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Income Tax Appellate Tribunal, RAJKOT BENCH, RAJKOT
Before: Shri Waseem Ahmed & Shri Siddhartha Nautiyal
PER BENCH:-
These four appeals have been filed by both the Assessee and the Revenue against the order passed by the Ld. CIT(Appeals) for assessment years 2005-06 and 2006-07. Since common issues are involved in the aforesaid appeals, the same are being disposed of by a common order.
The assessee has taken the following grounds of appeals:-
AY 2005-06 “1. The learned Commissioner of Income Tax (Appeals) - 11, Ahmedabad erred in upholding the validity of order passed u/s 153A r.w.s. 143(3) of the Act particularly in respect of deductions claimed originally and allowed in original order u/s 143(3) of the Act and not related to any incriminating material found during action u/s 132 of the Act. 2. The learned Commissioner of Income Tax (Appeals) - 11, Ahmedabad erred in confirming the action of the assessing officer in disallowing the claim of deduction u/s 801A(4) in respect of following infrastructure projects undertaken by the appellant:
Sr. No. of Name of the project project referred by CIT (Appeals)
1 Repairing of road
2 EE/B1/32/04-05 Repairing of road
3 EE/B1/33/04-05 Repairing of road
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4 Repairing of road
5 SE/B1/05-06 Repairing of road
6 EE/B1/32/04-05 Repairing of road
7 SE/B1/26/04-05 Repairing of road
8 SE/B1/04-05 Repairing of road
9 EE/B1/05-06 Repairing of road
10 Package No. NABARD/RIDF-V/RAJ/P Repairing of road
11 Repairing of road
12 Job No. SR/Rajkot/204-05/15 Repairing of road
13 Tender No. 49 Repairing of road
14 Providing WBM asphalt carpet
15 Providing WBM asphalt carpet
16 Providing WBM asphalt carpet
17 Providing WBM asphalt carpet
18 Providing WBM asphalt carpet
19 Agreement No. ADB/2 Mahua Road Repairing only
23 Agreement No. CE/6. Repairing of road
25 Agreement No. CE/6. Repairing of road
26 Agreement for Road Repairing only.
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28 Agreement for Road Repairing only.
29 Agreement for Road Repairing only.
30 Agreement for Road Repairing only.
31 Agreement for Road Repairing only.
32 Agreement for Road Repairing only.
33 Agreement for Road Repairing only.
34 Agreement for Road Repairing only.
35 Agreement for Road Repairing only.
36 Agreement for Road Repairing only.
37 Agreement for Road Repairing only.
39 Agreement for Road Repairing only. 45 Improvement of Zamrala Ratanav Panavi Road Km 0/0 to 6/5 Ta. Botad (under 12th FC Programme)
46 Improvement of Tata, Bhimbad Road (MDR) Km 0/0 to 6/0 Taluka Gadhada (Under Kishan Path)
47 Improvement of Road Under Kishanpath Yojna of Dist. Bhavnagar Pkg. BVN/KP/06-07/03, Ta. Botad / Gadhada
48 Improvement of Rural Roads Under Kishanpath Yojna Package No. Kishanpath/RAJ/OlTa. Morbi, Padadhari, Maliya Rajkot Wakaner
49 Improvement of Rural Roads Under Kishanpath Yojna, Ta. Jetpur Package No. Kishanpath/P-7/Raj
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50 Improvement of Rural Roads of Kalyanpur Dwarka Taluka (12th FC Programme 2005-06) Pkg. Jam/P/2
51 Repairs and Rehabilitation of Dhrol Latipur Road SH 22 from Km 9/600 to 15/000
52 SR to Vavera Babariya Dhar Road Km 0/0 to 8/0 (MDR) Prov. Renew of 25mm thick Carpet and seal coat by HMP and PF Ta. Rajula
53 SR to Sardargadh Jinjari Road MDR Km 0/0 to 2/0 and 2/0 to 3/81 by Prov. 37.50mm thick compacted BSG in selected length and 37.50mm BM and 20mm MSS
65 Repairs and rehabilitation of Khambhaliya Dwarka Road SH 25 Km 176/0 to 187/0
66 Construction of new OHT UG sump house and demolition of OHT at Gotri Harinagar
67 Supplying and laying Dl delivery line in command area of Tandalja OHT (VMC Department)
68 Khedbrahma Ta. Chack Dam Nala Plaguing work (K- 14) Dist. Sabarkatha (GWSSB)
69 Earthwork in bank cutting for formatting including side drains between JLR-WSJ in Connection with Jetalsar Wanshjhaliya GC Project
70 PMGSY Pkg GJ -11-03 Ta. Kodinar
71 SR to Manavadar Sardargadh road widening and strengthening tp intermediate lane by prov. WBM seal coat by HMP and PF Km 2/0 to 4/0
