BERMACO ENERGY SYSTEMS LTD,NAVI MUMBAI vs. DCIT CC 47, MUMBAI

आयकर अपीऱीय अधिकरण, म ुंबई न्यायपीठ ‘बी’, म ुंबई । IN THE INCOME TAX APPELLATE TRIBUNAL “B”, BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI PAWAN SINGH, JM आमकय अऩीर सं./ITA Nos.2198, 2199&2202/Mum/2013 (नििाारण वषा / Assessment Years :2004-05 to 2006-07) M/s Bermaco Energy Vs. DCIT, CC-47, Mumbai Systems Ltd., D-73/1, TTC Industrial Area, MIDC Road, Turbhe, Navi Mumbai- 400705 स्थामी रेखा सं./ जीआइआय सं./ PAN/GIR No. : AAACB 2727 N (अऩीराथी /Appellant) (प्रत्मथी / Respondent) .. ननधाारयती की ओर से /Assessee by : Shri J.P.Bairagra याजस्व की ओर से /Revenue by : Shri N.P.Singh सुनवाई की तायीख / Date of Hearing : 15/03/2016 घोषणा की तायीख/Date of Pronouncement 31/05/2016 आदेश / O R D E R PER R.C.SHARMA (A.M): These are the appeals filed by the assessee against the order of CIT(A)-Mumbai, for the assessment years 2004-05 to 2006-07, in the matter of order passed u/s.153A r.w.s.143(3) of the I.T.Act. 2. Rival contentions have been heard and record perused. The brief facts of the case are that a search & seizure action u/s.132(1) of the Act was carried out on the business premises of M/s. Flemingo / Bennaco Group of companies as well as on the residential premises of the Directors of the group on 31.10.2009. The assessee is the flagship company of the group.' The assessee is engaged in the business of Turnkey Project Management Consultants (Power Projects). The

2 ITA No.2198,2199&2202/13 assessee was also covered u/s.132(1) of the Act. Consequent to the search & seizure action, notice uls.153A of the Act was issued and the assessment uls.153A r.w.s. 143(3) of the Act was completed on 30.12.2011 after making additions / disallowances on account of depreciation, disallowance on account of loss on sale of assets, addition on account of share application money u/s.68 of the Act of and addition on account of cash credit (loans) u/s.68 of the Act etc. 3. Before the CIT(A) assessee raised issue of validity of the assessment order passed by the Assessing Officer uls.153A r.w.s. 143(3) of the Act and Ground No.2 pertains to the, issue of violation of principles of natural justice. In the written submissions filed during the appellate proceedings, it was submitted that, to assess income u/s.153A of the Act, A.O retains the original jurisdiction as well as jurisdiction conferred on him uls.153A of the Act to assess income in respect of such six years provided these assessments are abated and in respect of other cases i.e. cases where the assessments are not abated, A.O can make assessment u/s.153A of the Act on the basis of material found during the course of search but not produced in the course of assessment proceedings or in cases any undisclosed income / property is discovered during the search. It was further submitted that, in the case of the assessee, no assessment was abated for A.Y.2004-05 since the period to issue the notice u/s.143(2) of the Act had expired on 31.10.2005 whereas the search took place on 31.10.2009 and the A.O had also not issued any notice u/s.148 of the Act and therefore no assessment or reassessment proceedings

3 ITA No.2198,2199&2202/13 were pending. It was further stated that A.O could make assessment u/s.153A of the Act only on the basis of material and income found during the course of the search and since no incriminating material or income was found during the course of search in the case of the assessee and the A.O had not made addition on the basis of such material, the assessment made by the A.O is bad in law. Assessee relied upon the decisions in the case of All Cargo Global Logistics Ltd. vs. DCIT (137 ITD 267) (SB). 4. By the impugned order the CIT(A) dismissed the legal ground after having following observations :- “6.0 I have carefully examined the facts of the case, the stand taken by the A.O in the assessment order, the grounds of appeal and the written submissions filed by the appellant during the hearing proceedings. As held by the Hon'ble Delhi High Court in the case of CIT vs. Anil Kumar Bhatia (2012) (82 CCH 113) (Delhi High Court), it is mandatory on the part of the A.O to initiate proceedings uls.l53A of the Act, consequent to the search & seizure action uls.132(1) of the Act. Having initiated the proceedings, A.O is empowered to examine all the materials, including the materials found during the search & seizure proceedings and frame the assessment orders u/s.143(3) r.w.s. 153A of the Act. The relevant paras of Hon'ble Delhi High Court's order in support of this view are reproduced as under: "19. Under the provisions of Section 153A, as we have already noticed, the Assessing' Officer is bound to issue notice to the assessee to furnish returns for each assessment year falling within the six assessment years immediately preceding the assessment year relevant to the previous year in which the search or requisition was made. Another significant feature of this Section is that the Assessing Officer is empowered to assess or reassess the "total income" of the aforesaid years. This; is a significant departure from the earlier block assessment scheme in which the 'block assessment roped 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. This means that there can be only one assessment

4 ITA No.2198,2199&2202/13 order in respect of each of the six assessment years, in which both the disclosed and the undisclosed income would be brought to tax. 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. For this purpose, 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 153 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. 21. Now there can be cases where at the time when the search is initiated or requisition is made, the assessment or reassessment proceedings relating to any assessment year falling within the period of the six assessment years mentioned above, may be pending. In such a case, the second proviso to sub section (1) of Section 153A says that such proceedings "shall abate". The reason is not far to seek Under Section 153A, there is no room for multiple assessment orders in respect of any of the six assessment years under consideration. That is because the Assessing Officer has to determine not merely the undisclosed income of the assessee, but also the 'total income' of the assessee in whose case a search or requisition has been initiated. Obviously there cannot be several orders for the same assessment year determining the total income of the assessee. In order to ensure this state of affairs namely, that in respect of the six assessment years preceding the assessment year relevant to the year in which the search took place there is only one determination of the total income, it has been provided in the second proviso of sub Section (1) of Section 153A that any proceedings for assessment or reassessment of the assessee which are pending on the date of initiation of the search or

