V.R.VENKAATACHALAM,CHENNAI vs. ACIT, CHENNAI

आदेश / O R D E R

PER CHANDRA POOJARI, ACCOUNTANT MEMBER

These six appeals by assessee’s are directed against the different orders of the Commissioner of Income Tax, Chennai, passed u/s.263 of the Act dated 31.07.2014 for the above assessment years.

I.T.A.Nos.2634 to 2639/Mds/2014 :- 2 -:

Since the issue in these appeals are common in nature, these appeals

are clubbed, heard together, and disposed of by this common order for

the sake of convenience.

invoking of jurisdiction u/s.263 of the Act by the Commissioner of

Income Tax directing the Assessing Officer to pass fresh assessment

order which was completed u/s.153A r.w.s. 143(3) of the Act though

there was no incrementing materials found during the course of search

u/s.132 of the Act.

original assessment was completed u/s.143(3) of the Act followed by

u/s.153A r.w.s. 143(3) of the Act. Consequent to search action at

the residential premises of the assessee on 18.11.2011. According to

the Commissioner of Income Tax the Assessing Officer could not

examine certain issues relating to investment made by the assessee in

various companies and firms and the interest income received

/receivable from some of the debtors. It was also noticed by the

Commissioner of Income Tax that the opening capital balance for the

year 2006-07 and the capital account for the subsequent years was

not properly reconciled by the assessee during the course of the

I.T.A.Nos.2634 to 2639/Mds/2014 :- 3 -:

proceedings u/s 153A r.w.s.143(3). It was further noticed by the

Commissioner of Income Tax that the Cash Flow Statement

furnished by the assessee indicating drawings and justifying the

cash found during the course of search at �14,50,000/- cannot be

accepted as the drawings reflected in such Cash Flow Statement

would not have been adequate for the assessee's life style and has

accordingly proposed to estimate the drawings at a higher level

and thus add back the cash found during 'search as unexplained

cash since not supported by the Cash Flow Statement filed. For all

these deficiencies, he has proposed that the assessment

completed u/s 153A be reviewed u/s 263 as Assessing Officer

could not examine the issues due to paucity of time as the

information was filed before Assessing Officer only on 28.3.2014.

noticed that the assessee has filed three Statement of Affairs for

the year- 2006-07 - i) Statement of Affairs along with the return

u/s 139(1) ii) During the course of proceedings u/s 143(3) and iii)

During the proceedings u/s 153A in the financial year 2013-2014.

All the three Statement of Affairs are different among themselves.

During the course of the proceedings u/s 143(3) finalized on

31.12.2009, the Assessing Officer has analyzed the Statement of

I.T.A.Nos.2634 to 2639/Mds/2014 :- 4 -:

Affairs for the assessment years 2006-07 and 2007-08 and has

made additions in the Asst.Year 2007-08 as below:-

‘’ The assessee’s business is money lending and filed a statement of affairs as on 31.03.2007 Opening Balance of capital i.e as on 31.03.2006 : 13,16,06,077/- Net profit for the financial year 2006-07 was : 1,87,00,173/- --------------------- 15,03,06,250/- Closing balance of capital as on 31.03.2007 : 15,25,96,482/- -------------------- Difference in the Capital Account : 22,90,232/- --------------------- The ld. Authorised Representative for assessee vide letter dated

22.12.2009 before Commissioner of Income Tax has stated that

the closing balance kept with Indian Bank Porur (�3,86,774/)

Bank of Baroda (�.12,12,517/-) and SB account with Egmore

Benefit Society Ltd (�21,897/-) not reduced than the

corresponding capital account balance figure would be

�15,09,75,204/-. The difference of �6,68,954/- offered to tax.

The assessee's representative contention was not accepted by

Assessing Officer while completing assessment u/s.143(3) of the

Act as the assessee's business in money lending, and the

assessee has not charging interest from the person to whom

money has been lent. According to the Assessing Officer it can't

not be distinguished whether that particular loan was interest

bearing or not. Hence, the difference of �.22,90,232/- was

I.T.A.Nos.2634 to 2639/Mds/2014 :- 5 -:

added to the returned income. Aggrieved, the assessee preferred

an appeal before the Commissioner of Income Tax (Appeals)

against original assessment order passed u/s.143(3) of the Act.

relief to the assessee. Further on contesting before the ITAT, the

matter was set aside with the direction to the Assessing Officer to

re-examine the statement of affairs vide their orders No.

986/MDS/2012 dated 12.09.2012.

Statement of Affairs for both the assessment years 2006-07 and

2007-08, the Assessing Officer has noticed a shortage of

�1,01,97,722/- in the liability side for the assessment year 2006-

07 and �12,15,79,373/- for the assessment year 2007-08. When

these differences were sought to be explained by the assessee,

the assessee has come up with another revised Statement of

Affairs as substantial differences in the balances of Assets and

Liabilities. Thus, there was substantial discrepancies in the three

Statements of Affairs which could not be examined properly by the

Assessing Officer during the proceedings u/s 153A finalized on

28.3.2014. Thus, the acceptance of the Revised Statement of

I.T.A.Nos.2634 to 2639/Mds/2014 :- 6 -:

Affairs was suffering from defects resulting in a assessment

erroneous and prejudicial to the interests of revenue.

6.1 The assessee filed revised statement of affairs for

assessment year 2005-06, figures of which are basis for opening

balances of assessment year 2006-07. Following major

discrepancies are as under (a) figures of loans received has been increased to ₹.15,02,54,907/- ₹.8,70,17,359/- from (difference ₹.6,32,37,548/-. The credit appearing in the books of accounts of assessee is not explained, therefore ,it would have been covered u/s.68, after allowing the assessee an opportunity to explain being difference in opening balances for assessment year 2006-07. (b) Figures for opening balance of loan given for assessment year 2006-07 has been increased to ₹43,25,53,096/- (28,97,14,166/- +65,78,171/-+ 1,00,000/-+13,61,60,759/-) from ₹.21,06,23,375/- (difference ₹ 22,19,29,721/-) liable to be considered as un-explained investment. 6.2. Comparison of three statement of affairs for assessment year

2006-2007 has shown following discrepancies.

a) The first SOA shows loan received (balance) of ₹15,83,40,723/-, the second does not show any balance on this account and in third SOA the balance of loan received has been decreased to ₹5,32,54,907/-. It implies that either the assessee has repaid ₹10,50,85,816/- (if compared with the SOA filed along with return u/s 139) / repaid ₹9,70,00,000/- (if compared with the final SOA filed on 28/03/2014) or the balances shown are not true. The sources of repayment have not been verified due to scarcity of time. The bank books filed by the assessee for assessment year 2006-07 do not show any such repayment of loan. therefore. it may be presumed that the assessee has repaid from undisclosed sources. It may be noted that the assessee has never produced complete books of accounts so that the source could have been ascertained.

I.T.A.Nos.2634 to 2639/Mds/2014 :- 7 -:

b) Originally the total balance of loan paid was shown at ₹28,55,32,805/-. In second statement of affairs shown loan paid balance amounting to ₹11,69,94,360/- and it has now been increased to ₹ 31,39,82,017/-(133369665+ 36578171 +100000+ 143934181). The difference is visible. The assessee has even changed the balance with M/s. TCP which was earlier shown as ₹11,69,94,360/- and now it is shown at ₹13,33,69,665/-. The filed copy of account of banks in the books of assessee does not explain the difference and the source of payment of ₹11,85,71,079/- (43,25,53,096 – 31,39,82,017/- ) is not explainable from the bank statements.