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73 Arambhada - 2 Industrial Zone WBM Rasta by Paver finisher using asphalt (GIDC Rajkot)
74 2006-07 action plan re-carpet road by using Paver in Central Zone (Rajkot Manager Palika)
75 Holenda Umrali Road (Km 0/0 to 3/100) Ta. Rajkot (Panchayat R&B Division Rajkot)
76 SR to Thana Golal Amarpara Resamadi Golal Road Ta. Jetpur (Km 0/0 to 3/80)
77 SR to Vasavad Madhadam Road Km 0/0 to 3/10 Ta. Jasdan
78 Lothadada Bhayasar Road repair & recarpet Bitumen Ta. Rajkot
79 Improvement including strengthening of Urban Road in Jetpur City under R&B Department (Vikashapath Yojna) Pkg. RJD/VP/2
80 SR to SH to Mota Matra Road KmO/0 to 5/0 (selected length) by prov. 25mm thick carpet & 0.18 cum/10 sqm. Seal coat by HMP&PF
81 RMC Zone I & III
82 Recarpeting Road of Word No. 5,6,7,16,17,18, 23 East Zone 83 Modheswar Filtration Plant Una Nagarpalika
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The learned Commissioner of Income Tax (Appeals) - 11, Ahmedabad erred in holding that appellant was not a developer of infrastructure facility in respect of projects specified by him and listed in ground No. 2 above.
The appellant craves leave to add, amend, alter and withdraw any ground of appeal anytime up to the hearing of this appeal.”
AY 2006-07
“1. The learned Commissioner of Income Tax (Appeals) - 11, Ahmedabad erred in upholding the validity of order passed u/s 153A r.w.s. 143(3) of the Act particularly in respect of deductions claimed originally and allowed in original order u/s 143(3) of the Act and not related to any incriminating material found during action u/s 132 of the Act. 2. The learned Commissioner of Income Tax (Appeals) - 11, Ahmedabad erred in confirming the action of the assessing officer in disallowing the claim of deduction u/s 80IA(4) in respect of following infrastructure projects undertaken by the appellant:
1 Periodical renewal to Km 424/0 to 442 of NH 8E (Extn.) Dwarka-Porbandar-Somnath Road
2 Periodical renewal to Km 12/0 to 25/750 of NH 8D Jetpur- Junagadh-Somnath Road
3 Strengthening Jamnagar-Dwarka-Okha Road CH No. 6 Between KM 252/0 to 262/2 Dist. Jamnagar 9 (CRF)
4 Strengthening Jamnagar-Dwarka-Okha Road CH No. 6 Between KM 252/0 to 262/2 Dist. Jamnagar 9 (CRF)
5 SR to Dwarka Okha Road CH No. 6 between Km 233/4 to 237/0 By Prov. 37.5 mm IBM & 0.18 Cum/10 Sqm Seal coat by paver HMP&PF
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6 SR to Dwarka Mithapur Road CH No. 6 between Km 236/2 to 239/4 By Prov. 37.5 mm IBM & 0.18 Cum/10 Sqm Seal coat by paver finisher (Job No. JMN/SR/2005-06/17)
7 Construction and Maintenance of Rural Roads under PMGSY Pkg. No. GJ-1008Ta. Khambhaliya/Kalyanpur Dist. Jamnagar
8 Construction and Maintenance of Rural Roads under PMGSY Scheme Block:
9 Construction and Maintenance of Rural Roads under PMGSY Scheme Block:
10 Srto Limbadi-Rangurgadh-Charkala-Dwarka Road SH No. 6 Bet. Km. 28/4 to 34/4 By Prova. 37.50 mm IBM & 0.18 Cum/10 Sqm Seal coat By HMP & PF (Job No. JMN/SR/2004-05/19)
11 Srto Limbadi-Rangurgadh-Charkala-Dwarka Road SH No. 6 Bet. Km. 17/4 to 20/0 By Prova. 37.50 mm IBM & 0.18 Cum/10 Sqm Seal coat By HMP & PF (Job No. JMN/SR/2005-06/16)
12 Improvement Including Strengthening of R&B Roads Passing through Urban Area Under Vikas Path Yojna (Pkg. No. JMN/VT/1)
13 Improving/Resurfacing Rural Road in Earthquake affected District Rajkot Lot No. L-3B
14 Improving/Resurfacing Rural Road in Earthquake affected District Rajkot Lot No. L-2A
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15 Const, of WBM & Asphalt Road on IPS Jamnagar Vistar Vikas Sata Mandal
16 VMC Harinagar APS to Umang Society & Makdar Desai Road 600mm Work
17 Construction of Roads under Pradhan Mantri Gram Sadak Yojna PlU-Ujjain
18 Construction of Pavad Side Shoulders between Km. 150/0 to 167/0 on NH 8E Somnath - Bhavnagar Road
The learned Commissioner of Income Tax (Appeals) - 11, Ahmedabad erred in holding that appellant was not a developer of infrastructure facility in respect of projects specified by him and listed in ground No. 2 above.
