DCIT, CC-2, JAIPUR vs. M/S. ROYAL JEWELLERS, JAIPUR

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”B” JAIPUR Jh lanhi xkslkbZ] U;kf;d lnL; ,oa Jh jkBkSM+ deys'k t;arHkkbZ] ys[kk lnL; ds le{k BEFORE: SHRI SANDEEP GOSAIN, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA Nos. 171 to 173/JP/2020 fu/kZkj.k o"kZ@Assessment Years : 2011-12 to 2013-14 cuke The Dy. Commissioner of Income- M/s Royal Jewellers, Vs. tax, 1756, Telipara, Chaura Central Circle-02, Jaipur Rasta, Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAEFR 6642 P vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Sh. Manish Agarwal (CA) jktLo dh vksj ls@ Revenue by : Sh. Sanjay Dhariwal (CIT) & Smt. Runi Pal (Add. CIT) lquokbZ dh rkjh[k@ Date of Hearing : 14/03/2023 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 07/06/2023 vkns'k@ ORDER PER BENCH:

These are three appeals filed by the revenue and is directed against the order of the ld. Commissioner of Income Tax (Appeals)-4, Jaipur [hereinafter referred to as (ld. CIT(A)] dated 08.11.2019 for the Assessment Years 2011-12 to 2013-14, which in turn arise out of an order passed by DCIT, Central Circle-2, Jaipur passed u/s. 143 (3) r.w.s. 153A of the Income Tax Act, 1961 [ here in after referred to act “Act”] on 26.12.2018.

2 ITA Nos. 171 to 173 /JP/2020 DCIT vs. M/s Royal Jewellers 2. Since the issues involved in these three appeals of the revenue in the

case of the same assessee are almost identical and having common

grounds, all these appeals of the revenue were heard together with the

agreement of both the parties and are being disposed off by this

consolidated order.

ITA No. 171/JPR/2020 may be taken as a lead case for discussions as the

issues involved in the lead case are common and inextricably interlinked or

in fact interwoven and the facts and circumstances of other cases are

identical except the difference in the amount added and disputed and

relates to the three different assessment year. The ld. AR did not raise any

specific objection against taking that case as a lead case. Therefore, for the

purpose of the present discussions, the case of revenue in ITA No.

171/JPR/2020 taken as a lead case.

three appeals grounds, facts and arguments were similar. Therefore, we

have heard together these three appeals and are disposed by taking lead

3 ITA Nos. 171 to 173 /JP/2020 DCIT vs. M/s Royal Jewellers case facts, grounds and arguments from the folder in ITA No.

171/JPR/2020.

that the revenue has assailed the appeal in ITA No. 171/JPR/2020 before

us on the following grounds;

“1. The Ld CIT(A) has erred in law and on facts (independently & severally) in granting relief to the assessee". 2. On the facts and in the circumstances of the case and in law the Ld. CIT(A) has etred in allowing assessee's appeal on legal ground that the assessment completed u/s 143(3) rws 153A is bad in law and viod-ab-initio in spite of the fact that the Section 153A of the Act does not specifically say that scope of scrutiny for assessment or reassessment should be restricted and strictly made on the basis of evidence found in the course of the search, or other post-search material or information available?" 3. Without prejudice to the ground no. 1, "on the facts and in the circumstances of the case and in law the Ld. CIT(A) has erred in allowing assessee's appeal on legal ground in spite of the fact that incriminating documents realted to A.Y. 2014- 15 and A.Y. 2016-17 in form of parallel unaccounted balance sheet maintained by the assessee have direct nexus for A.Y. 2011-12 and A.Y. 2013-14 as well since opening balance for A.Y. 2014-15 has bearing on closing balance for A.Y. 2013-14 and so on upto A.Y. 2011-12" 4. Without prejudice to the ground no.1 & 2, "on the fact's and in the circumstances of the case and in law the Id. CIT(A) has erred in allowing assessee's appeal on legal gorund without alternatively considering the opening balance as unexpoained cash credit of the firm for A.Y. 2014-15" 5. Without prejudice to the ground no. 1, "on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in allowing assessee's appeal on legal ground that the assessment completed u/s 143(3) rws 153A is bad in law and viod-ab-initio in spite of the fact that the incriminating material can be from search or even from subsequent surveys or any other enquiries. Recently, in the case of CIT, Chennai Vs Ajith S Kumar 93 Taxman.com294(SC), the Hon'ble Supreme

4 ITA Nos. 171 to 173 /JP/2020 DCIT vs. M/s Royal Jewellers Court in the context of section 158BB has upheld the use of information collected in a survey in case of connected. persons carried alongwith search in other person for the purpose of making assessment u/s 158BB. Provisions of 158BB are Pari Materia to section 153A of the Income Tax Act, 1961" 6. Without prejudice to the ground no. 1. "on the facts and in the circumstances of the case and in law the Ld. CIT(A) has erred in allowing assessee's appeal on legal ground that the assessment completed u/s 143(3) rws 153A is bad in law and vicd-ab-initio in spite of the fact that the Hon'ble High Court, New Delhi in the case of PCIT Vs Kabul Chawla in para 37(iv) addition has to be based on evidences found during search, or post search or information available with the AO which can be related to the evidence found but it cannot be arbitrary" 7. Without prejudice to the ground no. 1, "on the facts and the in circumstances of the case and in law the Ld. CIT(A) has erred in allowing assessee's appeal on legal ground that the assessment completed u/s 143(3) rws 153A is bad in law and viod-ab-initio in spite of the fact that Section 44 of the Evidence Act also enables a party otherwise bound by a previous adjudication to show that it was not final or binding because it is vitiated by fraud. The provision therefore gives jurisdiction and authority to a Court to consider and decide the question whether a prior adjudication is vitiated by fraud. The above propositions of law abundantly make clear that the AO also being quasi-judicial authority, while functioning under the Income Tax Act, shall also be bound by similar principle of jurisprudence" 8. On the facts and the in circumstances of the case and in law the Ld. CIT(A) has erred in not adjudicating the case on legal ground and not merits" 9. That the Appellant craves to add, amend, alter or forgo any ground(s) of appeal either before or at the time hearing of the appeal".

action u/s 132 of the Income Tax Act, 1961 ("the Act") and/or survey action

u/s 133A of the Act was carried out by the Income Tax Department on the

members of Chandra Prakash Agarwal Group on 28-07-2016 of which the

Assessee is one of the members covered u/s 132. The jurisdiction over the

case was assigned to Central Circle - 2, Jaipur by the Commissioner of

Income Tax, Jaipur-1, Jaipur by means of an Order u/s 127 of the Act

5 ITA Nos. 171 to 173 /JP/2020 DCIT vs. M/s Royal Jewellers circulated vide CIT-I/ITO(Hqrs)/JPR/u/s127/2016-17/2328 dated 01-12-

2016. Notice under section 153A of the Act dated 06-03-2017 was issued

and served upon the Assessee on 09-03-2017 requiring it to file a true and

correct return of income as prescribed under Rule 12 of the Income Tax

Rules, 1962 within 15 days of the service of the said notice. In response to

the said notice(s), a return declaring an income of Rs. 7,31,370/- was filed

by the Assessee on 07-04-2017. In the return of income Originally filed by

the Assessee u/s 139(1) of the Act on 08-09-2014 an income of Rs.

7,31,370/- was declared. However, in the return of income filed in response

to notice u/s 153A of the Act no undisclosed income pertaining to the

relevant year has been declared by the Assessee. The assessee is a

partnership firm engaged in any business of manufacturing and trading of

gold jewellery. The proceedings of assessment of income were commenced

by issue of notice u/s 143(2) of the Act on 14-09-2017, and notice u/s

142(1) dated 13-07-2018, and 20-07-2018 were also issued to the

assessee and information and details pertaining to the case relevant to

assessment of its income were called by means of a questionnaire. Later

queries were raised vide notices under section 142(1) and/or Order Sheet

Entries wherever deemed fit.

6 ITA Nos. 171 to 173 /JP/2020 DCIT vs. M/s Royal Jewellers 7. The assessee vide letter dated 27.07.2018 has objected the issuance

of notice u/s 153A for the assessment year 2011-12 stating that in the

course of search action neither any incriminating documents or undisclosed

income was found nor any surrender was made for aforesaid periods and

assessment for above period is complete assessment and no proceeding

are pending. Therefore, there is no need of assessment to be reframed u/s

153A and notice issued u/s 153A deserved to be quashed.

7.1 The ld. AO considered and the objections raised by the assessee

against the initiation of proceedings u/s. 153A of the Act and have not been

found tenable for the reasons that the provision of section 153A(1)(b) of the

Act categorically says that the assessing officer shall issue the notice u/s

153A of the Act for six assessment years immediately preceding the

assessment year relevant to the previous years in which search is

conducted or requisition is made. Further, the objection raised by the

assessee is contrary to his own submission wherein has objected the

issuance of notice u/s 153A of the IT Act itself stating that “the notice issued

u/s 153A deserve to be quashed” after relying on pronouncement of

Hon’ble Delhi High Court in case of Kabul Chawala but in this case itself it

was held by the Hon’ble Court that

7 ITA Nos. 171 to 173 /JP/2020 DCIT vs. M/s Royal Jewellers “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.”

Hence, the objection of the assessee is baseless and the issuance of notice

under section 153A of the act is as per the law.

7.2 During assessment proceeding various defects in the books of

account of the assessee were found for A. Y. 2011-12 to 2017-18. The

assessing officer has recorded his finding on the aspect of the inventory

register, valuation method adopted, maintaining the mix stock of 22 kt, 20 kt

and 18 kt, records related to alloys, records related to goods sent on

approval for which the ld. AO has made his observation in detailed in para

Act was conducted at 14, Sunder Nagar, Malivya Nagar, Jaipur occupied by

Shri Manoj Kumar Agarwal, one of the partner of the assessee firm. During

the course of search some documents found and seized which has been

inventorized as Annexure-AS, Exhibit-11, page 19,208 21. The copy of

page 19 was also found form residence of another partner Smt Pooja

Agarwal, at 1756, Telepada, SMS Highway, Jaipur which has been seized

and inventorized as page no. 1 of Annexure-A, Exhibit-10. These page

8 ITA Nos. 171 to 173 /JP/2020 DCIT vs. M/s Royal Jewellers contain details of handwritten balance sheet for FY 2013-14 and FY 2015-

perusal of these it is found that it is a parallel balance sheet of the firm

which is maintained in form of metal l.e. 24 CT gold. On these paper name

of both the partner has been written in cord word i.e. 'GJ' & 'MJ. The

abbreviation of these are GargJeweller and ManojKhandelwal respectively.

The Garg Jeweller is the prop. Concern of Shri Jitendra Kumar Agarwal

who is a husband of 2nd partner of the firm Smt. Pooja Agarwal.

These pages contain details of net profit, distribution of profit between

the partners, rate of the gold on the date of preparation of balance sheet,

opening balance of partners, cash in hand and cash in bank etc. all these

details have been found mentioned in these pages in 24CTgold. For

example at page no. 19 cash amounting to Rs 320816/- has been

converted in to 112.570 gm of 24 CT GOLD by dividing Rs. 2850 which is

the rate of 24 CT gold as on 30.03.2016. Further, one of the partner Shri

Manoj Kumar Khandelwal was confronted with these paper during the

course of recording of statement wherein he acknowledged these paper as

stock valuation of M/s Royal Jewellers as on 31-03-2014 or 31-03-2016.