6.3 Comparison of three statement of affairs for assessment year

2007-08 shown following discrepancies.:

(a) Originally, the statement of affairs for AY 2007-08 showed balance of loan received of ₹38,96,40,723/- (liability side of SOA). The second SOA did not include this item at all but in third statement of affairs filed on 28/03/2014, the balance on this account has been shown at ₹33,70,54,907/-. Although there is increase in loan received balances if compared with the SOA for AY 2006-07 filed on 28/03/2014, yet difference balances shown in statement of affairs originally filed and the SOA filed on 28/03/2014 is not explainable. (b) Balances of loan paid was shown at ₹ 52,45,95,954/- in SOA originally filed which stood reduced to ₹1,33,75,858/-. Now in the statement of affairs filed on 28/03/2014, it has been increased to ₹54,71,54,871/-. No explanation is filed by the assessee for such difference and sources of investment (c) On 11/04/2006, there is a deposit of ₹5,21,898/-. The assessee has credit it as 'other income' but it is not reflected from the statement of taxable income. This amount has escaped assessment. Similarly, there is another credit of ₹25,000/- on 19/09/2006. (d) The assessee had given list of balances of loan received and paid during the assessment proceedings u/s 143(3) taken up against return filed u/s 139(1). The assessee has furnished a list of such loan paid and loan received balances as per SOA filed on 28/03/2014. It is noticed that there is huge

I.T.A.Nos.2634 to 2639/Mds/2014 :- 8 -:

difference in the total as well as individual name wise details of loan received and paid when compared with the list given earlier. A comparison is given hereunder:-

Details for Loans As per old SOA As per New SOA Received filed alongwith filed return u/s.139(1) Balances as on 31.03.2007

1 A.Koteewaran Loan 500000 2 A. Kuberan Loan 1000000 3 Appu Hotels Ltd 2813000 4 Baba Enterprises Loan 5552000 5 Karnataka Breweries & 8700000 8700000 Distilleries P. Ltd 6 MBDL Loand 500000 7 N. Neelavathi Loan 500000 8 Poovaiammal Loan 132243 9 Sapthagiri Enterprises 3000000 20000000 loan 10 S. Lakshmi Narayani 450000 Ammal Loan 11 S. Pushapavalli Loan 500000 12 Thirumagal Mills Loan 592200 13 Udayar Investments & 26893650 Consultancy Co. P. Ltd 14 Vijay Televisions Ltd 5600000 15 VRV Imports & 4740421 3448566 Exports P. Ltd. 16 E.K Lingamoorthy 1500000 1500000 17 Kavitha Narendran 600000 18 KMB Granites 22000000 22000000 19 K. Nalliappan 700000 20 K. Neelavathy 2000000 2000000 21 Kumbakonam Kannan 3740000 22 K. Yusuff Basha 3800000 3800000 23 Marrs Granities 1000000 24 M.S.Meiyappan 150000 25 Natarajan Nandagopal 658458 26 N. Chandrasekar 212410 27 P. Yasodha 3000000 3000000 28 Raghava Enterprises Pl 25300000 Ltd 29 Ravikumar Industries 5000000 30 R.Gandhi 500000 31 R.G.Narendran 400000 32 Salem Basha 14806341 13806341

I.T.A.Nos.2634 to 2639/Mds/2014 :- 9 -:

33 Salem KMB 10000000 10000000 Constructions 34 Shri. Ramdhas Estates 11800000 11800000 P.Ltd 35 Sundaram Finance Ltd 130000000 1300000000 36 Sundaram Home 700000000 70000000 Fiance Ltd 37 Swasti Chem Pvt. Ltd 4000000 4000000 38 Trident Granities 2000000 39 V. Kannan 15000000 40 D.K. audikeshvulu 20000000 41 The Narasimha mills 10000000 ltd 42 Sapthagiri enterprises 3000000

Total 389640723 337054907

Loan paid balance as on 31.03.2007

Sl. Details for loans received As per old As per No SOA filed New SOA along with filed return u/s.139(1) 7th Channel communications 1 3600000 2 Aalwel Fabs 500000 3 Anchor Breweries Ltd 20070 4 Andal Loan 10770508 5 A.N. Ramesh Babu 500000 6 Arihan Shelters India Ltd 30000000 30000000 7 Arudhathi loan 46225777 8 A.S. Thillainayam loan 504438 9 A.V.L. Narayanswamy loan 100000 10 A.V.M . Productions 15000000 15000000 11 C.M.K. Reddy loan 300000 12 Cosy Realtors P. Ltd 1080000 1371302 13 Diamond District 405000 14 Freezing products 165600 15 G. Babu loan 300000 300000 16 G. Hemadri babu 50000000 50000000 17 G. Sulochana loan 1500000 1500000 18 Indira M. Kameswaran loan 1000000 1000000 19 Jayshree holdings pvt. ltd 17000000 21297064 20 J.K. Puri loan 500000 21 Karur Manoharan loan 500000 22 K.M. Ameenuddin loan 500000

I.T.A.Nos.2634 to 2639/Mds/2014 :- 10 -:

23 Master Hari Venkataraman 350000 24 Matrix Foundations P. Ltd 1245600 3299571 25 Meera papers ltd 5000000 26 M.G. Enterprises Loan 4007762 27 M. Nithiyandam loan 300000 28 Mookambika Realotrs pvt ltd 14921500 19336595 29 M. Radha loan 1075500 30 Nauzer Nowraji Bangalore 3000000 3000000 31 N.P.V. Ramasamy Udayar 21296379 21176379 (HUF) 32 NVK Arumugam loan 800000 33 Padma loan 1570400 34 Promoters contribution to 57974008 TCP ltd 35 Radha Venkatachalam loan 53168130 53168131 36 Ramaniklal Gosalia & Co 50000000 50000000 37 Ramraj associates loan 2489885 38 R. Kalalam loan 2022894 2022894 39 Sabari Steels loan 900000 40 Samyuktha loan 320000 5820000 41 Sengutuvan loan 2077502 21577502 42 Sri Ramachandra Educational 3817238 3817238 and health trust 43 Sterling computer loan 2000000 44 Sunil Yunus Zia 10000000 10000000 45 S. K. Varatharaj loan 1000000 46 Swadesamitran Ltd Loan 2785000 47 T. Amudha loan 5130758 48 Tanchem imports & Exports 10052263 10052263 p. Ltd 49 Thiruballa Realtors P. Ltd 6600000 62638850 50 Thiruballa Realtors P. Ltd 26706360 29360819 51 Transworld properties P. Ltd 5500000 52 Trivitron Medical Systems P. 5000000 5000000 Ltd 53 TVRSS Enterprises 18223932 54 Vivek Gover loan 1314450 55 Woods Indian Negotiations 550000 56 Binny Ltd 17500000 17500000 57 Virion Chemicals & 5425000 Distilleries Ltd 58 Advance for land 37437564 59 TCP 18686728 60 Thiruvalluvar textiles p. ltd 51878171 61 Jagathra holdings p. ltd 100000 62 Four square realtors p. ltd 15519 63 Sun breeze realtors p. ltd 15519