The learned Commissioner of Income Tax (Appeals) - 11, Ahmedabad erred in confirming disallowance of Rs. 50,000/- out of administrative expenses.
The appellant craves leave to add, amend, alter and withdraw any ground anytime up to the hearing of this appeal.”
The Revenue has taken the following grounds of appeal:- AY 2005-06
“1. The Ld. CIT(A) has erred in law and on facts in allowing the deduction U/s 80IA(4) in respect of various projects by treating the assessee as developer instead of work contracts' as treated by the A.O.
On the facts-and circumstances of the case, the ld. CIT(A) has erred in interpreting the provision of section 80IA(4) of the Act
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whereby the vital conditions to be fulfilled such as findings on new infrastructure facility and requirement of eligible income to be derived from use of the said infrastructure facility was ignored while deciding the issue of deduction u/s 80IA(4)of the Act.
On the facts and circumstances of the case, the ld. CIT(A) erred in not taking into account the decision of Hon'ble Supreme Court of India on the issue of 'work contract' viz. decision in the case of M/s HAL 55 STC 327 (SC) dtd. 16.12.1983 to decide on the issue of 'work contract' vis-a-vis 'development contract' for deduction u/s 80IA(4) of the Act. In the said case of M/s HAL, Hon'ble Apex Court had held that no element of ownership or right of property is produced in the case of 'work contract'.
The Ld. CIT(A) has erred in law and on facts in deleting the addition made by the A.O. of Rs. 270,600/- U/s 40A(2)(b) of the I.T. Act.
On the facts and in the circumstances of the case and in law, the CIT(A) ought to have upheld the order of the A.O.
It is, therefore, prayed that the order of the CIT(A) be set aside and that of the A.O. be restored to the above extent.”
AY 2006-07
“1. The Ld.CIT(A) has erred in law and on facts in allowing the deduction U/s 80IA(4) in respect of various projects by treating the assessee as developer instead of 'work contracts' as treated by the A.O. 2. On the facts and circumstances of the case, the ld. CIT(A) has erred in interpreting the provision of section 80IA(4) of the Act whereby the vital conditions to ,be fulfilled such as findings on new infrastructure facility and requirement of eligible income to be derived from use of
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the said infrastructure facility was ignored while deciding the issue of deduction u/s 80IA(4)of the Act. 3. On the facts and circumstances of the case, the ld. CIT(A) erred in not taking into account the decision of Hon'ble Supreme Court of India on the issue of 'work contract' viz. decision in the case of M/s HAL 55 STC 327 (SC) dtd. 16.12.1983 to decide on the issue of 'work contract' vis-a-vis 'development contract' for deduction u/s 80IA(4) of the Act. In the said case of M/s HAL, Hon'ble Apex Court had held that no element of ownership or right of property is produced in the case of 'work contract'. 4. On the facts and in the circumstances of the case and in law, the CIT(A) ought to have upheld the order of the A.O. 5. It is, therefore, prayed that the order of the CIT(A) be set aside and that of the A.O. be restored to the above extent.”