5 ITA No.2198,2199&2202/13 making requisition "shall abate". Once those proceedings abate, the decks are cleared, for the Assessing Officer to pass assessment orders for each of those six years determining the total income of the assessee which would include both the income declared in the returns, if any, furnished by the assessee as well as the undisclosed income, if any, unearthed during the search or requisition. The position thus emerging is that where assessment or reassessment proceedings are pending completion when the search is initiated or requisition is made, they will abate making way for the Assessing Officer to determine the total income of the assessee in which the undisclosed income would also be included, but in cases where the assessment or reassessment proceedings have already been completed and assessment orders have been passed determining the assessee's total income and such orders are subsisting at the time when the search or the requisition is made, there is no question of any abatement since no proceedings are pending. In this latter situation, the Assessing Officer will reopen the assessments or reassessments already made (without having the need to follow the strict provisions or complying with the strict conditions of Sections 147, 148 and 151 and determine the total income of the assessee. Such determination in the orders passed under Section 153A would be similar to the orders passed in any reassessment, where the total income determined in the original assessment order and the income that escaped assessment are clubbed together and assessed as the total income. In such a case, to reiterate, there is no question of any abatement of the earlier proceedings for the simple reason that no proceedings for assessment or reassessment were pending since they had already culminated in assessment or reassessment orders when the search was initiated or the requisition was made. 22. In the light of our discussion, we find it difficult to uphold the view of the Tribunal expressed in Para 9.6 of its order that since the returns of income filed by the assessee for all the six years under consideration before the search took place were processed under Section 143(1)(a) of the Act, the provisions of Section 153A cannot be invoked. The Assessing Officer has the power under Section 153A to make assessment for all the six years and compute the total income of the assessee, including the undisclosed income, notwithstanding that the assessee filed returns before the date of search which stood processed under Section 143(1)(a)." 6.1 In this case, no scrutiny assessment was framed and the return of income was routinely processed u/s.143(l) of the Act. Having regard to the facts and circumstances of the case and in the light of the decision of Hon'bIe Delhi High Court cited above, ground no.1 of appeal is hereby dismissed. As regards the issue of giving adequate opportunity, in terms of principles of natural justice is concerned, since the appellant is given adequate opportunity to

6 ITA No.2198,2199&2202/13 present the facts and other legal contentions during the appeal proceedings, such a ground of appeal is treated as infructuous.” 5. Merit of the additions was also confirmed by the CIT(A) after observing that assessee could not substantiate identity, creditworthiness and genuineness of share applicants and the loan creditors.. 6. Against the above order of CIT(A) assessee is in further appeals before us, wherein following grounds have been taken by assessee with respect to legality of assessment framed/additions made u/s.153A r.w.s.143(3) of the I.T.Act. Grounds raised in ITA No.2198/Mum/2013(AY : 2004-2005) :- Grounds of appeal against the order dated 04.01.2013 passed by the learned Commissioner of Income-tax(Appeals)-38, Mumbai Following grounds of appeal are without prejudice to each other: 1. The learned CIT(A) has erred in law and in facts in confirming the additions made by the Assessing Officer in the assessment order passed u/ s. 153A r.w.s. 143(3) of the Act which are illegal and bad in law. 2. The order passed by the learned CIT(A) is in violation of principles of natural justice and is passed without giving a proper opportunity of hearing to the appellant. 3. The learned CIT(A) has erred in law and in facts in passing the order which is illegal and bad in law. The order passed by the learned CIT(A) purportedly on 04.01.2013 after the conclusion of hearing on 11.12.2012, which has been served on 09.03.2013 is illegal. 4. The learned CIT(A) has erred in law and in facts in not holding that the assessment order was passed in violation of principles of natural justice and was passed without giving proper opportunity of hearing to the appellant. In ground No.5, 6 & 7 the assessee had challenged validity of additions made with respect to share capital, unsecured loans etc.

7 ITA No.2198,2199&2202/13 Grounds raised in ITA No.2199/Mum/2013(AY : 2005-2006) :- Grounds of appeal against the order dated 04.01.2013 passed by the learned Commissioner of Income-tax(Appeals)- 38, Mumbai Following grounds of appeal are without prejudice to each other: 1. The learned CIT(A) has erred in law and in facts in confirming the additions made by the Assessing Officer in the assessment order passed u/ s. 153A r.w.s. 143(3) of the Act which are illegal and bad in law. 2. The order passed by the learned CIT(A) is in violation of principles of natural justice and is passed without giving a proper opportunity of hearing to the appellant. 3. The learned CIT(A) has erred in law and in facts in passing the order which is illegal and bad in law. The order passed by the learned CIT(A) purportedly on 04.01.2013 after the conclusion of hearing on 11.12.2012, which has been served on 09.03.2013 is illegal. 4. The learned CIT(A) has erred in law and in facts in not holding that the assessment order was in violation of principles of natural justice and was passed without giving proper opportunity of hearing to the appellant. 5. The learned CIT(A) has erred in law and in facts 1. in confirming the disallowance of Rs. 1,50,958/- on account of personal usage element estimated at 10% of total amount of depreciation and other expenses incurred on car. ii. in not holding that the disallowance of Rs. 1,50,958/- on account of personal usage element estimated at 10% of total amount of depreciation and other expenses incurred on car is bad in law as the addition is not based on the material found during the course of search and that it pertained to non-abated assessment year. 6. The learned CIT(A) has erred in law and in facts i. in confirming the addition of Rs. 7,00,000/- u/ s. 68 of the Act in respect of share application money received by the appellant. ii. in not holding that the addition of Rs. 7,00,000/- u/s. 68 of the Act in respect of share application money received by the appellant is bad in law as the addition is not based on the material found during the course of search and that it pertained to non-abated assessment year.

