unexplained gifts aggregating to Rs. 93.70 lakhs is concerned, the Commissioner of Income- tax (Appeals) did not disturb the finding of the Assessing Officer. On further appeal before the Tribunal, the assessee inter alia challenged the validity of the assessment made under section 153A of the Act. This onaccount of the fact that no assessment in respect of the six assessment years were pending so as to have abated. The impugned order accepted the aforesaid submission of the respondent- assessee by inter alia placing reliance upon the decision of the Special Bench of the Tribunal in All Cargo Global Logistics Ltd. rendered on July 6, 2012 - [2012] 18 ITR (Trib) 106 (Mum) [SB]. The Tribunal in the impugned order further held that no incriminating material was found during the course of the search. Thus the entire proceedings under section 153A of the Act were without jurisdiction and therefore the addition made had to be deleted on the aforesaid ground. The impugned order also thereafter considered the issues on the merits and on it also held in favour of the respondent-assessee. Mr. Kotangale, the learned counsel for the Revenue very fairly states that the decision of the Special Bench of the Tribunal in All Cargo Global Logistics Ltd. v. Deputy CIT [2012] 18 ITR (Trib) 106 (Mum) [SB] was a subject matter of challenge before this court as a part of the group of appeals disposed of as CIT v. Continental Warehousing Corporation (Nhava Sheva) Ltd. [2015] 374 ITR 645 (Bom) upholding the view of the Special Bench of the Tribunal in All Cargo Global Logistics Ltd. Consequently, once an assessment has attained finality for a particular year, i.e., it is not pending then the same cannot be subject to tax in proceedings under section 153A of the Act. This of course would not apply if incriminating materials are gathered in the course of search or during proceedings under section 153A of the Act which are contrary to and/or not disclosed during the regular assessment proceedings.
In view of the above, on issue of jurisdiction itself the issue stands concluded against the Revenue by the decision of this court in Continental Warehousing Corporation (Nhava Sheva) Ltd. (supra). In the appeal before us, the Revenue has made no grievance with regard to the impugned order of the Tribunal holding that in law the proceedings under section 153A of the Act are without jurisdiction. This in view of the fact that no assessment was pending, so as to abate nor any incriminating evidence was found. The grievance of the Revenue is only with regard to finding in the impugned order on the merits of the individual claim regarding gifts and deemed dividend. However once it is not disputed by the Revenue that the decision of this court in Continental Warehousing Corporation (Nhava Sheva) Ltd. (supra) would apply to the present facts and also that there are no assessments pending on the time of the initiation of proceedings under section 153A of the Act. The occasion to consider the issues raised on the merits in the proposed questions becomes academic.”
Respectfully following the above said decision of the Jurisdictional High Court and the decision in assessee’s own case by the Coordinate Bench of this Tribunal, we hold that no disallowance will survive as such disallowance was not made based on any incriminating material found in the course of search and all these assessments are admittedly, non-abated assessments. Thus, we delete the disallowance made in respect of interest paid and business expenses against interest income received from partnership in all these assessment years.
In the result, all the appeals filed by the assessee are allowed.
Order pronounced in the open court on 21st October, 2016