I.T.A.Nos.2634 to 2639/Mds/2014 :- 11 -:

Total 524595954 547154871

(f) The assessee vide his letter dated 26.03.2014 has submitted that the is not able to furnish evidences for sources of fund invested in shares of M/s. Thiruvalluvaar Textiles Private Ltd. For this, he has offered ₹1,26,000/- for taxation. This addition has not been made. (g) There is no reason for exclusion of certain parties from the lists mentioned above and inclusion of new entries. There is also no reason mentioned by the assessee to deviate from the figures originally shown as loan received and loan paid’’.

examined the records and gone through the discrepancies pointed out

by the Assessing Officer in the statement of affairs in the proposals

u/s.263 and compared the same with the explanation and the

statements filed by the assessee. The Commissioner of Income Tax

observed that the assessee had furnished statement of affairs with the

original return filed u/s.139(1) and subsequently the same were

revised during the course of proceedings u/s.143(3) and later 153A on

28.03.2014. However, the assessee could not explain the discrepancies

among the three statement of affairs filed during the proceedings

u/s.153A. According to Commissioner of Income Tax even though, it

was stated that the books of accounts seized on 29.1.1985,

18.12.1985, 17.08.1990 and 25.11.1999 were not yet returned to the

assessee, it was not clear as to why copies of the same were not taken

by the assessee. This cannot be an explanation for not filing a proper

I.T.A.Nos.2634 to 2639/Mds/2014 :- 12 -:

Statement of Affairs. Further the Commissioner of Income Tax noticed

that the assessee was a Director or Partner in about 28 companies and he has been extending loans to various persons in substantial sums as part of his money lending business. It was not clear from the Statement of Affairs that all the investments in the firms and companies were

properly reflected in the books of account and also reflected the loans

given by him to various persons. Thus, according to Commissioner of

Income Tax it was essential that the three Statement of Affairs filed at

different times shall be properly reconciled and a finality be brought to

tax.

Assessing Officer should have merged all the three Statements of

Affairs filed and constructed a tentative Trial Balance from the

balances under each account. After balancing the Trial balance, the

Assessing Officer should have independently verified with each

creditor or debtor to ascertain the balances by calling for statement of

the assessee in the respective books. The Assessing Officer should

also have verified the investments made with different entity

separately and also ascertain the quantum of investment made with

reference to the purchase documents etc. While doing so, the

incomes received from such loans, investments and properties should

I.T.A.Nos.2634 to 2639/Mds/2014 :- 13 -:

be verified and taken into account from the respective account.

Similarly, wherever the assessee has borrowed the monies, the

Statement of Accounts should be obtained from the creditors along

with the interest paid. It was also to be ascertained whether the

assessee was following Cash method of accounting or Mercantile

method of accounting to arrive at the correct balances and correct

incomes /expenditures from each of the assets as well as loans

However, this is a very elaborate exercise involving not only the

assessment years 2006-07 and 2007-08 but also subsequent

assessment years and this could not have been completed in the

three days available for the Assessing Officer before the proceedings

are completed in time on 31.3.2014. Hence, the proceedings u/ 153A

r.w.s. 143(3) finalized on 29.03.2014 are set aside with the direction

to re- examine all the assets and liabilities bearing in the Balance

Sheet on the above mentioned lines and also to arrive the correct

income. Since the assessment was being set aside for re-examining

and reworking out the statement of affairs for the assessment year

2006-07 and the same will have a cascading effect on the

subsequent assessment year, the assessment year 2007-08 to

2012-13 were also set aside for carrying out the same exercise in the

Statement of Affairs. Further, a true picture on Statement of Affairs

I.T.A.Nos.2634 to 2639/Mds/2014 :- 14 -:

was also essential to ascertain the sources and nature of use of

properties purchased, for determining the Wealth Tax liability. When

this proposition was put forth to the Authorized Representative for

assessee, he has also fairly conceded that the Statement of Affairs

needs to be examined in detail. For this reason, this assessment was

set aside for fresh examination of the Statement of Affairs by the

Assessing Officer in the lines discussed above and also to arrive at

the interest incomes from all the loans given and also, the interest

paid on the loans borrowed.

considered inadequate drawings for personal consumption and its

impact on the cash flow starting from the Asst.Year 2006-07. The

assessee has claimed �1,20,000/- has been withdrawn by him and

coupled with the drawings by the other family members who are also

assessed to tax, it was claimed that the total drawings were adequate

for making their personal and family needs.

9.1 The Commissioner of Income Tax observed that the assessee

claimed that the companies and firms in which the assessee was a

Director or Partner have been meeting the expenditure on

transportation, telephones etc. With these observations, the assessee

I.T.A.Nos.2634 to 2639/Mds/2014 :- 15 -:

has argued that the Cash Flow Statement for the Asst. year 2006-07

and also for the subsequent Asst. Years and thus claimed that the

cash found during the search at �14,51,000/- fully explained.

Assessing Officer has not accepted the explanation of the assessee

that cash withdrawn for personal consumption was adequate as the

assessee's personal expenditure for the period 1.4.2011 to date of

search 18.11.2011 stands at �4,60,000/-. It was contention of the

Assessing Officer that if the assessee has spent �4,60,000/- from

April to 18.11.2011, the date of search i.e. seven and half months,

the expenditure could have been much more than the withdrawals of

the assessee in the earlier years too, than what have been shown

in books. Hence, he has interpolated the probable expenditure

incurred by the assessee in the earlier years by applying the Cost

Inflation Index method inversely as given below:-

"Examination of these cash accounts revealed that the assessee has never withdrew cash for house-hold expenses like food and clothing. This issue was discussed with the ld. Authorised Representative for assessee. The ld. Authorised Representative for assessee filed a revised cash tally. This cash tally has been found not acceptable, since besides other abnormalities, the cash receipts for each year does not match with the cash book and the withdrawal for household expenses is not reflected with the cash book. The expenditure on house hold expenses although not reflected from the cash account was estimated by

I.T.A.Nos.2634 to 2639/Mds/2014 :- 16 -:

assessee. The cash withdrawal for financial year 2006-07 to 2011-12 (upto date of search) have been claimed to be ₹1,80,000/-, ₹2,40,000/-, ₹3,00,000/-, ₹3,60,000/-, ₹4,20,000/- and ₹4,60,000/-(upto DOS) respectively. The cash withdrawal from 01/04/2011 to 18/11/2011 (for 7.5 month) has been claimed to be ₹4,60,000/-. On the basis of claimed household expenses for search year, the house-hold expenses for earlier years were estimated to be ₹40,10,028/-by applying cost inflation ratio as under:

Asst. Year Estimate of C.I. ratio Assessee’s requirement of claim of assessee withdrawal 2006-07 465977.1 0.957611 120000 2007-08 486603.8 0.941924 180000 2008-09 516606.4 0.946735 240000 2009-10 545671.3 0.920886 300000 2010-11 592550.3 0.888889 360000 2011-12 666619.1 0.905732 420000 2012-13 736000.00 736000 * upto date of search Total 4010028 * ₹4,60,000 X12/7.5

The Commissioner of Income Tax observed that the 11.