8 ITA No.2198,2199&2202/13 7. The learned CIT(A) has erred in law and in facts in not adjudicating and allowing the set off of carried forward losses of earlier assessment years. 8. The learned CIT(A) has erred in law and in facts in not giving the credit for taxes paid by/deducted for the appellant while computing the tax liability of the appellant. 9. The learned CIT(A) has erred' in law and in facts in confirming the interest levied by the Assessing Officer u/ s. 234A, 234B and 234C of the Act. Grounds raised in ITA No.2202/Mum/2013(AY : 2006-2007) :- Grounds of appeal against the order dated 04.01.2013 passed by the learned Commissioner of Income-tax(Appeals) 38, Mumbai Following grounds of appeal are without prejudice to each other: 1. The learned CIT(A) has erred in law and in facts in confirming the additions made by the Assessing Officer in the assessment order passed u/ s. 153A r.w.s. 143(3) of the Act which are illegal and bad in law. 2. The order passed by the learned CIT(A) is in violation of principles of natural justice and is passed without giving a proper opportunity of hearing to the appellant. 3. The learned CIT(A) has erred in law and in facts in passing the order which is illegal and bad in law. The order passed by the learned CIT(A) purportedly on 04.01.2013 after the conclusion of hearing on 11.12.2012, which has been served on 09.03.2013 is illegal. 4. The learned CIT(A) has erred in law and in facts in not holding that the assessment order was in violation of principles of natural justice and was passed without giving proper opportunity of hearing to the appellant. 5. The learned CIT(A) has erred in law and in facts in not determining the, income from business at Rs.1,65,02,341/- as against Rs.1,66,95,046/ - as determined by the Assessing Officer. 6. The learned CIT(A) has erred in law and in facts

9 ITA No.2198,2199&2202/13 i. in upholding the addition of Rs.64,74,581/- on account of alleged unsupported purchases by treating it as bogus expenditure. 11. in not holding that the addition of Rs.64,74,581/- on account of alleged unsupported purchases by treating it as bogus expenditure is bad in law as the addition is not based on the material found during the course of search and that it pertained to non-abated assessment year. 12. The appellant craves leave to add to, amend, alter or delete all or any of the foregoing grounds of appeal. 7. The learned CIT(A) has erred in law and in facts 1. in confirming the disallowance of Rs.1,34,321/- on account of personal usage element estimated at 10% of total amount of depreciation and other expenses incurred on car. ii. in not holding that disallowance of Rs.1,34,321/- on account of personal usage element estimated at 10% of total amount of depreciation and other expenses incurred on car is bad in law as the addition is not based on the material found during the course of search and that it pertained to non-abated assessment year. 8. The learned CIT(A) has erred in law and in facts in not determining the income from short term capital gains at Rs.10,49,769/- as against Rs.13,63,847/- as determined by the Assessing Officer. 9. The learned CIT(A) has erred in law and in facts in not adjudicating and allowing the set off of carried forward losses of earlier assessment years. 10. The learned CIT(A) has erred in law and in facts in not giving the credit for taxes paid by/deducted for the appellant while computing the tax liability of the appellant. 11. The learned CIT(A) has erred in law and in facts in confirming the interest levied by the Assessing Officer u/ s. 234A, 234B and 234C of the Act. 7. It was argued by ld. AR that with respect of the assessment years 2004-05 & 2005-06, the AO has no jurisdiction to make addition u/s.153A r.w.s.143(3), insofar as no incriminating material was found during the

10 ITA No.2198,2199&2202/13 course of search and the assessments have been completed and the time limit for issue of notice u/s.143(2) have already been expired. In respect of assessment year 2004-05, as per ld. AR return was filed on 31-10-2004. With the return of Income the assessee had enclosed its Audited Balance Sheet and Profit & Loss Account along with Audit Reports, Computation of Total Income and other details. The return had been processed u/s.143(1) but no scrutiny assessment notice u/s. 143(2) was issued. For AY 2004-05, notice u/s. 143(2) of the Act was to be issued before expiry of 12 months from the end of the month in which the return is furnished. Accordingly, in this case AO should have issued notice by 31-10-2005, but no such notice was issued. Thereby the assessment was treated to be completed since on the date of search i.e. on 31-10-2009, limit for issuing notice u/s.143(2) was already expired much before date of search. 8. In respect of assessment year 2005-06, return was filed on 29-10- 2005 which has been processed u/s. 143(1) but no scrutiny notice u/s. 143(2) was issued on or before 31-10-2006 i.e. time limit for issuing notice was expired. Further, in this case no notice u/s. 148 was issued for reopening of the assessment. As per ld. AR the assessment had been processed u/s.143(1) and no notice u/s. 143(2) or 148 was issued. 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 legally u/s. 153A of the Act in case where assessment was not pending unless there was some incriminating material found during the course of search. Reliance was placed on the

11 ITA No.2198,2199&2202/13 Special Bench of Hon. Mumbai Tribunal in the case of All Cargo Global Logistics Ltd. 137 ITD 287, wherein it was held that provisions of Section 153A come into operation if a search or requisition is initiated after 31/05/2003 and on satisfaction of this condition, the AO is under obligation to issue notice to the person requiring him to furnish the return of income for six years immediately preceding the year of search. The Special Bench further held that in case assessment is abated, the AO retains the original jurisdiction as well as jurisdiction u/s.153A for which assessment shall be made for each assessment year separately. Thus in case where assessment has abated the AO can make additions in the assessment, even if no incriminating material has been found. But in other cases the Special bench held that the assessment u/s 153A can be made on the basis of the incriminating material which in the context of relevant provisions means books of account and other documents found in the course of search but not produced in the course of original assessment and undisclosed income or property disclosed during the course of search. Reliance was also placed on the decision of Hon’ble Bombay High Court in the case of Continental Warehousing Corporation (Nhava Sheva) Ltd. [2015] 58 taxmann.com 78 wherein it is 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.

12 ITA No.2198,2199&2202/13 Reliance was also placed on the latest decision of the Delhi Bench of the Tribunal in the case of Jakson Enterprises vs. ACIT dated 27-05-2015 being ITA No. 383/Del/2013, wherein decision of Delhi HC in the case of CIT vs. Anil Kumar Bhatia as relied on by CIT(A) in the instant case before us have been discussed. Reliance was also placed on the 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 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. 879/M/2011 [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

13 ITA No.2198,2199&2202/13 It was submitted by ld. AR that in the present case, the assessment had been completed under summary scheme u/s. 143(1) and time limit for issue of notice u/s. 143(2) had expired on the date of search. Therefore, there was no assessment pending in this case and in such a case there was no question of abatement. Therefore, addition could be made only on the basis of incriminating material found during search. In this case, no incriminating documents were found in relation to addition made on account of share capital, unsecured loans and disallowance of Rs.75,003/- made on account of personal use of car etc. After inviting our attention to the order of AO and CIT(A) it was contended by ld. AR that during the search no information or documents or any other incriminating material was found during the search which was relating to receipt of bogus share application money or receipt of bogus loan by the assessee company. Moreover it is pertinent to note that the Ld. CIT(A) while giving his decision has not proved anything that any incriminating material was found during search on the basis of which AO has made addition, but he has confirmed the validity of assessment u/s. 153A merely on the basis decision of Hon. Delhi High court in the case of Anil Kumar Bhatia. 9. With regard to the merit of addition so made, it was contended by ld. AR that in response to show cause notice issued by AO asking assessee to prove identity of share applicant, genuineness of transaction & creditworthiness of said party, assessee company vide its letter dated 09-11-2011 submitted its explanation and various documents. However he mentioned that the assessee could not satisfactorily explained the