These pages contain details of net profit, distribution of profit between

the partners, rate of the gold on the date of preparation of balance sheet,

9 ITA Nos. 171 to 173 /JP/2020 DCIT vs. M/s Royal Jewellers opening balance of partners, cash in hand and cash in bank etc. all these

details have been found mentioned in these pages in 24CTgold. For

example at page no. 19 cash amounting to Rs. 320816/- has been

converted in to 112.570 gm of 24 CT Gold by dividing Rs. 2850 which is the

rate of 24 CT gold as on 30.03.2016. As it evident that these pages contain

details of unaccounted net profit of the assessee firm which has been

recorded in metal i.e. 34 CT gold.

Accordingly, the assessee was asked to furnish his explanation on

these documents vide note sheet entry 03.12.2018. In compliance of the

same the assessee furnished his written submission on 08.12.2018 wherein

he categorically denied these documents stating that these pages are not in

the handwriting of the assessee, accounted and any employee of the

assessee.

7.3 In view of the discussion in the assessment order the ld. AO based on

the various discrepancies, a parallel undisclosed balance sheet maintained

by the assessee and out of books purchase, sale and expenditure revealed

from the documents seized during the course of search proceeding, it is

held that books of accounts maintained by the assessee do not reveal the

true income of the assessee. Although the parallel undisclosed balance

10 ITA Nos. 171 to 173 /JP/2020 DCIT vs. M/s Royal Jewellers sheet is for F. Y. 2013-14 2015-16 but from the details of the opening stock

of partner GJ (Garg Jewelers) and MK ( Manojkumar Khandelwal ) at

91280.140 and 23096.120 gm 24 CT gold in the parallel balance sheet was

also exist prior to FY 2013-14 as well which includes AY 2011-12 to 2013-

stock of AY 2017-18 and was in exist under preparation but could not be

completed due to search action on 28.07.2016. In view of the these

discussion assessing officer hold that books of accounts maintained by the

assessee do not reveal true income of the assessee for AY 2011-12 to

2017-18. Therefore, the books of accounts of the assessee for AY 2011-12

to 2017-18 rejected u/s. 145(3) of the Act.

7.4 Since, in the instance case books of accounts are rejected as

discussed above, therefore keeping in view various jurisprudences holing

that part history is the best guiding factor to determining taxable profit in

cases where books of accounts are rejected. Accordingly, the assessee

was asked vide note sheet entry dated 10-12-2018 to furnish G.P. rate of 5

previous years prior to AY 2011-12 which has been attained finality. But the

assessee furnished the G.P. for AY 2011-12 to AY 2017-18 reasons best

known to the assessee. In these circumstances to find out the G.P. prior to

11 ITA Nos. 171 to 173 /JP/2020 DCIT vs. M/s Royal Jewellers

the AY 2011-12 to 2017-18 an effort was made and on perusal of working

copy of hard disk found and seized at 1756, Telipada, SMS Highway,

Choura Rasta, Jaipur and inventoried as Annexure-AS, Exhibit-24 it is

gathered that G.P. for the AY 2010-11 and AY 2009-10 was 21.11% and

27.17% respectively. However, G.P. for AY prior to AY 2009-10 could not

be gathered. In the given circumstances there is no other alternatives

available but to considered the G.P. for AY 2009-10 and AY 2010-11 for

determination of G.P for AY 2011-12 and onwards. Therefore, the average

GP for AY 2009- 10 & AY 2010-11 is come to 24.14% which is applied to

AY 2011-12 to 2017- 18. Accordingly, trading addition for AY 2011-12 to

2017-18 is computed as under:-

s.no AY GP Estimated GP% Turnover Trading addition (D- declared in ITR C)*E A B C D E F 1 2011-12 11.51% 24.14% 28269535 3570442 2 2012-13 9.08% 24.14% 38096579 5737344 3 2013-14 9.21% 24.14% 47425310 7080598 24.14% 4 2014-15 9.60% 47860076 6958855 5 2015-16 9.64% 24.14% 53522361 7760742 6 2016-17 7.93% 24.14% 72126335 11691678 24.14% 7 2017-18 7.86% 74581156* 12141812

In view of the discussion trading addition of Rs. 35,70,442/- made

after applying the GP as mentioned in above table.

12 ITA Nos. 171 to 173 /JP/2020 DCIT vs. M/s Royal Jewellers 7.5 Since, the page no. 20 which is parallel balance sheet for FY 2013-14

is showing huge opening balance of weighing 91280.140 gram and

38096.120 gram 24 CT gold in the hand of ‘GJ’ i.e. Smt. Pooja Agarwal and

‘MK’ i.e. Shri Manoj Kumar Khandelwal respectively. Hence, it is evident the

parallel balance sheet was also exists prior to FY 2013-14. Since, the

assessee has not owned these papers and come forward with any

explanation. Therefore, it will be justifiable to derive undisclosed net profit of

the assessee firm for AY 2011-12 to 2013-14 taking average of net profit

found recorded in parallel balance sheet as mentioned in above table which

computed at Rs. 3,52,55,083/-. Thus a sum of Rs. 3,52,55,083/- is added

back to the total income of the assessee u/s 68 of the I.T. Act for AY 2011-

12 and taxed @ 30% as per provision of 115BBE of the I.T. Act.

an appeal before, the Commissioner of Income Tax, Appeal-4, Jaipur. A

propose to the grounds so raised by the assessee the relevant findings of

the ld. CIT(A) is reiterated here in below:

“12. The appellant has raised a legal ground no. 1 challenging the validity of assessment made 143(3)/u/s 153A. This ground is adjudicated first as it goes into the root of the matter.

12.2 I have perused the order of the AO and submissions made in this regard. Perusal of assessment orders passed u/s 143(3)/153A shows that the rejection of books of

13 ITA Nos. 171 to 173 /JP/2020 DCIT vs. M/s Royal Jewellers

accounts u/s 145(3) of the act by the AO are not relatable to any seized material. I also find that for the A.Yr the assessments stood completed on the date of search &/or there was no time to issue notice u/s 143(2) for the instant A.Yr. Following information is taken from the assessment order u/s 143(3)/153A may be referred to.

A. Yr ROI filing date 143(2) notice time expiry Remark 2011-12 08.09.2011 30.09.2012 Assessment stood completed 2012-13 01.09.2012 30.09.2012 Assessment stood completed 2-13-14 18.09.2013 30.09.2012 Assessment stood completed

It is clear from the table above that assessment for the A.Yr. 2011-12 to 2013-14 stood completed on the date of search and there was no time left to issue the notice u/s 143(2).

12.3. Close perusal of the order shows that the ld. assessing officer has rejected books of accounts and estimate profit based on the certain observation drawn from the assessment records and the details filed during the assessment proceedings. This is amply evident from the observation by the Id. assessing officer in para (vi) on page 5 of the order which reads as under:

"During the course of assessment proceedings various defect in the books of accounts of the assessee were found for the A Yr 2011-12 to 2017-18. The same are discussed as under”

12.4. Other than the observation, as above, there is no incriminating material found for AY 2011-12 to 2013-14. I may clarify that the Ld. AO has discussed certain incriminating material, as discussed in page 12 of his order for the A Yr 2011-12, but all these pertain to AY 2014-15 onwards. Any way the Ld. A/R has not taken such a legal ground for the AY 2014-15 on wards.

For deciding legal ground above, there cannot be better guidance than the decision of jurisdictional high court in the case of Jai Steel (India), (2013) 36 Taxmann.com 523. In the said case, the facts were that A search under Section 132(1) of the Act was conducted at various business premises of Suncity Alloys Group of Companies, Jodhpur, to which, the appellant firm belong and at the residence of directors/partners of various firms/companies on 20.02.2004. Several incriminating documents were recovered from the residential premises of such partners/directors and from business premises of the firms/companies of the group; notice under Section 153A

14 ITA Nos. 171 to 173 /JP/2020 DCIT vs. M/s Royal Jewellers of the Act was issued on 05.10.2004 for filing of return within 35 days of receipt of the notice, which was served on 12.10.2004; in compliance to this notice, return declaring income of 'NIL' was filed on 07.04.2005. In the return filed in response to the notice under Section 153A of the Act, the assessee, inter alia, claimed deduction of Sales Tax Incentive relying on decision in the case of Dy. CIT v. Reliance Industries Ltd. [2004] 88 ITD 273 (Mum.) (SB). The said claim was not made in the original return filed under Section 139(1) of the Act and it was contended that such claim can be made in the return filed in response to notice under Section 153A of the Act as it was over riding all proceedings earlier taken overall. The claim was not held to be admissible by all the authorities. When further appeal was filed, Hon'ble Rajasthan High Court while analysing the provision of sec. 132 r.w.s 153A held thus:

15 ITA Nos. 171 to 173 /JP/2020 DCIT vs. M/s Royal Jewellers therefore, the proviso provides for abatement of such pending assessment and reassessment proceedings and it is only the assessment made under Section 153A of the Act would be the assessment for the said year. 20. The necessary corollary of the above second proviso is that the assessment or reassessment proceedings, which 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 such cases, where the assessments already stands completed, the AO can reopen the assessments or reassessments already made without following the provisions of Sections 147, 148 and 151 of the Act and determine the total income of the assessee. 21. The argument raised by the counsel for the appellant to the effect that once a notice under Section 1534 of the Act is issued, the assessments for six years are at large both for the AD and assessee has no warrant in law. 22.In the firm opinion of this Court from a plain reading of the provision along with the purpose and purport of the said provision, which is intricately linked with search and requisition under Sections 132 and 132A of the Act, it is apparent that:

1) the assessments or reassessments, which stand abated in terms of Il proviso to Section 153A of the Act, the AO acts under his original jurisdiction, for which, assessments have to be made;

2) regarding other cases, the addition to the income that has already been assessed, the assessment will be made on the basis of incriminating material and

3) in absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. Though such a claim by the assessee for the first time under Section 153A of the Act is not completed, the case in hand, has to be considered at best similar to a case where in spite of a search and/or requisition, nothing incriminating is found. In such a case though Section 153A of the Act would be triggered and assessment or reassessment to ascertain the total income of the person is required to be done, however, the same would in that case not result in any addition and the assessments passed earlier may have to be reiterated.(emphasis supplied)

Noticing the above ratio laid down, it can be safely concluded that when a search is initiated in the case of an appellant, the AO shall issue notice to such person requiring

16 ITA Nos. 171 to 173 /JP/2020 DCIT vs. M/s Royal Jewellers him to file return in respect of each assessment years falling within six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted and shall assess or reassess the total income for such years. However as per second proviso, only those assessments will abate which are pending on the date of search. Thus the assessment not pending on the date of search will not abate and assessment for such non pending years will be only on the basis of incriminating material found during search in respect of non abated assessment, though the assessment is to be framed regarding, the addition to the income that has already been assessed, the assessment will be made on the basis of incriminating material and in absence of any incriminating material, the completed assessment can be reiterated Just as the appellant cannot raise any additional claim for any exemption/deduction in respect of unabated assessment where no incriminating material is found, the powers of the AD will be ali limited to make addition/disallowances only to the extent of incriminating material for a non abated assessment. The judgment of jurisdictional high court in the case of at Steel (supra) has been considered in all the judgments of Delhi High court, Karnataka High Court and Gujarat High court relied upon by the appellant and therefore they are not discussed herein. At the same time, useful reference can be made to the judgment of Hon'ble Bombay High Court in the case of Murali Agro Products Ltd. (2014) 49 Taxmann.com 172 where it was held thus:

17 ITA Nos. 171 to 173 /JP/2020 DCIT vs. M/s Royal Jewellers 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.

18 ITA Nos. 171 to 173 /JP/2020 DCIT vs. M/s Royal Jewellers assessment/reassessment were contrary to the facts unearthed during the course of 153A proceedings.