Assessing Officer as well as the explanations furnished by the ld.

Authorised Representative for assessee with reference to the

inadequacy or adequacy of the drawings. The Commissioner of

Income Tax did not approve the methodology adopted by the

Assessing Officer for arriving at the expenditure of the earlier

years with reference to the expenditure of the current year. The

reverse interpolation of the Cost Inflation Index was neither

I.T.A.Nos.2634 to 2639/Mds/2014 :- 17 -:

scientific nor sanctioned by the statute, as the expenditures need

not remain constant in each year. However, the Assessing Officer

should have examined the adequacy of the drawings for meeting

the personal expenditure of the assessee on year to year basis as

the contents of expenditure was likely to change from year to year.

Hence, this issue was also set aside with a direction to the

Assessing Officer to ascertain the details of personal expenditure in the Asst.Year 2011-12 and come to a reasonable conclusion about

the amount of personal expenses incurred. Thereon, he may

decide the justification and explanation for the cash found during search at �14,78,000/- and the same may be decided on

independent merits in the relevant Assessment year. Similar is the

position in other assessment years. Against this, the assessee is in

appeal before us.

the assessee was engaged in the money lending business and

was also a partner in various firms and was a director in

companies. A search and seizure operation was carried out in the group cases of Trivitron group of companies on 18th

November, 2011 at the office, factory and residential house of

Directors. In the case of the assessee search was conducted at

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his residence. During the course of search operations, the

Income Tax department had seized cash amounting to

�14,50,000/- and jewellery valuing 4234 grams (net). There

were no other material, books or other documents found/seized

during the said search operations. A sworn statement was

recorded from the assessee on the date of search questioning

the source of the cash and the jewellery seized. The assessee

gave an impromptu statement that he possessed about � 15 to

20 lakhs of which � 10 lakhs were collected from his friends and

well wishers for the construction activity of the Pollachi

Narasimhar Temple and the same had to be handed over to the

temple authorities. The assessee had also stated that there was

adequate cash balance available with him as per the books of

accounts. Regarding the jewellery he had replied that those

jewellery belonged to his mother, (late) Mrs Kamalam and his

wife Mrs Radha Venkataachalam and they had already declared

jewellery to the tune of 5516.35 grams of net weight under VDIS'

Act was issued for the AYs 2006-07 to 2011-12 and the

assessments were completed u/s. 153A r.w.s.143(3) of the act on 28th March, 2014 accepting the original returned/ assessed

I.T.A.Nos.2634 to 2639/Mds/2014 :- 19 -:

income, without making any additions. Later the Commissioner

of Income Tax- Central-I invoked Sec 263 stating that the

assessment was held to be erroneous and prejudicial to the

interest of revenue. It was also stated in the notice u/s 263 that

the Assessing Officer, due to paucity of time, had not verified the

loan balances and hence the assessment was treated as

erroneous and prejudicial to the interests of revenue and

accordingly an order u/s 263 of the Act was passed by the

Commissioner of Income Act on 31.7.2014.

assessee submitted the following:-

(i) During the course of search operations, there was no

incriminating material found by the Income Tax Department other

than the cash and the jewellery as stated supra.

(ii) During the course of Sec 153A proceedings, the Assessing

Officer had called for various details and the same were filed, of

which, among others was the Statement of Affairs and the bank

statements.

(iii) The assessee had filed statements of affairs pertaining to

the money lending business, along with the original return of

I.T.A.Nos.2634 to 2639/Mds/2014 :- 20 -:

income on 26/10/2006 for AY 2006-07 and on 31/10/2007 for AY

2007-08. These returns (ie., AY 2006-07 and AY 2007-08) were

duly subjected to scrutiny vide orders u/s 143(3) dated

28/11/2008 and 31/12/2009 and AY 2007-08) were duly

subjected to scrutiny vide orders u/s 143(3) dated 28/11/2008

and 31/12/2009 for AY 2006-07 and AY 2007-08 respectively,

after examining the loan balances contained thereon together

with their confirmation of balances. These details were

admittedly available in the file of the assessing officer while

completing the search assessment proceedings u/s 153A of the

IT Act. During the course of search assessment proceedings, the

assessee had filed the statement of affairs in respect of his

personal assets and liabilities.

(iv) Later a combined statement of affairs was filed before the

Assessing Officer as per his directions during the course of search assessment proceedings on 26th March 2014.

(v) The Assessing Officer completed the 153A proceedings for

the AYs 2006-07 to AY 2011-12 without making additions as he

was apparently and admittedly convinced that the assessments

for the Asst Years 2006-07 and 2007-08 were duly completed u/s

I.T.A.Nos.2634 to 2639/Mds/2014 :- 21 -:

143(3) after thorough verification of loan balances, among

others, and by giving due credence to the undisputed fact that

there was no search material found during the course of search

relatable to the Asst Years 2006-07 to 2011-12.

(vi) The cash found during the course of search operations was

added as the income of the assessee in the year of search i.e in

Asst Year 2012-13. During the course of assessment

proceedings, the assessee had filed a cash book without

considering the cash drawn for his personal expenses and the

total of the cash available with himself and his family members

was �30 lakhs (approx). Later on, when the Assessing Officer

asked for the drawings for his personal expenditure, the assessee

had stated that expenses like telephone, electricity etc., were

taken care by the company in which he is the managing director

and the same was included in the Form 16 as perquisite. The

personal expenses like food and clothing were met by the

assessee from the cash balance. The assessee filed a combined

cash book of himself and his family members considering the

drawings for the personal expenses like food and clothing and

arrived at the cash balance of �10 lakhs (approx).

(vii) However, the Assessing Officer did accept to the

I.T.A.Nos.2634 to 2639/Mds/2014 :- 22 -:

assessee's submission but did not agree to the quantum of the

drawings made by the assessee. Accordingly, the Assessing

Officer applied the Cost Inflation ratio for the drawings ought to

have been made by the assessee from AYs 2006-07 up to the

date of search and arrived at an estimated drawings of

�37,34,028/- and concluded that the assessee is not left with any

cash as on the date of search as per books of accounts and

accordingly the assessee did not have any source to explain the

cash seized in the sum of �14,50,000/- thereby leading to an

addition u/s.69A of the act for the AY 2012-13. A copy of the

scrutiny assessment order u/ s 143(3) of the Act for the Asst

Year 2012-13 (i.e the year of search) is enclosed in Page Nos.25-

30 of the Paper Book. Hence it was submitted that effectively the

adequacy / inadequacy of drawings had been examined in detail

by the Assessing Officer during the course of search assessment

proceedings and hence on this account, the provisions of section

263 of the Act could not be invoked by the Commissioner for

Income Tax.

(viii) The Jewellery found during the course of search operations

was not added as the income of the assessee for any of the

years from AY 2006-07 to AY 2011-12. In fact detailed

I.T.A.Nos.2634 to 2639/Mds/2014 :- 23 -:

questionnaire were given by the Learned AO for the Asst Year

2012-13 with a show cause notice as to why the Jewellery found

during the course of search should not be added as undisclosed

income of the assessee for the Asst Year 2012- 13. On going

through the detailed replies given by the assessee in this regard,

no addition was made by the Assessing Officer for the Asst Year

2012-2013.