14 ITA No.2198,2199&2202/13 cash credits into its books and merely submitted following documents of 17 share applicant parties :- i) MOA/ AOA of the investing companies; ii) Share Applications form; iii) PAN Details; iv) board resolution of the investor companies; v) Confirmations; vi) Balance sheet of those companies; and vii) Copy of Income-tax returns filed by the share applicant companies for Assessment Year. As per ld. AR the AO has also asked to produce the director or authorised person of the said share applicant companies. Thereafter in the same para, in sub-points 1.2 to 1.15 AO has discussed share application money received from each share applicant and given his finding in respect of bank account entries of each of the share applicant. According to the finding of the AO, share applicant companies at the time of making payment to the assessee have received cheques from various companies. The AO has examined the bank account of those other companies and found that they have received cheque from some other companies and on examination of forth level companies they have found that cash was deposited in their account. The AO also recorded that in few cases those companies are having account with Progressive Co. Op. Bank wherein Mumbai address was mentioned but the Inspector did not find any such company at such address. It was further contended by ld. AR that during the course of assessment proceeding, assessee has submitted following documents to prove identity of the parties, Genuineness of transaction and creditworthiness of such parties vide its submission letter dated 09-11-2011

15 ITA No.2198,2199&2202/13 • Copy PAN of Share applicant companies • Copy of MOA/ AOA of Share applicant Companies • Copies of Ledger Confirmation from all the companies • Copy of Bank passbook of share applicant from which share application money was paid • Copies of Balance Sheet of the companies • Copies of LT Return copies for relevant assessment years in few cases As per ld. AR the assessee has discharged his onus to prove identity of the share applicant parties by filing PAN Copy, MOA/ AOA of share applicant, etc., genuineness of transaction since money received through cheque only and creditworthiness of the parties by filing their Financials, IT Return copies, etc. Thereafter onus is shifted to the AO to examine further the documents submitted by the assessee and give his findings on the same. As per ld. AR the AO has made investigation of the bank account entries reflected in the bank account of share applicant and found that they have received cheques from other companies and on examination of third party they have found that cash was deposited in their account. According to AO chain of funds movement in this case is as under: Assessee -------»» Share Applicant -------»»> Company-1---»»» Company -2 -----------»»»> Company - 3 (Cash deposited) Further, it was submitted by ld. AR that assessee need to prove source of the amount received by him and it should not be expected from assessee to prove source of source of the funds at third or fourth level companies. He further contended that during the search proceedings or post search proceedings, directors of the share applicant companies from whom money received has not given any statement that share application

16 ITA No.2198,2199&2202/13 money given to the assessee company is only a book entry and department has not brought on records any material that assessee company has received back cash against the said payment made to them. Further if the department believe that the money received by the assessee is from bogus shareholders/parties, whose all the relevant details such as names, PAN Copy, Ledger confirmation, MOA/AOA, Bank account passbook of share applicant and Balance Sheet were furnished to the assessing officer, then the Revenue is free to reopen their assessment proceedings in accordance with the law. He further submitted that the AO has not issued any notice u/s. 133(6) or summons u/s. 131 to share applicant companies to substantiate his findings in respect of bank account discrepancy at third and forth level before drawing conclusion on hypothetic basis regarding chain of payment and should have also established that cash deposited in bank account of companies falling at third or fourth level is actually assessee's own money. As per ld. AR the AO had merely relied on the information received from Investigation wing without confronting to the assessee on the information so received. 10. Our attention was also invited to para 9 of AO’s order wherein he observed that during the course of search and post search enquiries, it has been established that the assessee has received huge share application money with heavy premium from various companies. However, as per ld. AR during the search no incriminating material was found regarding share application money received from the various shareholders. The same can be verified from the statement recorded u/s.

17 ITA No.2198,2199&2202/13 132(4) of the Act dated 31-10-2009 and 20-11-2009]. By inviting our attention to the statement recorded u/s.132(4), ld. AR submitted that during the course of search, the search arty had not questioned the director of the Company on the issue of bogus share applicant or bogus loan which shows that at the time of search the search party was not having this information in possession on the basis of which additions were made by AO. 11. With regard to merit of the addition, reliance was also placed by ld. AR on the decision of Hon. Gujarat High court in the case of Murlidhar Lahorimal vs. CIT 280 ITR 512, wherein it is held as under: As section 68 denotes, once there is a credit in the books maintained by the assessee, the primary onus is on the assessee, namely, to offer an explanation as to the nature and source of the credit. An assessee can be asked to prove the source of credit in books, but cannot be asked to prove the source of the source. What would be the degree of the onus and what should be the extent of explanation in such circumstances, is succinctly laid down by this Court in the decision in case of CIT v .Pragati Co-operative Bank Ltd.(2005) 278 ITR 170. Suffice it to state that an assessee can be asked to prove the source of credit in books, but cannot be asked to prove the source of the source” Reliance was also placed on the decision of hon’ble Rajasthan High court in the case of Labh chand Bohra v. ITO - Rajasthan High Court - 219 CTR 571, wherein it is held as under: Income-Cash credit-Burden of proof-Identity of creditors D and V has been established and they have confirmed the credits by making statements on oath-This also satisfies the requirement of discharge of burden on the part of the assessee to prove the genuineness of the transactions-Capacity of the lender to advance money to the assessee was not a matter which the assessee would be required to establish as that would amount to calling upon him to establish the source of the source. Therefore, additions in respect of the entries in the names of said creditors cannot be sustained.