The above quoted passage was also approved by Bombay High court in the case of Continental Warehousing Corporation (374 ITR 645, para 30 thereof) It appears that there is unanimity of view on the subject that when a search is initiated and an assessment is to be framed u/s 153A in respect of a year which was not pending on date of search and which does not abate, the same can be only on the basis of incriminating material. In absence of any incriminating material, the completed assessment can be reiterated. Completed assessment can be interfered with by the AO while making assessment u/s 153A only on the basis of some incriminating material unearthed during the course of search which were not produced or not already disclosed. I have not come across any contrary view being taken by jurisdictional high court or tribunal. Thus following the decision of Jurisdictional high court in the case of Jai Steel (supra) as also Delhi, Bombay, Karnataka and Gujarat high court cited (supra)

Section 153A of the Income-tax Act, 1961- Search and seizure (General) principles) - Assessment years 2001-02 to 2003-04 and 2004-05- High Court in impugned order held that invocation of section 153A to re-open concluded assessments of assessment years earlier to year of search was not justified in absence of incriminating material found during search qua each such earlier assessment year-Whether SLP against said decision was to be dismissed-Held, yes [Para 2] In favour of assessee]

Further, similar view of also taken in the following judgments, including by Hon'ble ITAT Jaipur, in many cases:

a) Vijay Kumar D Agarwal V/S DCIT in IT(SS)A Nos 153, 154, 155 & 156/Ahd/2012

b) Ratan Kumar Sharma vs. DCIT ITA 797 & 798/Jaipur/2014

c) Vikram Goyal vs DCIT ITA 174/laipur/2017 etc

d) Jadau Jewellers & Manufacturer PL VS. ACIT (686/Jaipur/2014)

19 ITA Nos. 171 to 173 /JP/2020 DCIT vs. M/s Royal Jewellers

e) Prateek Kathari Vs. ACIT (312/Jarpur/2015.

13.2 Considering the above, I am of the view that as the additions made by the AO are without any reference to the seized material are not legally tenable. The same are therefore directed to be deleted. The legal ground taken by the appellant is thus allowed. Since appellant succeeds on legal ground it is not necessary to adjudicate the grounds on merits.”

challenged the order of the ld. CIT(A) on the grounds as raised and

reiterated here in above. A propose to the grounds so raised the ld. DR has

relied upon the following submissions:

S. No. Description of the case Page No. 1 Synopsis and written submission 1-9 2 Commissioner of Income-tax, Thichur v. ST. Francis Clay Décor Tiles [2016] 70 10-22 taxmann.com 234 (Kerala) 3 E.N. Gopakumar vs. Commissioner of Income-tax (Central) 23-28 [2016] 75 taxmann.com 215 (kerala) 4 Commissioner of Income-tax 1 v. MGF Automoblies Ltd. [2016] 72 taxmann.com 29-30 240(SC) 5 Commissioner of Income-tax, Trichur v. Dr. P. Sasikuarm [2016] 73 31-48 taxmann.com 173 (kerala) 6 Canara Housing Development Co. v. Deputy Commissioner of Income-tax, 49-58 Central Circle-1(1), Bangalore [2014] 52 taxman.com 98 (Karnataka) 7 Commissioner of Income-tax, Central, Kanpur vs. Raj Kumar Arora [2014] 52 59-57 taxmann.com 172 (Allahabad) 8 A. Kishore Kumar v. Deputy Commissioner of Income-tax, Central Circle-IV 68-73 (1), Chennai [2014] 52 taxmann.com 449 (Madras) 9 Principal Commissioner of Income-tax, Delhi-2 v. Best Infrastructure (India) (P.) 74-75 Ltd [2018] 94 taxmann.com 115 (SC) 10 DR. A. V. Sreekumar v. Commissioner of Income Tax, Kochi [2018] 90 76-90 taxmann.com 355 (Kerala) 11 Principle Commissioner of Income Tax v. Gahoi Foods (P) Ltd [2020] 117 91-98 taxmann.com 118 (SC) 12 Sunny Jacob Jewellers and Wedding Centre vs. DCIT [2014] 48 taxmann.com 99-108 347 (Kerala) 13 Orma Marble Palace P. Ltd. vs. Commissioner of Income-tax-1 [2019] 110 109-123 taxmann.com 436 (SC)

20 ITA Nos. 171 to 173 /JP/2020 DCIT vs. M/s Royal Jewellers Written submission is reiterated here in below :

“1 In this case, the ld. CIT(A) has deleted the additions made by the AO on the legal ground that since no incriminating material was found as a result of search action u/s 132 of the Act, therefore, the additions made by the AO in the assessment order is without authority: of law. The Id. CIT(A) has not decided the matter on merit.

1.1 It is submitted that as per provisions of section 153A, the AO has to issue notices u/s 153A(1) of the Act for six assessment years immediately preceding the assessment year relevant to the previous year in which search was conducted. Further as per provisions of section 153A(1)(b), the AO has to assess or reassess the total income of such years. Therefore, in pursuance to these notices issued u/s 153A(1), the AO has to assess or reassess the total income for the relevant assessment years. Further, there is no mention in the section that these assessments should be based on incriminating material found during the course of search.

2.1 Further, even otherwise, if a return of income was filed u/s 139 of the Act, which was processed u/s 143(1)(a) of the Act and no assessment order was passed u/s 143(3)/144, the AO can made addition to the total income of the assessee in pursuance to notice issued u/s 153A even in the absence of incriminating material as the said processing/intimation u/s 143(1)(a) is not an assessment order as held by the Hon'ble Apex Court in the case of ACIT Vs Rajesh Jhaveri Stock Brokers (P.) Ltd. [2007] 161 Taxman 316 (SC) and subsequently reiterated in Dy. CIT v. Zuari Estate Development & Investment Co. Ltd. [2015] 63 taxmann.com 177/[2016] 236 Taxman 1 (SC).

2.2 As per 2nd proviso to section 153A, assessment proceedings pending on the date of search shall abate. Further, in view of the provisions of section 153A(2), only the abated assessment proceedings could be revived if the assessment made u/s 153A(1) is annulled. It would be appropriate to reproduce the provisions of section 153A(2) of the Act as under: (2) If any proceeding initiated or any order of assessment or reassessment made under sub-section (1) has been annulled in appeal or any other legal proceeding then, notwithstanding anything contained in sub-section (1) or section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to sub-section (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Commissioner: 3 Thus, in view of the above, it is submitted that if no scrutiny assessment u/s 143(3144 of the Act was made earlier, then the AO is duty bound to assess the total income of the assessee, whether it is based on incriminating material found during the course of

21 ITA Nos. 171 to 173 /JP/2020 DCIT vs. M/s Royal Jewellers search or on the basis of information available on record or comes to his notice during the assessment proceedings. Otherwise, in the case of assessee, in whose case a search was conducted and there was no assessments u's 143(3) or 144 in respect of six assessment years for which notice u/s 153A have to be issued, there would be no assessment order and the revenue would not get any opportunity to assess such income, which could not be the intention of the legislature.

(i) It would be appropriate to reproduce the head note in the case of CIT Vs ST. Francis Clay Decor Tiles [2016] 70 taxmann.com 234 (Kerala) as under:

"Section 1534. read with section 132 and 132A of the Income-tax Act, 1961- Search and seizure-Assessment in case of (Scope of) - Assessment years 2002- 03 to 2006-07 Whether where there was a disclosure made by giving a statement during course of search. Assessing Officer, by virtue of power conferred on him under section 1534 was competent to issue notice under said provision and require assessee firm to furnish returns as provided thereunder- Held, yes Whether neither under section 132 nor under section 153A, phraseology incriminating' is used by Parliament, therefore, any material which was unearthed during search operations or any statement made during course of search by assessee is a valuable piece of evidence in order to invoke section 153A-Held, yes [Para 21][Matter remanded In favour of revenue]

(ii) The head note in the case of E.N. Gopakumar Vs CIT [2016] 75 taxmann.com 215 (Kerala) is as under.

"Section 153A, read with section 132, of the Income-tax Act, 1961-Search & seizure-Assessment in case of (Scope of Whether for issuance of a notice under section 1534(1)(a), it is not necessary that search on which it was founded should have necessarily yielded any incriminating material against assessee or person to whom such notice is issued Held yes - Whether, therefore, assessment proceedings generated by issuance of a notice under section 1534(1)(u) can be concluded against interest of assessee including making additions even without any incriminating material being available against assessee in search under section 132 on basis of which notice was issued under section 1534(1)(a)- Held yes [Paras 7 and 8] [In favour of revenue]"

(iii) In the case of CIT Vs MGF Automobiles Ltd. [2016] 72 taxmann.com 240 (SC), the SLP filed by the department has been admitted. The head note is as under

22 ITA Nos. 171 to 173 /JP/2020 DCIT vs. M/s Royal Jewellers

Section 1534. of the Income-tax Act, 1961-Search and seizure- Assessment in case of (Conditions precedent) Assessment years 2004-05 and 2005-06 Pursuant to High Court's order company CML was amalgamated with assessee- company from 1-4-2003-In returns of income, assessee set off losses of company CMI. against its income-Thereafter a search took place in assessee's premises and certain incriminating material was seized, which was stated to be destroyed in a fire that took place at premises of revenue-Consequent to search. Assessing Officer framed assessments disallowing set off of losses of company CML and made additions High Court by impugned order held that since Assessing Officer proceeded to frame assessments under section 153A relying on some information not unearthed during search, assessment orders so passed were not sustainable in law - Whether Special Leave Petition filed against impugned order was to be granted - Held, yes [Para 2] [In favour of revenue]

(iv) The head note in the case of CIT Vs Dr. P. Sasikumar [2016] 73 taxmann.com (Kerala) is as under: "I Section 153A, read with sections 132 and 1324, of the Income-tax Act, 1961 173 -Search and seizure-Assessment in case of (Submission of returns for six years) -Assessment years 2002-03 to 2008-09- Whether any material unearthed during search operations or any statement made during course of search by assessee is a valuable piece of evidence in order to invoke section 1534 Held, yes Whether once search is initiated under section 132 or a requisition is made under section 132A, Assessing Officer is empowered to issue notice to person searched requiring him to furnish return of income in respect of each of following six assessment years as referred to in clause (b) of section 1534(1) - Held, yes- Whether once aforesaid notice is issued assessee has to furnish all details with respect to each assessment year since same is treated as a return filed under section 139-Held, yes- Whether even if no documents are unearthed, nor any statement was made by assessee during course of search under section 132 or any material is received for afore specified period of six years, assessee is bound to file a return-Held, yes - Whether abatement of assessment or reassessment pending on date of initiation of search within period of six assessment years specified under section 153A will also not absolve assessee from his liability to submit returns as provided under section 1534(1)(a)-Held, yes [Paras 5 & 6) [In favour of revenue]

(v) The head note in the case of Canara Housing Development Co. Vs DCIT [2014] 49 taxmann.com 98 (Karnataka) is as under:

23 ITA Nos. 171 to 173 /JP/2020 DCIT vs. M/s Royal Jewellers "Section 1534, read with section 263, of the Income-tax Act, 1961-Search and seizure-Assessment in case of search or requisition (Conditions precedent) - Assessment year 2008-09- Whether once proceedings under section 1534 is initiated, pursuant to search, order of assessment in respect of six years stands reopened and, therefore, in absence of any valid assessment order in existence, revisional proceedings under section 263 cannot be initiated in such a case- Held, yes [Paras 10 and 111 [In favour of assessee]

Section 153A, read with section 132, of the Income-tax Act, 1961-Search and seizure - Assessment in case of search or requisition (Conditions precedent) - Assessment year 2008-09 Whether condition precedent for application of section 153A is that there should be a search under section 132, however, initiation of proceedings is not dependent on any undisclosed income being unearthed during such search - Held, yes [Para 107" (vi) The head note in the case of CIT Vs Raj Kumar Arora [2014] 52 taxmann.com 172 (Allahabad) is as under: "Section 1534, read with section 143 of the Income-tax Act, 1961-Search and seizure - Assessment in case of (Scope of assessment) - Assessment year 2000- 01-Whether Assessing Officer has power to reassess returns of assessee not only for undisclosed income, which was found during search operation but also with regard to material that was available at time of original assessment- Held, yes [Para 111 [In favour of revenue/Matter remanded]

(vii) The head note in the case of B. Kishore Kumar Vs DCIT [2014] 52 taxmann.com 449 (Madras) is as under: "Section 694, read with sections 143, 153, 1334 of the Income-tax Act, 1961- Unexplained moneys (Admission in sworn statement) Assessment years 2001- 02 to 2007-08-Assessing Officer made additions as undisclosed income on basis of sworn statements of assessee during search and seizure-Assessee made out an issue that submissions of certain materials by him were not considered by Assessing Officer-However assessee himself stated in sworn statement that he had separate business income which was not included in his returns and outstanding loans were to be recovered with interest, hence that was a clear admission and there was no necessity to scrutinize documents Whether therefore Assessing Officer was justified in bringing to tax undisclosed income- Held yes [Paras 5,6 & 71 [In favour of revenue]

It may be mentioned that the SLP filed by the assessee has been dismissed by the Hon'ble Apex Court as reported in [2015] 62 taxmann.com 215 (SC).