(i) there was no incriminating material found during the course of search operations other than the cash and jewellery. A copy of the panchanama was enclosed in Page Nos. 31-37 of the Paper Book. (ii) The assessments for the Asst Years 2006-07 and 2007-08 were duly completed u/s.143(3) after thorough verification of loan balances together with their confirmations. (iii) The proceedings u/s/153A were concluded for the AYs 2006-07 to AY s 2011-12 without making additions, as the AO was apparently convinced that the loan balances reflected in the statement of affairs were duly examined in detail for the Asst Years 2006-07 and 2007-08 during scrutiny assessment proceedings and more so in view of the fact that, admittedly, there was no incriminating material found during the course of search relatable to Asst Years 2006-07 to 2011-12 for making any addition in any manner whatsoever loan balances reflected in the statement of affairs were duly examined in detail for the Asst Years 2006-07 and 2007-08 during scrutiny assessment proceedings and more so in view of the fact that, admittedly, there was no incriminating material found during the course of search relatable to Asst Years 2006-07 to 2011-12 for making any addition in any manner whatsoever. (iv) While this is so, the Commissioner of Income Tax- Central-I erred in setting aside the entire assessment

I.T.A.Nos.2634 to 2639/Mds/2014 :- 24 -:

proceedings to the file of the AO for review of the Statement of Affairs filed during the course of Sec 153A proceedings. 15. The ld. Authorised Representative for assessee placed

reliance on the decision of the Special Bench of the Mumbai

Bench rendered in the case of CIT vs All Cargo Global Logistics

Ltd in ITA Nos. 5018 to 5022 & 5059/M/2010 which was recently

affirmed by the Bombay High Court in the case of CIT vs

Continental warehousing Corporation in ITA no. 523 of 2013, dated 21st April, 2015. The operative portion of the judgement of

Bombay High Court is as follows:-

"a) In assessments that are abated, the AO retains the original jurisdiction as well as jurisdiction conferred on him u/s. 153A for which assessments shall be made for each of the six assessment years separately; b) In other cases, in addition to the income that has already been assessed, the assessment u/s.153A will be made on the basis of incriminating material, which in the context of relevant provisions means - (i) books of account, other documents, found in the course of search but not produced in the course of original assessment, and (ii) undisclosed income or property discovered in the course of search.

15.1 The ld. Authorised Representative for assessee further

submitted that as per the provisions of Sec 263 of the Income

Tax Act, 1961, the orders can be revised by the Commissioner of

Income Tax if the Commissioner of Income Tax considers that

the order passed by the AO is erroneous and prejudicial to the

interests of the revenue. The bare reading of the section makes it

I.T.A.Nos.2634 to 2639/Mds/2014 :- 25 -:

clear that for an order to be revised, there should be satisfaction

of dual conditions i.e (i) the order should be erroneous and (ii) it

should be prejudicial to the interests of the revenue. Applying

the ratio of the decision of the Bombay High court as stated

above, the assessment could be framed only based on the

incriminating material found during the search operations and

not otherwise. Hence, the Assessing Officer had rightly applied

the ratio decidendi in the case of All Cargo Logistics by placing

reliance on the order of the Mumbai Tribunal Special Bench and

accordingly decided not to make any addition for the Asst Years

2006-07 to 2011-12. The ld. Authorised Representative for assessee

submitted that the Assessing Officer had taken one possible

view in the eyes of law and accordingly made a decision not to

make any addition. Hence, it cannot be construed that the order

is erroneous within the meaning of section 263 of the Act and

accordingly invoking of jurisdiction u/s 263 of the Act by the CIT

was null and void. Reliance was placed in this regard on the

decision of Supreme Court in the case of Malabar Industrial Co.

Ltd (2000) 243 ITR 83 (SC), in which it observed that ‘’a bare

reading of this provision makes it clear that the pre-requisite to the

exercise of jurisdiction by the Commissioner suo motu under it, is that

I.T.A.Nos.2634 to 2639/Mds/2014 :- 26 -:

the order of the Income-tax Officer is erroneous in so far as it is

prejudicial to the interests of the Revenue. The Commissioner has to

be satisfied of twin conditions, namely, (i) the order of the Assessing

Officer sought to be revised is erroneous; and (ii) it is prejudicial to

the interests of the Revenue. If one of them is absent - if the order of

the Income-tax Officer is erroneous but is not prejudicial to the

Revenue or if it is not erroneous but is prejudicial to the Revenue -

recourse cannot be had to Sec. 263(1) of the act’’.

15.2 Moreover, the notice u/s 263 of the Income Tax Act, 1961

received by the assessee from the office of the Commissioner of

Income Tax-Central I, it was stated that there was no adequate

inquiry made by the Assessing Officer on the Statement of Affairs

filed by the assessee due to paucity of time. This proves that the

provisions of Sec 263 of the Income Tax Act, 1961 are invoked by

the CIT as in his opinion that the inquiry made was inadequate.

It is submitted that this reason cannot be the subject matter of

revision proceedings u/s 263 of the Act. Reliance was placed in

this regard on the decision of Delhi High Court rendered in the

case of CIT vs. Sunbeam Auto Ltd (2011) reported in 332 ITR

167.

I.T.A.Nos.2634 to 2639/Mds/2014 :- 27 -:

15.3 The ld. Authorised Representative for assessee humbly

submitted that the issues raised by the CIT in the show cause

notice can be stated as "not considered by the Assessing Officer"

only on the assessment which was completed u/s.143(3).The

CIT cannot invoke the provisions of section 263 on the

assessment completed u/s 153A r.w.s 143(3) dated 28/03/2014

for the assessment years 2006-07 and 2007-08 since the same

was barred by limitation.

15.4 The ld. Authorised Representative for assessee further relied

to the decision of the Jurisdictional High Court in the case of CIT

v Shriram Engineering Construction Company Ltd [2011] 330 ITR 568

(Mad) wherein it was held that the period of limitation applicable

for revision u/s.263 commences from the dates of the original

assessment and not from the date of order of rectification

u/s.154. It was further held that what was sought to be revised

was the assessment order and not the rectification order passed

because the rectification order was passed for the limited

purpose of reduction of deduction u/s.80-IA, therefore the

revision was barred by limitation.

15.5 The ld. Authorised Representative for assessee relied on the

I.T.A.Nos.2634 to 2639/Mds/2014 :- 28 -:

above decisions, it can be construed that the CIT can invoke the

provisions of Sec 263 for assessment year 2006-07 and

assessment year 2007-08 for the assessments completed on

28/11/2008 and 31/12/2009 for assessment year 2006-07 and

assessment year 2007-08 respectively and not for assessments

completed on 28/03/2014 for the said years. Hence it is barred

by limitation.

15.6 The ld. Authorised Representative for assessee prayed for

dismissing the appeals by invoking of jurisdiction u/s.263 of the

Act passed by the Commissioner of Income Tax.