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Decision of Hon. Delhi High Court in the case of CIT v. Dwarkadish Investment Pvt. Ltd. - 330 ITR 298 was also relied on by ld. AR, wherein it is held as under: Revenue has all the power and wherewithal to trace any person- Moreover, it is settled law that the assessee need not to prove the 'source of source'-In the instant case, the Tribunal has confirmed the order of the CIT(A) deleting the impugned addition holding that the assessee has been able to prove the identity of the share applicants and the share application money has been received by way of account payee cheques-No question of law arises. Further reliance was placed on the decision of Hon’ble Patna High Court in the case of Sarogi Credit Corporation, 103 ITR 344, decision of Hon. Gujarat High Court in the case of DCIT v. Rohini Builders - 256 ITR 360, decision of Hon’ble Rajasthan High Court in the case of Aravali Trading Co., 220 CTR 622, decision of Hon. High Court of Gauhati in the case of Nemi Chand Kothari vs. CIT [2004] 264 ITR 254. 12. In support of the proposition reliance was placed on the decision of Hon. Delhi High court in the case of CIT - Divine Lasing & Finance Ltd. 299 ITR 268 (Delhi High Court], wherein it is held as under: The tribunal has further found that the AO has not brought any positive material or evidence which would indicate that the shareholders were benamidars or fictitious persons or that any part of the share capital represented company's own income from undisclosed sources. As regards receipt of share capital on issue of rights shares to five companies, these companies were duly incorporated under the Sikkimese Companies Act and were assessed under the Sikkimese Taxation Manual-Their share subscriptions were also received through banking channels and found to be valid by the jurisdictional, AO-Therefore, no addition could be made under section 68.” Under these circumstances the department is free to proceed to reopen individual assessments in accordance with law of the parties in question,

19 ITA No.2198,2199&2202/13 but it cannot be regarded as undisclosed income of assessee company. 13. Reliance was also placed on the decision of Hon. Supreme Court in the case of CIT v. Lovely Exports Pvt. Ltd. - 216 CTR (SC) 195/319 ITR (St.) 5, wherein it is held as under: The appeal filed by the department against the judgment of Hon. Delhi High Court is dismissed by the Hon. Supreme Court. If the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the AO, then the Department is free to proceed to reopen their individual assessments in accordance with law, but it cannot be regarded as undisclosed income of assessee company. Further reliance was placed on the decision of Hon’ble Supreme Court in the case of Orissa Corporation Pvt. Ltd., 159 ITR 78, Bombay High Court in the case of Creative World Telefilm Ltd., 333 ITR 100, Allahabad High Court in the case of Vacmet Packaging (India) Pvt. Ltd., 2014-TIOL-297- HC-ALL-IT 14. In support of the proposition that burden is on the Department to show that money received by the assessee company is money received was actually assessee's own money particularly when the assessee has complied with all the ingredients of section 68 of the Act, reliance was placed on the following decisions :- CIT v . VALUE CAPITAL SERVICES PVT. LTD. - [2008] 307 ITR 334 (Delhi) wherein it is held as under: Held, dismissing the appeal of revenue that the additional burden was on the department to show that even if the share applicants did not have the means to make the investment, the investment made by them actually emanated from the coffers of the assessee so as to enable it to be treated as the undisclosed income of the assessee. No substantial question of law arose. Netscape Software Ltd. v. DCIT - ITA/3852/M/2009 dt 19-10-2011) wherein it is held as under:

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Income tax-Section 68- Whether AO can solely rely on the enquiries of investigation wing to treat the share application money as in genuine and make additions- Whether AO is bound to bring positive evidence on record to establish that the money received in the shape of share application money was actually assessee's own money particularly when the assessee has complied with all the ingredients of section 68 of the Act. CIT v. Daulat Ram Rawatmull [1973] 87 ITR 349 wherein it is held as under: The onus to prove that the apparent is not the real is on the party who claims it to be so. As it was the department which claimed that the amount of fixed deposit receipt belonged to the respondent firm even though the receipt had been issued in the name of B, the burden laid on the department to prove that the respondent was the owner of the amount despite the fact that the receipt was in the name of B. So far as the source was concerned, there was no material on the record to show that the amount came from the coffers of the respondent-firm or that it was tendered in B Calcutta branch of the Central Bank, on behalf of the respondent. As regards the destination of the amount, there was nothing to show that it went to the coffers of the respondent. On the contrary, there was positive evidence that the amount was received by B. It would thus follow that both as regards the source as well as the destination of the amount, the material on the record gave no support to the claim of the department. 15. In support of the proposition that addition cannot be made u/s. 68 of the Act merely on the basis of information received from Investigation Wing when AO himself has not made any effort to bring on record any valid or corroborative evidence to discredit the documentary evidences and explanation submitted by Assessee Company, reliance was placed on :- (i) Latest decision of Hon. Delhi High Court in the case of CIT vs. Fair Finvest Ltd. [2014] 357 ITR 146 wherein decision of Hon. Delhi· High Court in the case of Nova Promoters & Finlease (P) Ltd. is also considered and distinguished wherein it is held as under: "7. Having regard to the entirety of facts and circumstances, the Court is satisfied that the finding of the Tribunal in this case accords with the ratio of the decision of the Supreme Court in Lovely Exports (P.) Ltd. (supra).

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22 ITA No.2198,2199&2202/13 not made any further enquiry, merely because of the false allegation, a genuine transaction cannot become non genuine transaction. ITA No.7465/Mum12012 "11.1. Further the allegation that these companies have taken money from their sister concerns who have deposited cash before lending money to these companies is baseless. The assessee has to prove that the money has come from these companies. The assessee is not required to prove the source of these companies. If the AO doubted the source of the source, he should have proceeded against these companies in the light of the ratio laid down by the Hon'ble Supreme Court in the case of Lovely Exports(P) Ltd (supra). A perusal of the documentary evidences brought on record before us shows that the transactions have been done by account payee cheques, money has flown into the bank account of the assessee from the identified bank account of these companies, the transactions are duly reflected in the bank statements of the respective parties. The facts of the case are therefore squarely covered by the ratio laid down by the Hon'ble Supreme Court in the case of Lovely Export (supra). In our considered opinion, the assessee has successfully discharged the onus cast upon it by provisions of Sec. 68 of the Act, meaning thereby that the assessee has successfully established the genuineness of the transaction, the identity of the share applicants and by filing their bank statements, in respect of credit worthiness. After considering all these facts in totality, we set aside the findings of the Ld. CIT(A) and direct the AO to delete the addition made in respect of the above mentioned six companies. 12. In the result, the appeal filed by the assessee is allowed." (iv) Latest decision of Hon. Mumbai Tribunal in the case of ITO vs. Superline Construction Pvt. Ltd. in ITA No. 3645/Mum/2014 dated 30-11-2015, it is held as under: The assessee-company received share application money to the tune of Rs.85 lakhs from eight companies - The stand of the assessee has been that the reasons recorded did not whisper about any tangible material which triggered re-opening u/ s 147. The reassessment proceedings were initiated on the basis of information received from Directorate of Income-tax (Investigation) without recording Assessing Officer's own satisfaction - Addition was made by the Assessing Officer on account of bogus share application money under the provisions of Section 68 of the Act - the Assessing Officer failed to appreciate that there is no documentary evidence against the assessee-company to support such impugned additions - the assessee-company has fully discharged the burden of proof, onus of proof and explained the source of share capital and

23 ITA No.2198,2199&2202/13 advances received by established the identity) creditworthiness and genuineness of transaction by banking instruments with documentary evidences - assessee company substantiated the details with the documentary evidences as extracted from the website of Ministry of Corporate Affairs) Government of India before the Assessing Officer. These facts have not been rebutted on behalf of the Revenue. (v) Decision of Hon. Delhi Tribunal m the case of ITO vs. Shakti Securities Pvt. Ltd. in ITA No. 3475/Del/2009 dated 10-09- 2015 [2015-TIOL-1634-ITAT-DEL] it is held as under: "A) ++ CIT(A) held that the AO did not bring on record any material or evidence proves that the various payments received were in the nature of accommodation entry. Simply the explanation was called for in response to which the assessee submitted various documents in support of the transactions. All the transactions have been carried out through account payee cheque and confirmations, share application forms, written acknowledgement of these parties have been filed. The AO rejected the said explanation merely on the ground that the summons issued by him was not responded to. Since the concerned parties were assessed to tax and their return acknowledgements were submitted, the facts could have been verified from their assessment records. The assessee has furnished sufficient documents to prove the identity of the parties and therefore in view of the decision of Supreme Court in the case of Lovely Exports no additions in the company have been made as regards share application money. Therefore entire addition of Rs 17 lacs was deleted. CIT(A) has deleted the addition in dispute after considering all the relevant evidences produced by the assessee. Therefore, order of CIT(A) upheld; (para 9 & 9.1) (vi) Decision of Hon. Delhi Tribunal in the case of ACIT vs. Divine (India) Infrastructure Pvt. Ltd. in ITA No. 2082/Del/2011 dated 08- 12-2014 [20 15-TIOL-I06-ITAT-DEL] it is held as under: "++ the initial onus lies on the assessee to prove the genuineness of the transaction along with identity of the investor and its creditworthiness. Having done so, the assessee company had discharged the above onus cast upon it by furnishing details, PAN Nos., addresses and confirmations in the form of affidavits of share applicants/ contributors. After discharge of onus by the assessee, the onus shifts on the AO to disprove the claim of the assessee by establishing that the evidence filed by the assessee was false and by bringing new adverse material on record and failure to do so at the end of AO would certainly vitiate the addition made u/ s 68. When the summons issued to the alleged investors could not be complied with, without any further effort and verification, the AO proceeded to make an addition u/ s 68 merely relying on the

24 ITA No.2198,2199&2202/13 information received from the Investigation Wing of the department which is not a proper approach. Respectfully taking note of decision of Supreme Court in the case of CIT vs Lovely Export wherein it has been held that if the share application money is received by the assessee company from alleged bogus shareholders whose names are given to the AO, then the department is free to proceed to reopen their individual assessment in accordance with law but no such exercise has been conducted by the AO in the instant case. Hence, we are unable to see any perversity, ambiguity or any other valid reason to interfere with the impugned order and we uphold the same. " (vii) Decision of Hon. Delhi High Court in the case of CIT vs. Navodaya Castles Pvt. Ltd. in [2014-TIOL-1775-HC-DEL-IT] "Whether mere deposit of cash in the bank accounts prior to issue of cheque / pay orders would only raise suspicion, once the assessee had been able to show that the shareholder companies were duly incorporated and their identity & genuineness stands established - Whether it is for the AO to conduct further investigation, before any addition can be made u/ s 68 in the guise that the money belonged to the assessee and was their unaccounted money, which had been channelized.: - held in favour of the assessee" (viii) Decision of Hon. Delhi High Court in the case of CIT vs. Shiv Dhooti Pearls And Investment Ltd. [20 16-TIOL-10-HC-DEL-IT] Whether the assessee is liable to disclose only the sources from where it has received the credit/ loans - YES: HC Whether such liability of the assessee can be burdened to an extent, to show the sources of his creditor or to prove the creditworthiness of the sources of the sub-creditors - NO: HC (ix)Decision of Hon. Delhi ITAT in the case of ITO vs. Shantam Fashion Fabrics Pvt. Ltd. [2015-TIOL-2045-ITAT-DEL] Whether in case the assessee has discharged the preliminary onus on it to prove the identity, creditworthiness and genuineness of the transaction in question, the AO merely on suspicion and surmises, has not applied its own mind, it cannot make addition u/ s 68 of the Act YES: ITAT (x) Decision of Hon. Ahmedabad ITAT in the case of Chartered Speed Pvt. Ltd. vs. ACIT [2014-TIOL-610-ITAT-AHM] Whether when the assessee has discharged its onus to prove genuineness of a transaction in relation to any investment u/ s 68, the burden can be said to have shifted to the Revenue to prove ingenuity of such transactions.”

25 ITA No.2198,2199&2202/13 16. In view of the above, the contention of ld. AR was that the addition made on merit has also no legs to stand. 17. On other hand, ld. DR contended that as per scheme of Section 153A, once an action u/s.132(1) is carried out resulting into search and seizure, the Assessing Officer is bound to issue notice to the assessee to furnish returns for each assessment year falling within the six assessment years immediately preceding the assessment year relevant to the previous year in which the search or requisition was made. 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. While framing assessment the AO is to consider all the materials on record. As per ld. DR the assessee company had introduced cash in the account of share applicants and received the money under the guise of application money. The assessee could not produce even a single party for establishing the identity even after giving various opportunities by AO. The assessee has summarily even failed to establish identity. In the complete chain, there is neither actual existence of any entity nor could assessee prove during the course of scrutiny assessment proceedings. In view of the above, AO correctly concluded that the share application money received into the books of the assessee from all 17 parties remains unexplained and made addition of the said amount u/s. 68 of the Act. As per ld. DR in the complete chain, there is neither actual existence of any entity nor could assessee prove during the course of scrutiny assessment proceedings. Ld. CIT DR relied

26 ITA No.2198,2199&2202/13 on the decision in the case of Nova Promoters & Finlease (P) Ltd., 342 ITR 169, Independent Media Pvt. Ltd. (2012) 82 CCH 133 Delhi and Major Metal Ltd. (2012) 251 CTR 385. 18. With respect to the loan received from GIPTECH of Rs.90 lakhs, addition was made u/s.68. During the course of assessment the AO observed that in response to the show cause, notice issued by AO to explain credit of this amount, Assessee company has submitted Loan Confirmation from GIPTECH on the company's letter head wherein it has been confirmed that loan was given by them and it was through banking channel. While deciding this issue, the CIT(A) has relied on issue adjudicated in the case of Mrs. Vina Viren Ahuja for AY 2004-05 as there was identical issue wherein by placing reliance on following case laws held that in this case the appellant has thwarted any further enquiry into the matter by not submitting the requisite details and not discharge its onus of submitting the basis information: i) Decision of Hon. Supreme court in the case of CIT vs. P.R. Ganapathy & Ors. in Civil Appeal No. 5528 of 2007 ii) Decision of Supreme Court in the case of CIT vs. P. Mohankala reported in (2007) 291 ITR 278 Accordingly CIT(A) confirmed the addition made by AO in respect of loan taken from GIPTECH of Rs.90,00,000/-. 19. It was submitted by ld. AR that during the year, the assessee company has received unsecured loans from GIPTECH Co. LLC. GIPTECH is a foreign company incorporated and operated in Dubai and it is headed by Mr. Jatin Ahuja brother of director of the assessee company.

27 ITA No.2198,2199&2202/13 Being relative of promoter, this interest free loan was received by the company from M/ s. GIPTECH for business purpose of assessee company. Further they have also declared in the confirmation that being Dubai based company, the company is not required to prepare any balance sheet or file any income tax return in Dubai, hence these documents cannot be produced. 20. It was vehemently argued by ld. AR that while deciding the issue the AO and Ld. CIT(A) both had ignored the fact that assessee company has submitted loan confirmation and also proved that loan taken is from normal banking channels. In the confirmation, Lender Company has declared that being a foreign company located in Dubai no document such as Balance Sheet and Income tax return cannot be produced since there is no such requirement to maintain these documents in Dubai. The AO has not proved that loan taken from GIPTECH is assesse’s own money. 20. We have considered rival contentions, carefully gone through the orders of authorities below and also the paper book filed by the ld. AR, particularly, the pages to which our attention was invited during the course of hearing. We had also deliberated on the judicial pronouncements referred by ld.AO and CIT(A) in their respective orders as well as cited by ld. AR and DR during the course of hearing before us in the context of factual matrix of the instant case. From the record we found that search was carried on 31-10-2009 at the business and residential premises of the assessee. Thereafter assessment was framed u/s.153A r.w.s.143(3) of

28 ITA No.2198,2199&2202/13 I.T.Act. In respect of assessment year 2004-05, the assessee has filed its return of income on 31-10-2004, which was processed u/s.143(1) but no scrutiny assessment notice u/s.143(2) was issued till 31-10-2005. As per the relevant provisions of law prevailing during the year under consideration notice u/s.143(2) is required to be issued before expiry of 12 months from the end of the month in which return was furnished. Accordingly, the AO should have issued notice u/s.143(2) by 31-10-2005. However, no such notice was issued, thus, the assessment is treated to be completed since on the date of search i.e. 31-10-2009, limit for issuing notice u/s.143(2) was already expired. In respect of assessment year 2005-06 assessee has filed its return of income on 29-10-2005, which was also processed u/s.143(1). For taking into scrutiny notice u/s.143(2) was required to be issued before 31-10-2006 i.e. time limit for issuing notice during the relevant assessment year under consideration. However, no notice u/s.143(2) was issued. Even no notice u/s.148 was issued for reopening of the assessment. Thus, the assessment for 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

29 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.

30 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 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 132A after 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 the Income-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

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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. ■ 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

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section 263. Had that been the case, the 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 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 , 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 under section 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 (Delhi). However, this argument is not found to be accurate. Upon reading of the observations of the Delhi High

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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.

34 ITA No.2198,2199&2202/13 incriminating material found during the search. The Delhi Bench of the Tribunal in its recent decision on the 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 to

35 ITA 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 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 of Canara Housing Development Company vs. DCIT (supra) of Hon‟ble Karnataka High Court and Filatex 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 question

36 ITA 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 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

37 ITA No.2198,2199&2202/13 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 concluded assessment does not arise, which would require more reiteration and it is only in the context of the abated

38 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 the Income-tax Act, 1961 for the assessment year under consideration is not valid and the same is accordingly 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 of

39 ITA 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 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 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.

40 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 under section 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 263 of 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

41 ITA 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 under section 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 under section 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 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

42 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 under section 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

43 ITA No.2198,2199&2202/13 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.

44 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”. 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 under Section 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 “In

45 ITA 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”. 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.

46 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. ITA No.2202/Mum/2013 (AY : 2006-2007) 31. In this appeal also the assessee has taken legal ground with regard to addition made u/s.153A r.w.s.143(3) of the I.T.Act. For this year the assessment was pending, therefore, there is no merit in the ground taken by the assessee to the effect that assessment was abated. Accordingly, the legal ground taken by the assessee in this year are dismissed. On merit the assessee is aggrieved for upholding addition on account of unsupported purchases made by the assessee. We have considered rival contentions and found from the record that during the course of search, it was asked to Director Mr. Viren Ahuja to produce the detail of expenses claimed by the company in respect of which invoices were not made available in the course of search. These expenses mainly covers payment made to various suppliers. One of the supplier during the year under consideration was Manav Impex from whom assessee has shown purchase of Rs.64,74,581/-. In the search interrogation, Mr. Viren Ahuja, director of the company had responded in his statement recorded u/s.132(4) during the search that in respect of these payments no documents were available and the said expense payments are not in order and declared undisclosed income for such purchases. However, after the conclusion of search proceedings on 20-11-2009, he has admittedly retracted his aforesaid statement by way of affidavit executed

47 ITA No.2198,2199&2202/13 before Notary Public on 24-11-2009. What was stated in the aforesaid retraction statement is reiterated a s under :- “7. I state that the aforesaid alleged voluntary disclosure is nothing but the outcome of aforesaid disturbed mental and physical state, 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.” 32. The AO disregarded the above retraction and observed in the assessment order that show cause notice dated 02-11-2011 in which he has mentioned that as per the findings given by the Investigation Wing there no activity was found to be carried out in the factory premises of the assessee Company and hence the claim of expenses made by the Assessee is bogus. It was the contention of assessee before the AO that the company is engaged in the business of providing consultancy and other services in relation to setting up power projects at various sites to various major players in the field of Power Industry. After getting contract, the Company in turn subcontracted the work to various other contractors. The activities for which the expenses are claimed were not carried out at factory premises of the Company but rather all the activities were carried out at respective site itself where the power project has been undertaken. However, the AO did not convince with the assessee’s explanation and

48 ITA No.2198,2199&2202/13 added the purchase amount in assessee’s income as unproved purchases. Action of the AO was confirmed by the CIT(A), against which assessee is in further appeal before us. 33. We have considered rival contentions and carefully gone through the orders of authorities below and found from the record that before the lower authorities assessee had filed a letter in response to show cause notice issued by the AO, the assessee has supplied year-wise details of income received from the power projects contracts and subcontract expenses incurred in relation to the same. The assessee has also filed a statement showing tabular presentation of the Income earned by the Assessee Company from the project services and its corresponding subcontract expenses for the Assessment Year 2006-07. For the year under consideration, AO has made addition of Rs.64,74,581/- in respect of payment made to M/s. Manav Impex. In relation to the aforesaid addition, it was explained to the AO that the Assessee Company has made payment to M/s. Manav Impex towards subcontract charges on account of work carried out for the project services relating to Koyna Dam Project undertaken by the Company for its customer M/s. Soma Enterprise. From the said Koyna Dam Project services, the Assessee Company has earned revenue of amounting to Rs.7.40 crores which was duly offered to tax for the year under consideration. 34. We had also perused the copy of Invoice raised by M/s. Manav Impex on the Assessee Company for rendering the services dated 20-12- 2005; Copy of Ledger Account of the said party in the books of assessee;

49 ITA No.2198,2199&2202/13 copy of Ledger Account of the said party in the books of Assessee Company in which it is reflected the invoices booked and the bank payment made against the said invoices; Copy of bank statement of the Assessee Company from which payment has been made to the said party; and Copy of Ledger Account of M/ s. Soma Enterprise Ltd. (Customer) in the books of Assessee Company along with copies of invoices raised by Assessee on said party. For rendering of services to this customer assessee has availed services from M/s. Manav Impex. 35. It appears from the above-mentioned documents that the Assessee Company has made payment to M/s. Manav Impex towards charges for excavation of under-ground tunnel by shaft. The said subcontract work is a part of the main project work undertaken by the Company for M/s Soma Enterprise Limited in relation to the Koyan Dam Project. Further, it was also shown from the copy of bank statement and copy of ledger account that the payments made to M/s Manav Impex was through normal banking channels. 36. In view of the above discussion, we set aside the issue of addition on account of purchase to the file of AO for deciding afresh by considering above documents discussed by us. 37. The assessee is also aggrieved for confirming disallowance of Rs.1,34,321/- on account of personal usage of car. 38. We have considered rival contentions and found that AO has disallowed suo motu estimated 10% on account of personal use of car by the Director. The assessee is a corporate entity, therefore, in view of the

50 ITA No.2198,2199&2202/13 decision of Hon’ble Gujarat High Court in the case of Sayaji Iron & Engg. Co. 253 ITR 749, no disallowance on the plea of personal use can be made in the case of corporate entity. Accordingly, we direct the AO to delete the said disallowance. 39. The next grievance of the assessee relates to determining short term capital gain at Rs.13,63,847/- as against capital gain of Rs.10,49,769/-. 40. We have considered rival contentions and found that CIT(A) has already directed the assessee to approach the AO u/s.154 of the Act with the required details for seeking necessary rectification. Accordingly, we do not find any infirmity in the order of CIT(A). We further direct the AO to immediately dispose the application filed u/s.154 for correcting the error in the computation of short term capital gains offered by the assessee. We direct accordingly. 41. The assessee is also aggrieved for not adjudicating and allowing the set off of carry forward loss of earlier assessment years by the CIT(A). In the interest of justice, we restore this issue back to the file of CIT(A) for adjudicating ground with regard to set off of carry forward loss of earlier assessment years. The CIT(A) is also directed to give credit for taxed paid by the assessee or deducted at source while computing tax liability of the assessee. 42. The next grievance of the assessee relates to charging of interest u/s.234A,B & C of the Act, which are consequential in nature.

51 ITA No.2198,2199&2202/13 43. In the result, appeal for A.Y. 2006-07 is allowed in part for statistical purposes. Order pronounced in the open court on this 31/05/2016/ 2016. Sd/- Sd/- (PAWAN SINGH) (R.C.SHARMA) न्यानयक सदस्य / JUDICIAL MEMBER ऱेखा सदस्य / ACCOUNTANT MEMBER भुंफई Mumbai; ददनांक Dated 31/05/2016 प्र.कु.मभ/pkm, नन.स/ PS आदेश की प्रनिलऱपप अग्रेपषि/Copy of the Order forwarded to : अऩीराथी / The Appellant 1. प्रत्मथी / The Respondent. 2. आदेशाि सार/ BY ORDER, आमकय आमुक्त(अऩीर) / The CIT(A), Mumbai. 3. आमकय आमुक्त / CIT 4. ववबागीम प्रनतननधध, आमकय अऩीरीम अधधकयण, भुंफई / DR, ITAT, Mumbai 5. उप/सहायक पुंजीकार गार्ा पाईर / Guard file. 6. (Asstt. Registrar) आयकर अपीऱीय अधिकरण, भुंफई / सत्मावऩत प्रनत //True Copy// ITAT, Mumbai