24 ITA Nos. 171 to 173 /JP/2020 DCIT vs. M/s Royal Jewellers (viii) The SLP filed by the department in the case of PCIT Vs Best Infrastructure (India) (P.) Ltd. [2018] 94 taxmann.com 115 (SC) has been admitted. The head note is as under:

"Il Section 153A of the Income-tax Act, 1961- Search and seizure-Assessment in case of (General)- Assessment years 2005-06 to 2009-10- High Court by impugned order held that where during search proceeding one of directors of assessee-company surrendered a certain sum as undisclosed income only for assessment year in question and not for each of six assessment years preceding year of search, said submission could not be said to be incriminating material qua each of preceding assessment years and, consequently, assumption of jurisdiction under section 1534 and consequent additions made by Assessing Officer on said basis were not justified Whether SLP against said impugned order was to be allowed-Held, yes [Para 1] [In favour of revenue]"

(IX) The head note in the case of DR. A. V. Sreekumar Vs CIT [2018] 90 taxmann.com 355 (Kerala) is as under:

"Section 153A. read with sections 132 and 143 of the Income-tax Act, 1961- Search and seizure-Assessment in case of (Scope of)- Assessment years 1999. 2000 and 2000-2001- Search was conducted at premises of assessee on basis of two documents received before search by Department through a Tax Evasion Petition allegedly filed by one of brokers involved in transaction pursuant to which notices under sections 1534 and 143 were issued and assessment orders were passed for respective years making additions - Assessee contended that documents relied on to make additions, being not one seized in search conducted, proceedings under section 153A read with section 143 were non-est- However it was pursuant to search and enquiry conducted thereafter that it was revealed that assessee had rental income from a flat purchased at Bangalore which had been sold-Further, suppressed account maintained by assessee in which there was unaccounted consideration from purchaser also was unearthed and exact amount of income escaped from assessment was supported by ample evidence- Whether therefore, no ground could be taken that other material which were already available with Department could not be relied on in proceedings- Held, yes [Paras 13, 21 and 22] [In favour of revenue]"

(X) The ld AR has placed reliance on the case of PCIT Vs Meeta Gutgutia [2018] 96 taxmann.com 468 (SC). It may be mentioned that vide above judgement dated 02.07.2018, the SLP filed by the department was dismissed. However, vide order dated 16.09.2019 in the case of PCIT Vs Devi Dass Garg [2020] 114 taxmann.com 552 (SC),

25 ITA Nos. 171 to 173 /JP/2020 DCIT vs. M/s Royal Jewellers the Hon'ble Apex Court has admitted the SLP filed by the department. The head note is reproduced as under:

"Section 132, read with section 153A of the Income-tax Act, 1961 - Search and seizure-General (Scope of) - In course of appellate proceedings, Tribunal deleted addition made by Assessing Officer in course of scrutiny assessment primarily on ground that no fresh material was discovered during search and seizure proceedings under section 132 to justify addition under section 153A-High Court confirmed order passed by Tribunal - Whether, on facts, SLP filed against said order of High Court was to be granted - Held, yes [Para 2] [In favour of revenue]"

(X-A) On the same date, Hon'ble Apex Court has also admitted SLP on the same issue in the case of PCIT Vs Dhananjay International Ltd [2020] 114 taxmann.com 351 (SC)

(XI) Similarly, vide order dated 24.01.2020 in the case of PCIT vs. Gahoi Foods (P.) Ltd. [2020] 117 taxmann.com 118 (SC), the Hon'ble Apex Court has admitted SLP filed by the department. The head note is as under:

"Section 153A, read with section 132 of the Income-tax Act, 1961 - Search and seizure - Assessment in case of (Scope of) - Assessment years 2005-06 to 2011- 12- Assessee-company was engaged in production of 'Gutka-Assessing Officer, mainly relying upon Notification No. 30/2008-Central Excise (NT), dated 1-7-2008 came to conclusion that assessee was engaged in unaccounted production and sale of 'Gutka' -He thus made addition to assessee's income - Tribunal opined that Assessing Officer while making assessment under section 153A could make addition only on basis of some incriminating material unearthed during course of search or requisition of documents - Tribunal further concluded that since no incriminating documents during course of search were found, impugned addition made by Assessing Officer was not sustainable High Court upheld Tribunal's order Whether, on facts, SLP filed against order of High Court was to be granted Held, yes [Para 2][In favour of revenue]" (XII) It is therefore humbly submitted that the issue has not been conclusively decided by the Hon'ble Apex Court in the case of Meeta Gugutia (Supra) as relied upon by the Id. AR, otherwise, these SLPs should not have been admitted by the Hon'ble Apex Court.

(XIII) In the case of Sunny Jacob Jewellers And Wedding Centre v. DCIT [2014] 48 taxmann.com 347 (Kerala), it was held that: In the case of CIT v. Hotel Meriya [2010] 195 Taxman 459 (Ket.) it was held that none of the provisions under Chapter XIV-B mandates, for making block assessment there shall be evidence regarding the concealment of income for

26 ITA Nos. 171 to 173 /JP/2020 DCIT vs. M/s Royal Jewellers every year for the block period. Though technically one is not concerned with the block assessment, based on the information as stated above for six previous assessment years, under section 153A the Department can assess or reassess in accordance with the procedure contemplated.

Therefore, there is no prohibition or embargo on the Department to consider this information for assessment or reassessments contemplated under section 153A. There is also no requirement under section 153A and other provisions requiring the Department to collect information and evidence for each and every year for six previous years under section 153A. Therefore, the argument of assessee that the information gathered either during pre-search enquiry or during the course of search cannot be made use so far as the six previous assessment years, is unsustainable.

(XIV) In the case of CIT v. Orma Marble Palace (P.) Ltd. [2019] 110 taxmann.com 435 (Kerala), it has been held that:

"23. We have already found that there is lack of material insofar as the prior years of the block period, but the same has been held to be inconsequential, in so far as the A.O being conferred with the power to make assessment in the best of his judgment. The AO was perfectly justified in carrying out an assessment on the best of judgment, making estimations on the basis of the materials recovered. As has been found in Hotel Meriya, it cannot be assumed that a dealer who practises suppression would retain the materials disclosing suppression, for long years; in the instant case a block period of 6 years. There is also no presumption insofar as the suppression having occurred only in the year in which the search was conducted. If at all, the presumption is otherwise insofar as the special procedure prescribed under Chapter XIV-B to assess undisclosed income for a block period, comprising of assessment years prior to the date of search, on the basis of the materials recovered at the search and other evidences available before the AO relatable to such material. At the risk of repetition, it has to be noticed that the block assessment prescribed under Chapter XIV-B also confers power on the AO to make assessment on the best of judgment."

XV In Orma Marble Palace P. Ltd. V. CIT [2019] 110 taxmann.com 436 (SC), SLP filed by the assessee has been dismissed.

XVI In the case of CIT v. H.M. Esufali [1973] 1973 taxmann.com 150 (SC), the estimate of taxable turnover was made by the Assessing Authority for the entire year on the basis

27 ITA Nos. 171 to 173 /JP/2020 DCIT vs. M/s Royal Jewellers

of the escaped turnover noted in bill book for a period of 19 days was held to be legal and justified by the Hon'ble Apex Court.

9.1 The ld. DR also emphasized on the following compilation of case

law(s):-

S. No. Description of the case Page No. 1 [1963] 49 ITR 112 (SC) Sreelekh Banerjee vs. CIT 1-10 2 [2012] 25 taxmann.com 552 (SC) Zaveri Diamonds vs. CIT 11-12 3 [2016] 69 taxmann.com 219 (SC) Sudhir Kumar Sharma (HUF) 13-14 4 [2020] 118 taxmann.com 166 (Delhi) Ravinder Kumar vs. ITO 15-20 5 [2013] 36 taxmann.com 513 (Delhi) Commissioner of Income-tax vs. Ajay 21-29 Kapoor 6 [2019] 106 taxmann.com 128 (SC) Bannalal Jat Constructions (P.) Ltd,. vs. 30-40 Assistant Commissioner of Income-tax 7 Ravi Mathur & Others (D.S. Appeal No. 67/2002 & others) 13.05.2016 41-56 8 PCIT vs. Shri Roshan Lal Sanchti, D.B. ITA No. 47/2018 dated 30.10.2018 57-74 Rajasthan High Court. 9 [2017] 82 taxmann.com 315 (Mumbai- Trib.) Ms. Chhaya P. Gangar vs. Deputy 75-95 Commissioner of Income-tax 10 [2017] 88 taxmann.com 700 (Patna) Dr. Gauri Shankar Prasad vs. Income-tax 96-102 Appellate Tribunal, Patna

9.2 Further, in this appeal the ld. DR representing the revenue has also

submitted synopsis of additions made in the case of Royal Jewellers in A.Y

2011-12 to 2013-14 which are reiterated as under:-

AY Additions by A.O Amount Decision of ld. CIT(A)

28 ITA Nos. 171 to 173 /JP/2020 DCIT vs. M/s Royal Jewellers

2011-12 1. Trading addition 35,70,442 1. Deleted the addition on legal ground that assessment was completed and no incriminating material was seized

2013-14 1. Trading addition 70,80,598 1. Deleted the addition on legal ground that assessment was completed and no incriminating material was seized

9.3 In addition the ld. DR representing the revenue submitted that

considering the loose papers found the finding of the ld. CIT(A) not

corrected and the appeal should have been decided based on the merits of

the case instead only on technical ground.

29 ITA Nos. 171 to 173 /JP/2020 DCIT vs. M/s Royal Jewellers

the order of the ld. CIT(A) based on the detailed finding and to counter the

grounds of the revenue the ld. AR of the assessee has placed their written

submission which is extracted in below;

“Brief facts of the case are that the appellant is a partnership firm engaged in the business of manufacturing and trading of jewellery having its principal place of business at 1756, Telipada, SMS Highway, Jaipur. The place of business of the appellant firm is commonly used by the appellant’s sister concern “M/s Shrinath Corporation” which is solely engaged in wholesale trading of bullions. Admittedly, as submitted above, though both the concerns are sharing common place for their business activities but the nature of business is all-together different.

A search and seizure action u/s 132 of the Income Tax Act, 1961 (herein after referred to as the act) was carried out on 28/07/2016 by the Income Tax department on CP Garg group of which the appellant is one of the constituent and as a result its business premises and residential premises of its partners were also searched. During the course of search various loose papers/ documents were seized besides the seizure of cash, valuables etc. from various places including from the business premises of the appellant. Besides the statements of the partners of the assessee firm, their family members and employees were also recorded.

Subsequent to the search, in response to notices u/s 153A returns of income for the following years were filed declaring Total Income as under: Sl. Assessment Date of filing Return of Total APB No. Year Income Income 1. 2011-12 07-04-2017 7,31,370/- 4 2. 2012-13 07-04-2017 7,31,880/- 4 3. 2013-14 07-04-2017 10,03,130/- 4

The ld. Assessing Officer (herein after referred to as the “ld. AO”) completed the assessments u/s 143(3) r.w.s. 153A of the Act by making various additions after invoking the provisions of section 145(3) and by applying the GP rate.

Aggrieved of the additions made by ld. AO, assessee preferred appeal before ld.CIT(A), who decided the legal issue in favour of the appellant accordingly the assessment

30 ITA Nos. 171 to 173 /JP/2020 DCIT vs. M/s Royal Jewellers framed u/s 153A by making additions without referring to any seized material pertaining to the assessment years 2011-12 to 2013-14 were quashed by a common order for all the three years. Against such order department has preferred present appeals before the hon’ble bench challenging such order.

Departmental grounds of appeal No. 1 to 8 All these grounds of appeal are in relation to the order of ld. CIT(A) quashing the orders passed u/s 153A wherein additions were made without making reference to any material found and seized as a result of search pertaining to these three assessment years thus a common submission is made for all the grounds taken in AY 2011-12 to AY 2013-14.

As submitted above, during the course of search various loose papers / documents were seized besides the seizure of cash and valuables etc. from the business premises of the appellant, its sister concerns and also from the residential premises of its partners and their relative. The ld. AO while invoking the provisions of section 145(3) has made general observation and no paper whatsoever found as result of search pertaining to AY 2011-12 to AY 2013-14 were referred.

Admittedly, no incriminating document whatsoever was found at any place indicating any transaction pertaining to A.Y. 2011-12 to 2013-14. Your honours would appreciate that books of accounts were rejected by ld. AO on the basis of generalized discrepancies having no connection with any loose paper / material found / seized as a result of search and consequent trading additions made by ld.AO were based on assumptions, presumptions and surmises the ld. AO and also based on the conclusions drawn in the subsequent assessment years for which the entries were found recorded in seized material.

Ld. CIT(A) after considering this fact and also verifying the same form the assessment orders and also by appreciating that no proceedings whatsoever, were pending for these assessment years, quashed the orders so passed. While making observation, ld. CIT(A) followed the decision of the jurisdictional high court in the case of Jai Steel reported in 259 CTR 281 and also of the hon’ble Supreme court in the case of Meeta Gutgutia reported in 396 ITR 691.

As is evident form the assessment orders for Ay 2011-12 to AY 2013-14, ld. AO has referred few papers seized from the residential premises of partners of the appellant which as per the ld. AO are parallel Balance Sheets for FY 2013-14 and 2015-16 and not related to AY 2011-12 to 2013-14. Ld. AO based on these assumed that there might be certain transaction in earlier years also which were not recorded in the books of

31 ITA Nos. 171 to 173 /JP/2020 DCIT vs. M/s Royal Jewellers accounts and based on such presumptions has made the additions of the average amount of profits alleged as found noticed in those Balance Sheets. It is thus submitted such action of the ld. AO in assuming the profits for Ay 2011-12 to 2013-14 further strengthen the contention of the appellant that there was not a single entry found recorded in any of the loose paper/ document found as a result of search pertaining to the assessment years 2011-12 to 2013-14.

It is humbly submitted that, the impugned assessment orders of Ld. AO suffers from serious error of law in-as-much-as, it is not based on a single loose paper found / seized as the result of search conducted in the case of assessee; on the other hand and contrary to the law, this order is clearly in the nature of regular assessment order and therefore, could not have been made under the garb of section 153A particularly when the returned income was accepted by department and the case of assessee was not picked up for scrutiny and thus assessment for the year under appeal in the case of assessee was not pending before the Ld. AO, as on the date of search. Thus, when no assessment proceedings pertaining to the assessment years under appeal were pending before the Ld. AO, no proceedings could have abated due to the search and therefore, cannot be considered as merged into the assessment u/s 153A. It may kindly be noted that, the returned income was processed and accepted by the department and the case was not picked for scrutiny in any of the assessment years, and thus the assessments in the case of assessee for the years under appeal stood already finalized. No proceedings relating to the assessment with respect to assessment years 2011-12 to 2013-14 were pending before the Ld. AO as on the date of search, and therefore, the Ld. AO’s jurisdiction was merely limited to the material found during the course of search and he could not have completed the assessment u/s 153A without referring to any material found / seized during the course of search. Therefore, it was not permissible for the Ld. AO to make regular scrutiny assessments under the garb of assessment u/s 153A in view of the fact that the returned income was accepted and the cases were not selected for scrutiny.

It is further submitted that, it is settled proposition of law based on numerous judgments of Hon’ble High Courts (including Jurisdictional High Court) and a plethora of ITAT decisions that no additions could be made in the assessment u/s 153A for a particular assessment year on the issues for which no incriminating material was found as a result of search. Thus, it is submitted that the trading additions made vide impugned assessment without referring to any incriminating documents found during search could not have been made at all in assessment made u/s 153A on income which already stood accepted especially when no incriminating material in this regard was found as a result of search.

32 ITA Nos. 171 to 173 /JP/2020 DCIT vs. M/s Royal Jewellers In this regard, reliance is placed on:

Jai Steel India v. ACIT reported in 259 CTR 281(Rajasthan HC) In a case where nothing incriminating is found though s. 153A would be triggered and assessment or reassessment to ascertain the total income is required to be done, the same would not result in any addition and the assessments made earlier may have to be reiterated. Argument of the counsel that the AO is free to disturb the income, expenditure or deduction dehorns any incriminating material while making the assessment u/s 153A is not borne out from the scheme of the said provision. Provisions of ss. 153A to 153C cannot be interpreted to be further innings for the AO and / or the assessee beyond the provisions of ss. 139, 147 and 263A harmonious construction of the entire provisions of s. 153A would lead to an irresistible conclusion that the word ‘assess’ has been used the context of abated proceedings and ‘reassess’ has been used for completed assessment proceedings which do not abate as they are not pending on the date of initiation of the search or making of requisition and can be tinkered only on the basis of incriminating material found during the course of search or requisition of documents, therefore, it is not open to the assessee to seek deduction or claim relief not claimed by it in the original assessment which already stands completed in an assessment u/s 153A made in pursuance of a search or requisition.”

CIT Vs. Kabul Chawla reported in 380 ITR 573 (Delhi High Court) The legal position that emerges on a perusal of section 153A and section 132 of the Income-tax Act, 1961, 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 in respect of whom search was conducted requiring him to file returns for six assessment years immediately preceding the previous year relevant to the assessment year in which the search takes place. (ii) Assessments and reassessments pending on the date of the search shall abate. The total income for such assessment years will have to be computed by the Assessing Officers as a fresh exercise. (iii) The Assessing Officer will exercise normal assessment powers in respect of the six years previous to the relevant assessment year in which the search takes place. The Assessing Officer has the power to assess and reassess the “total income” of the 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 assessment years 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 Assessing Officer 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

33 ITA Nos. 171 to 173 /JP/2020 DCIT vs. M/s Royal Jewellers material. Obviously, an assessment has to be made under this section only on the basis of the seized material.

Hon’ble Delhi High Court in the case of Pr. CIT vs Meeta Gutgutia vide order dated 25.05.2017 reported in 396 ITR 691, after discussing decisions of various courts on the issue, decided the appeal in favour of assessee by holding that invocation of provisions of section 153A is unjustified in respect of years for which no incriminating documents were found and also no assessment was pending on the date of search. This decision of the Hon’ble Delhi High Court has become final as the SLP has been dismissed by the Supreme court.

In this case in para 63, it is further observed by Hon’ble Court that in case of Kurle Papers Mills Pvt. Ltd., (which was decided by Hon’ble Delhi High Court in favour of assessee), Hon’ble Supreme Court has dismissed the revenue’s SLP on 07.12.2015.

Reliance is also placed on:

- Dr. Ratan Kumar Sharma vs ACIT (ITAT JAipur) ITA No.797-798/JP/14 - Dr. Vikram Goyal vs DCIT (ITAT Jaipur) ITA No.174/JP/17 - All Cargo Global Logistics Ltd. v. DCIT (2012) 18 ITR (Trib) 106 (Mumbai) (SB) – Later on upheld by Bombay High Court. - Gurinder Singh Bawa v. DCIT (2012) 28 Taxmann.com 328 (Mum Trib), - Kusum Gupta v. DCIT, ITA Nos. 4873/Del/2009, (2005-06)2510 (A.Y. 2003-04), 3312(A.Y. 2004-05) 2833/Del/2011(A.Y. 2006-07) - MGF Automobiles Ltd. V. ACIT, ITA No’s 4212 & 4213/Del/2011 - Tarannum Zafar Khan Vs. ACIT, ITA Nos. 5888 to5890/Mum/2009 - Vee Gee Industrial Enterprises vs. ACIT, ITA No. 1/Del/2011& ITA No.2/Del/2011 - ACIT Vs. Shri Manoj Narain Aggarwal, ITA Nos. 5518 to 5524/Del/2012 (ITAT- Delhi) - Mir Mazharuddin ITA Nos. 1153 to 1159/Hyd/2012 - Asha Kataria, I.T.A. Nos. 3105, 3106 & 3107/Del/2011 - M/s Jadau JewellersVs. ACIT ITA Nos. 686/JP/2014 - Damodar Das Agarwal Vs. ACIT in ITA Nos. 152 to 155/JP/2015 - Nirmal Kumar Agarwal Vs. ACIT in ITA Nos. 156 & 157/JP/2015

Therefore, in these facts and circumstances and in view of the well-established law in this regard, it is submitted that ld. CIT(A) has rightly held that the assessments completed by making trading additions u/s 153A for A.Y. 2011-12 to 2013-14 without referring to any paper whatsoever seized containing any entries related to these years and therefore, such orders deserves to be upheld.”

34 ITA Nos. 171 to 173 /JP/2020 DCIT vs. M/s Royal Jewellers

10.1 The ld. AR of the assessee based on the finding recorded in the

assessment order at page 21 submitted that the ld. AO himself admitted

that the based on which the addition made related to the FY 2013-14 to FY

2015-16 relevant to AY 2014-15 to 2016-17. Once the same is categorically

admitted the addition based on the other documents which were not in the

nature of incriminating material no addition can be made in the hands of the

assessee for which he relied upon the various judgement cited in the written

submission.

available on record and gone through findings of the lower authorities

recorded in their orders as well as gone through the various judicial rulings

placed before us by both the parties to drive home their contentions. Brief

facts pertaining to the issue are that appellant is a partnership firm engaged

in the business of manufacturing and trading of jewellery having its principal

place of business at 1756, Telipada, SMS Highway, Jaipur. This place of

business of the appellant firm is also used by appellant’s sister concern

namely “M/s Shrinath Corporation”, which is solely engaged in wholesale

trading of bullion and thus though both the concerns are sharing common

35 ITA Nos. 171 to 173 /JP/2020 DCIT vs. M/s Royal Jewellers place for their business activity but nature of business is altogether

different. A search and seizure action u/s 132 of I.T. Act was carried out on

28.07.2016 by Income Tax Department on C.P. Garg Group, of which

appellant is one of the constituent and business premises as well as

residential premises of its partners were also searched. During search

cash, valuables and various loose papers / documents related to the group

persons / concerns were found and seized, though no incriminating

documents of the appellant firm for the period relevant to A.Y. 2011-12,

2012-13 or 2013-14 were found or seized as recorded in the order of the

assessment at page 21.

was issued to the assessee to file the return of income for the year under

consideration. In response to the notice u/s 153A, the appellant filed its

return of income and assessment was completed u/s 143(3) r.w.s. 153A by

ld. AO by making additions after invoking provisions of section 145(3) and

applying the GP rate. Aggrieved with the addition made by ld. AO, the

assessee preferred appeal before ld. CIT(A) who deleted the additions so

made u/s 153A in A.Y. 2011-12 to 2013-14, because additions so made

were without referring to any seized material pertaining to these

36 ITA Nos. 171 to 173 /JP/2020 DCIT vs. M/s Royal Jewellers assessment years having nature of incriminating nature, by passing a

common order for all the aforesaid three years. Against such order, revenue

has preferred present appeals before us challenging the order of ld. CIT(A).

As all the grounds of appeal viz ground No. 1 to 8 are in relation to allowing

the appeal of the assessee wherein additions were made without making

reference to any seized material found as a result of search relevant to

concerned assessment years. Ld. CIT DR and also ld. AR of the appellant

has submitted their respective submissions common for all the grounds.

Accordingly, these 8 grounds are decided together. In the submission made

by the ld. CIT DR has referred to the Judgement of Keral High Court

decisions in the case of CIT Vs. Saint Francis Clay Décor Tiles (supra),

E.N. Gopakumar Vs. CIT (supra) and CIT Vs. Dr. P. Sasikumar (supra) as

well as decision of Allahabad High Court in the case of CIT Vs. Rajkumar

Arora (supra) and some other decisions. On the other hand, ld. AR of the

appellant cited the binding decisions of Rajasthan High Court in the case of

Jai Steel India Vs. ACIT reported in 259 CTR 281 and decision of Delhi

High Court in the case of CIT Vs. Kabul Chawla 380 ITR 573 and Kurele

Paper Mills Pvt. Ltd. as well as the subsequent decision of Delhi High Court

in the case of Pr. CIT Vs. Meeta Gutgutia decided on 25.07.2017, reported

in 395 ITR 526 and Vikas Gutgutia reported in 396 ITR 691. It was further

37 ITA Nos. 171 to 173 /JP/2020 DCIT vs. M/s Royal Jewellers submitted by ld. AR of the appellant that in the case of Kurele Paper Mills

Pvt. Ltd. reported in 380 ITR 571, Hon’ble Supreme Court has dismissed

the SLP of the department on 07.12.2015. Thereafter and in a separate

matter of Meeta Gutgutia also, the SLP of the department has also been

dismissed by the Hon’ble Supreme Court. It was also submitted by the ld.

AR that in the case of PCIT Vs. Meeta Gutgutia Hon’ble Delhi High Court

has considered the various decisions available at the time in favour of

assessee as well as in favour of department and finally after elaborate

discussion it has been held that invocation of provisions of section 153A is

unjustified in respective years for which no incriminating documents were

found and no assessment was pending as on the date of search, as it is

also not disputed facts, obviously an assessment has to be made under

section 153A only on the basis of seized material which are of the

incriminating in nature. On perusal of the assessment order it is undisputed

that while making trading addition and rejecting books of accounts u/s

145(3) the ld. AO has not referred to any of the seized document found

during the course of search relevant to the years under consideration.

Though he has referred to some notings on some paper stated to be the

Balance Sheet that was also admittedly having details not at all related to

38 ITA Nos. 171 to 173 /JP/2020 DCIT vs. M/s Royal Jewellers any of the three assessment years the relevant extract of the order is

reiterated here in below:

“… it is quite evident that these documents are related to the assessee firm wherein accounted net profit has been mentioned for FY 2013-14 to 2015-16. “

be made while making the assessment order u/s 153A, without referring to

any incriminating material found during search. On this issue one of the

important decision under consideration is of Hon’ble Delhi High Court in the

case of CIT Vs. Kabul Chawla reported in 380 ITR 573 (Delhi). In this

decision, the various issues related to addition in the order u/s 153A based

on incriminating documents or otherwise and related case laws available till

then were discussed and finally at para 37 & 38, the Hon’ble Court has

observed as under:

"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 153 A(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. 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. I other words there will be only one assessment order in

39 ITA Nos. 171 to 173 /JP/2020 DCIT vs. M/s Royal Jewellers respect of each of the six AYS "in which both the disclosed and the undisclosed income would be brought to tax". iv. Although Section 153 A 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 153 A 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 153 A 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."

the absence of any incriminating material, the completed assessment can

be reiterated and the abated assessment or reassessment can be made.

The Hon'ble High Court has also referred the term used in section 153A as

"assess" which is relatable to abated proceedings and the word "reassess"

related to completed assessment proceedings. Therefore, the completed

40 ITA Nos. 171 to 173 /JP/2020 DCIT vs. M/s Royal Jewellers assessments can be interfered with by the AO while making the

assessment under section 153A only based on some incriminating material

unearthed during the course of search or requisition of document 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. The Hon'ble Delhi High Court has reiterated its view in

another case namely Principal CIT vs. Kurele Paper Mills (supra) in para 1

to 3 as under:

"1. The Revenue has filed the appeal against an order dated 14.11.2014 passed by the Income Tax Appellate Tribunal (ITAT) in 3761/Del/2011 pertaining to the Assessment Year 2002-03. The question was whether the learned CIT (Appeals) had erred in law and on the facts in deleting the addition of Rs. 89 lacs made by the Assessing Officer under Section 68 of the Income Tax Act, 1961 ('ACT) on bogus share capital. But, the issae was whether there was any Incriminating material whatsoever found during the search to justify initiation of proceedings under Section 153A of the Act. 2. The Court finds that the order of the CIT(Appeals) reveals that there is a factual finding that "no incriminating evidence related to share capital issued was found during the course of search as is manifest from the order of the AO." Consequently, it was held that the AO was not justified in invoking Section 68 of the Act for the purposes of making additions on account of share capital. 3. As far as the above facts are concerned, there is nothing shown to the court to persuade and hold that the above factual determination is perverse. Consequently, after considering all the facts and circumstances of the case, the Court is of the opinion that no substantial question of law arises in the impugned order of the ITAT which requires examination."

decision of Kurele Paper Mills of Hon'ble Delhi High Court was dismissed

by the Hon'ble Supreme Court vide order dated 7th December, 2015. In a

41 ITA Nos. 171 to 173 /JP/2020 DCIT vs. M/s Royal Jewellers subsequent decision, the Hon'ble Delhi High Court in the case of Principal

CIT vs. Meeta Gutgutia has again analyzed this issue and also considered

the decision in the case of Anil Kumar Bhatia and Chetan Das Laxman Das

referred on behalf of revenue. The Hon’ble Court at para 55 to 58 has

mentioned about these cases and has referred to the decision in the case

of Kabul Chawla where these cases have been discussed and

distinguished.

"55. On the legal aspect of invocation of Section 153A in relation to AYS 2000 01 to 2003-04, the central plank of the Revenue's submission is the decision of this Court in Smt. Dayawanti Gupta (supra). Before beginning to examine the said decision, it is necessary to revisit the legal landscape in light of the elaborate arguments advanced by the Revenue. 56. Section 153A of the Act is titled "Assessment in case of search or requisition". It is connected to Section 132 which deals with 'search and seizure'. Both these provisions, therefore, have to be read together. Section 153A is indeed an extremely potent power which enables the Revenue to re open at least six years of assessments earlier to the year of search. It is not to be exercised lightly. It is only if during the course of search under Section 132 incriminating material justifying the re-opening of the assessments for six previous years is found that the invocation of Section 153A qua each of the AYS would be justified. 57. The question whether unearthing of incriminating material relating to any one of the AYS could justify the re-opening of the assessment for all the earlier AYS was considered both in Anil Kumar Bhatia (supra) and Chetan Das Lachman Das (supra). Incidentally, both these decisions were discussed threadbare in the decision of this Court in Kabul Chawla supra). As far as Anil Kumar Bhatia (supra) was concerned, the Court in paragraph 24 of that decision noted that "we are not concerned with a case where no incriminating material was found during the search conducted under Section 132 of the Act. We therefore express no opinion as to whether Section 153A can be invoked even under such situation". That question was, therefore, left open. As far as Chetan Das Lachman Das (supra) is concerned, in para 11 of the decision it was observed: "11. Section 153A (1) (b) provides for the assessment or reassessment of the total income of the six assessment years immediately preceding the assessment year relevant to the previous year in which the search took place. To repeat, there is no condition in this Section 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 Assessing Officer

42 ITA Nos. 171 to 173 /JP/2020 DCIT vs. M/s Royal Jewellers which can be related to the evidence found. This, however, does not mean that the assessment under Section 153A 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." 58. In Kabul Chawla (supra), the Court discussed the decision in Filatex India Ltd. (supra) as well as the above two decisions and observed as under: "31. What distinguishes the decisions both in CITV. Chetan Das Lachman Das (supra), and Filatex India Ltd. v. CIT-IV (supra) in their application to the present case is that in both the said cases there was some material unearthed during the search, whereas in the present case there admittedly was none. Secondly, it is plain from a careful reading of the said two. decisions that they do not hold that additions can be validly made to income forming the subject matter of completed assessments prior to the search even if no incriminating material whatsoever was unearthed during the search. 32. Recently by its order dated 6th July 2015 in ITA No. 369 of 2015 (Pr. Commissioner of Income Tax v. Kurele Paper Mills P. Ltd.), this Court declined to frame a question of law in a case where, in the absence of any incriminating materia being found during the search under Section 132 of the Act, the Revenue sought to justify initiation of proceedings under Section 153A of the Act and make an addition under Section 68 of the Act on bogus share capital gain. The order of the CIT (A), affirmed by the ITAT, deleting the addition, was not interfered with."

High Court in the case of Jai Steel (India) Vs. ACIT (2013) 36

Taxmann.com 523 / 219 Taxman 223 has also occasion to discuss the

issue of addition u/s 153A and has held that addition could be made u/s

153A based on incriminating material found during the course of search or

requisition of documents. Hon’ble Delhi High Court in the case of Kabul

Chawla as well as in the case of Kurele Paper Mills has usefully referred to

the aforementioned decision of Rajasthan High Court in the case of Jai

Steel (India). Moreover, at para 59 of the decision in the case of Meeta

Gutgutia, the Hon’ble Court has observed about decision of Rajasthan High

43 ITA Nos. 171 to 173 /JP/2020 DCIT vs. M/s Royal Jewellers Court in Jai Steel (India) being referred and followed in Kabul Chawla,

which is as under:

44 ITA Nos. 171 to 173 /JP/2020 DCIT vs. M/s Royal Jewellers abated proceedings and reassess has been used for completed assessment proceedings, which would not abate as they are not pending on the date of initiation of the search or making of requisition and which would also necessarily support the interpretation that for the completed assessments, the same can be tinkered only based on the incriminating material found during the course of search or requisition of documents."

Court in the case of Kabul Chawla, while deciding the case of Saumya

Construction Pvt. Ltd. In this case, Hon’ble ITAT deleted the addition on the

ground that same was not based on any incriminating material found during

the course of search in respect of assessment year under consideration.