Commissioner of Income Tax and specifically stated that a true picture

of statement of affairs was essential to ascertain the sources and

nature of use of properties purchased, for determining the Wealth Tax

liability. The ld. Authorised Representative for assessee before the

Commissioner of Income Tax has also fairly conceded that the

statement of affairs needs to be examined in detail. For this reason,

the assessment was set aside for fresh examination of the statement

of affairs by the Assessing Officer and also to arrive at the interest

incomes from all the loans given and also, the interest paid on the

I.T.A.Nos.2634 to 2639/Mds/2014 :- 29 -:

loans borrowed.

record. In this case for the assessment year 2006-07, the original

assessment was completed u/s.143(3) of the Act on 28.11.2008. Later

on, there was a search action u/s.132 of the Act at the residential

premises on 18.11.2011. Consequent to search action the assessment

for the assessment year 2006-07 was framed u/s.153A r.w.s.143(3) of

the Act vide order dated 28.03.2014, wherein the Assessing Officer

computed assessed income at �3,12,33,973/- as he did in u/s.143(3)

of the Act. In other words, there was no addition of whatsoever to

the returned income consequent to search action. However, as

evident from the para one of order passed by the Commissioner of

Income Tax passed u/s.263 of the Act, the Assessing Officer

could not examine certain issues relating to the investments

made by the assessee in various companies and firms and

interest incomes received/ receivable from some of the debtors.

It was also noticed that the opening capital balance for the year

2006-07 and the capital account for the subsequent years was

not properly reconciled by the assessee during the course of the

proceedings u/s.153A r.w.s. 143(3). It was further noticed by

the Assessing Officer that the Cash Flow Statement furnished by

I.T.A.Nos.2634 to 2639/Mds/2014 :- 30 -:

the assessee indicating drawings and justifying the cash found

during the course of search at �14,50,000/- cannot be accepted

as the drawings reflected in such Cash Flow Statement would not

have been adequate for the assessee’s life style and the

Assessing Officer has accordingly proposed to estimate the

drawings at a higher level and thus add back the cash found

during search as unexplained cash since not supported by the

Cash Flow Statement filed. For all these deficiencies, the

Assessing Officer has proposed that the assessment completed

u/s.153A be reviewed u/s.263 by Commissioner of Income Tax

as he could not examine the issues due to paucity of time as the

information was filed before him only on 28.03.2014.

recorded was called for and the same was examined by the

Commissioner of Income Tax and issued notice u/s.263 on

20.06.2014. After the proposals sent by the Assessing Officer, it

was noticed that the assessee has filed three Statement of Affairs

for the year- 2006-07 - i) Statement of Affairs along with the return

u/s 139(1) ii) During the course of proceedings u/s 143(3) and iii)

During the proceedings u/s 153A in the financial year 2013-2014.

All the three Statement of Affairs are different among themselves.

I.T.A.Nos.2634 to 2639/Mds/2014 :- 31 -:

During the course of the proceedings u/s 143(3) finalized on

31.12.2009, the Assessing Officer has analyzed the Statement of

Affairs for the assessment years 2006-07 and 2007-08 and has

made additions in the Asst.Year 2007-08 as below:-

‘’ The assessee’s business is money lending and filed a statement of affairs as on 31.03.2007 Opening Balance of capital i.e as on 31.03.2006 : 13,16,06,077/- Net profit for the financial year 2006-07 was : 1,87,00,173/- --------------------- 15,03,06,250/- Closing balance of capital as on 31.03.2007 : 15,25,96,482/- -------------------- Difference in the Capital Account : 22,90,232/- --------------------- The ld. Authorised Representative for assessee vide letter

dated 22.12.2009 before the Commissioner of Income Tax has

stated that the closing balance kept with Indian Bank Porur

(�3,86,774/-), Bank of Baroda (�.12,12,517/-) and SB account

with Egmore Benefit Society Ltd (�21,897/-) not reduced than the

corresponding capital account balance figure would be

�15,09,75,204/- The difference of �6,68,954/- offered to tax.

The assessee's representative contention was not be accepted by

Commissioner of Income Tax as the assessee's business in money

lending, and the assessee has not charging interest from the

person to whom money has been lent. According to the

Commissioner of Income tax it can't not be distinguished whether

I.T.A.Nos.2634 to 2639/Mds/2014 :- 32 -:

that particular loan was interest bearing or not. Hence, the difference of �.22,90,232/- was added to the returned income.

Thus, it was also on record that original assessment order

passed u/s.143(3) of the Act for the assessment year 2007-08 on

31.12.2009 was subject matter of the appeal before the

Commissioner of Income Tax (Appeals) as well as before the

Tribunal. The Tribunal in ITA No.986/Mds/2012 vide its order

dated 12.09.2012, directed the Assessing Officer to re-examine

the statement of affairs filed by the assessee.

wanted to review the order of the Assessing Officer passed

u/s.153A r.w.s 143(3) dated 28.03.2014. First of all u/s.263 of

the Act, the Commissioner of Income Tax must call for

examining the records of the proceedings under Act and after

examining the same if he came to a conclusion that the order

passed by the Assessing Officer to be erroneous in so far as it is

prejudicial to the interest of revenue, then he can revise the

assessment order u/s.263 of the Act and issue notice. There

should be independent application of mind by Commissioner of

Income Tax himself. He cannot solely act upon the proposal

sent by Assessing Officer so as to rectify any omission on the

I.T.A.Nos.2634 to 2639/Mds/2014 :- 33 -:

part of the Assessing Officer since the Assessing Officer has the

remedy to rectify the same under the Act. From the proceedings

u/s.263 of the Act in the present case, it is evident from the first

para of the impugned order that the Commissioner of Income

Tax acted upon the proposal sent by the Assessing Officer which

is not permitted u/s.263 of the Act.

subject matter of appeal in respect of original assessment

passed u/s.143(3) of the Act before the Tribunal for the

assessment year 2007-08. The original assessment order passed

u/s.143(3) was set aside by the Tribunal and remitted back to

the file of the Assessing Officer to re-examine vide Tribunal order

in ITA No.986/Mds/2012, dated 12.09.2012. So there is no

doubt whatsoever as regards the matter covered by the

assessment order which have been perused by the assessee in

appeal on earlier occasion. The power of revision conferred on

the Commissioner of Income Tax was restricted to the order

passed by the Assessing Officer. It is further to be noted that

whatever the order Tribunal passed, the order of the Assessing

Officer ceases to exist and merges in the order of the Tribunal

and thereafter, the Tribunal order stands and is operative and

I.T.A.Nos.2634 to 2639/Mds/2014 :- 34 -:

not the original assessment order. Then it is to be noted that

Commissioner of Income Tax through proceedings u/s.263

cannot sit over on the order of the Tribunal so as to decide what

is right or wrong. In other words, in respect of any issue which

was subject matter of the appeal before the Tribunal and the

Tribunal decided it one way or other, the Commissioner of

Income Tax would not take up the same issue in proceedings

u/s.263 of the Act as held by jurisdictional High Court in the case

of CIT vs. Farida Prime Tannery, 259 ITR 342 (Mad). The

Commissioner of Income Tax observed in its order at para 5 that

while re-examining, comparing and contrasting the two Statement

of Affairs for both the assessment years 2006-07 and 2007-08,

the Assessing Officer has noticed a shortage of �1,01,97,722/- in

the liability side for the assessment year 2006-07 and

�12,15,79,373/- for the assessment year 2007-08. When these

differences were sought to be explained by the assessee, the

assessee has come up with another revised Statement of Affairs

as substantial differences in the balances of Assets and Liabilities.

There was substantial discrepancies in the three Statements of

Affairs which could not be examined properly by the Assessing

Officer during the proceedings u/s 153A finalized on 28.3.2014.