We shall start with assessment year 2005-06 and since the facts involved in both the years are common, the decision for assessment 2005-06 would apply to assessment year 2006-07 as well. At the outset, the counsel for the assessee has raised the issue of jurisdiction of passing the assessment order for the above years under section 153A r.w.s. 143(3) of the Act on the ground that assessment for the above years were already concluded/unabated and during the course of search initiated on the assessee for the impugned assessment years, no incriminating material was found so as to justify the aforesaid additions. The counsel for the assessee relied on several judicial precedents including on the case of Pr. CIT v. Saumya Constructions 81 Taxman.com 292 (Gujarat) rendered by the jurisdiction Gujarat High Court which is to the effect that additions under section 153A r.w.s. 143(3) of the Act in case of completed / unabated assessments can be made only on
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the basis of incriminating material found during the course of search, and not otherwise.
In order to understand/appreciate the issue raised by the counsel for the assessee, it would be pertinent to reproduce the relevant extracts of the assessment order for assessment year 2005-06, to understand whether any fresh incriminating material was found in the course of search conducted on the assessee, so as to disallowed assessee’s claim under section 80IA of the Act.
“2. The assessee company is a Government Contractor doing mainly Government work on contractual basis. Copies of P&L account and balance sheet, which were filed originally with the return filed u/s. 139(1) of the Act were also filed. Various issues were discussed at length. On perusal of details called for during the course of assessment it is seen that the assessee's receipts on which deduction u/s. 80IA(4) has been claimed, mainly consists of works contract with the Govt. and it's enterprises and Semi Govt. Bodies. On perusal of computation of income, filed along with the return of income it is noticed that the assessee has claimed deduction u/s. 80IA(4) of the Act on the profit derived from such contracts executed. In view of the provisions of section 80IA(4) of the Act the deduction is allowable to any enterprise carrying on the business of (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining any infrastructure facilities. On perusal of the provision of section 80IA(4) of the Act, viewed in the light of the explanation, inserted after sub section (13) of section 80IA, which clarifies the provision of section 80IA(4), the assessee is apparently not eligible for deduction claimed under section80IA(4) as the explanation says that “for the removal of doubts, it is hereby declared that nothing contained in this section shall apply in relation to a business referred to in sub section (4) which is in the nature of a works contract awarded by any person (including the Central or State
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Government) and executed by the undertaking or enterprise referred to in sub section (1)." 3. On the basis of details collected during the course of search and subsequent assessment proceedings it is seen that the receipts of the assessee on which deduction u/s. 80IA(4) of the Act is claimed, is from works contract with the Central or State Govt. or it's enterprises or Semi Govt. Bodies. The assessee was therefore, requested to show cause as to why the deduction u/s. 80IA(4) claimed by the company should not be disallowed, which is apparently a wrong claim and against the provisions of law as discussed above. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
“5. The arguments put forth by the assessee company have been carefully considered and a claim of the assessee has been thoroughly examined in the light of provisions of section 80IA(4) read with explanation inserted after sub section (13) of section 80IA of the Act. On perusal of the reply submitted by the assessee it is seen that the same is not acceptable for the reasons discussed in the following paragraphs:
5.1 The claim of the assessee is that in the decision of Hon. ITAT Mumbai Bench, Mumbai in the case of M/s. All Cargo Global Ltd Vs DCIT(supra) it was held that the assessment years which are not abated has to be finalized on the basis of incriminating materials found during the course of search and which was not produced in the course of original assessment and undisclosed income or property discovered during the course of search. However, the decision of the Hon, ITAT Mumbai Bench in this case has to be read in proper context. The Hon. ITAT has held further that this is in addition to the income that has been already assessed. The Hon. ITAT has therefore, mentioned that the original income assessed has to be taken into consideration and it did not say that if any claim of exemption/deduction allowed wrongly in the earlier assessments the same would stay allowed in the same manner even if it was against the provisions of law. This has never been the intention of the Hon. ITAT and the assessee is trying to look for an interpretation to continue with its wrong claim of deduction which is not intended to be