The Hon’ble Gujarat High Court referred to the decision in Kabul Chawla

and also referred to the decision of Jurisdictional Rajasthan High Court in

Jai Steel (India) and earlier decision of Gujarat High Court itself and has

explained in para 15 & 16 of its order as under:-

'15. On a plain reading of section 153A of the Act, it is evident that the trigger point for exercise of powers thereunder is a search under section 132 or a requisition under section 132A of the Act. Once a search or requisition is made, a mandate is cast upon the Assessing Officer to issue notice under section 153A of the Act to the person, requiring him to furnish the return of income in respect of each assessment year falling within six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made and assess or reassess the same. Since the assessment under section 153A of the Act is linked with search and requisition under sections 132 and 132A of the Act, it is evident that the object of the section is to bring to tax the undisclosed income which is found during the course of or pursuant to the search or requisition. However, instead of the earlier regime of block assessment whereby, it was only the undisclosed income of the block period that was assessed, section 153A of the Act seeks to assess the total income for the assessment year, which is clear from the first proviso thereto which provides

45 ITA Nos. 171 to 173 /JP/2020 DCIT vs. M/s Royal Jewellers that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years. The second proviso makes the intention of the Legislature clear as the same provides that assessment or reassessment, if any, relating to the six assessment years referred to in the sub-section pending on the date of initiation of search under section 132 or requisition under section 132A, as the case may be, shall abate. Sub-section (2) of section 153A of the Act provides that if any proceeding or any order of assessment or reassessment made under sub-section (1) is annulled in appeal or any other legal provision, then the assessment or reassessment relating to any assessment year which had abated under the second proviso would stand revived. The proviso thereto says that such revival shall cease to have effect if such order of annulment is set aside. Thus, any proceeding of assessment or reassessment falling within the six assessment years prior to the search or requisition stands abated and the total income of the assessee is required to be determined under section 153A of the Act. Similarly, sub-section (2) provides for revival of any assessment or reassessment which stood abated, if any proceeding or any order of assessment or reassessment made under section 153A of the Act is annulled in appeal or any other proceeding.

46 ITA Nos. 171 to 173 /JP/2020 DCIT vs. M/s Royal Jewellers the Act has abated, needless to state that the scope and ambit of the assessment would include any order which the Assessing Officer could have passed under section 147 of the Act as well as under section 153A of the Act.

Development Co. Vs. DCIT (2014) 49 taxmann.com 98 of Karnataka High Court. This case was decided vide order dated 25th July, 2014. However,

subsequently the Karnataka High Court in the case of IBC Knowledge Park

(P.) Ltd. (2016) 385 ITR 346 followed the decision of Delhi High Court in

Kabul Chawla (supra) and held that there had to be incriminating material

qua each of the AYS in which additions were sought to be made pursuant

to search and seizure operation. The Calcutta High Court in Salasar Stock

Broking Ltd. (supra), too, followed the decision of Delhi High Court in Kabul

Chawla (supra). In Gurinder Singh Bawa (supra), the Bombay High Court

held that:

"6. . . . . . once an assessment has attained finality for a particular year, i.e., it is not pending then the same cannot be subject to tax in proceedings under section 153A of the Act. This of course would not apply if incriminating materials are gathered in the course of search or during proceedings under section 153A of the Act which are contrary to and/or not disclosed during the regular assessment proceedings." 19. It is mentioned that the case of Dayawanti Gupta was referred on

behalf of assessee while arguing the case of Meeta Gutgutia. Hon’ble Delhi

High Court after going through the facts has distinguished the case of

47 ITA Nos. 171 to 173 /JP/2020 DCIT vs. M/s Royal Jewellers Dayawanti Gupta and has observed as under in para 70 & 71 in the case of

Meeta Gutgutia (supra):-

Rajasthan High Court have decided the issue in favour of assessee holding

that addition u/s 153A can be made only on the basis of incriminating

material found during the course of search. The ld. CIT DR has referred the

cases of Kerala High Court in the case of Saint Francis Clay Décor Tiles;

Dr. P. Sasikumar as well as E.N. Gopkumar. On perusal of these cases, it

is seen that in the first case, the issue before the Hon’ble High Court was

as to whether notice u/s 153A can be issued or not in absence of any

incriminating material found during the course of search; for which the

Hon’ble Court has held in favour of revenue in respect of issue of notice u/s

153A and there was no decision so given by the Hon’ble Court on the issue

of addition to be made or not to be made in such cases. In the case of Dr.

P. Sasikumar cited by ld. CIT DR, the Hon’ble Kerala High Court has

decided the issue of issue of notice u/s 153A in absence of any

48 ITA Nos. 171 to 173 /JP/2020 DCIT vs. M/s Royal Jewellers incriminating document, in favour of revenue. The Hon’ble Court has further

held in affirmative as to whether abatement of assessment or

reassessment pending on the date of search within period of six

assessment years will also not absolve the assessee from his liability to

submit return as provided u/s 153A(1)(a). There was no categorical

decision that even in absence of incriminating material, the addition can be

made u/s 153A. Without prejudice to above, it is seen that this decision of

Kerala High Court is of July, 2016. Similarly, another decision of Kerala

High Court in the case of E.N. Gopkumar cited by the CIT DR was decided

in 2016 and subsequent to these decisions of Kerala High Court there have

been various decisions of other High Courts in favour of assessee as has

been discussed herein above. Similarly, case of CIT Vs. Rajkumar Arora

referred by the CIT DR was decided in 2014 and there have been ample

decisions of various high courts subsequent to the above decisions in

favour of assessee. It is further seen that the SLP in the case of Kabul

Chawla was dismissed by the Hon’ble Supreme Court. Moreover SLP in

the case of Meeta Gutgutia was also dismissed by the Hon’ble Supreme

Court. The ld. CIT DR mentioned about SLP being admitted in the case of

Continental Warehousing and Best Infrastructure. In this regard we are of

the view that no final order has been passed so far by Hon’ble Supreme

49 ITA Nos. 171 to 173 /JP/2020 DCIT vs. M/s Royal Jewellers Court in the judgments cited by ld. DR. Therefore the principal of “Ratio

decendi” is not applicable with regard to aforementioned cases. Recently

after pronouncement of various judgment including the jurisdictional high

court, but now even the Honourable apex court in the case of Principal

Commissioner of Income Tax, Central-3 Versus Abhisar Buildwell P. Ltd.

has also decided the issue in favour of the assessee and the relevant

finding is reiterated here in below:

50 ITA Nos. 171 to 173 /JP/2020 DCIT vs. M/s Royal Jewellers 7. At the outset, it is required to be noted that as such various High Courts, namely, Delhi High Court, Gujarat High Court, Bombay High Court, Karnataka High Court, Orissa High Court, Calcutta High Court, Rajasthan High Court and the Kerala High Court have taken the view that no addition can be made in respect of completed/unabated assessments in absence of any incriminating material. The lead judgment is by the Delhi High Court in the case of Kabul Chawla (supra), which has been subsequently followed and approved by the other High Courts, referred to hereinabove. One another lead judgment on the issue is the decision of the Gujarat High Court in the case of Saumya Construction (supra), which has been followed by the Gujarat High Court in the subsequent decisions, referred to hereinabove. Only the Allahabad High Court in the case of Pr. Commissioner Of Income Tax v. Mehndipur Balaji, 2022 SCC OnLine All 444 : (2022) 447 ITR 517 has taken a contrary view. 7.1 In the case of Kabul Chawla (supra), the Delhi High Court, while considering the very issue and on interpretation of Section 153A of the Act, 1961, has summarised the legal position as under: Summary of the legal position 38. 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. 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 153 A 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 153 A 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.

51 ITA Nos. 171 to 173 /JP/2020 DCIT vs. M/s Royal Jewellers 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 153 A 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.” 7.2 Thereafter in the case of Saumya Construction (supra), the Gujarat High Court, while referring the decision of the Delhi High Court in the case of Kabul Chawla (supra) and after considering the entire scheme of block assessment under Section 153A of the Act, 1961, had held that in case of completed assessment/unabated assessment, in absence of any incriminating material, no additional can be made by the AO and the AO has no jurisdiction to re-open the completed assessment. In paragraphs 15 & 16, it is held as under: “15.On a plain reading of section 153A of the Act, it is evident that the trigger point for exercise of powers thereunder is a search under section 132 or a requisition under section 132A of the Act. Once a search or requisition is made, a mandate is cast upon the Assessing Officer to issue notice under section 153A of the Act to the person requiring him to furnish the return of income in respect of each assessment year falling within six assessment years immediately preceding the’ assessment year relevant to the previous year in which such search is conducted or requisition is made and assess or reassess the same. Since the assessment under section 153A of the Act is linked with search and requisition under sections 132 and 132A of the Act, it is evident that the object of the section is to bring to tax the undisclosed income which is found during the course of or pursuant to the search or requisition. However, instead of the earlier regime of block assessment whereby; it was only the undisclosed income of the block period that was assessed, section 153A of the Act seeks to assess the total income for the assessment year, which is clear from the first proviso thereto which provides that the Assessing Officer shall assess or reassess the total income in respect of each assessment year, falling within such six assessment years. The second proviso makes the intention of the Legislature clear as the same provides that assessment or reassessment, if any, relating to the six assessment years referred to in the sub- section pending on the date of initiation of search under section 132 or requisition under section 132A, as the case may be, shall abate. Sub-section (2) of section 153A of the Act provides that if any proceeding or any order of assessment or reassessment made under sub-section (1) is annulled in appeal or any other legal provision, then the assessment or reassessment relating to any assessment year which had abated under the second proviso would stand revived. The proviso thereto says, that such revival shall cease to have effect if such order of annulment is set aside. Thus, any proceeding of assessment or reassessment falling within the, six assessment years prior to the search or requisition stands abated and the total income of the assessee is required to be determined under section 153A, of the Act. Similarly, subsection (2) provides for revival of any assessment or

52 ITA Nos. 171 to 173 /JP/2020 DCIT vs. M/s Royal Jewellers reassessment which stood abated, if any proceeding or any order of assessment or reassessment made under section 153A of, the Act is annulled in appeal or any other proceeding. 16. Section 153A bears the heading “Assessment in case of search or requisition”. It is well settled as held by the Supreme Court in a catena of decisions that the heading of the, section can be regarded as a key to the interpretation of the operative portion of, the section and if there is no ambiguity in the language or if it is plain and clear, then the heading used in the section strengthens that meaning From the heading of section 153, the intention of the Legislature is clear, viz, to provide for assessment in case of search and requisition. When, the very purpose of the provision is to make assessment in case of search or requisition, it goes without saying that the assessment has to have relation to the search or requisition. In other words, the assessment, should be connected with something found during the search or requisition, viz., incriminating material which reveals undisclosed income Thus, while in view of the mandate of sub-section (1) of section 153A of the Act, in every case where there is a search or requisition, the Assessing Officer is obliged to issue notice to such person to furnish returns of income for the six years preceding the assessment year relevant to the previous year in which the search is conducted or requisition is made, any addition or disallowance can be made only on the basis of material collected during the search or requisition. In case no incriminating material is found, as held by the Rajasthan High Court in the case of Jai Steel (India) v. Asst. CIT (supra), the earlier assessment would have to be reiterated. In case where pending assessments have abated, the Assessing Officer can pass assessment orders for each of the six years determining the total income of the assessee which would include income declared in the returns, if any, furnished by the assessee as well as undisclosed income, if any, unearthed during the search or requisition. In case where a pending reassessment under section 147 of the Act has abated, needless to state that the scope and ambit of the assessment would include any order which the Assessing Officer could have passed under section 147 of the Act as well as under section 153A of the Act.”

53 ITA Nos. 171 to 173 /JP/2020 DCIT vs. M/s Royal Jewellers reasons, firstly that there were two parallel assessments envisaged under the erstwhile regime, i.e., (i) block assessment under section 158BA to assess the ‘undisclosed income’ and (ii) regular assessment in accordance with the provisions of the Act to make assessment qua income other than undisclosed income. Secondly, that the ‘undisclosed income’ was chargeable to tax at a special rate of 60% under section 113 whereas income other than ‘undisclosed income’ was required to be assessed under regular assessment procedure and was taxable at normal rate. Therefore, section 153A came to be inserted and brought on the statute. Under Section 153A regime, the intention of the legislation was to do away with the scheme of two parallel assessments and tax the ‘undisclosed’ income too at the normal rate of tax as against any special rate. Thus, after introduction of Section 153A and in case of search, there shall be block assessment for six years. Search assessments/block assessments under Section 153A are triggered by conducting of a valid search under Section 132 of the Act, 1961. The very purpose of search, which is a prerequisite/trigger for invoking the provisions of sections 153A/153C is detection of undisclosed income by undertaking extraordinary power of search and seizure, i.e., the income which cannot be detected in ordinary course of regular assessment. Thus, the foundation for making search assessments under Sections 153A/153C can be said to be the existence of incriminating material showing undisclosed income detected as a result of search.

54 ITA Nos. 171 to 173 /JP/2020 DCIT vs. M/s Royal Jewellers reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this sub-section pending on the date of initiation of the search under Section 132 or making of requisition under Section 132-A, as the case may be, shall abate. (2) If any proceeding initiated or any order of assessment or reassessment made under sub- section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) or Section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to sub-section (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Commissioner: Provided that such revival shall cease to have effect, if such order of annulment is set aside Explanation.—For the removal of doubts, it is hereby declared that,— (i) save as otherwise provided in this section, Section 153- B and Section 153-C, all other provisions of this Act shall apply to the assessment made under this section; (ii) in an assessment or reassessment made in respect of an assessment year under this section, the tax shall be chargeable at the rate or rates as applicable to such assessment year.” 11. As per the provisions of Section 153A, in case of a search under Section 132 or requisition under Section 132A, the AO gets the jurisdiction to assess or reassess the ‘total income’ in respect of each assessment year falling within six assessment years. However, it is required to be noted that as per the second proviso to Section 153A, the assessment or re-assessment, if any, relating to any assessment year falling within the period of six assessment years pending on the date of initiation of the search under Section 132 or making of requisition under Section 132A, as the case may be, shall abate. As per sub-section (2) of Section 153A, if any proceeding initiated or any order of assessment or reassessmentmade under sub-section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) or section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to subsection (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Commissioner. Therefore, the intention of the legislation seems to be that in case of search only the pending assessment/reassessment proceedings shall abate and the AO would assume the jurisdiction to assess or reassess the ‘total income’ for the entire six years period/block assessment period. The intention does not seem to be to re-open the completed/unabated assessments, unless any incriminating material is found with respect to concerned assessment year falling within last six years preceding the search. Therefore, on true interpretation of Section 153A of the Act, 1961, in case of a search under Section 132 or requisition under Section 132A and during the search any incriminating material isfound, even in case of unabated/completed assessment, the AO would have the jurisdiction to assess or reassess the ‘total income’ taking into consideration the incriminating material collected during the search and other material which would include income declared in the returns, if any, furnished by the assessee as well as the undisclosed income. However, in case during the search no incriminating material is found, in case of completed/unabated assessment, the only remedy available to the Revenue would be to initiate the

55 ITA Nos. 171 to 173 /JP/2020 DCIT vs. M/s Royal Jewellers reassessment proceedings under sections 147/48 of the Act, subject to fulfilment of the conditions mentioned in sections 147/148, as in such a situation, the Revenue cannot be left with no remedy. Therefore, even in case of block assessment under section 153A and in case of unabated/completed assessment and in case no incriminating material is found during the search, the power of the Revenue to have the reassessment under sections 147/148 of the Act has to be saved, otherwise the Revenue would be left without remedy. 12. If the submission on behalf of the Revenue that in case of search even where no incriminating material is found during the course of search, even in case of unabated/completed assessment, the AO can assess or reassess the income/total income taking into consideration the other material is accepted, in that case,there will be two assessment orders, which shall not bepermissible under the law. At the cost of repetition, it isobserved that the assessment under Section 153A of the Act is linked with the search and requisition under Sections 132 and 132A of the Act. The object of Section 153A is to bring under tax the undisclosed income which is found during the course of search or pursuant to search or requisition. Therefore, only in a case where the undisclosed income is found on the basis of incriminating material, the AO would assume the jurisdiction to assess or reassess the total income for the entire six years block assessment period even in case of completed/unabated assessment. As per the second proviso to Section 153A, only pending assessment/reassessment shall stand abated and the AO would assume the jurisdiction with respect to such abated assessments. It does not provide that all completed/unabated assessments shall abate. If the submission on behalf of the Revenue is accepted, in that case, second proviso to section 153A and subsection (2) of Section 153A would be redundant and/or rewriting the said provisions, which is not permissible under the law. 13. For the reasons stated hereinabove, we are in complete agreement with the view taken by the Delhi High Court in the case of Kabul Chawla (supra) and the Gujarat High Court in the case of Saumya Construction (supra) and the decisions of the other High Courts taking the view that no addition can be made in respect of the completed assessments in absence of any incriminating material. 14. In view of the above and for the reasons stated above, it is concluded as under: i) that in case of search under Section 132 or requisition under Section 132A, the AO assumes the jurisdiction for block assessment under section 153A; ii) all pending assessments/reassessments shall stand abated; iii) in case any incriminating material is found/unearthed, even, in case of unabated/completed assessments, the AO would assume the jurisdiction to assess or reassess the ‘total income’ taking into consideration the incriminating material unearthed during the search and the other material available with the AO including the income declared in the returns; and iv) in case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabated assessments. Meaning thereby, in respect of completed/unabated assessments, no addition can be made by the AO in absence of any incriminating material found during the course of search under Section 132 or requisition under Section 132A of the Act, 1961. However, the

56 ITA Nos. 171 to 173 /JP/2020 DCIT vs. M/s Royal Jewellers completed/unabated assessments can be re-opened by the AO in exercise of powers under Sections 147/148 of the Act, subject to fulfilment of the conditions as envisaged/mentioned under sections 147/148 of the Act and those powers are saved. The question involved in the present set of appeals and review petition is answered accordingly in terms of the above and the appeals and review petition preferred by the Revenue are hereby dismissed. No costs.”

Courts and now the position is very much settled clarifying position of law

even by the apex court wherein it has been categorically held that in search

cases no incriminating material is unearthed during the search, the AO

cannot assess or reassess taking into consideration the other material in

respect of completed assessments/unabated assessments. In the light of

the facts and circumstances discussed herein above and binding judicial

decision of the apex court, in our considered view we do not find any error

having been committed by the ld. CIT(A) in accepting the plea of the

Assessee that there is no incriminating document which was seized in the

course of search relating to the addition sought to be made on account of

rejection of the book results and without supporting any incriminating

material making the addition on net profit on the estimate without any

supporting corroborative material placed on record the addition is made is

bad and not permitted as per provision of section 153A of the Act.

Therefore, the jurisdictional requirement of Section 153A of the Act was not

57 ITA Nos. 171 to 173 /JP/2020 DCIT vs. M/s Royal Jewellers satisfied in this case. In view of the above and for the reasons stated

above and considering the binding decisions of various High Courts

and final verdict of the apex court, we see no reason to interfere with

the impugned judgment and order passed by the learned CIT(A).

the ld. CIT the revenue has marched this appeal on the following grounds;

“1. The Ld CIT(A) has erred in law and on facts (independently &severally) in granting relief to the assessee".

2 On the facts and in the circumstances of the case and in law the Ld. CIT(A) has erred in allowing assessee's appeal on legal ground that the assessment completed u/s 143(3) rws 153A is bad in law and viod-ab-initio in spite of the fact that the Section 153A of the Act does not specifically say that scope of scrutiny for assessment or reassessment should be restricted and strictly made on the basis of evidence found in the course of the search, or other post-search material or information available"

58 ITA Nos. 171 to 173 /JP/2020 DCIT vs. M/s Royal Jewellers subsequent surveys or any other enquiries. Recently, in the case of CIT. Chennai Vs Ajith S Kumar 93 Taxman.com 294(SC), the Hon'ble Supreme Court in the context of section 158BB has upheld the use of information collected in a survey in case of connected persons carried alongwith search in other person for the purpose of making assessment u/s 15888. Provisions of 158BB are PariMateria to section 153A of the Income Tax Act. 1961."

6 Without prejudice to the ground no. 1. "on the facts and in the circumstances of the case and in law the Ld. CIT(A) has erred in allowing assessee's appeal on legal ground that the assessment completed u/s 143(3) rws 153A is bad in law and viod-ab-initio in spite of the fact that the Hon'ble High Court. New Delhi In the case of PCIT Vs Kabul Chawla in para 37(iv) addition has to be based on evidences found during search, or post search or information available with the AO which can be related to the evidence found but it cannot be arbitrary."

8 On the facts and the in circumstances of the case and in law the Ld. CIT(A) has erred in not adjudicating the case on legal ground and not merits."

the ld. CIT the revenue has marched this appeal on the following grounds;

“1. The Ld CIT(A) has erred in law and on facts (independently &severally) in granting relief to the assessee.

59 ITA Nos. 171 to 173 /JP/2020 DCIT vs. M/s Royal Jewellers 2. "On the facts and in the circumstances of the case and in law the Ld. CIT(A) has erred in callowing assessee's appeal on legal ground that the assessment completed u/s 143(3) rws 153A is bad in law and viod-ab-initio in spite of the fact that the Section 153A of the Act does not specifically say that scope of scrutiny for assessment or reassessment should be restricted and strictly made on the basis of evidence found in the course of the search, or other post-search material or information available?"

60 ITA Nos. 171 to 173 /JP/2020 DCIT vs. M/s Royal Jewellers post search or information available with the AO which can be related to the evidence found but it cannot be arbitrary"

case in ITA No. 171/JP/2020 and we have heard both the parties and

persuaded the materials available on record. The bench has noticed that

the issues raised by the revenue in these appeals Nos. 172 & 173/JP/2020

are equally similar on set of facts and grounds. Therefore, it is not

imperative to repeat the facts and various grounds raised by both the

parties. Hence, the bench feels that the decision taken by us in ITA No.

171/JP/2020 for the Assessment Year 2011-12 shall apply mutatis

61 ITA Nos. 171 to 173 /JP/2020 DCIT vs. M/s Royal Jewellers mutandis in the case of in ITA Nos. 172 & 173/JP/2020 for the Assessment

Years 2012-13 & 2013-14.

In the result, appeals of the revenue stands dismissed.

Order pronounced in the open court on 07/06/2023. Sd/- Sd/-

¼ lanhi xkslkbZ ½ ¼ jkBkSM deys’k t;arHkkbZ ½ (Sandeep Gosain) (Rathod Kamlesh Jayantbhai) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 07/06/2023 *Ganesh Kumar आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. The Appellant- DCIT, Central Circle-02, Jaipur 2. izR;FkhZ@ The Respondent- M/s Royal Jewellers, Jaipur 3. vk;dj vk;qDr@ The ld CIT vk;dj vk;qDr¼vihy½@The ld CIT(A) 4. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 5. xkMZ QkbZy@ Guard File (ITA Nos. 171 to 173/JP/2020) 6. vkns'kkuqlkj@ By order,

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