I.T.A.Nos.2634 to 2639/Mds/2014 :- 35 -:

Thus, the acceptance of the Revised Statement of Affairs was

suffering from defects resulting in a assessment erroneous and

prejudicial to the interests of revenue. The Commissioner of

Income Tax in its order u/s.263 wanted to review the giving

effect order to Tribunal order by Assessing Officer which is not

possible. If there is any error in giving effect order by the

Assessing Officer, that order is to be reviewed and not the order

passed u/s.153A r.w.s.143(3) of the Act. There is no dispute

that Section 153A is applicable in this case. Hence, the Assessing

Officer is obliged to issue notice under section 153A in respect of six

preceding years, preceding the year in which search etc. has been

initiated. Thereafter, he has to assess or reassesses the total income of

these six years. It is obligatory on the part of the Assessing Officer to

assess or reassess total income of the six years as provided in section

153A(1)(b) and reiterated in the 1st proviso to this section. The

second proviso states that the assessment or reassessment pending on

the date of initiation of the search or requisition shall abate. There is

no divergence of views in so far as the provision contained in section

153A till the 1st proviso. The divergence starts from the second

proviso which states that pending assessment or reassessment on the

date of initiation of search shall abate. This means that an assessment

I.T.A.Nos.2634 to 2639/Mds/2014 :- 36 -:

or reassessment pending on the date of initiation of search shall cease

to exist and no further action shall be taken thereon. The assessment

shall now be made under section 153A. The case of the assessee is

that necessary corollary to this provision is that completed assessment

shall not abate. These assessments become final except in so far and

to the extent as undisclosed income is found in the course of search.

On the other hand, it has been argued by the revenue that abatement

of pending assessment is only for the purpose of avoiding two

assessments for the same year, one being regular assessment and the

other being assessment under section 153A. In other words these two

assessments merge into one assessment. The second proviso does not

contain any word or words to the effect that no reassessment shall be

made in respect of a completed assessment. The language is clear in

this behalf and therefore literal interpreted should be followed. Such

interpretation does not produce manifestly absurd or unjust results as

section 153A(i)(b) and the first proviso clearly provide for assessment

or reassessment of all six years. It may cause hardship to some

assessees where one or more of such assessments has or have been

completed before the date of initiation of search. This is hardly of any

relevance in view clear and unambiguous words used by the

Legislature. This interpretation does not cause any absurd etc. results.

I.T.A.Nos.2634 to 2639/Mds/2014 :- 37 -:

There is no casus omisus and supplying any would be against the

legislative intent and against the very rule in this behalf that it should

be supplied for the purpose of achieving legislative intent. The

submissions are manifold, the foremost being that the provision under

section. 153A should be read in conjunction with the provision

contained in section 132(1), the reason being that the later deals with

search and seizure and the former deals with assessment in case of

search etc, thus, the two are inextricably linked with each other.

contained in sub-section (2) of section 153. It provides that if any

assessment made under sub-section (1) is annulled in appeal etc.,

then the abated assessment revives. However, if such annulment is

further nullified, the assessment again abates. The case of the assessee

is that this provision further shows that completed assessments stand

on a different footing from the pending assessments because appeals

etc. proceedings continue to remain in force in case of completed

assessments and their fate depends upon subsequent orders in

appeal. On consideration of the provision and the submissions, it is

found that this provision also makes it clear that the abatement of

pending proceedings is not of such permanent nature that they cease

to exist for all times to come. The interpretation of the assessee,

I.T.A.Nos.2634 to 2639/Mds/2014 :- 38 -:

though not specifically stated, would be that on annulment of the

assessment made under section 153(1), the Assessing Officer gets the

jurisdiction to assess the total income which was vested in him earlier

independent of the search and which came to an end due to initiation

of the search.

to issue a warrant of search of the premises of a person where anyone

or more of conditions mentioned therein is or are satisfied, i.e. (a)

summons or notice has been issued to produce books of account or

other documents but such books of account or documents have not

been produced, (b) summons or notice has been or might be issued,

he will not produce the books of account or other documents

mentioned therein, or (c) he is in possession of any money or bullion

etc. which represents wholly or partly the income or property which

has not been and which would not be disclosed for the purpose of

assessment, ea lied as undisclosed income or property. The provision

in section 132(1) does not use the word incriminating document:

Clauses (a) and (b) of section 132(1) employ the words books of

account or other documents: For harmonious interpretation of this

provision with provision contained in section 153A, all the three

conditions on satisfaction of which a warrant of search can be issued

I.T.A.Nos.2634 to 2639/Mds/2014 :- 39 -:

will have to be taken into account.

153A arises only 'When a search has been initiated and conducted.

Therefore, such an assessment has a vital link with the initiation and

conduct of the search. A search can be authorized on satisfaction of

one of the three conditions enumerated earlier. Therefore, while

interpreting the provision contained in section 153A, all these

conditions will have to be taken into account. With this, one proceeds

to literally interpret to provision in section 153A as it exists and read it

alongside the provision contained in section 132(1) of the Act.

initiated after 31.05.2003. On satisfaction of this condition, the

Assessing Officer is under obligation to issue notice to the person

requiring him to furnish the return of income of six years immediately

preceding the year of search. The word used is ‘shall’ and, thus, there

is no option but to issue such a notice. Thereafter he has to assess or

reassess total income of these six years. In this respect also, the word

used is ‘shall' and, therefore, the Assessing Officer has no option but

to assess or reassess the total income of these six years. The pending

proceedings shall abate. This means that out of six years, if any

I.T.A.Nos.2634 to 2639/Mds/2014 :- 40 -:

assessment or reassessment is pending on the date of initiation of the

search, it shall abate. In other words pending proceedings will not be

proceeded with thereafter. The assessment has now to be made

under section 153(1)(b) and the first proviso. It also means that only

one assessment will be made under the aforesaid provisions as the

two proceedings i.e. assessment or reassessment proceedings and

proceedings under this provision merge into one. If assessment made

under sub-section (1) is annulled in appeal or other legal

proceedings, then the abated assessment or reassessment shall

revive. This means that the assessment or reassessment, which had

abated, shall be made, for which extension of time has been

provided under section 153B.

reassessment of total income under section I53A(1)(b) and the first

proviso? For answering this question, guidance will have to be sought

from section 132(1). If any books of account or other documents

relevant to the assessment had not been produced in the course of

original assessment and found in the course of search, such books of

account or other documents have to be taken into account while

making assessment or reassessment of total income under the

aforesaid provision provision. Similar position will obtain in a case

I.T.A.Nos.2634 to 2639/Mds/2014 :- 41 -:

where undisclosed income or undisclosed property has been found as

a consequence of search. In other words, harmonious interpretation

will produce the following results :- (a) In so far as pending

assessments are concerned, the jurisdiction to make original

assessment and assessment under section 153A merge into one and

only one assessment for each assessment year shall be made

separately on the basis of the findings of the search and any other

material existing or brought on the record of the Assessing Officer, (b)

in respect of non-abated assessments, the assessment will be made on

the basis of books of account or other documents not produced in the

course of original assessment but found in the course of search, and

undisclosed income or undisclosed property discovered in the course of

search.

literal interpretation and reading the relevant provisions together. This

interpretation does not in any manner give results which can be said

to be ultra vires. It also does not give any absurd or unjust results.

retains the original jurisdiction as well as jurisdiction conferred on him

under section 153A for which assessments shall be made for each of

I.T.A.Nos.2634 to 2639/Mds/2014 :- 42 -:

the six assessment years separately and in other cases, in addition to

the income that has already been assessed, the assessment under

section 153A will be made on the basis of incriminating material,

which in the context of relevant provisions means – books of

account,, other document, found in the course of search but not

produced in the course of original assessment, and undisclosed

income or property discovered in the course of search.

case of CIT vs. All Cargo Global Logistics Ltd (supra).