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the interpretation of the provisions of section 153A as discussed in the said order of the Hon. Tribunal. Hence, If any wrong claim has been made in the income originally assessed, that has to be withdrawn because such deduction is part of the income originally assessed. The explanation inserted after sub section (13) of section 80IA been substituted by the Finance (No. 2) Act, 2009, with retrospective effect from 01.04.2000. In the said explanation it is clearly mentioned that ""Explanation--for the removal of doubts, if it is hereby declared that nothing contained in this section shall apply in relation to a business referred to in sub section (4) which is in the nature of a works contract awarded by any person (including the Central or State Government) and executed by the undertaking or enterprise referred to in sub section(l)." As mentioned earlier, it is clear from the details provided by the assessee that the assessee is a works contractor who receives regular amounts in respect of work contract entered into by it with Govt. or Semi Govt. Bodies; and the work executed by the assessee does not fall under the category of developer of an infrastructure. Therefore, the deduction claimed by the assessee u/s. 80IA(4) is not allowable. Here it would be pertinent to mention that where a claim is not admissible at all in law, it cannot be allowed in subsequent re-assessments even if it was allowed in the original assessment. The principle laid down by the Hon. High Court in the case of Swaraj Engine Ltd. vs. Asst.CIT(2003) 260ITR 202(P&H)/ although given in the context of reassessment under section 147, is of immense importance as in this case initial assessment was made under section 143(3) of the Act and deduction under section 80IA was wrongly allowed to the assessee as the assessee was not eligible for deduction in that particular assessment year, the argument of the assessee that there was no failure on the part of the assessee to disclose all material facts fully and truly was not accepted as it was felt that such an attitude would be a travesty of justice when the assessee is not eligible for deduction on merit. Further, in the case of Som Datt Builders Pvt. Ltd. vs DCIT(2006) 280 ITR(AT)229(Kol) it was held by the Hon. Kolkata High Court that where relief under section 80HHB was wrongly given for a year for which the provision was not applicable, reassessment in such a case cannot be challenged on the ground of change of opinion. Hence, the underlying principle of these decisions is that a claim wrongly allowed previously could be and should be set right in
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subsequent assessments and limiting the provisions of section 153A in the manner suggested by the assessee would in fact be a travesty of justice. 5.2 Further, the decision of Hon. Special bench has to be seen in the context of the case. The essence of this decision is that the issues which have reached finality in original assessment should not generally be disturbed in the assessments under section 153A unless and until evidences were found during the course of search demanding necessity for the same. In the case under consideration, original assessment under section 143(3) was completed prior to insertion of the above explanation which has been substituted by the Finance (No.2) Act, 2009, with retrospective effect from 01.04.2000. The said Explanation starts with the phrase “for removal of doubt”, meaning there by that it only clarifies which is always intended to be the meaning of the provisions of section 80IA(4) of the Act. Since, the original assessment was completed prior to insertion of this explanation the then Assessing Officer did not had the benefit or occasion to examine the claim of the assessee in the light of intention and meaning of the provision as clarified by the said Explanation. Subsequently a Search was conducted in the case of the assessee on 24.06.2010 and after examining the documents found at the premises of the assessee during the course of search, it was observed that the assessee was not eligible for deduction under section 80IA (4) as clarified by the said Explanation. It would therefore, be incorrect to say that this was not a finding of the Search. Further, the claim of the assessee was examined during the course of present assessment proceedings and it was found that the findings of the Search that the assessee is not eligible for such deduction, is correct in view of the said provisions of section 80IA(4) of the Act. It would also be most relevant to mention that the issue of eligibility of the assessee for deduction under section 80IA(4) in the case of the assessee could not be said to have reached finality in the original assessment as it was found during the course of search that the assessee was not eligible for the deduction under section 80IA(4) as clarified by the said explanation. The deductions and exemptions are special benefits and, as discussed earlier, it could be allowed only if the assessee is found to be eligible for the same on merit. If any deduction was wrongly allowed in the previous assessments the
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assessee cannot claim that it could not be disallowed in subsequent assessments under section 153A specially when the issue itself finality.
From the observations of the Ld. Assessing Officer reproduce above, apparently, no incriminating material was found during the course of search on the basis of which assessment was framed disallowing the claim of the assessee under section 80IA of the Act. The basis of additions apparently may be inferred from the below observations made by Ld. Assessing Officer in the assessment order “Hence, the underlying principle of these decisions is that a claim wrongly allowed previously could be and should be set right in subsequent assessments and limiting the provisions of section 153A in the manner suggested by the assessee would in fact be a travesty of justice…..Since, the original assessment was completed prior to insertion of this explanation the then Assessing Officer did not had the benefit or occasion to examine the claim of the assessee in the light of intention and meaning of the provision as clarified by the said Explanation”. Thus, the order passed u/s 153A r.w.s. 143(3) of the Act was not on the basis of any incriminating material found during the course, but on the basis of revision of order sought to be made on the basis of insertion of new Explanation to section 80-IA, which was not existing at the time of completion of original assessment. Now, which shall also refer to the relevant extracts of the order of the Ld. CIT(Appeals) on this point:
“6. The decisions relied by the appellant were carefully gone through and it was observed contents of the decisions were reproduced by the appellant in a distorted manner just to make believe his submission, by grossly ignoring the true spirit of the decisions as well as the provisions of the Act. As a matter of fact, the
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correct spirit of the findings in these decisions could be understood only after perusal of each of the decisions as a whole and not in piece meals. The extracts reproduced by the appellant were just to make them suitable for his own purpose. The Hon'ble Tribunals and the courts in the cases of Anil Kumar Bhatia 211 Taxman 453 (Delhi), Filatex Ltd. (2014) 49 Taxmann.com 465 (Delhi), Sunny Jacob Jewellers & Wedding Centre 362 ITR 664(Kerala) and Hotel Mariya (2011)332 ITR 537 (Kerala) are in agreement that according to the provisions of Section 153A, the A.O. is obliged to issue notice u/s 153A in respect of 6 Assessment Years preceding the year in which search has been initiated. Thereafter, he has to assess or reassess the total income of these six years as provided u/s 153A (1)(b). It was further clarified that only the assessments or assessments pending on the date of initiation of the search or requisition shall abate. The second proviso does not contain any word or words to the effect that no reassessment shall be made in respect of completed assessments. The courts have unanimous view that the language is clear in this behalf and therefore, literal interpretation should be followed. The Bombay Tribunal (special bench) held that such interpretation does not produce any manifestly absurd or unjust results as Section 153A (I) (b) and the first proviso clearly provide for assessment or reassessment of all six years.
6.1 The ratio of the decisions of the courts makes it abundantly clear that once action u/s 132 was carried or requisition u/s 132A initiated, it becomes mandatory to the AO. to initiate assessment proceedings in 6 A.Y’s, preceding to year in which search was carried out or requisition was made, it is not relevant whether any incriminating material was found in any particular year or in all of the relevant financial years. Therefore, the ground of appeal that the assessments already made cannot be re-opened u/s 153A is not in accordance with the provisions of the Act. After having regard to the rulings of the courts, the provisions of the Act and the facts of the case, this ground of appeal is rejected.”
A perusal of the contents of the Ld. CIT(Appeals) order seems to suggest that no incriminating material was found during the course of search
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so as to disallow the claim of the assessee under section 80-IA of the Act. The Ld. CIT(Appeals) in his order has categorically observed that “it is not relevant whether any incriminating was found in any particular order and all of the relevant years. Therefore, ground of appeal that the assessments already made cannot be reopened under section 153A is not in accordance with the provisions of the Act”.
Before us, the Ld. Counsel for the assessee challenged the validity of the assessment framed under section 153A of the Act in the absence of any incriminating material found during search action undertaken on the assessee, particularly when the assessment years 2005-06 and 2006-07 had attained finality and thus not abated. Further, vide order sheet entry dated 1st March 2022, this Bench had directed the Department to submit in writing any incriminating material on the basis of which the assessment has been framed duly substantiated in order to counter the contention of the counsel for the assessee. However, despite several opportunities, the Department has not been able to produce any material/evidence to prove that the assessment under section 153A r.w.s. 143(3) of the Act was framed on the basis of any incriminating material found during the course of search.
We have heard the rival contentions and perused the material on record. In the case of PCIT v. Meeta Gutgutia [2018] 96 taxmann.com 468 (SC), Supreme Court 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. In the case of Pr. CIT v. Saumya
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Constructions 81 Taxman.com 292 (Gujarat), the Gujarat High Court held that under section 153A, an assessment has to be made in relation to search or acquisition, namely, in relation to material disclosed during search requisitioned. If no incriminating material was found during search, no addition can be made on basis of material collected after the search. The Delhi High Court in the case of Kabul Chabla (2015) 380 ITR 573 (Delhi High Court) has held that completed assessment can be interfered by the Assessing Officer while making assessment u/s. 153A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which ware not produced or not already disclosed or made in the course of original assessment. The SLP filed by the Revenue against the above decision of Delhi High Court was dismissed by the Hon'ble Supreme Court vide SLP(C)No.018651/2016.The Gujarat High Court in the case of Pr. CIT v. Sunrise Finlease 89 Taxman.com 1 (Gujarat) has held that where no incriminating evidence against assessee was found or seized during the course of search so as to attract provisions of section 153A proceedings, no additions could be made on the basis of statement of director of assessee company which were recorded under section 131 much later after search. The Gujarat High Court in the case of PCIT v. Dipak Jashvantlal Panchal [2017] 88 taxmann.com 611 (Gujarat) held that only undisclosed income and undisclosed assets detected during search can be brought to tax in assessment under section 153A of the Act. In the case of PCIT v. Desai Construction (P.) Ltd. [2017] 81 taxmann.com 271 (Gujarat), the Gujarat High Court held that in absence of any incriminating material found during search, Assessing Officer, in
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assessment under section 153A, would not be entitled to interfere with assessee's claim for deduction under section 80-IA, which was part of original assessment proceedings and such assessment had abated. The ITAT Rajkot Bench in the case of a Rajat Minerals v. DCIT 114 Taxman.com 536 (Ranchi-Trib) held that where no incriminating evidence against the assessee was found or seized during course of search, invocation of provisions of section 153A and making additions/disallowances on basis of tax evasion petition found much after search was unjustified. The Delhi High Court in the case of Pr. CIT v. Jaypee financial services Ltd 127 Taxman.com 419 (Delhi), held that where AO during the course of post search proceedings under section 153A against assessee-share trader found certain evidences showing client code modification done by assessee which were not for genuine reasons and, accordingly, made addition on account of such client code modification, since impugned addition was not made by AO based on any incriminating material found during search against assessee and assessment was not pending on date of search, impugned addition was unjustified and same was to be deleted. The Department has not been able to produce any material to suggest / substantiate that the assessment order was passed on the basis of any incriminating material found during the course of search.
In the instant case, we observe that for assessment year 2005-06, return of income was filed on 31-10-2005 declaring total income of Rs. 61,18,044/- wherein deduction u/s 80-IA of Rs. 1,48,64,424/- has been claimed. The regular assessment for the captioned year was also completed on 31-12-2007. Subsequently, a search action under section 132 of the Act
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was carried out at the premises of the assessee company and on 24-05-2010, disallowing the deduction claimed under section 80IA(4) of � 1,48,64,424/-. From the facts placed on record, we observe that there was no incriminating material found during the course of search on the basis of which deduction claimed under section 80IA(4) was disallowed by the Ld. Assessing Officer and also confirmed by Ld. CIT(Appeals).
Similarly, for assessment year 2006-07, return of income was filed on 13-11-2006 declaring total income of Rs. 48,19,136/- wherein deduction u/s 80-IA of Rs. 2,62,16,961/- has been claimed. The regular assessment for the captioned year was also completed on 22-12-2008. Subsequently, a search action under section 132 of the Act was carried out at the premises of the assessee company and on 24-05-2010, disallowing the deduction claimed under section 80IA(4) of � 2,62,16,961/-. From the facts placed on record, we observe that there was no incriminating material found during the course of search on the basis of which deduction claimed under section 80IA(4) was disallowed by the Ld. Assessing Officer and also confirmed by Ld. CIT(Appeals). The Department has not been able to produce any material to suggest / substantiate that the assessment order was passed on the basis of any incriminating material found during the course of search.
Therefore, in view of well settled proposition of law that completed assessment can be interfered by the Assessing Officer while making assessment u/s. 153A only on the basis of some incriminating material unearthed during the course of search documents or undisclosed income or property discovered in the course of search which were not produced or not
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already disclosed or made in the course of original assessment, we are of the considered view that in the instant facts, the Ld. CIT(A) has erred in facts and in law in upholding the additions for assessment years 2005-06 and 2006-07. Since we have set aside the assessment order on the issue of jurisdiction itself, we are not separately discussing the merits of the case.
In the combined result, the appeals of the Assessee are allowed for assessment years 2005-06 and 2006-07 and the appeals of the Revenue are dismissed for assessment years 2005-06 and 2006-07.
Order pronounced in the open court on 10-08-2022
Sd/- Sd/- (WASEEM AHMED) (SIDHHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad : Dated 10/08/2022 आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order,
Assistant Registrar, Income Tax Appellate Tribunal, Rajkot