28.1 Further, it is to be noted that for the assessment year 2006-

2007 assessment was completed u/s.143(3) of the Act on 31.12.2009

and later on assessment was reopened consequent to search action

u/s.153A of the Act on 28.03.2014. The assessee filed statement of

affairs that original return filed u/s.139(1) of the Act and also same

was revised during the course of proceedings u/s.143(3) of the Act.

Later once again during the assessment proceedings u/s.153A of the

Act, the Commissioner of Income Tax observed that there were

difference between three statements filed by the assessee when

compared to each other. The Commissioner of Income Tax wanted to

bring difference between these statements for taxation. Thus, it

means that there was no incriminating material found during the

I.T.A.Nos.2634 to 2639/Mds/2014 :- 43 -:

course of search action u/s.132 of the Act.

28.2. In view of the above, the original assessment order for the

assessment year 2006-2007 was already completed u/s.143(3)

of the Act. Hence the assessment u/s.153A to be made on the

basis of incriminating material, which means books of account,

other documents, found in the course of search but not

produced in the course of original assessment, and undisclosed

income or property discovered in the course of search. It was

admitted fact in this case that there was no incriminating

material discovered in the course of search action. There was

also no allegation that the assessee has failed to produce books

of accounts and documents in the course of original documents.

It is also a fact that recorded by Commissioner of Income Tax

that the Assessing Officer failed to examine the books of

accounts produced by him due to paucity of time and the

Assessing Officer proposed the Commissioner of Income Tax to

review the order u/s.153A of the Act.

do the things indirectly which cannot be done directly. Further,

he mentioned in the order that the Assessing Officer examined

I.T.A.Nos.2634 to 2639/Mds/2014 :- 44 -:

the statement of affairs for the assessment years 2006-07 and

2007-08 during the course of assessment u/s.143(3) of the Act

finalised on 31.12.2009 and he wanted to review the same which

is nothing but causing roving inquiry which is not permitted u/s.263

of the Act.

independently arrived satisfaction with the order of the Assessing

Officer as erroneous and prejudicial to the interest of the Revenue.

The Commissioner of Income Tax u/s.263 cannot be invoked to correct

each and every type of mistake or error committed by the Assessing

Officer and it was only when an order is erroneous that the section will

be attracted. In the present case there is no incorrect assumption of

facts or an incorrect application of law by the Assessing Officer. The

Assessing Officer has applied his mind to the seized material while

framing assessment for the year 2006-07 u/s.153A of the Act. The

Commissioner of Income Tax cannot expect to correct the assessment

order passed u/s.153A of the Act duly considered the seized material

and in the present case the Commissioner of Income Tax wanted to

consider the statement of affairs filed by the assessee during the

course of assessment u/s.153A though it was not part of the seized

material and it cannot be considered for framing assessment u/s.153A

I.T.A.Nos.2634 to 2639/Mds/2014 :- 45 -:

of the Act as assessment for the assessment year 2006-07 has already

been completed u/s.143(3) and re-assessment u/s.153A be made

only on the basis of incriminating material found in the course of

search but not produced in the course of original assessment. In the

present case, the Commissioner of Income Tax categorically observed

whatever statements on record were already produced by the

assessee both in the course of original assessment u/s.143(3) and also

in assessment proceedings u/s.153A of the Act. The Assessing Officer

adopted one of the course permissible under law and he has taken one

view that the Commissioner of Income Tax does not agree which

cannot be treated as error unless the view taken by the Assessing

Officer is unsustainable under law. Moreover, while making

assessment the Assessing Officer examined the accounts, made

enquiries, applied his mind to the facts and circumstances of the case

and determined the income, the Commissioner of Income Tax while

exercising his power u/s.263 is not permitted to substitute his estimate

of income in place of the income estimated by the Assessing Officer.

In our opinion, the Assessing Officer exercises quasi-judicial power

vested in his hands and if he exercises such power in accordance with

law and arrive at a conclusion, such conclusion cannot be termed to

be erroneous simply because the Commissioner of Income Tax wanted

I.T.A.Nos.2634 to 2639/Mds/2014 :- 46 -:

to do further enquiry as he has not satisfied with the enquiry made

by the Assessing Officer. In the present case, the Assessing Officer

made enquiry both in the course of original assessment u/s.143(3) for

the assessment year 2006-07 and also during the course of

assessment u/s.153A of the Act and the assessee has given a detailed

explanation to Assessing Officer to consider the same after being

satisfied by the explanation given by the assessee, he adopted not to

make any addition.

Mariam Aysha vs. Commissioner of Agricultural Income Tax 104 ITR

381 that consent cannot give jurisdiction is an essential principle of

law. The taxing authority can act only if there is power under the

statute to do so. Being so, the contention of the Departmental

Representative cannot be accepted that before the Commissioner of

Income Tax, the assessee has conceded that the statement of affairs

needs to be examined, so that revision of jurisdiction u/s.263 is

appropriate. In our opinion this is not a fit case for revision u/s.263 of

the Act and we are cancelling the order passed u/s.263 for the year

2006-07.

I.T.A.Nos.2634 to 2639/Mds/2014 :- 47 -:

2008-09, 2009-10, 2010-11 and 2011-12 were mere aftermath to the

order passed u/s.263 for the assessment year 2006-07. The

Commissioner of Income Tax himself agreed that findings for

assessment year 2006-07 having cascading effect on the subsequent

assessment years i.e from 2007-08 to 2012-2013. Since, we have

cancelled the revision order for the assessment year 2006-07 on the

basis on which revision order for the other assessment year was

framed, these orders cannot stand on their own leg, in view of the

cancellation of the revision order of the assessment year 2006-07.

Thus, all the other orders passed u/s.263 by Commissioner of Income Tax are annulled.

to 2639/Mds/2014 are allowed.

Order pronounced on Friday, the 17th day of July, 2015, at Chennai.

Sd/- Sd/- (च�ला नागे�� �साद ) (चं� पूजार� ) (CHALLA NAGENDRA PRASAD) (CHANDRA POOJARI) �या�यक सद�य/ JUDICIAL MEMBER लेखा सद�य/ ACCOUNTANT MEMBER चे�नई/Chennai. �दनांक/Dated:17.07.2015. KV आदेश क� ��त�ल�प अ�े�षत/Copy to: 1. अपीलाथ�/Appellant 2.��यथ�/ Respondent 3. आयकर आयु�त (अपील)/CIT(A) 4. आयकर आयु�त/CIT 5. �वभागीय ��त�न�ध/DR 6. गाड� फाईल/GF.

I.T.A.Nos.2634 to 2639/Mds/2014 :- 48 -: