ACIT,ALLAHABAD vs. M/S SUNSINE INFRASTATE PVT TTD, ALLAHABAD

PER SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER:

This appeal filed by Revenue with Income Tax Appellate Tribunal, Allahabad Bench, Allahabad (hereinafter called “the tribunal”) in ITA No. 103/Alld/2017 for assessment year(ay) 2011-12 has arisen from the appellate order dated 22.02.2017 passed by learned Commissioner of Income Tax(Appeals)- III, Lucknow, U.P. (hereinafter called “ the CIT(A)”) u/s 250 of the Income-tax Act, 1961 (hereinafter called “theAct” ) in appeal number 77/46/ACIT/CC/Allah/CIT(A)- III/Lko/16-17, the appellate proceedings had arisen before learned CIT(A) from assessment order dated 29th March, 2016 passed by learned Assessing Officer (hereinafter called "the AO") u/s 153A read with Section 144 of the 1961 Act for ay:2011-12. The assessee has filed Cross Objection(C.O.) bearing number 22/Alld/2017 arising out of ITA No. 103/Alld/2017 for ay: 2011-12. This appeal and the C.O. were heard by Division Bench through video conferencing mode through Virtual Court. 2. The Revenue has raised following grounds of appeal in memo of appeal filed with the tribunal: “1. In view of the facts and circumstances of the case, Ld. CIT(A) has erred in deleting the addition of Rs. 2,50,00,000/- made on account of unexplained … without appreciating the facts that assessee failed to produce any satisfactory evidence to prove the genuineness during the course of assessment proceedings.

P a g e | 3 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad in 380 ITR 573(Del.) in this case , ignoring the order of jurisdictional High Court in the case of CIT Vs. Raj Kumar Arora (2014) 52 taxmann.com 172(Alld) wherein it was held that AO has power to reassess returns of assessee not only for undisclosed income found during search operation but also with regard to material available at the time of original assessment.” 2b. The assessee has raised following grounds in C.O. filed with tribunal: “1. That in any view of the matter it is not correct to say that the learned Commissioner of Income(Appeal) has erred in deleting the addition of Rs. 2.50 Cr. whereas Commissioner of Income Tax (Appeal) was perfectly justified and correct in deleting the addition by considering the facts of the case. 2. That in any view of the matter the various decision cited by the appellant are fully applicable in the appellant’s case and therefore Ground No.-2 in the departmental appeal is liable to be rejected. 3. That in any view of the matter the appellant reserves his right to take any fresh ground of appeal before hearing of the appeal. It is therefore respectfully prayed that a suitable order may kindly be passed as the departmental appeal deserves to be dismissed in the facts and circumstances of the case.” 3. The brief facts of the case are that the assessee is engaged in the business of real estate. There was a search and seizure operations conducted by Revenue u/s 132(1) of the 1961 Act in Hemant Kumar Sindhi , Dinesh Kumar Pahuja group, residential premises of partners, directors and various residential and business premises of partners , directors and proprietors of the group on 05.12.2013. The warrant of authorization was executed at the office premises of the assessee company. Thereafter notice dated 05.09.2014 u/s 153A of the 1961 Act was issued by the AO, requiring assesse to furnish return of income within 15 days. The assessee failed to furnish return of income within the aforesaid stipulated time . Thereafter several statutory notices were issued by AO u/s 142(1) from time to time . The assessee

P a g e | 4 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad finally filed return of income on 15.02.2016 in response to notice issued by AO u/s 153A, which return of income was filed belatedly beyond the time stipulated for filing of return of income in the aforesaid notice issued by the AO u/s 153A. During the course of assessment proceedings , the AO observed that the assessee has shown sundry creditors to the tune of Rs. 2,50,00,000/- in the name of Shri Ajeya Singh , which the assessee was not able to explain satisfactorily . The AO also observed that it appears that it is the unsecured loan which the assessee has not shown as loan nor filed evidence of identity , genuineness and creditworthiness of the person. The AO asked the assessee to furnish the evidence of identity, genuineness and creditworthiness of the Shri Ajeya Singh to prove the genuineness of transaction. The AO observed that the assessee has failed to adduce any corroborative evidence in support . The AO observed that the assessee has shown the amount as sundry creditors in the name of Shri Ajeya Singh of Rs.2.50 crore and the assessee has not explained the genuineness of transaction and failed to furnish identity and creditworthiness of Shri Ajeya Singh. The AO observed that the assessee has failed to satisfactory explain the transaction of Rs. 2.50 crore. Thus, the AO held that the amount shown as sundry creditor of Rs. 2.50 crore be treated as unexplained and the AO added the same to be the income of the assessee under the provisions of Section 68 of the 1961 Act, vide assessment order dated 29.03.2016 passed by AO u/s 153A r.w.s. 144 of the 1961 Act. 4. Aggrieved by the assessment order dated 29.03.2016 passed by AO u/s 153A r.w.s. 144 of the 1961 Act, the assessee filed first appeal with ld. CIT(A). The assessee submitted before ld. CIT(A) that it is engaged in business of real estate. It was submitted by assessee before ld. CIT(A) that the assessee is maintaining regular books of accounts which are audited and audit report was duly filed with Revenue along with return of income filed by the assessee company. It was submitted that return of income was originally filed by assessee u/s 139(1) of the 1961 Act with 4

P a g e | 5 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad Revenue on 30.09.2011, declaring income of Rs. 4,17,790/-. It was claimed that said return of income was processed by Revenue u/s 143(1) of the 1961 Act. It was submitted that complete details/information are available in the audited financial statements for framing assessment. It was claimed that search and seizure operations were conducted by revenue u/s 132(1) of the 1961 Act on 05.12.2013 in the business and residential premises of Hemant Kumar Sindhi who is one of the Directors of the assessee company w.e.f. 06.05.2011. It was submitted that in the course of search and seizure operations conducted by Revenue u/s 132(1), no incriminating material about any undisclosed income / any document connected with the assessee company for the ay in question was found by the search party. The assessee submitted that the AO issued notice dated 05.09.2014 u/s 153A of the 1961 Act requiring the assessee to file return of income and it was submitted that in compliance thereof , the assessee filed return of income u/s 153A of the 1961 Act for the impugned ay on 15.02.2016 by declaring the same income of Rs. 4,17,790/- as was declared by assessee in the original return of income filed on 30.09.2011 u/s 139(1) of the 1961 Act. It was claimed by assessee that the copies of audit report was also enclosed while filing return of income u/s 153A of the 1961 Act , on 15.02.2016. The assessee submitted that the AO has made additions to the tune of Rs. 2,50,00,000/- u/s 68 of the 1961 Act, vide assessment order dated 29.03.2016, despite all the replies/explanations/ details submitted by assessee. The assessee challenged the additions made by the AO , before ld. CIT(A) both on legal ground as to validity of search and also on merits of additions. The broad contentions on legal ground was that the return of income filed u/s 139(1) on 30.09.2011 was already processed u/s 143(1) of the 1961 Act and secondly no additions can be made in the absence of incrimination material found during the course of search operations. The assessee relied upon following judicial decisions:

P a g e | 6 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad 1. Hon’ble Allahabad High Court decision in the case of Commissioner of Income Tax(Central) , Kanpur v. Smt. Shaila Agarwal , reported in (2012)346 ITR 130(Alld. HC) ( (2011) 16 Taxmann.com 232(Alld. HC)) 2. Hon’ble ITAT , Special Bench decision in the case of All Cargo Global Logistics Limited & Ors. v. DCIT , Mumbai , reported in (2012)147 TTJ 513(Mum. SB) 3. Hon’ble Delhi High Court decision in the case of CIT v. Kabul Chawla (2016) 380 ITR 573(Del. HC)

On merits of the issue, the assessee submitted before ld. CIT(A) that said Shri Ajay Singh(trade creditor) deposited the amount of Rs. 2,50,00,000/- with the assessee company for purchase of land and not for the purposes of interest. The assessee submitted before ld. CIT(A) that the deposit was made by Shri Ajeya Singh through banking channel , copy of bank statement was enclosed along with confirmation letter of said Shri Ajeya Singh. It was submitted that confirmation letter issued by Sh. Ajeya Singh bears his PAN No. ALUPS0807N. It was submitted that Shri Ajeya Singh belongs to a respectable family of Allahabad , and he is son of Former Prime Minister of India , Shri Vishwanath Pratap Singh . It was submitted that he is residing in Manda at Allahabad. It was submitted that he is running several businesses . It was submitted that since transaction for sale of land did not materialize, therefore, deposit of Rs. 2,50,00,000/- was returned by assessee to Shri Ajeya Singh, through banking channel. The assessee submitted copies of account of Mr. Ajeya Singh in its books of accounts both at the time of receiving the said amount as well at the time of returning of the said amount. The assessee also filed an affidavit from its Director confirming all the facts, before ld. CIT(A) during appellate proceedings. Thus, the assessee contended before ld. CIT(A) that once the 6

P a g e | 7 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad identity, creditworthiness , PAN No. and capacity of the creditors are proved by the assessee through various documents, the additions as was made by AO was unwarranted. The assessee relied upon several judicial precedents to support its contentions, as detailed hereunder:

The ld. CIT(A) was pleased to allow the appeal filed by assessee by holding that the search and seizure operations were conducted by Revenue u/s 132(1) of the 1961 Act in Hemant Kumar Sindhi , Dinesh Kumar Pahuja, Directors and Proprietors of

P a g e | 8 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad the group on 05-12-2013 and for the impugned ay: 2011-12 no assessment proceedings were pending before the AO on the date of search. Thus, no assessment got abated on the date of search for the year under consideration. The ld. CIT(A) held that keeping in view above factual facts, the AO could have made addition in this year on the basis of incriminating documents relatable to year under consideration found during the course of search. The ld. CIT(A) observed that the assessee filed return of income u/s 139(1) of the 1961 Act , on 30.09.2011, declaring income of Rs. 4,17,790/- along with audit report and the return of income was processed u/s 143(1) of the 1961 Act. The ld. CIT(A) observed that the assessee filed return of income in compliance to notice issued by AO u/s 153A of the 1961 Act on 15.02.2016 declaring income of Rs. 4,17,790/- , as was originally declared in return of income filed u/s 139(1) of the 1961 Act . Thus, the ld. CIT(A) observed that in the instant case, the proceedings had not abated. The ld. CIT(A) referred to decision of Hon’ble Allahabad High Court in the case of Smt. Shaila Agarwal(supra) and decision of Hon’ble Delhi High Court in the case of Shri Kabul Chawla(supra) to support its aforesaid view. The ld. CIT(A) observed that the AO has treated the sundry creditor in the name of Shri Ajeya Singh of Rs. 2,50,00,000/- as not genuine since the appellant has not explained the genuineness of transaction. Hence, the AO treated an amount of Rs. 2,50,00,000/- as unexplained and added to the income of the assessee u/s 68 of the 1961 Act. The ld. CIT(A) after examining the audited accounts of the assessee which were filed along with the return of income filed u/s 139(1) on 30.09.2011 and also return of income filed on 15.02.2016 in response to notice u/s 153A , observed that Rs. 2,50,00,000/- was shown by assessee in the name of Shri Ajeya Singh as sundry creditor as on 31.03.2011. The ld. CIT(A) observed that Shri Ajeya Singh had deposited Rs. 2,50,00,000/- with the company for purchase of land through cheque number 000124 of Rs. 2,50,00,000/- of Kotak Mahindra Bank Limited, which has been credited in the account of the assessee

P a g e | 9 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad company on 06.07.2010. The ld. CIT(A) observed that the advance has been made for the purchase of land and the same is appearing in the books of accounts of the appellant. The ld. CIT(A) further observed that the said amount was received back by Shri Ajeya Singh through banking channel. The ld. CIT(A) observed that there was no assessment proceedings pending before the AO on the date of search. Therefore, no assessment proceedings of the assessee got abated on the date of search for the year under consideration. The ld. CIT(A) observed that the advance of Rs. 2,50,00,000/- received by assessee form Shri Ajeya Singh is a trade advance received for purchase of land through banking channel which is appearing in the books of accounts of the assessee. It was further observed by ld. CIT(A) that no incriminating document was found during the course of search(as none has been referred to in the assessment order) which has any bearing on the addition made by the AO. The ld. CIT(A) held that in the absence of any ‘incriminating documents’ the AO could not have made the impugned additions of Rs. 2,50,00,000/- . The ld. CIT(A) held that the action of the AO cannot be sustained in view of judgment of Hon’ble Delhi High Court in the case of CIT v. Kabul Chawla(supra) and hence , the ld. CIT(A) was pleased to delete the additions of Rs. 2,50,00,000/- made by the AO u/s 68 of the 1961 Act, vide appellate order dated 22.02.2017 passed by ld. CIT(A). 5. Now , it was the turn of the Revenue to be aggrieved by appellate order dated 22.02.2017 passed by ld. CIT(A) , who has filed this appeal with tribunal. The assessee has filed C.O. which is mainly in support of the appellate order dated 22.02.2017 passed by ld. CIT(A). We have heard both the rival parties through Video Conferencing mode through Virtual Court. The ld. CIT-DR opened arguments before the Division Bench. The ld. CIT-DR submitted before the Bench that the AO made additions to the income of the assessee to the tune of Rs. 2,50,00,000/- by invoking provisions of Section 68 of the 1961 Act. The ld. CIT(A) deleted the addition on the ground that no incriminating material was found during the course of search and 9

P a g e | 10 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad seizure operations conducted by Revenue u/s 132(1) of the 1961 Act, on 05.12.2013. It was submitted that ld. CIT(A) relied upon the decision of Hon’ble Delhi High Court in the case of Kabul Chawla(supra) and deleted the additions. It was submitted by ld. CIT-DR that it is claimed by assessee that it received the aforesaid amount of Rs. 2,50,00,000/- against sale of land. It was submitted that there is no evidence in the Balance Sheet as for from whom the said amount was received. Our attention was drawn by ld. CIT-DR to the financial statement of the assessee for financial year 2010-11, which is placed in paper book filed by the assessee. The ld. CIT-DR relied upon decision of Hon’ble Allahabad High court in the case of CIT, Kanpur v. Raj Kumar Arora , reported in (2014) 52 taxmann.com 172(Alld. HC). The ld. CIT-DR also relied upon decision of Hon’ble Allahabad High Court in the case of CIT v. Kesarwani Zarda Bhandar in ITA No. 270 of 2014 .It was submitted that even if no incriminating material was found during search operations conducted by Revenue u/s 132(1) of the 1961 Act, then also AO can assess total income of the tax-payer. The ld. CIT-DR would submit that Hon’ble ITAT, Delhi while deciding the appeal of the tax-payer based in Merrut(U.P.) jurisdiction , in the case of Roseberry Mercantile Private Limited v. ACIT in ITA no. 2995/Del/2015 for ay: 2008-09, vide order dated 30.11.2018 , decided this issue against the tax-payer by relying on the judgment of jurisdictional High Court in the case of Raj Kumar Arora(supra). It was submitted by ld. CIT-DR that ld. CIT(A) ignored the decision of Hon’ble Jurisdictional High Court while allowing the appeal of the assessee and deleting the additions as was made by the AO , and hence it was claimed by ld. CIT-DR that appellate order dated 22.02.2017 is not sustainable in eyes of law. It was submitted by ld. CIT-DR that there was a search and seizure operations conducted by Revenue u/s 132(1) of the 1961 Act , on 05.12.2013 against Shri Hemant Kumar Sindhi, Shri Dinesh Kumar Pahuja and other entities in the group. The assessee was also searched as part of the aforesaid searches

P a g e | 11 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad conducted by Revenue. It was submitted that notice was issued to the assessee by AO u/s 153A , on 05.09.2014 , requiring assessee to file return of income , but the assessee filed return of income in pursuance to notice u/s 153A belatedly on 15.02.2016. It was submitted that no satisfactory explanation was submitted by assessee to explain the creditworthiness, genuineness and identity of the creditor. The AO invoked provisions of Section 68 of the 1961 Act and made additions to the income of the assessee to the tune of Rs. 2,50,00,000/-. It was submitted that assessment was made by invoking provisions of Section 144 read with Section 153A of the 1961 Act. It was submitted by ld. CIT-DR before the Bench that there is no requirements of issuing notice u/s 143(2) of the 1961 Act ,while framing assessment u/s 153A of the 1961 Act. The ld. CIT-DR relied upon the decision of Hon’ble Madras High Court in the case of B. Kubendran v. DCIT, Chennai, reported in (2021) 126 taxmann.com 107(Mad. HC) to contend that Hon’ble Madras High Court distinguished the decision of Hon’ble Supreme Court in the case of ACIT v. Hotel Blue Moon (2010) 188 Taxman 113/321 ITR 362(SC) and held that no notice u/s 143(2) is required while framing assessment u/s 153A of the 1961 Act. Our attention was drawn by ld. CIT-DR to page 27/paper book filed by assessee to contend that the disclosure made by assessee in its audited financial statement for fy : 2010-11 is under sub-head ‘Other’ under the head ‘Sundry Creditors’ amounting to Rs. 2,50,00,000/- under the Schedule:E-Current Liabilities and Provisions, and even the name of the creditor was not disclosed in the financial statements. Thus, it was submitted that it cannot be said that true , proper and complete disclosure was made by the assessee. The ld. CIT-DR brought our attention to page 39/paper book to submit that this is a confirmation filed by Shri Ajeya Singh , which is the only evidence brought on record by assessee. Our attention was also drawn by ld. CIT-DR to page 44-45/paper book , wherein affidavit of Shri Hemant Kumar Sindhi is placed. It was submitted that there is no evidence as to the nature

P a g e | 12 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad of transaction and as to remittance of money. It was submitted that now it is explained that the money was advanced by Mr. Ajeya Singh as advance towards purchase of land , while in the Balance Sheet it is shown under the sub-head ‘others’ under the head ‘Sundry Creditors’ under the Schedule:E-Current Liabilities and Provisions , which explanation now submitted is contradictory to what is stated in Balance Sheet. 5.2 The ld. Counsel for the assessee on the other hand submitted before the Bench that return of income in this case was originally filed by assessee with Revenue u/s 139(1), on 30.09.2011. There was a search and seizure operations conducted by Revenue against the assessee u/s 132(1) of the 1961 Act, on 05.12.2013. It was submitted that on the date of search , the assessment for impugned ay was a concluded assessment. It was submitted that in the assessment framed by AO u/s 153A, no additions had been made by AO on the basis of incriminating material found during the course of search operations. The ld. Counsel for the assessee submitted that in large number of cases across India, decision has been taken by Hon’ble Courts that no addition can be made in proceedings u/s 153A , otherwise than based on incriminating material found during the course of search operations. Our attention was drawn to appellate order passed by ld. CIT(A). Reliance was placed by ld. Counsel for the assessee on the decision of Hon’ble Delhi High Court in the case of Kabul Chawla(supra) , decision of ITAT, Chennai Bench in the case of ACIT v. CMG Steels Private Limited, in ITA no. 1985/Chny/2017, dated 09.06.2021 and decision of ITAT, Jodhpur Bench in the case of Sir Pratap Heritage Hotels Private Limited v. ACIT , in ITA no. 488 to 494/Jd/2017, order dated 21.12.2020. The ld. Counsel for the assessee relied upon decision of Jaipur-tribunal in the case of Smt. Aruna Sankhla v. DCIT, reported in (2019) 72 ITR(Trib.) 696(Jaipur), in which one of us namely Hon’ble Judicial Member was part of the Division Bench which pronounced the order. Our attention was drawn to ‘Schedule:E of Current Liabilities 12

P a g e | 13 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad and Provisions’ forming part of audited accounts for fy: 2010-11, placed at page 27/paper book. Our attention was also drawn to page 39/paper book , wherein confirmation letter dated 19.02.2016 issued by Ajeya Singh is placed. Our attention was also drawn to page 40 of paper book , wherein statement of account of Shri Ajeya Singh in the books of the assessee for the period 01.04.2011 to 31.03.2014 is placed. Our attention was also drawn to page 42-43/paper book , wherein bank statement of the assessee for 19.10.2013 to 26.03.2014 are placed, to evidence that the repayment of Rs. 2,50,00,000/- was made by the assessee. Our attention was also drawn to page 44-45/paper book, wherein affidavit of Shri Hemant Kumar Sindhi is placed. It was submitted by ld. Counsel for the assessee before the Bench that there is no evidence brought on record by the AO that cash was deposited by Shri Ajeya Singh before issuing cheque of Rs. 2,50,00,000/- in favour of the assessee. It was submitted that Shri Ajeya Singh belongs to respectable family and is son of Former Prime Minister of India , Shri V.P.Singh. It was submitted that no incriminating material seized during search operations, are brought on record by the authorities below. It was submitted that the AO did not call for the bank statement of Shri Ajeya Singh. It was submitted that if the same is required to adjudicate the issue, the assessee can bring on record bank statement of Shri Ajeya Singh for which opportunity may be granted. It was submitted that as per mandate of Section 153A of the 1961 Act, the AO has to assess only undisclosed income based on seized material. The ld. Counsel for the assessee relied upon the appellate order passed by ld. CIT(A). It was submitted that C.O. is filed by the assessee in support of the appellate order passed by ld. CIT(A). 5.3 The ld. CIT-DR submitted in rejoinder that onus is on the assessee to discharge burden cast u/s 68 of the 1961 Act . The ld. CIT-DR submitted that the assessee did not brought on record details/evidence to discharge onus cast on it by virtue of provision of Section 68 of the 1961 Act. The ld. CIT-DR submitted that no evidences 13

P a g e | 14 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad were brought on record by the assessee before ld. AO/Ld. CIT(A) and even before the tribunal. It was submitted that creditworthiness of the creditor and genuineness of the transactions is not proved. It was submitted by ld. CIT-DR that even bank statement of Shri Ajeya Singh was not produced. It was submitted that copy of income-tax return of Shri Ajeya Singh was also not brought on record. It was submitted by ld. CIT-DR that even details of land which was sought to be purchased by Shri Ajeya Singh is also not brought on record. It is submitted by ld. CIT-DR that it is incomprehensible that Shri Ajeya Singh gave Rs. 2,50,00,000/- to the assessee without any agreement to sale. It was submitted that aforesaid amount was advanced in July, 2010 by Shri Ajeya Singh to the assessee, which was repaid by assessee in the year 2013/2014, which is after a gap of more than three years. It was submitted that the search operations took place on 05.12.2013, while repayments were made on 12.12.2013, 07.02.2014 and 08.03.2014 which are all payments made post search conducted by Revenue u/s 132(1) against the assessee on 05.12.2013. 6. We have considered rival contentions and perused the material on record included cited case laws. We have observed that the assessee is a private limited company engaged in the business of real estate. The assessee filed its return of income originally u/s. 139(1) of the 1961 Act, on 30.09.2011 declaring income of Rs. 4,17,790/-. The assessee has claimed that it filed its audited financial statements for fy:2010-11 and audit report , along with the return of income originally filed on 30.09.2011 under the provisions of Section 139(1). The said return of income was stated to have been processed by Revenue under the provisions of Section 143(1) of the 1961 Act. On 05th December 2013, there was search and seizure operations conducted by Revenue under the provisions of Section 132(1) of the 1961 Act , against Mr. Hemant Kumar Sindhi , Shri Dinesh Kumar Pahuja , residential and office premises of Directors, Partners , Proprietor and other entities in the group. The 14

P a g e | 15 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad assessee was admittedly searched on 05th December 2013 as part of the searches conducted on Shri Hemant Kumar Sindhi and Shri Dinesh Kumar Pahuja group. Shri Hemant Kumar Sindhi was Director of the assessee company, effective from 06th May , 2011. Thus in nuts-shell , so far as search conducted by Revenue u/s 132(1) against the assessee on 05th December 2013 is concerned, no dispute is raised before us , the effective dispute raised is that the additions were made despite the fact that no incriminating material was found and seized during the course of search operations. Proceeding further, The AO issued and served notice dated 05th September 2014 u/s 153A , requiring assessee to file return of income within 15 days of service of notice. The assessee did not filed return of income within stipulated time as stated in the aforesaid notice. The AO issued notice along with questionnaire under the provisions of Section 142(1), dated 03.11.2015 for compliance on 17th November , 2015. The assessee did not comply with the said notice. Thereafter, the AO issued several notices u/s 142(1) , dated 17.11.2015, 30.11.2015, 15.12.2015, 23.12.2015 , 04.01.2016 , 01.02.2016. In response , Shri Hemant Sindhi , Director filed reply in ‘Dak’ on 09.02.2016 stating that Shri Naresh Kumar Tulsiyani and Shri Ravi Kumar Mehrotra were the Directors of the company and required information may be called from them. The AO issued notices to Shri Naresh Kumar Tulsiyani and Shri Ravi Kumar Mehrotra on 10.02.2016 for compliance on 12.02.2016. In compliance , on 12.12.2016 , the assessee filed reply and the assessee also submitted copy of acknowledgement dated 15.02.2016 of return of income claimed to be filed in response to notice u/s 153A , and in this return of income filed on 15.02.2016 the assessee declared income of Rs. 4,17,790/- which was also the income originally declared in return of income filed u/s 139(1), which return of income filed on 15.02.2016 was a belated return filed beyond the stipulated time prescribed for filing of return of income vide notice dated 05.09.2014 issued by AO u/s 153A of the 1961 Act. The assessee also filed further

P a g e | 16 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad reply before the AO on 23.02.2016. With this background before proceeding further, we shall summaries the main issue(s) broadly to be adjudicated by us in this appeal: a) Whether the assessment can be made by AO based on the material which is available at the time of original assessment whether framed u/s 143(1) or 143(3) for an assessment year , by invoking provisions of Section 153 A of the 1961 Act , even in case no incriminating material relatable to that assessment year was found during the course of search and seizure operations conducted by Revenue u/s 132(1) of the 1961 Act? 2.Whether assessment framed u/s 153A can be sustained , in the absence of notice being issued under the provisions of Section 143(2) of the 1961 Act 3. Whether addition of Rs. 2,50,00,000/- as made by AO which stood deleted by ld. CIT(A), on account of credit of Rs. 2,50,00,000/- being received by assessee from Shri Ajeya Singh through banking channel be sustained? The First issue relates to framing of an assessment based on material which was available at the time of original assessment, while no fresh incriminating material was found relatable to that assessment year in searches conducted by Revenue u/s 132(1) of the 1961 Act. We are presently concerned with ay: 2011-12. The searches were conducted by Revenue u/s 132(1) of the 1961 Act, on 05th December 2013. The claim is made by assessee that no incriminating material was found during the course of search and seizure operations, and the addition of Rs. 2,50,00,000/- was made by the AO to the income of the assessee based on the material available at the time of processing of return of income u/s 143(1) of the 1961 Act, albeit no assessment was framed by Revenue u/s 143(3) of the 1961 Act. It is claimed that return of income was originally filed u/s 139(1) of the 1961 Act by assessee for impugned ay: 2011-12 , on 30.09.2011. The return of income was processed u/s 143(1) of the 1961 Act , and no scrutiny assessment was framed u/s 143(3) of the 16

P a g e | 17 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad 1961 Act. The claim is made that last date for issuance of notice u/s 143(2) for framing of assessment u/s 143(3) , as provided under statute during relevant point of time was six months from the expiry of six months from the end of the financial year in which return of income was furnished. Thus, it was claimed that notice u/s 143(2) of the 1961 Act for framing scrutiny assessment ought to have been issued by Revenue , latest by 30.09.2012, and since Revenue did not issued notice u/s 143(2) for framing scrutiny assessment by 30.09.2012, the assessment of the assessee got completed. The search was conducted by Revenue on 05.12.2013 and hence it is claimed that the assessment for the impugned ay is not an abated assessment and hence additions can only be made by Revenue based only on incriminating material found during the course of search. The claim is made that since no incriminating material was found during the course of search , no addition can be made in the assessment framed by the AO by invoking provisions of Section 153A of the 1961 Act. The assessee has relied upon various case laws in its support, as detailed hereunder:

P a g e | 18 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad 4. ITAT, Chennai Bench decision in the case of ACIT v. CMG Steels Private Limited, in ITA no. 1985/Chny/2017, dated 09.06.2021 5. ITAT, Jodhpur Bench decision in the case of Sir Pratap Heritage Hotels Private Limited v. ACIT , in ITA no. 488 to 494/Jd/2017, order dated 21.12.2020. 6. ITAT, Jaipur Bench decision in the case of Smt. Aruna Sankhla v. DCIT, reported in (2019) 72 ITR(Trib.) 696(Jaipur), in which one of us namely Hon’ble Judicial Member was part of the Division Bench which pronounced the order.

Thus, crux of the arguments of ld. Counsel for the assessee is that in the absence of any incriminating material being found during search operations relatable to that assessment year, no additions can be made in assessment u/s 153A in the case of assessments which have not been abated. The Revenue on the other hand has relied upon the Hon’ble Jurisdictional High Court decision in the case of Shri Raj Kumar Arora(supra) and in the case of Kesarvani Zarda Bhandar, Sahson(supra), wherein Hon’ble Jurisdictional High Court has taken a view that purpose and purport of framing assessment u/s 153A is to assess or reassess the total income including undisclosed income, and even in the cases where assessment or reassessment proceedings are already completed and assessment orders were passed , which were subsisting when search operations took place, the AO would be competent to reopen the assessment proceedings already made and determine the total income of the tax-payer including undisclosed income, notwithstanding that the assessee has filed the return of income before the date of search which stood processed u/s 143(1)(a) of the 1961 Act. The judgments of Hon’ble Jurisdictional High Court in the case of Shri Raj Kumar Arora(supra) and M/s Kesarvani Zarda Bhandar(supra) are 18

P a g e | 19 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad subsequent to judgment of Hon’ble Jurisdictional High Court in the case of Smt. Shaila Agarwal(supra) relied upon by ld. Counsel for the assessee. Further, on perusal of the aforesaid judgment of Hon’ble Allahabad High Court in the case of Mrs. Shaila Agarwal(supra) , it is observed that the Hon’ble High Court decided the issue that the assessments which have been completed prior to the initiation of search and where appeal is pending with respect to these completed assessments shall not abate , as provided u/s 153A of the 1961 Act, and it is only the pending assessments which shall abate. So far as , computing income of the assessee (including undisclosed income) for the six years covered for making assessment u/s 153A, pursuant to Search u/s 132(1) of the 1961 Act, the Hon’ble High Court did not laid down any ratio of law in the judgment in the case of Mrs. Shaila Agarwal(supra). Rather , the Hon’ble Jurisdictional High Court observed in para 16 if as a result of the search , some undisclosed income is found to have escaped , the AO , may initiate steps for reassessment after sanction of competent authorities , within the prescribed period of limitation. It is only in the case of Raj Kumar Arora(supra), after analyzing provisions of Section 153A, the Hon’ble Allahabad High Court laid down the ratio of law that the purpose and purport of framing assessment u/s 153A is to assess or reassess the total income including undisclosed income, and even in the cases where assessment or reassessment proceedings are already completed and assessment orders were passed , which were subsisting when search operations took place, the AO would be competent to reopen the assessment proceedings already made and determine the total income of the tax- payer including undisclosed income, notwithstanding that the assessee has filed the return of income before the date of search which stood processed u/s 143(1)(a) of the 1961 Act. Any decision of Hon’ble Supreme Court on this issue has not been brought to our notice by both the rival parties, rather , we have observed that SLP has been admitted by Hon’ble Supreme Court against the decision of Hon’ble High

P a g e | 20 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad Court(s) granting relief to the tax-payer on the grounds that if no incriminating material is found during search operations, no additions can be made in assessment framed u/s 153A, as detailed hereunder: a) PCIT v. Gahoi Foods Private Limited (2020) 117 taxmann.com 118(SC) b) PCIT v. Devi Dass Garg (2020) 114 taxmann.com552(SC) c) CIT-II v. Continental Warehousing Corporation (Nhava Sheva) Limited (2015) 64 taxmann.com 34(SC) It also observed that Hon’ble Supreme Court vide orders dated 02nd July, 2018 dismissed the SLP filed by Revenue in PCIT v. Meeta Gutgutia ((2018) 96 taxmann.com 468(SC), against the judgment of Hon’ble Delhi High Court in PCIT v. Meeta Gutgutia(2017) 82 taxmann.com 287(Delhi) wherein Hon’ble Delhi High Court held that no additions can be framed u/s 153A for a particular assessment year without there being an incriminating material qua that assessment year which would justify such an addition. However , it is well settled that if SLP is dismissed in limine by Hon’ble Supreme Court , neither it will lead to merger of judgment of Hon’ble High Court with the dismissal of SLP in limine by Hon’ble Supreme Court as doctrine of merger shall not be applicable in such situation , and such dismissal will also not lead to a declaration of law by Hon’ble Supreme Court as envisaged in Article 141 of the Constitution of India. Reference is drawn to decision of Hon’ble Supreme Court in the case of Kunhayammed v. State of Kerala (2000) 113 Taxman 470(SC). We have also observed that this issue whether additions can be made while framing assessment u/s 153A , in the absence of any incriminating material found during the search , was decided by ITAT, Delhi Bench while adjudicating the appeal in the case of the tax-payer situated under the jurisdiction of AO situated at Meerut, U.P. in the case of Roseberry Mercantile Private Limited v. ACIT, Meerut, U.P. in ITA no. 2995/Del/2015 for ay: 2008-09, vide order dated 30.11.2018 ,

P a g e | 21 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad wherein the tribunal decided this issue in favour of Revenue by following the decision(s) of Hon’ble Allahabad High Court in the case of Shri Raj Kumar Arora(supra) and M/s Kesarvani Zarda Bhandar(supra). We at tribunal being inferior judicial body to Hon’ble Jurisdictional High Court are bound by the decision of Hon’ble Allahabad High Court as a matter of judicial disciple, thus, by following the ratio of decision(s) of Hon’ble Allahabad High Court in the case of Shri Raj Kumar Arora(supra) and M/s Kesarvani Zarda Bhandar(supra), we decide this effective issue in favour of Revenue by reversing the decision of ld. CIT(A), by holding that the purpose and purport of framing assessment u/s 153A is to assess or reassess the total income including undisclosed income, and even in the cases where assessment or reassessment proceedings are already completed and assessment orders were passed , which were subsisting when search operations took place, the AO would be competent to reopen the assessment proceedings already made and determine the total income of the tax-payer including undisclosed income, notwithstanding that the assessee has filed return of income before the date of search which stood processed u/s 143(1)(a) of the 1961 Act . The Revenue succeeds on this issue. Now, we have to adjudicate that whether assessment framed u/s 153A of the 1961 Act , without issuing notice u/s 143(2) can be sustained in the eyes of law. Admittedly, in this case notice dated 05.09.2014 u/s 153A was issued by the AO , requiring assessee to file return of income within fifteen day of the service of notice. The aforesaid notice was duly served on the assessee. The assessee did not file return of income within the stipulated time. The AO , then, issued notice along with questionnaire under the provisions of Section 142(1), dated 03.11.2015 for compliance on 17th November , 2015. The assessee did not comply with the said notice , dated 03.11.2015 . Thereafter, the AO issued several notices u/s 142(1) , dated 17.11.2015, 30.11.2015, 15.12.2015, 23.12.2015 , 04.01.2016 , 01.02.2016. 21

P a g e | 22 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad Thus, admittedly notices u/s 153A as well Section 142(1) was issued by Revenue. The assessee did not file return of income within stipulated time as provided in the notice issued u/s 153A of the 1961 Act. This issue should not detain us for long . The Hon’ble Madras High Court in recent decision in B.Kubendran v. DCIT reported in (2021) 126 taxmann.com 107(Mad. HC), has recently after detailed discussion considering the distinction between provisions of Section 158BC and 153A decided this issue in favour of Revenue , by holding that in framing assessment u/s 153A , due regard must be given to principles of natural justice, which requirement shall stand satisfied either by issuance of notice u/s 143(2) or questionnaire u/s 142(1) was issued by the AO. The Hon’ble Madras High Court distinguished the decision of Hon’ble Supreme Court in the case of Hotel Blue Moon(supra) , which held that notice u/s 143(2) is mandatorily required while framing block assessment u/s 158BC. The Hon’ble Madras High Court referred to decision of Hon’ble Delhi High Court in the case of Ashok Chaddha v. ITO (2012) 20 taxmann.com 387(Del. HC) ; decision of Hon’ble Punjab and Haryana High Court in the case of Tarsem Singla v. DCIT ((2017) 81 taxmann.com 347(P&H HC);CIT v. Promy Kuriakose (2017) 79 taxmann.com 405(Ker. HC), and then held that that in framing assessment u/s 153A, due regard must be given to principles of natural justice, which requirement shall stand satisfied either by issuance of notice u/s 143(2) or questionnaire u/s 142(1) issued by the AO. Thus, we hold this issue in favour of Revenue in the instant case. We order accordingly. Now, coming to Merits of the issue, It is observed that the assessee company had received Rs. 2,50,00,000/- on 06th July 2010 , which was credited to its bank account, vide cheque number 124 . The relevant bank statements of the assessee company are filed by assessee in paper book filed with tribunal. It is claimed that the said amount was received by assessee from Shri Ajeya Singh towards advance against sale of land. The assessee has reflected the said amount in its audited 22

P a g e | 23 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad financial statement for the fy: 2010-11, under the ‘Schedule E: Current Liabilities and Provisions’ under the head ‘Sundry Creditors’ ,sub-head ‘Others’ –Rs. 2,50,00,000/-. It is pertinent to mention that just above this amount there is a sub- head ‘Advance Against Land and Property’ – Rs. 1,48,00,000/- under the same Schedule and head, but this amount of Rs. 2,50,00,000/- which now assessee is claiming to be ‘Advance Received against Land’ was not included in the relevant sub-head of ‘Advance Against Land and Property’ , but was included under the sub- head ‘others’. There was no disclosure of the name of the creditors in the audited statements. The aforesaid details being part of audited financial statements are at page 27 of paper book filed by assessee with tribunal. The return of income was processed u/s 143(1) and no scrutiny assessment u/s 143(3) was framed by Revenue. However, moving forward, it is observed that the assessee has claimed that the land deal did not materialize and hence the said amount received by the assessee on 06th July 2010, was refunded by assessee to Shri Ajeya Singh, from 12th December , 2013 to 08th March , 2014 , in three tranches viz. after a gap of three years. The relevant bank statements are filed by assessee in paper book filed with tribunal. It is pertinent to mention that search and seizure operations against the assessee was conducted by Revenue u/s 132(1), on 05th December 2013. Thus, prior to search and seizure operations, the amount was not refunded but was refunded by assessee post search operations, after a gap of more than three years. The assessee has filed confirmatory letter dated 19.02.2016 issued by Shri Ajeya Singh (PAN ALUPS0807N),in which Shri Ajeya Singh confirmed that he advanced Rs. 2,50,00,000/- vide cheque number 000124 drawn on Kotak Mahindra Bank Limited to assessee as advance against land Bungalow No. 21 , Colvin Road, Dr. Ram Manohar Lohia Marg ,Allahabad built over Part of Nazul Plot No. 21/1, Clive Road, Village Chikatpur Nasibpur Bakhtiyara , Allahabad , on 05th July 2010( the amount stood credited in assessee’s bank account on 06th July , 2010)(page 39/paper book).

P a g e | 24 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad The assessee has also filed copy of account of Shri Ajeya Singh in its books of accounts from 01.04.2011 to 31.03.2014(page 40/pb). It is also claimed that Shri Ajeya Singh belongs to highly respectable family being son of Former Prime Minister of India, Shri V.P.Singh . It is also claimed that Shri Ajeya Singh is person of means and is running several businesses. The assessee has also filed an affidavit dated 10.01.2017 before ld. CIT(A) , executed by its Director Shri Hemant Kumar Sindhi averring that the aforesaid amount of Rs. 2,50,00,000/- was received by assessee from Shri Ajeya Singh for purchase of land by Shri Ajeya Singh with the assessee. It is further averred in the said affidavit that the said amount was received through banking channel. It is further averred in the said affidavit that the deal was not materialized and hence the said amount was returned to Shri Ajeya Singh through banking channel. This affidavit dated 10.01.2017 is filed for the first time before ld. CIT(A) and is an additional evidence filed for the first time before ld. CIT(A) in first appellate proceedings. The ld. CIT(A) did not forwarded the additional evidences to AO for his comments/remand report and hence principles of natural justice are breached. Reference is drawn to Rule 46A of the Income-tax Rules, 1962. The AO invoked provisions of Section 68 of the 1961 Act, as in the opinion of the AO ingredients of Section 68 being identity as well creditworthiness of the creditor are not proved , and also genuineness of the transaction is not proved. The ld. CIT(A) , on the strength of aforesaid documents/explanations submitted by assessee during appellate proceedings, decided the appeal in favour of the assessee. Before proceeding further, it will be relevant to see the mandate of Section 68 and the onus/burden cast by the said section. The tax-payer under the provisions of Section 68 has to prove three ingredients cumulatively, viz. identity of the creditor, creditworthiness of the creditor and genuineness of the transaction to come out of clutches of Section 68 of the 1961 Act which is a deeming section which creates a deeming fiction. We are of the considered view that Section 68 of the Act creates a

P a g e | 25 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad legal fiction which cast obligation on the assessee to explain to the satisfaction of the AO about nature and source of credit in case any amount is found credited in the books of the assessee maintained for any previous year. This creates a legal fiction and in case the assessee did not offer explanation to the satisfaction of the AO as to the nature and source of credit of any amount found credited in the books of the assessee for any previous year by cumulatively satisfying the AO about the identity and creditworthiness of the creditor and about the genuineness of the transaction, the amount found credited in the books of the assessee shall be treated to be the income of the assessee as unexplained income under legal fiction created by Section 68 of the Act. Section 68 of the Act creates a legal fiction which does not require that the Revenue has to show the sources of the income before bringing the amount to tax since the amount is found to be credited in the books of the assessee in case the assessee has not offered explanation to the satisfaction of the AO. Thus, Section 68 of the Act cast obligation on the assessee where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source of credit thereof or the explanation offered by the assessee is found not satisfactory in the opinion of the AO, the sum so credited may be treated as income and charged to income-tax as income of the assessee of that previous year. The burden/onus is cast on the assessee and the assessee is required to explain to the satisfaction of the AO cumulatively about the identity and capacity/creditworthiness of the creditors along with the genuineness of the transaction to the satisfaction of the AO. All the constituents are required to be cumulatively satisfied. If one or more of them is absent, then the AO can make the additions u/s. 68 of the Act as an income. The use of the word 'any sum found credited in the books' in Section 68 indicates that it is widely worded and the AO can make enquiries as to the nature and source thereof. The AO can go to enquire/investigate into truthfulness of the assertion of the assessee regarding the

P a g e | 26 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad nature and the source of the credit in its books of accounts and in case the AO is not satisfied with the explanation of the assessee with respect to establishing identity and credit worthiness of the creditor and the genuineness of the transactions, the AO is empowered to make additions to the income of the assessee u/s. 68 of the Act as an unexplained credit in the hands of the assessee company. In the instant case, the assessee has merely submitted the confirmation letter of Mr. Ajeya Singh along with PAN number. The assessee has not submitted copies of bank statement of the creditor Mr. Ajeya Singh. The assessee has not submitted even the agreement to sale entered into with Mr. Ajeya Singh for sale of property viz. land Bungalow No. 21 , Colvin Road, Dr. Ram Manohar Lohia Marg ,Allahabad built over Part of Nazul Plot No. 21/1, Clive Road, Village Chikatpur Nasibpur Bakhtiyara , Allahabad , and it is not known as to what were the terms and conditions of the sale of said property. The said amount is claimed to be returned after a gap of three years as the amount was received by assessee in July , 2010, while the same was returned in December, 2013 to February, 2014 in three tranches , and that too after the assessee was searched. The assessee has not submitted cancellation deed for cancelling the deal for sale of land and reasons for such cancellation. It could not be seen what were the terms of agreement to sale entered by assessee while receiving the sum of Rs. 2.50 crores from Mr. Ajeya Singh, and the terms of cancellation of agreement while returning the said amount. It is also not known that whether these agreements were registered agreements. The amount of advance of Rs. 2.50 crores received by assessee by no stretch of imagination can be considered as insignificant. In our considered view keeping in view the entire factual matrix as is emerging from records, the onus / burden which lay on the assessee is not satisfied . The assessee filed affidavit before ld. CIT(A) of the Director of the assessee , but the ld. CIT(A) did not forwarded the same to AO for remand report/comments. There is breach of Rule

P a g e | 27 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad 46A of the 1962 Rules. The Hon'ble Supreme Court dealt with this issue in A. Govindarajulu Mudaliar v. CIT [1958] 34 ITR 807, as under:

"Now the contention of the appellant is that assuming that he had failed to establish the case put forward "by him, it does not follow as a matter of law that the amounts in question were income received or accrued during the previous year, that it was the duty of the Department to adduce evidence to show from what source the income was derived and why it should be treated as concealed income. In the absence of such evidence, it is argued, the finding is erroneous. We are unable to agree. Whether a receipt is to be treated as income or not, must depend very largely on the facts and circumstances of each case. In the present case the receipts are shown in the account books of a firm of which the appellant and Govindaswamy Mudaliar were partners. When he was called upon to give explanation he put forward two explanations, one being a gift of Rs. 80,000 and the other being receipt of Rs. 42,000 from business of which he claimed to be the real owner. When both these explanations were rejected, as they have been, it was clearly open to the Income-tax Officer to hold that the income must be concealed income. There is ample authority for the position that where an assessee fails to prove satisfactorily the source and nature of certain amount of cash received during the accounting year, the Income-tax Officer is entitled to draw the inference that the receipts are of an assessable nature. The conclusion to which the Appellate Tribunal came appears to us to be amply warranted by the facts of the case. There is no ground for interfering with that finding, and these appeals are accordingly dismissed with costs."

Thus, keeping in view the entire factual matrix of the case , we are of the considered view that the appellate order passed by ld. CIT(A) cannot be sustained and is liable to be set aside . We are of the considered view that one more opportunity be provided to assessee to bring on record complete details/evidences in support of its contentions . The ld. Counsel for the assessee has also submitted before the Bench that all the necessary documents such as bank statements etc of Shri Ajeya Singh will be produced . Thus, we are setting aside the matter to the file of the AO for fresh

P a g e | 28 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad adjudication of the issue on merits. Needless to say that the AO shall provide proper and adequate opportunity of heard to the assessee in set aside proceedings. The AO shall admit all the evidences /explanations submitted by assessee in set aside proceedings and adjudicate the matter on merits in accordance with law. The appeal of the Revenue is allowed for statistical purposes. The C.O. filed by the assessee has become infructuous as the appellate order passed by ld. CIT(A) is set aside by us, and hence C.O. stand dismissed. We order accordingly. 10. In the result, the appeal filed by Revenue in ITA no. 103/Alld/2017 for ay: 2011-12 is allowed for statistical purposes and C.O.No.22/Alld/2017 filed by assessee stand dismissed, as indicated above. Order pronounced on /08/2021 at Allahabad

Sd/- 02/09/2021 Vide separate order [VIJAY PAL RAO] [RAMIT KOCHAR] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: /08/2021 Copy forwarded to: 1. Appellant – ACIT, Central Circle, Allahabad, U.P. 2. Respondent – Sunshine Infraestate Private Limited, Allahabad, U.P. 3. CIT(A)-III, Lucknow, U.P. 4. CIT- Aaykar Bhawan, 38, M G Marg , Allahabad, U.P. 5. CIT-DR, Aaykar Bhawan, 38, M G Marg, Allahabad, U.P.

By order

Assistant Registrar

P a g e | 29 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad ITA No. 103/Alld/2017 (AY 2011-12) in the case of Sunshine Infraestate Pvt. Ltd. vs. The ACIT, Central Circle, Allahabad & CO No. 22/Alld/2017 (Arising out of ITA No. 103/Alld/2017) A.Y. 2011-12.

PER SHRI VIJAY PAL RAO, JUDICIAL MEMBER: I have gone through the order of my learned Brother Accountant Member and given my deep thought to the reasoning, view and finding of the learned brother however, I could not able to agree and concur with the reasoning, view and finding of learned AM on both the issues raised in the appeal filed by the Revenue and the Cross Objections filed by the assessee. 2. One of the issue is regarding validity of reassessment order passed by the Assessing Officer under section 153A read with section 144 of the Income Tax Act for want of notice issued under section 143(2) of the Income Tax Act. Section 153(A) contemplates that in case of search under section 132 or requisition under section 132A of the Act initiated after 31st May, 2003, the Assessing Officer shall issue notice to searched person requiring him to furnish the return of income in respect of each of six assessment years falling immediately preceding assessment year relevant to the previous year in which such search is conducted or requisition is made. For ready reference under section 153A(1) is quoted as under:- (1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003, the Assessing Officer shall— (a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly

P a g e | 30 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad as if such return were a return required to be furnished under section 139; (b) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made : Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years]: Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years [ and for the relevant assessment year or years] referred to in this sub-section pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate. Provided also that the Central Government may by rules made by it and published in the Official Gazette (except in cases where any assessment or reassessment has abated under the second proviso), specify the class or classes of cases in which the Assessing Officer shall not be required to issue notice for assessing or reassessing the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made [ and for the relevant assessment year or years]: Provided also that no notice for assessment or reassessment shall be issued by the Assessing officer for the relevant assessment year or years unless- (a) The Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income, represented in the form of asset, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more in the relevant assessment year or in aggregate in the relevant assessment years: (b) The income referred to in clause 9a0 or part thereof has escaped assessment for such year or years; and (c) The search under section 32 is initiated or requisition under section 132A is made on or after the 1st day of April, 2017. Explanation 1.- For the purposes of sub-section, the expression “relevant assessment year” shall mean an assessment year preceding the assessment year relevant to the previous year in which search is conducted or requisition is made which falls beyond six assessment year but not later than ten assessment years from the end of the assessment year rel3evant to the previous year in which search is conducted or requisition is made. Explanation 2.- For the purposes of the fourth provisio, “asset” shall include immovable property being land or building or both, shares and securities, loans and advances, deposits in bank account.’

P a g e | 31 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad (2) If any proceeding initiated or any order of assessment or reassessment made under subsection (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) or section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to sub-section (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Commissioner: Provided that such revival shall cease to have effect, if such order of annulment is set aside. Explanation.—for the removal of doubts, it is hereby declared that,— (i) save as otherwise provided in this section, section 153B and section 153C, all other provisions of this Act shall apply to the assessment made under this section; 1 Inserted with effect from the 1st day of July, 2012 (ii) in an assessment or reassessment made in respect of an assessment year under this section, the tax shall be chargeable at the rate or rates as applicable to such assessment year.” 3. As per the Clause (a) of sub section 1 of section 153A, the other provisions of this Act shall, so far as may be, applied accordingly as if such return of income were a return required to be furnished under section 139 of Income Tax Act. Though, this section begins with a Non Obstante Clause so far as the applicability of the provisions of section 139, 147 to 149, 151 and 153 yet the other provisions of the Act are applicable on the return of income being deemed as filed under section 139 of the Act. The plain language of Clause (a) of section 153A(1) makes it clear that relevant provisions of the Act shall apply to the return of income filed in response to the notice under section 153A(1) by treating the same as return filed under section 139 of the Act. This means the manner and limitation as prescribed under section 139 of the Act are not applicable to the return of income filed under section 153A of the Act but the provisions of section 142 and 143 of the Act are applicable for scrutiny / process of such return of income. A similar treatment is given to the return of income filed in response to the notice issued under section 148(1) of the Income Tax Act which reads as under:- Section-148(1)

P a g e | 32 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad

Before making the assessment, reassessment or re-computation under section 147, and subject to the provisions of section 148A, the Assessing officer shall serve on the assessee a notice, along with a copy of the order passed, if required under clause 9d) of section 148A, requiring him to furnish within such period, as may be specified in such notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed , and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139: Provided that no notice under this section shall be issued unless there is information with the Assessing Officer which suggests that the income chargeable to tax has escaped assessment in the case of the assessee for the relevant specified authority to issue such notice. Explanation 1.- for the purpose of this section and section 148A, the information with the Assessing Officer which suggests that the income chargeable to tax has escaped assessment means.- (i) Any information flagged in the case of the assessee for the relevant assessment year in accordance with the risk management strategy formulated by the Board from time to time: (ii) Any final objection raised by the comptroller and Auditor General of India to the effect that the assessment in the case of the assessee for the relevant assessment year has not been made in accordance with the provisions of this Act. Explanation 2.- for the purpose of this section, where,- (i) A search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A, on or after the 1st day of April, 2021, in the case of the assessee; or (ii) A survey is conducted under section 133A, other than under sub section (2A) of that section, on or after the 1st day of April, 2021, in the case of the assessee; or (iii) The Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner, that any money, bullion, jewellery or other valuable article or thing, seized or requisitioned under section 132 or section 132A in case of any other person on or after the 1st day of April, 2021, belongs to the assessee: or (iv) The Assessing officer is satisfied, with the prior approval of Principal Commissioner or commissioner, that nay books of

P a g e | 33 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad account or documents, seized or requisitioned under section 132 or section 132A in case of any other person on or after the 1st day of April, 2021, pertains or pertain to, or any information contained therein, relate to the assessee. The Assessing Officer shall be deemed to have information which suggests that the income chargeable to tax has escaped assessment in the case of the assessee for the three assessment years immediately preceding the assessment year relevant to the previous year in which the search is initiated or books of account, other documents or any assets are requisitioned or survey is conducted in the case of the assessee or money, bullion, jewellery or other valuable article or thing or books of account for documents are seized o requisitioned in case of any other person. Explanation 3.- For the purpose of this section, specified authority means the specified authority referred to in section 151.] 4. Thus so far as the applicability of the provisions of this Act to the return of income filed in response to notice under section 148 as well as under section 153A is concerned there is no difference in the language of Clause (a) to section 153A(1) and section 148(1) of the Income Tax Act. Therefore, under both these provisions the return of income is treated as if it is required to be furnished under section 139 of the Income Tax Act. Even otherwise, the proceedings initiated under section 148 as well as under section 153A are for assessment or reassessment of the income of the assessee though the basis of assessment or re-assessment are quite different. The proceedings under section 147/148 are initiated subject to the satisfaction of the conditions prescribed under section 147 of the Act and hence the requirement to form a belief based on some tangible material that income assessable to tax as escaped assessment is a pre-condition whereas the proceedings under section 153A are consequential to the search under section 132 or requisition under section 132A of the Act. The Assessing Officer has the discretion under section 147/148 to initiate as well as to drop the proceedings if he is satisfied after conducting an enquiry or with the reply of the assessee that no income has escaped assessment but the proceedings under section 153A are mandatory in nature and the Assessing Officer

P a g e | 34 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad is required to assess or re-assess total income of the assessee for six assessment years preceding to the assessment year relevant to the previous year in which such search is conducted or requisition is made. The mandatory nature of completing the assessment or reassessment under section 153A does not obliterate the mandatory requirement of assessment proceedings as prescribed for the return of income filed under section 139 of the Act which are equally applicable to the return of income filed in response to notice under section 153A(1) of the Income Tax Act as provided in Clause (a) of Section 153A(1). The Hon'ble Supreme Court in case of ACIT vs. Hotel Blue Moon 188 taxman 113 has held in para 15 to 18 as under:-

15) We may now revert back to Section 158 BC(b) which is the material provision which requires our consideration. Section 158 BC(b) provides for enquiry and assessment. The said provision reads "that the assessing officer shall proceed to determine the undisclosed income of the Block period in the manner laid down in Section 158 BB and the provisions of Section 142, sub- section (2) and (3) of Section 143, Section 144 and Section 145 shall, so far as may be, apply." An analysis of this sub section indicates that, after the return is filed, this clause enables the assessing officer to complete the assessment by following the procedure like issue of notice under Sections 143(2)/142 and complete the assessment under Section 143(3). This Section does not provide for accepting the return as provided under Section 143(i)(a). The assessing officer has to complete the assessment under Section 143(3) only. In case of default in not filing the return or not complying with the notice under Sections 143(2)/142, the assessing officer is authorized to complete the assessment ex- parte under Section 144. Clause (b) of Section 158 BC by referring to Section 143(2) and (3) would appear to imply that the provisions of Section 143(1) are excluded. But Section 143(2) itself becomes necessary only where it becomes necessary to check the return, so that where block return conforms to the undisclosed income inferred by the authorities, there is no reason, why the authorities should issue notice under Section 143(2). However, if an assessment is to be completed under Section 143(3) read with Section 158-BC, notice under Section 143(2) should be issued within one year from the date of filing of block return. Omission on the part of the assessing authority to issue notice under Section 143(2) cannot be a procedural irregularity and the same is not curable and, 34

P a g e | 35 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad therefore, the requirement of notice under Section 143(2) cannot be dispensed with. The other important feature that requires to be noticed is that the Section 158 BC(b) specifically refers to some of the provisions of the Act which requires to be followed by the assessing officer while completing the block assessments under Chapter XIV-B of the Act. This legislation is by incorporation. This Section even speaks of sub- sections which are to be followed by the assessing officer. Had the intention of the legislature was to exclude the provisions of Chapter XIV of the Act, the legislature would have or could have indicated that also. A reading of the provision would clearly indicate, in our opinion, if the assessing officer, if for any reason, repudiates the return filed by the assessee in response to notice under Section 158 BC(a), the assessing officer must necessarily issue notice under Section 143(2) of the Act within the time prescribed in the proviso to Section 143(2) of the Act. Where the legislature intended to exclude certain provisions from the ambit of Section 158 BC(b) it has done so specifically. Thus, when Section 158 BC(b) specifically refers to applicability of the proviso thereto cannot be exclude. We may also notice here itself that the clarification given by CBDT in its circular No.717 dated 14th August, 1995, has a binding effect on the department, but not on the Court. This circular clarifies the requirement of law in respect of service of notice under sub-section (2) of Section 143 of the Act. Accordingly, we conclude even for the purpose of Chapter XIV-B of the Act, for the determination of undisclosed income for a block period under the provisions of Section 158 BC, the provisions of Section 142 and sub-sections (2) and (3) of Section 143 are applicable and no assessment could be made without issuing notice under Section 143(2) of the Act. However, it is contended by Sri Shekhar, learned counsel for the department that in view of the expression "So far as may be" in Section 153 BC(b), the issue of notice is not mandatory but optional and are to be applied to the extent practicable. In support of that contention, the learned counsel has relied on the observation made by this Court in Dr. Pratap Singh's case [1985] 155 ITR 166(SC). In this case, the Court has observed that Section 37(2) provides that "the provisions of the Code relating to searches, shall so far as may be, apply to searches directed under Section 37(2). Reading the two sections together it merely means that the methodology prescribed for carrying out the search provided in Section 165 has to be generally followed. The expression "so far as may be" has always been construed to mean that those provisions may be generally followed to the extent possible. The learned counsel for the respondent has brought to our notice the observations made by this Court in the case of Maganlal Vs. Jaiswal Industries, Neemach and Ors., [(1989) 4 SCC 344], wherein this Court while dealing with the scope and import of the expression "as far as practicable" has stated "without anything more the expression `as far as possible' will mean that the manner provided in the code

P a g e | 36 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad for attachment or sale of property in execution of a decree shall be applicable in its entirety except such provision therein which may not be practicable to be applied." 16) The case of the revenue is that the expression `so far as may be apply' indicates that it is not expected to follow the provisions of Section 142, sub- sections 2 and 3 of Section 143 strictly for the purpose of Block assessments. We do not agree with the submissions of the learned counsel for the revenue, since we do not see any reason to restrict the scope and meaning of the expression `so far as may be apply'. In our view, where the assessing officer in repudiation of the return filed under Section 158 BC(a) proceeds to make an enquiry, he has necessarily to follow the provisions of Section 142, sub-sections (2) and (3) of Section 143. 17) Section 158 BH provides for application of the other provisions of the Act. It reads: "Save as otherwise provided in this Chapter, all the other provisions of this Act shall apply to assessment made under this Chapter." This is an enabling provision, which makes all the provisions of the Act, save as otherwise provided, applicable for proceedings for block assessment. The provisions which are specifically included are those which are available in Chapter XIV-B of the Act, which includes Section 142 and sub-sections (2) and (3) of Section 143. 18) On a consideration of the provisions of Chapter XIV-B of the Act, we are in agreement with the reasoning and the conclusion reached by the High Court.”

P a g e | 37 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad under section 147 read with section 143(3) without issuing notice under section 143(2). The relevant finding of Hon'ble High Court in para 33 and 34 are as under:- “33. The extended question then is whether even if the assessee is deemed to have participated in the proceedings under Section 143, even without the Assessing Officer having issued the mandatory notice, would the Revenue be entitled to the benefit provided under Section 292BB of the Act. Section 292BB creates an estoppel against the assessee in claiming that no notice has been served on him, if he has participated in the proceedings. However, the said section does not in any manner grant any privilege to the Assessing Officer in dispensing with the issuance of a notice under Section 143(2) of the Act. Since the jurisdiction under Section 143 is founded on the issuance of a notice under Section 143(2), the assessing officer could have assumed jurisdiction only after issuing a notice under Section 143 (2). Even the participation of the assessee would not provide the benefit under Section 292BB to the Revenue. The requirement that a notice be issued is mandatory and the Assessing Officer has no other option but to issue the notice before commencing the jurisdiction. Here, we draw support from the judgment of the Honble Supreme Court in Assistant Commissioner of Income Tax v. Greater Noida Industrial Development Authority ((2015) 379 ITR 0014 (All)), wherein it was held as under: "Section 148(1) provides for service of notice as a condition precedent to making the order of assessment. Once a notice is issued within the period of limitation, jurisdiction becomes vested in the Income-tax Officer to proceed to reassess. The mandate of section 148(1) is that reassessment shall not be made until there has been service. The requirement of issue of notice is satisfied when a notice is actually issued." 34. The only benefit that Section 292BB obtains to the assessing officer is that after the issuance of such notice the assessee appears and participates in the proceedings, then he shall not he heard, subject to the proviso to the said section, that he had not been properly served with notice. We have no hesitation in holding that the Assessing Officer can claim and avail the benefit under Section 292BB and the assessee will be burdened by the rigour of estoppel contained therein only after a notice under Section 143(2) had been validly issued. When it is virtually

P a g e | 38 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad admitted that no such notice had been issued, the Assessing Officer loses even the authority to enter into the jurisdiction under Section 143 and the participation or otherwise of the assessee would be of no avail. It is here that the words of Rowlat, J. vide supra in paragraph 5 of this judgment assumes climataric importance because in taxation nothing is to be intended and nothing can be presumed. If a notice under Section 143(2) has not been issued, the Assessing Officer cannot claim the benefit under Section 292BB and the claim that the earlier notice extracted in paragraph 29 of the judgment was intended to be the notice issued under Section 143(2) and that substantial compliance under Section 143(2) must be inferred, cannot be countenanced.

P a g e | 39 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad and Sub-sections (2) and (3) of Section 143 are applicable and, therefore, no 7 Block assessments could be made without issuing notice under Section 143(2) of the Act. It is further contended that notice under Section 143(2) could have been dispensed with by the assessing officer if he proceeds to determine the income on the basis of the return without going for scrutiny. Referring to the provisions in clause (v) of the Second Proviso to Section 158 BC, it is submitted by the learned counsel that the words “so far as may be” does not give any discretion to the assessing officer to dispense with the requirement of such a notice under Section 143(2), when he proceeds to make an enquiry within the scope and ambit of Section 143(2). It is further contended that after a notice under Section 158 BC is issued, the assessee is required to file a return within a stipulated period. Once the return is filed, it is open to the assessing officer to accept the same or to require further investigation. If he accepts the return of undisclosed income as it is, then, there would be no necessity of issuing any notice under Section 143(2) of the Act. However, if the assessing officer is not satisfied with the return so filed, 8 then he is required to issue further notice under Section 143(2) before an assessment order is passed under Chapter XIV-B of the Act. 7. The only question that arises for our consideration in this batch of appeals is, whether service of notice on the assessee under Section 143(2) within the prescribed period of time is a pre-requisite for framing the block assessment under Chapter XIV-B of the Income Tax Act, 1961? 8. Chapter XVI-B prescribes the special procedure for making the assessment of search cases. 9. Section 158 B defines “undisclosed income”, and “block period” which are the two basic factors for framing the block assessments. 10. Section 158 BA is an enabling section, empowering the assessing officer, to assess “undisclosed income” as a result of search initiated or requisition made after June 30, 1995, in accordance with the provisions of this Chapter and tax the same at the fixed rate specified in Section 113. Section 158 BB provides the methodology for computation of undisclosed income of the block period. Section 158 BC prescribes the procedure for making the Block assessment of the searched person. Section 158 BD enables assessment of any person, other than the searched person. Section 158 BE sets the time limits for completion of the Block assessments. Section 158 BF provides for immunity from levy of interest under Sections 234A, 234B and 234C and penalties under Section 271(1)(C), 271A and 271B. Section 158 BFA provides for levy of interest and penalty in cases of search on or after January 1, 1997. Section 158 BG specifies the authorities competent to make the block assessment. Section 158 BH provides 39

P a g e | 40 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad for application of all the other provisions of this Act, except those as provided in Chapter XIV-B. Section 158 BI provides for abolition of the scheme in cases of search after 31.5.2003. 11. The scheme of Block assessment has been explained by Central Board of Direct Taxes in paragraph 39.3 of Circular No.717 dated 14th August, 1995 ([1995] 215 ITR.70). We may only notice clause (e) of the circular which provides for the procedure for making Block assessment. Omitting what is not necessary for the purpose of this case, clause (e) is extracted and it reads as under :- “(e) Procedure for making block assessment: (i) The Assessing Officer shall serve a notice on such person requiring him to furnish within such time, not being less than 15 days, as may be specified in the notice, a return in the prescribed form and verified in the same manner as a return under clause (i) of sub-section(1) of section 142 setting forth his total income including undisclosed income for the block period. The officer shall proceed to determine the undisclosed income of the block period and the provisions of section 142, sub-sections (2) and (3) of section 143 and section 144 shall apply accordingly.” 12. Chapter XIV-B provides for an assessment of the undisclosed income unearthed as a result of search without affecting the regular assessment made or to be made. Search is the sine qua non for the Block assessment. The special provisions are devised to operate in the distinct field of undisclosed income and are clearly in addition to the regular assessments covering the previous years falling in the block period. The special procedure of Chapter XIV-B is intended to provide a mode of assessment of undisclosed income, which has been detected as a result of search. It is not intended to be substitute for regular assessment. Its scope and ambit is limited in that sense to materials unearthed during search. It is in addition to the regular assessment already done or to be done. The assessment for the block period can only be done on the basis of evidence found as a result of search or requisition of books of accounts or documents and such other materials or information as are available with the assessing officer. Therefore, the income assessable in Block assessment under Chapter XIV-B is the income not disclosed but found and determined as the result of search under Section 132 or requisition under Section 132A of the Act. 13. Section 158 BC stipulates that the Chapter would have application where search has been effected under Section 132 or on requisition of books of accounts, other documents or assets under Section 132A. By making the notice issued under this Section mandatory, it makes such notice the very foundation for jurisdiction. Such notice under the Section is required to be served on the person who is found to be having undisclosed income. The Section itself prescribes the time limit of 15 days for compliance. In respect of searches on or 40

P a g e | 41 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad after 1.1.1997, the time limit may be given up to 45 days instead of 15 days for compliance. Such notice is prescribed under Rule 12(1A) which in turn prescribes Form 2B for block return. 14. Section 158 BC(b) is a procedural provision for making a regular assessment applicable to Block assessment as well. Section 158 BC(c) would require the assessing officer to compute the income as well as tax on completion of the proceedings to be made. Section 158 BC(d) would authorize the assessing officer to apply the assets seized in the same manner as are applied under Section 132B. 15. We may now revert back to Section 158 BC(b) which is the material provision which requires our consideration. Section 158 BC(b) provides for enquiry and assessment. The said provision reads “that the assessing officer shall proceed to determine the undisclosed income of the Block period in the manner laid down in Section 158 BB and the provisions of Section 142, sub- section (2) and (3) of Section 143, Section 144 and Section 145 shall, so far as may be, apply.” An analysis of this sub section indicates that, after the return is filed, this clause enables the assessing officer to complete the assessment by following the procedure like issue of notice under Sections 143(2)/142 and complete the assessment under Section 143(3). This Section does not provide for accepting the return as provided under Section 143(i)(a). The assessing officer has to complete the assessment under Section 143(3) only. In case of default in not filing the return or not complying with the notice under Sections 143(2)/142, the assessing officer is authorized to complete the assessment ex- parte under Section 144. Clause (b) of Section 158 BC by referring to Section 143(2) and (3) would appear to imply that the provisions of Section 143(1) are excluded. But Section 143(2) itself becomes necessary only where it becomes necessary to check the return, so that where block return conforms to the undisclosed income inferred by the authorities, there is no reason, why the authorities should issue notice under Section 143(2). However, if an assessment is to be completed under Section 143(3) read with Section 158-BC, notice under Section 143(2) should be issued within one year from the date of filing of block return. Omission on the part of the assessing authority to issue notice under Section 143(2) cannot be a procedural irregularity and the same is not curable and, therefore, the requirement of notice under Section 143(2) cannot be dispensed with. The other important feature that requires to be noticed is that the Section 158 BC(b) specifically refers to some of the provisions of the Act which requires to be followed by the assessing officer while completing the block assessments under Chapter XIV-B of the Act. This legislation is by incorporation. This Section even speaks of subsections which are to be followed 41

P a g e | 42 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad by the assessing officer. Had the intention of the legislature was to exclude the provisions of Chapter XIV of the Act, the legislature would have or could have indicated that also. A reading of the provision would clearly indicate, in our opinion, if the assessing officer, if for any reason, repudiates the return filed by the assessee in response to notice under Section 158 BC(a), the assessing officer must necessarily issue notice under Section 143(2) of the Act within the time prescribed in the proviso to Section 143(2) of the Act. Where the legislature intended to exclude certain provisions from the ambit of Section 158 BC(b) it has done so specifically. Thus, when Section 158 BC(b) specifically refers to applicability of the proviso thereto cannot be exclude. We may also notice here itself that the clarification given by CBDT in its circular No.717 dated 14th August, 1995, has a binding effect on the department, but not on the Court. This circular clarifies the requirement of law in respect of service of notice under sub-section (2) of Section 143 of the Act. Accordingly, we conclude even for the purpose of Chapter XIV-B of the Act, for the determination of undisclosed income for a block period under the provisions of Section 158 BC, the provisions of Section 142 and sub-sections (2) and (3) of Section 143 are applicable and no assessment could be made without issuing notice under Section 143(2) of the Act. However, it is contended by Sri Shekhar, learned counsel for the department that in view of the 16 expression “So far as may be” in Section 153 BC(b), the issue of notice is not mandatory but optional and are to be applied to the extent practicable. In support of that contention, the learned counsel has relied on the observation made by this Court in Dr. Pratap Singh’s case [1985] 155 ITR 166(SC). In this case, the Court has observed that Section 37(2) provides that “the provisions of the Code relating to searches, shall so far as may be, apply to searches directed under Section 37(2). Reading the two sections together it merely means that the methodology prescribed for carrying out the search provided in Section 165 has to be generally followed. The expression “so far as may be” has always been construed to mean that those provisions may be generally followed to the extent possible. The learned counsel for the respondent has brought to our notice the observations made by this Court in the case of Maganlal Vs. Jaiswal Industries, Neemach and Ors., [(1989) 4 SCC 344], wherein this Court while dealing with the scope and import of the expression “as far as practicable” has stated “without anything more the expression `as far as possible’ will mean that the manner provided in the code for attachment or sale of property in execution of a decree shall be applicable in its entirety except such provision therein which may not be practicable to be applied.”

P a g e | 43 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad 8. A consistent view has been taken by the Hon'ble High Court of Kerela as well as Hon'ble Calcutta High Court that the issuance of notice under section 143(2) of the Act is mandatory if the Assessing Officer seeks not to accept any part of the return as furnished by the assessee or make an assessment order contrary thereto and even in course of reassessment the notice under section 143(2) cannot be dispensed with. The proceedings under section 153A read with section 143/144 of the Act are in the nature of reassessment in the case in hand and therefore, a valid notice under section 143(2) is a mandatory requirement before passing the assessment order. The non issuance of notice under section 143(2) is a jurisdictional defect which cannot be regularized. It is settled proposition of law as held by the various High Courts cited above that the requirement of notice under section 143(2) while passing the reassessment order under section 147 is mandatory jurisdictional condition and in the absence of such notice, the order passed by the Assessing Officer is invalid and liable to be quashed. Since the return of income filed in response to notice under section 148 as well as under section 153A(1) are treated as if such return is furnished under section 139 of the Income Tax Act therefore, the logical corollary would be that the order passed under section 153A read with section 143/144 of the Act without issuing the notice under section 143(2) is invalid and liable to be quashed. 9. In the case in hand, there is no dispute that the assessee has filed a return of income in compliance of notice under section 153A on 15.02.2016 though the said return was filed after the stipulated time given by the Assessing Officer however, the Assessing Officer passed the impugned assessment order by considering the return of income filed by the assessee and therefore, it is manifest that the belated return filed by the assessee was regularized by the Assessing Officer. Without issuing the notice under section 143(2), the Assessing Officer has no jurisdiction to distribute the income declared by the assessee in the return of income. The notice under 43

P a g e | 44 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad section 142(1) is in the nature of show cause for a particular issue or raising the queries by the Assessing Officer in the assessment proceedings and failure to issue the notice under section 142(1) is no doubt violates the principles of natural justice and would render the assessment order voidable. Whereas the notice under section 143(2) is a mandatory jurisdictional requirement to question the correctness of the return of income filed by the assessee and in the absence of notice under section 143(2), the order passed by the Assessing Officer would be void ab initio and liable to be quashed. Therefore, the failure of the Assessing Officer to issue notice under section 143(2) would render the assessment order as invalid. At the cost of repetition, it is pertinent to note that notice issued under section 142(1) cannot substitute the notice under section 143(2) and hence the mandatory requirement of issuing the notice under section 143(2) cannot be satisfied by issuing notice under section 142(1). Sub section (2) of section 153A also contemplate the situations where the proceedings or any order of assessment or reassessment under section 153A(1) is annulled in appeal or other legal proceedings then the assessment or reassessment which got abated by virtue of such search shall stand revived. Thus it is clear that the possibility of assessment or re-assessment under section 153(A) being declared invalid and consequently quashed is not ruled out by the Legislature which means non satisfaction of the mandatory conditions for framing the assessment or reassessment under section 153A would result annulment of such order passed by the Assessing Officer. Accordingly, in view of the above discussion, the order passed by the Assessing Officer under section 153A read with section 144 of the Act is invalid and liable to be quashed.

P a g e | 45 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad shown by the assessee in the balance-sheet as unexplained cash credit. The assessee filed its return of income under section 139 of the Act for the assessment year under consideration on 30th September, 2011 declaring total income of Rs. 4,17,790/-. It is undisputed fact that the assessment was not pending on 5.12.2013 when a search and seizure operation was conducted under section 132 of the Income Tax Act in case of the assessee. Therefore, the assessment has not got abated by virtue of the initiation of search and seizure action. Consequently the notice issued by the Assessing Officer under section 153A of the Act would be for reassessment of the total income of the assessee. The Assessing Officer in the entire assessment order has not pointed out any incriminating material found or seized during the course of search and seizure proceedings. Even no addition was made by the Assessing Officer on account of undisclosed income while passing the impugned assessment order under section 153A read with section 144 of the Income Tax Act. The only addition made by the Assessing Officer to the total income of the assessee declared in the return of income is on account of sundry creditors of Rs. 2.5 Crores treated as unexplained. It is also not the case of the Assessing Officer that the sundry creditors as recorded in the books of accounts was either detected or questioned during the course of search and seizure action or post search enquiry. Therefore, the claim of sundry creditors as reported by the assessee in its books of accounts was never questioned by the department prior to the assessment proceedings under section 153A of the Act. Once there was no incriminating material found during the course of search and seizure action disclosing any undisclosed income of the assessee and assessment for a particular year falling within six years as prescribed under section 153A of the Act has not got abated by virtue of search then the Assessing Officer though is under the obligation to reassess the total income of the assessee cannot make an addition which is not in the nature of undisclosed income and that too is not based on any incriminating material found and seized the during the course of

P a g e | 46 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad search and seizure action. Though the Assessing Officer is bound reassess the total income of the assessee once a search and seizure is conducted however, the reassessment in pursuance to the search does not mean that the Assessing Officer shall always make an addition to the total income declared by the assessee. The Hon'ble Rajasthan High Court in case of Jai Steel India vs. ACIT 219 taxman 223 has considered this issue in para 22 to 30 reads as under:- “22. In the firm opinion of this Court from a plain reading of the provision alongwith the purpose and purport of the said provision, which is intricately linked with search and requisition under Sections 132 and 132A of the Act, it is apparent that: (a) the assessments or reassessments, which stand abated in terms of II proviso to Section 153A of the Act, the AO acts under his original jurisdiction, for which, assessments have to be made; (b) regarding other cases, the addition to the income that has already been assessed, the assessment will be made on the basis of incriminating material and (c) in absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. Though such a claim by the assessee for the first time under Section 153A of the Act is not completed, the case in hand, has to be considered at best similar to a case where in spite of a search and/or requisition, nothing incriminating is found. In such a case though Section 153A of the Act would be triggered and assessment or reassessment to ascertain the total income of the person is required to be done, however, the same would in that case not result in any addition and the assessments passed earlier may have to be reiterated. 23. The reliance placed by the counsel for the appellant on the case of Anil Kumar Bhatia (supra) also does not help the case of the assessee. The relevant extract of the said judgment reads as under:- “19. Under the provisions of Section 153A, as we have already noticed, the Assessing Officer is bound to issue notice to the assessee to furnish returns for each assessment year falling within the six assessment years immediately preceding the assessment year relevant to the previous year in which the search or requisition was made. Another significant feature of this Section is that the Assessing Officer is empowered to assess or reassess the “total income” of the aforesaid years. This is a significant departure from the earlier block assessment scheme in which the block assessment roped in only the undisclosed income and the regular assessment proceedings were preserved, resulting in multiple 46

P a g e | 47 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad assessments. Under Section 153A, however, the Assessing Officer has been given the power to assess or reassess the 'total income' of the six assessment years in question in separate assessment orders. This means that there can be only one assessment order in respect of each of the six assessment years, in which both the disclosed and the undisclosed income would be brought to tax. 20. A question may arise as to how this is sought to be achieved where an assessment order had already been passed in respect of all or any of those six assessment years, either under Section 143(1)(a) or Section 143(3) of the Act. If such an order is already in existence, having obviously been passed prior to the initiation of the search/requisition, the Assessing Officer is empowered to reopen those proceedings and reassess the total income, taking note to the undisclosed income, if any, unearthed during the search. For this purpose, the fetters imposed upon the Assessing Officer by the strict procedure to assume jurisdiction to reopen the assessment under Sections 147 and 148, have been removed by the non obstante clause with which sub section (1) of Section 153A opens. The time-limit within which the notice under Section 148 can be issued, as provided in Section 149 has also been made inapplicable by the non obstante clause. Section 151 which requires sanction to be obtained by the Assessing Officer by issue of notice to reopen the assessment under Section 148 has also been excluded in a case covered by Section 153A. The time-limit prescribed for completion of an assessment or reassessment by Section 153 has also been done away with in a case covered by Section 153A. With all the stops having been pulled out, the Assessing Officer under Section 153A has been entrusted with the duty of bringing to tax the total income of an assessee whose case is covered by Section 153A, by even making reassessments without any fetters, if need be. 21. Now there can be cases where at the time when the search is initiated or requisition is made, the assessment or reassessment proceedings relating to any assessment year falling within the period of the six assessment years mentioned above, may be pending. In such a case, the second proviso to sub section (1) of Section 153A says that such proceedings “shall abate”. The reason is not far to seek. Under Section 153A, there is no room for multiple assessment orders in respect of any of the six assessment years under consideration. That is because the Assessing Officer has to determine not merely the undisclosed income of the assessee, but also the 'total income' of the assessee in whose case a 47

P a g e | 48 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad search or requisition has been initiated. Obviously there cannot be several orders for the same assessment year determining the total income of the assessee. In order to ensure this state of affairs namely, that in respect of the six assessment years preceding the assessment year relevant to the year in which the search took place there is only one determination of the total income, it has been provided in the second proviso of sub Section (1) of Section 153A that any proceedings for assessment or reassessment of the assessee which are pending on the date of initiation of the search or making requisition “shall abate”. Once those proceedings abate, the decks are cleared, for the Assessing Officer to pass assessment orders for each of those six years determining the total income of the assessee which would include both the income declared in the returns, if any, furnished by the assessee as well as the undisclosed income, if any, unearthed during the search or requisition. The position thus emerging is that the search is initiated or requisition is made, they will abate making way for the Assessing Officer to determine the total income of the assessee in which the undisclosed income would also be included, but in case where the assessment or reassessment proceedings have already been completed and assessment orders have been passed determining the assessee's total income and such orders subsisting at the time when the search or the requisition is made, there is no question of any abatement since no proceedings are pending. In this latter situation, the Assessing Officer will reopen the assessments or reassessments already made (without having the need to follow the strict provisions or complying with the strict conditions of Sections 147, 148 and 151) and determine the total income of the assessee. Such determination in the orders passed under Section 153A would be similar to the orders passed in any reassessment, where the total income determined in the original assessment order and the income that escaped assessment are clubbed together and assessed as the total income. In such a case, to reiterate, there is no question of any abatement of the earlier proceedings for the simple reason that no proceedings for assessment or reassessment were pending since they had already culminated in assessment or reassessment orders when the search was initiated or the requisition was made.” (emphasis supplied)

P a g e | 49 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad determined in the original assessment and assessed as the total income. The observations made in the judgment contrasting the provisions of determination of undisclosed income under Chapter XIVB with determination of total income under Sections 153A to 153C of the Act have to be read in the context of second proviso only, which deals with the pending assessment/reassessment proceedings. The further observations made in the context of de novo assessment proceedings also have to be read in context that irrespective of the fact whether any incriminating material is found during the course of search, the notice and consequential assessment under Section 153A have to be undertaken. 25. The argument of the learned counsel that the AO is also free to disturb income, expenditure or deduction de hors the incriminating material, while making assessment under Section 153A of the Act is also not borne out from the scheme of the said provision which as noticed above is essentially in context of search and/or requisition. The provisions of Sections 153A to 153C cannot be interpreted to be a further innings for the AO and/or assessee beyond provisions of Sections 139 (return of income), 139(5) (revised return of income), 147 (income escaping assessment) and 263 (revision of orders) of the Act. The plea raised on behalf of the assessee that as the first proviso provides for assessment or reassessment of the total income in respect of each assessment year falling within the six assessment years, is merely reading the said provision in isolation and not in the context of the entire section. The words 'assess' or 'reassess' have been used at more than one place in the Section and a harmonious construction of the entire provision would lead to an irresistible conclusion that the word 'assess' has been used in the context of an abated proceedings and reassess has been used for completed assessment proceedings, which would not abate as they are not pending on the date of initiation of the search or making of requisition and which would also necessarily support the interpretation that for the completed assessments, the same can be tinkered only based on the incriminating material found during the course of search or requisition of documents. The Allahabad High Court in Commissioner of Income-tax (Central, Kanpur v. Smt. Shaila Agarwal (supra) has held as under:- “19. The second proviso to Section 153A of the Act, refers to abatement of the pending assessment or reassessment proceedings. The word 'pending' does not operate any such interpretation, that wherever the appeal against such assessment or reassessment is pending, the same alongwith assessment or reassessment proceedings is liable to be abated. The principles of interpretation of taxing statutes do not permit the Court to interpret the Second Proviso to Section 153A in a manner that where 49

P a g e | 50 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad the assessment or reassessment proceedings are complete, and the matter is pending in appeal in the Tribunal, the entire proceedings will abate. 20. There is another aspect to the matter, namely that the abatement of any proceedings has serious causes and effect in as much as the abatement of the proceedings, takes away all the consequences that arise thereafter. In the present case after deducting bogus gifts in the regular assessment proceedings, the proceedings for penalty were drawn under Section 271 (1)(c) of the Act. The material found in the search may be a ground for notice and assessment under Section 153A of the Act but that would not efface or terminate all the consequence, which has arisen out of the regular assessment or reassessment resulting into the demand or proceedings of penalty.” (emphasis supplied). The said judgment which essentially deals with second proviso to Section 153A of the Act also supports the conclusion, which we have reached hereinbefore. 28. It has been observed by the Hon'ble Supreme Court in K.P. Varghese v. Income Tax Officer : (1981) 131 ITR 597 that “it is well recognized rule of construction that a statutory provision must be so construed, if possible that absurdity and mischief may be avoided.” 29. The argument of the counsel for the appellant if taken to its logical end would mean that even in cases where the appeal arising out of the completed assessment has been decided by the CIT(A), ITAT and the High Court, on a notice issued under Section 153A of the Act, the AO would have power to undo what has been concluded upto the High Court. Any interpretation which leads to such conclusion has to be repelled and/or avoided as held by the Hon'ble Supreme Court in the case of K.P. Varghese (supra). 30. Consequently, it is held that it is not open for the assessee to seek deduction or claim expenditure which has not been claimed in the original assessment, which assessment already stands completed, only because a assessment under Section 153A of the Act in pursuance of search or requisition is required to be made.”

P a g e | 51 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad absence of any incriminating material and the assessment completed earlier may have to be reiterated. The provisions of section 153A cannot be interpreted to be a further innings of an Assessing Officer beyond the provisions of section 147. The same rule is applicable for the assessee and does not open for the assessee to seek deduction or claim expenditure which has not been claimed in the original assessment already completed. Thereafter a series of decisions were delivered by the Hon'ble High Courts on this issue and in case of CIT vs. Kabul Chawla 380 ITR 573, the Hon'ble Delhi High Court while analyzing the provisions of section 153A read with section 132 of the Act has concluded in paras 37 and 38 reads as under:- “37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: i. Once a search takes place under Section 132 of the Act, notice under Section 153 A (1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs "in which both the disclosed and the undisclosed income would be brought to tax". iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment "can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material."

P a g e | 52 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment. Conclusion 38. The present appeals concern AYs, 2002-03, 2005-06 and 2006-07. On the date of the search the said assessments already stood completed. Since no incriminating material was unearthed during the search, no additions could have been made to the income already assessed.”

P a g e | 53 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad term used in section 153A as “assess” relates to abated proceedings and “re-assess” relates to completed assessment proceedings. Therefore, when the assessments were not pending on the date of search, the same can be interfered with by the Assessing Officer while making the assessment under section 153A only on the basis of some incriminating material found during the course of search or requisition disclosing undisclosed income or discovery of property which were not produced or disclosed by the assessee in the original assessment. The Hon'ble Delhi High Court reiterates its view in the case of Pr. CIT vs. Kurli Paper Mills 380 ITR 571 in para 1 to 3 which reads as under:- “1. The Revenue has filed the appeal against an order dated November, 14, 2014 passed by the Income Tax Appellate Tribunal (“the I.T.A.T.”) in 3761/Del/2011 pertaining to the assessment year 2002-03. The question was whether learned Commissioner of Income Tax (Appeals) had erred in law and on the facts in deleting the addition of Rs. 89 Lakhs made by the Assessing Officer under section 68 of the Income Tax Act, 1961 (“the Act”) on bogus share capital. But the issue was whether there was any incriminating material whatsoever found during the search to justify the initiation of proceedings under section 153A. 2. The Courts finds that the order of Commissioner of Income Tax (Appeals) reveals that there is a factual finding that “no incriminating evidence related to share capital issued was found during the course of search as is manifest from the order of the Assessing Officer”. Consequently, it was held that the Assessing Officer was not justified in invoking section 68 of the Act for the purposes of making additions on account of share capital. 3. As far as the above facts are concerned, there is nothing shown to the Court to persuade and hold that the above factual determination is perverse. Consequently, considering all the facts and circumstances of the case, he court is of the opinion that no substantial question of law arises in the impugned order of the Income tax Appellate Tribunal which requires examination.”

P a g e | 54 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad 13. The SLP filed by the Revenue against the judgment of Hon'ble Delhi High Court in case of Pr. CIT vs. Kurli Paper Mills (supra) was dismissed vide order dated 07th December, 2015. In a subsequent judgment, the Hon'ble Delhi High Court in the case of Pr. CIT vs. Meeta Gutgutiya 395 ITR 526 has again considered this issue in appeal in para 55 to 71 reads as under:-

“55. On the legal aspect of invocation of Section 153A in relation to AYs 2000-01 to 2003-04, the central plank of the Revenue’s submission is the decision of this Court in Dayawanti Gupta (supra). Before beginning to examine the said decision, it is necessary to revisit the legal landscape in light of the elaborate arguments advanced by the Revenue. 56. Section 153A of the Act is titled "Assessment in case of search or requisition". It is connected to Section 132 which deals with 'search and seizure'. Both these provisions, therefore, have to be read together. Section 153A is indeed an extremely potent power which enables the Revenue to re- open at least six years of assessments earlier to the year of search. It is not to be exercised lightly. It is only if during the course of search under Section 132 incriminating material justifying the re-opening of the assessments for six previous years is found that the invocation of Section 153A qua each of the AYs would be justified. 57. The question whether unearthing of incriminating material relating to any one of the AYs could justify the re-opening of the assessment for all the earlier AYs was considered both in CIT v. Anil Kumar Bhatia (supra) and CIT v. Chetan Das Lachman Das (supra). Incidentally, both these decisions were discussed threadbare in the decision of this Court in Kabul Chawla (supra). As far as CIT v. Anil Kumar Bhatia (supra) was concerned, the Court in paragraph 24 of that decision noted that "we are not concerned with a case where no incriminating material was found during the search conducted under Section 132 of the Act. We therefore express no opinion as to whether Section 153A can be invoked even under such situation". That question was, therefore, left open. As far as CIT v Chetan Das Lachman Das (supra) is concerned, in para 11 of the decision it was observed: "11. Section 153A (1) (b) provides for the assessment or reassessment of the total income of the six assessment years immediately preceding the assessment year relevant to the previous year in which the search took place. To repeat, there is no condition in this Section that additions 54

P a g e | 55 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad should be strictly made on the basis of evidence found in the course of the search or other post-search material or Information available with the Assessing Officer which can be related to the evidence found. This, however, does not mean that the assessment under Section 153A can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material." 58. In Kabul Chawla (supra), the Court discussed the decision in Filatex India Ltd. v. CIT (supra) as well as the above two decisions and observed as under: "31. What distinguishes the decisions both in CIT v. Chetan Das Lachman Das (supra), and Filatex India Ltd. v. CIT-IV (supra) in their application to the present case is that in both the said cases there was some material unearthed during the search, whereas in the present case there admittedly was none. Secondly, it is plain from a careful reading of the said two decisions that they do not hold that additions can be validly made to income forming the subject matter of completed assessments prior to the search even if no incriminating material whatsoever was unearthed during the search. 32. Recently by its order dated 6th July 2015 in ITA No. 369 of 2015 (Pr. Commissioner of Income Tax v. Kurele Paper Mills P. Ltd.), this Court declined to frame a question of law in a case where, in the absence of any incriminating material being found during the search under Section 132 of the Act, the Revenue sought to justify initiation of proceedings under Section 153A of the Act and make an addition under Section 68 of the Act on bogus share capital gain. The order of the CIT(A), affirmed by the ITAT, deleting the addition, was not interfered with." 59. In Kabul Chawla (supra), the Court referred to the decision of the Rajasthan High Court in Jai Steel (India), Jodhpur v. ACIT (2013) 36 Taxman 523 (Raj). The said part of the decision in Kabul Chawla (supra) in paras 33 and 34 reads as under: "33. The decision of the Rajasthan High Court in Jai Steel (India), Jodhpur v. ACIT (supra) involved a case where certain books of accounts and other documents that had not been produced in the course of original assessment were found in the course of search. It was held where undisclosed income or undisclosed property has been found as a consequence of the search, the same would also be taken into

P a g e | 56 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad consideration while computing the total income under Section 153A of the Act. The Court then explained as under: "22. In the firm opinion of this Court from a plain reading of the provision along with the purpose and purport of the said provision, which is intricately linked with search and requisition under Sections 132 and 132A of the Act, it is apparent that: (a) the assessments or reassessments, which stand abated in terms of II proviso to Section 153A of the Act, the AO acts under his original jurisdiction, for which, assessments have to be made; (b) regarding other cases, the addition to the income that has already been assessed, the assessment will be made on the basis of incriminating material; and (c) in absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made." 34. The argument of the Revenue that the AO was free to disturb income de hors the incriminating material while making assessment under Section 153A of the Act was specifically rejected by the Court on the ground that it was "not borne out from the scheme of the said provision" which was in the context of search and/or requisition. The Court also explained the purport of the words "assess" and "reassess", which have been found at more than one place in Section 153A of the Act as under: "26. The plea raised on behalf of the assessee that as the first proviso provides for assessment or reassessment of the total income in respect of each assessment year falling within the six assessment years, is merely reading the said provision in isolation and not in the context of the entire section. The words 'assess' or 'reassess'-have been used at more than one place in the Section and a harmonious construction of the entire provision would lead to an irresistible conclusion that the word assess has been used in the context of an abated proceedings and reassess has been used for completed assessment proceedings, which would not abate as they are not pending on the date of initiation of the search or making of requisition and which would also necessarily support the interpretation that for the completed assessments, the same can be tinkered only based on the incriminating material found during the course of search or requisition of documents." 60. In Kabul Chawla (supra), the Court also took note of the decision of the Bombay High Court in Commissioner of Income Tax v. Continental Warehousing 56

P a g e | 57 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad Corporation (Nhava Sheva) Ltd. [2015] 58 taxmann.com 78 (Bom) which accepted the plea that if no incriminating material was found during the course of search in respect of an issue, then no additions in respect of any issue can be made to the assessment under Section 153A and 153C of the Act. The legal position was thereafter summarized in Kabul Chawla (supra) as under: "37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: i. Once a search takes place under Section 132 of the Act, notice under Section 153 A (1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs "in which both the disclosed and the undisclosed income would be brought to tax". iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment "can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material." v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each

P a g e | 58 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment." 61. It appears that a number of High Courts have concurred with the decision of this Court in Kabul Chawla (supra) beginning with the Gujarat High Court in Principal Commissioner of Income Tax v. Saumya Construction Pvt. Ltd. (supra). There, a search and seizure operation was carried out on 7th October, 2009 and an assessment came to be framed under Section 143(3) read with Section 153A(1)(b) in determining the total income of the Assessee of Rs. 14.5 crores against declared income of Rs. 3.44 crores. The ITAT deleted the additions on the ground that it was not based on any incriminating material found during the course of the search in respect of AYs under consideration i.e., AY 2006-07. The Gujarat High Court referred to the decision in Kabul Chawla (supra), of the Rajasthan High Court in Jai Steel (India), Jodhpur v. ACIT (supra) and one earlier decision of the Gujarat High Court itself. It explained in para 15 and 16 as under: "15. On a plain reading of section 153A of the Act, it is evident that the trigger point for exercise of powers thereunder is a search under section 132 or a requisition under section 132A of the Act. Once a search or requisition is made, a mandate is cast upon the Assessing Officer to issue notice under section 153A of the Act to the person, requiring him to furnish the return of income in respect of each assessment year falling within six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made and assess or reassess the same. Since the assessment under section 153A of the Act is linked with search and requisition under sections 132 and 132A of the Act, it is evident that the object of the section is to bring to tax the undisclosed income which is found during the course of or pursuant to the search or requisition. However, instead of the earlier regime of block assessment whereby, it was only the undisclosed income of the block period that was assessed, section 153A of the Act seeks to assess the total income for the assessment year, which is clear from the first proviso thereto which provides that the Assessing Officer shall assess or reassess the total income in respect of each

P a g e | 59 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad assessment year falling within such six assessment years. The second proviso makes the intention of the Legislature clear as the same provides that assessment or reassessment, if any, relating to the six assessment years referred to in the sub-section pending on the date of initiation of search under section 132 or requisition under section 132A, as the case may be, shall abate. Sub- section (2) of section 153A of the Act provides that if any proceeding or any order of assessment or reassessment made under sub-section (1) is annulled in appeal or any other legal provision, then the assessment or reassessment relating to any assessment year which had abated under the second proviso would stand revived. The proviso thereto says that such revival shall cease to have effect if such order of annulment is set aside. Thus, any proceeding of assessment or reassessment falling within the six assessment years prior to the search or requisition stands abated and the total income of the assessee is required to be determined under section 153A of the Act. Similarly, sub- section (2) provides for revival of any assessment or reassessment which stood abated, if any proceeding or any order of assessment or reassessment made under section 153A of the Act is annulled in appeal or any other proceeding. 16. Section 153A bears the heading "Assessment in case of search or requisition". It is "well settled as held by the Supreme Court in a catena of decisions that the heading or the Section can be regarded as a key to the interpretation of the operative portion of the section and if there is no ambiguity in the language or if it is plain and clear, then the heading used in the section strengthens that meaning. From the heading of section 153. the intention of the Legislature is clear, viz., to provide for assessment in case of search and requisition. When the very purpose of the provision is to make assessment In case of search or requisition, it goes without saying that the assessment has to have relation to the search or requisition, in other words, the assessment should connected With something round during the search or requisition viz., incriminating material which reveals undisclosed income. Thus, while in view of the mandate of sub-section (1) of section 153A of the Act, in every case where there is a search or requisition, the Assessing Officer is obliged to issue notice to such person to furnish returns of income for the six years preceding the assessment year relevant to the previous year in which the search is conducted or requisition is made, any addition' or disallowance can be made only on the basis of material collected during the search or requisition, in case no incriminating material is found, as 59

P a g e | 60 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad held by the Rajasthan High Court in the case of Jai Steel (India) v. Asst. CIT (supra), the earlier assessment would have to be reiterated, in case where pending assessments have abated, the Assessing Officer can pass assessment orders for each of the six years determining the total income of the assessee which would include income declared in the returns, if any, furnished by the assessee as well as undisclosed income, if any, unearthed during the search or requisition. In case where a pending reassessment under section 147 of the Act has abated, needless to state that the scope and ambit of the assessment would include any order which the Assessing Officer could have passed under section 147 of the Act as well as under section 153A of the Act. 19. On behalf of the appellant, it has been contended that if any incriminating material is found, notwithstanding that in relation to the year under consideration, no incriminating material is found, it would be permissible to make additions and disallowance in respect of an the six assessment years. In the opinion of this court, the said contention does not merit acceptance, inasmuch as. the assessment in respect of each of the six assessment years is a separate and distinct assessment. Under section 153A of the Act, assessment has to be made in relation to the search or requisition, namely, in relation to material disclosed during the search or requisition. If in relation to any assessment year, no incriminating material is found, no addition or disallowance can be made in relation to that assessment year in exercise of powers under section 153A of the Act and the earlier assessment shall have to be reiterated. In this regard, this court is in complete agreement with the view adopted by the Rajasthan High Court in the case of Jai Steel (India) v. Asst. CIT (supra). Besides, as rightly pointed out by the learned counsel for the respondent, the controversy involved in the present case stands concluded by the decision of this court In the case of CIT v. Jayaben Ratilal Sorathia (supra) wherein it has been held that while it cannot be disputed that considering section 153A of the Act, the Assessing Officer can reopen and/or assess the return with respect to six preceding years ; however, there must be some incriminating material available with the Assessing Officer with respect to the sale transactions in the particular assessment year." 62. Subsequently, in Principal Commissioner of Income Tax- 1 v. Devangi alias Rupa (supra), another Bench of the Gujarat High Court reiterated the above legal position following its earlier decision in Principal Commissioner of Income Tax v. Saumya Construction P. Ltd. (supra) and of this Court in Kabul Chawla

P a g e | 61 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad (supra). As far as Karnataka High Court is concerned, it has in CIT v. IBC Knowledge Park P. Ltd. (supra) followed the decision of this Court in Kabul Chawla (supra) and held that there had to be incriminating material qua each of the AYs in which additions were sought to be made pursuant to search and seizure operation. The Calcutta High Court in CIT-2 v. Salasar Stock Broking Ltd. (supra), too, followed the decision of this Court in Kabul Chawla (supra). In CIT v. Gurinder Singh Bawa (supra), the Bombay High Court held that: "6...once an assessment has attained finality for a particular year, i.e., it is not pending then the same cannot be subject to tax in proceedings under section 153A of the Act. This of course would not apply if incriminating materials are gathered in the course of search or during proceedings under section 153A of the Act which are contrary to and/or not disclosed during the regular assessment proceedings." 63. Even this Court has in CIT v Mahesh Kumar Gupta (supra) and The Pr .Commissioner of Income Tax-9 v. Ram Avtar Verma (supra) followed the decision in Kabul Chawla (supra). The decision of this Court in Pr. Commissioner of Income Tax v. Kurele Paper Mills P. Ltd. (supra) which was referred to in Kabul Chawla (supra) has been affirmed by the Supreme Court by the dismissal of the Revenue's SLP on 7th December, 2015. 64. That brings us to the decision in Dayawanti Gupta (supra). As rightly pointed out by Mr. Kaushik, learned counsel appearing for the Respondent, that there are several distinguishing features in that case which makes its ratio inapplicable to the facts of the present case. In the first place, the Assessees there were engaged in the business of Pan Masala and Gutkha etc. The answers given to questions posed to the Assessee in the course of search and survey proceedings in that case bring out the points of distinction. In the first place, it was stated that the statement recorded was under Section 132(4) and not under Section 133A. It was a statement by the Assessee himself. In response to question no. 7 whether all the purchases made by the family firms, were entered in the regular books of account, the answer was: "We and our family firms namely M/s Assam Supari Traders and M/s Balaji Perfumes generally try to record the transactions made in respect of purchase, manufacturing and sales in our regular books of accounts but it is also fact that some time due to some factors like inability of accountant, our busy schedule and some family problems, various purchases and sales of Supari, Gutka and other items dealt by our firms is not entered and shown in the regular books of accounts maintained by our firms."

P a g e | 62 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad 65. Therefore, there was a clear admission by the Assessees in Dayawanti Gupta (supra) there that they were not maintaining regular books of accounts and the transactions were not recorded therein. 66. Further, in answer to Question No. 11, the Assessee in Dayawanti Gupta (supra) was confronted with certain documents seized during the search. The answer was categorical and reads thus: "Ans:- I hereby admit that these papers also contend details of various transactions include purchase/ sales/ manufacturing trading of Gutkha, Supari made in cash outside Books of accounts and these are actually unaccounted transactions made by our two firms namely M/s Asom Trading and M/s. Balaji Perfumes." 67. By contrast, there is no such statement in the present case which can be said to constitute an admission by the Assessee of a failure to record any transaction in the accounts of the Assessee for the AYs in question. On the contrary, the Assessee herein stated that, he is regularly maintaining the books of accounts. The disclosure made in the sum of Rs. 1.10 crores was only for the year of search and not for the earlier years. As already noticed, the books of accounts maintained by the Assessee in the present case have been accepted by the AO. In response to question No. 16 posed to Mr. Pawan Gadia, he stated that there was no possibility of manipulation of the accounts. In Dayawanti Gupta (supra), by contrast, there was a chart prepared confirming that there had been a year- wise non-recording of transactions. In Dayawanti Gupta (supra), on the basis of material recovered during search, the additions which were made for all the years whereas additions in the present case were made by the AO only for AY 2004-05 and not any of the other years. Even the additions made for AYs 2004- 05 were subsequently deleted by the CIT(A), which order was affirmed by the ITAT. Even the Revenue has challenged only two of such deletions in ITA No. 306/2017. 68. In para 23 of the decision in Dayawanti Gupta (supra), it was observed as under: "23. This court is of opinion that the ITAT's findings do not reveal any fundamental error, calling for correction. The inferences drawn in respect of undeclared income were premised on the materials found as well as the statements recorded by the assessees. These additions therefore were not baseless. Given that the assessing authorities in such cases have to draw inferences, because of the nature of the materials - 62

P a g e | 63 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad since they could be scanty (as one habitually concealing income or indulging in clandestine operations can hardly be expected to maintain meticulous books or records for long and in all probability be anxious to do away with such evidence at the shortest possibility) the element of guess work is to have some reasonable nexus with the statements recorded and documents seized. In tills case, the differences of opinion between the CIT (A) on the one hand and the AO and ITAT on the other cannot be the sole basis for disagreeing with what is essentially a factual surmise that is logical and plausible. These findings do not call for interference. The second question of law is answered again in favour of the revenue and against the assessee." 69. What weighed with the Court in the above decision was the "habitual concealing of income and indulging in clandestine operations" and that a person indulging in such activities "can hardly be accepted to maintain meticulous books or records for long." These factors are absent in the present case. There was no justification at all for the AO to proceed on surmises and estimates without there being any incriminating material qua the AY for which he sought to make additions of franchisee commission. 70. The above distinguishing factors in Dayawanti Gupta (supra), therefore, do not detract from the settled legal position in Kabul Chawla (supra) which has been followed not only by this Court in its subsequent decisions but also by several other High Courts. 71. For all of the aforementioned reasons, the Court is of the view that the ITAT was justified in holding that the invocation of Section 153A by the Revenue for the AYs 2000-01 to 2003-04 was without any legal basis as there was no incriminating material qua each of those AYs.”

P a g e | 64 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad absence of any incriminating material found or seized during the course of search and seizure action disclosing any undisclosed income, no addition can be made by the Assessing Officer to the total income of the assessee in the proceedings under section 153A of the Act when the assessment was not abated by virtue of search. The Hon'ble Jurisdictional High Court in case of CIT vs. Raj Kumar Arora (supra) as relied upon by the learned DR has held that the Assessing Officer would be required to reopen the assessment proceedings and re-assess the total income of the assessee taking notice of undisclosed income found during the search and seizure operation. The Assessing Officer would be competent to reopen the assessment proceedings already made and determining the total income of the assessee. The Assessing Officer while exercising the power under section 153A would make assessment and compute the total income of the assessee including undisclosed income notwithstanding the assessee has filed return of income before the date of search which stood processed under section 143(1)(a) of the Act. Therefore, the Hon'ble High Court has held that the Assessing Officer has power to re-assess return of income of the assessee not only for undisclosed income which was found during the search operation but also with regard to the material that was available at the time of original assessment. That finding of the Hon'ble High Court is in the context of assessing the total income of the assessee which includes undisclosed income and disclosed income both. Therefore, the income which can be assessed during the proceedings under section 153A of the Act must be undisclosed unearthed during the course of search and seizure action, the disclosed income as declared in the return of income as well as the income which has escaped assessment and came to light during the course of search and seizure action. 15. In the case in hand, since nothing was unearthed during the course of search and seizure action so far as the assessment year under consideration and further the sundry creditors as reported by the assessee in the books of accounts 64

P a g e | 65 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad and particularly in the balance-sheet was not disputed or questioned by the department either during the course of search and seizure action or during the post enquiry but this issue was first time taken up by the Assessing Officer during the proceedings under section 153A of the Act. Thus the addition made by the Assessing Officer on account of sundry creditors does not fall either in the category of undisclosed income or an income which has escaped assessment and detected during the course of search and seizure action. Hence the provisions of reassessment proceedings under section 153A of the Act cannot be used for conducting a rowing and fishing enquiry but at the most an income which has escaped assessment in the original proceedings can be brought to tax in the reassessment proceedings. Unless the Assessing Officer assess or reassess the income which relates to the evidence or material found during the course of search and seizure action it would not be open to the Assessing Officer to assess or reassess any other income chargeable to tax which comes to his notice during the course of proceedings under section 153A of the Act. Such income can be assessed alongwith the undisclosed income based on some evidence or incriminating material found during the course of search and seizure operation. Therefore, the law laid down by the Hon'ble Bombay High Court in the case of CIT vs. Jet Airways India Limited 331 ITR 236 is equally applicable in the proceedings under section 153A of the Act so far as the reassessment of income which is not falling in the category of undisclosed income or an income escaped assessment and not detected during the course of search and seizure proceedings. Accordingly, in the absence of any incriminating material disclosing any undisclosed income as well as in the absence of any income which has escaped assessment found during the course of search and seizure action the addition made by the Assessing Officer on account of sundry creditor is not sustainable and the same is liable to be deleted.

P a g e | 66 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad

Sd/- [VIJAY PAL RAO] JUDICIAL MEMBER DATED: 16/09/2021 Allahabad sh Copy forwarded to: 1. Appellant – 2. Respondent – 3. CIT(A) , Allahabad 4. CIT 5. DR - By order Assistant Registrar

P a g e | 67 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad

INCOME TAX APPELLATE TRIBUNAL ALLAHABAD BENCH – VIRTUAL COURT BEFORE SHRI R.S. SYAL, VICE PRESIDENT (AS THIRD MEMBER) ITA No.103/Alld/2017 Assessment Year : 2011-12

ACIT, Vs. M/s. Sunshine Infraestate Pvt. Ltd. Central Circle, Allahabad. 17, Industrial Area, Naini, Allahabad PAN: AANCS9247H (Appellant) (Respondent)

CO No.22/Alld/2017 Assessment Year : 2011-12

M/s. Sunshine Infraestate Pvt. Ltd. Vs. ACIT, 17, Industrial Area, Naini, Central Circle, Allahabad. Allahabad PAN: AANCS9247H (Appellant) (Respondent) Assessee by : Shri Praveen Godbole

P a g e | 68 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad Department by : Shri Ramendra Kumar Vishwakarma CIT-DR Date of Hearing : 07.04.2022 Date of Pronouncement : 12.04.2022

ORDER

A reference u/s 255(4) of the Income Tax Act, 1961 (hereinafter also called as ‘the Act’) has been made by the Hon’ble President, ITAT for my opinion as Third Member in the captioned appeals for the Assessment Year 2011-12. 2. The ld. AM, who first wrote his opinion, proposed the following questions as reflecting the points of difference requiring consideration by the Third Member:

P a g e | 69 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad Hon’ble High Court of Delhi decision in the case of Ashok Chaddha v. ITO (2012) 20 taxmann.com 387 (Del. HC), Hon’ble High Court of Punjab and Haryana in the case of Tarsem Singla v. DCIT (2017) 81 taxmann.com 347 (P&H HC) and Hon’ble High Court of Kerala in the case of CIT vs. Promy Kuriakose (2017) 79 taxmann.com 405 (Ker.HC)? 2. Whether in the facts and circumstances of the case, the mandate of framing assessment u/s 153A of the 1961 Act, pursuant to search u/s 132(1) of the 1961 Act is to assess total income of the tax-payer and not merely income detected during search operations, more so keeping in view ratio of two decision(s) of Hon’ble Jurisdictional High Court in the case of CIT v. Raj Kumar Arora (2014) 52 taxmann.com 172 (All. HC) and in the case of CIT v. Kesarwani Zarda Bhandar in ITA No.270 of 2014, which decisions are binding on tribunal? 3. Whether in the facts and circumstances of the case, the order passed by the Assessing Officer u/s 153A read with Section 144A of the 1961 Act is liable to be quashed or, is liable to be set aside and restored to the file of the Assessing Officer for framing de-novo assessment? 3. The ld. JM, who wrote the dissent, has framed the following questions for reference to the Third Member: (1) Whether in the facts and circumstances of the case, the reassessment order framed under section 153A read with section 144 of the Income Tax Act is invalid and liable to be quashed or not?

P a g e | 70 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad (2) Whether in the facts and circumstances of the case, the addition made by the Assessing Officer under section 68 of the Income Tax Act on account of Sundry Creditors shown in the books of accounts in the absence of any incriminating material found or seized during the search and seizure action is not sustainable and is liable to be deleted or not?

a. Whether on the facts and in law, the issuance of notice u/s 143(2) is a mandatory jurisdictional requirement for making assessment u/s 153A of the Act, in the absence of which the assessment order became null and void? b. Whether on the facts and in law, the ld. CIT(A) was justified in holding that no addition, based otherwise than on an incriminating document or material etc. found during the course of search, can be made in the assessment relating to any assessment year falling within the period of six assessment years as prescribed u/s 153A of the Act which is not pending on the date of initiation of the search?

P a g e | 71 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad c. Whether on the facts and in law, the ld. CIT(A) was justified in deleting the addition rather than restoring the matter to the Assessing Officer for a fresh decision? 5. The matter was adjourned for 07.04.2022 and it was advised that either party may propose modifications or alterations in the above questions. On the scheduled date, both the sides were consensus ad idem that the above questions reflected the controversy reflecting the difference between the Hon’ble Members who initially heard the appeal. As such, I am proceeding to dispose off the above three questions in seriatim. 6.1. Succinctly, the factual matrix of the case is that the assessee is engaged in the business of real estate. A search and seizure action was taken up against the assessee on 5.12.2013. A notice dated 05.09.2014 was issued by the Assessing Officer (AO) u/s 153A of the Act requiring the assessee to furnish its return of income. The assessee filed return for the year under consideration on 15.02.2016 declaring total income of Rs.4,17,790. The assessee had shown a sum of Rs.2.50 crore payable to one Sh. Ajay Singh in the list of Sundry Creditors. On being called

P a g e | 72 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad upon to prove the genuineness of the transaction by furnishing evidence as to the identity and capacity of Sh. Ajay Kumar Singh, the assessee failed to lead any cogent evidence. The AO made the addition of Rs.2.50 crore u/s 68 of the Act. The ld. CIT(A) deleted the addition. The Revenue approached the Tribunal and the assessee filed its Cross Objection. The assessee raised the first issue before the Tribunal contending that no notice u/s 143(2) of the Act was issued by the AO before taking up the assessment u/s 153A and hence, the assessment was rendered null and void. The ld. AM did not concur with such a view in his opinion, while the ld. JM accepted the proposition. This is the first issue before me for consideration as to whether issuance of notice u/s 143(2) is a mandatory jurisdictional requirement for making an assessment u/s 153A, in the absence of which the assessment order becomes null and void. 6.2. Section 153A of the Act, at the relevant time, opens with a non- obstante clause, inter-alia, qua section 147 and provides that when a person is searched after the specified date, the AO shall: “(a) issue notice

P a g e | 73 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years referred to in clause (b) ….. and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139”. Section 153A(1)(b) states that the AO shall: “assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made”. The first proviso to section 153A(1) also says that “the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years”. On going through the mandate of section 153A, it gets clear that once a notice is issued to the assessee requiring him to furnish his return in respect of each assessment year falling within six assessment years referred to in clause (b), the assessment has to mandatorily take place. The position can be compared with a regular assessment u/s 143(3) etc., which takes place in both the

P a g e | 74 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad circumstances of the assessee having furnished or not furnished its return of income. If a return is already filed, the assessment can be espoused straight away and completed. On the other hand, if no return has been filed, then firstly, a return has to be called for by issuing notice u/s 142(2)(i). It is only when the return is either suo motu filed or in response to notice u/s 142(1)(i) that the case becomes ripe for undergoing assessment. Thereafter, a notice u/s 143(2) is required to be issued if the AO `considers it necessary or expedient to ensure that the assessee has not understated the income’ in the return. The point to be noted is that making assessment of all the returns filed is not necessary. It is only in some of the returns where the AO considers it necessary or expedient to ensure that the assessee has not understated the income, that he takes up the assessment after first, acquiring jurisdiction by issuing notice u/s 143(2). It, therefore, follows that whereas the filing of return by the assessees having income chargeable to tax etc. is essential, but making the assessment of such returns is not essential under law. Only in such cases where the AO considers it necessary to ensure that

P a g e | 75 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad the assessee has not understated his income etc. that he takes up assessment, which is done by firstly acquiring jurisdiction on issuing notice u/s 143(2) of the Act. If the AO does not consider necessary or expedient etc., he need not make an assessment, in which case no notice u/s 143(2) would be required. Thus, it follows that notice u/s 143(2) gives jurisdiction to the AO to take up assessment. On the other hand, section 153A gets triggered for making assessment in case of search or requisition. Such assessments have to be mandatorily made by the AO whether or not he considers necessary to expedient to ensure that the assessee has not understated the income. There is no choice with the AO except to make the assessments of the prescribed six assessment years. Once the assessments are to be mandatorily made in search cases, unlike the regular cases giving choice to the AO to make assessment only on considering it necessary or expedient, there is no requirement of acquiring any jurisdiction to do so by firstly issuing notice u/s 143(2). The very factum of search confers jurisdiction on the AO to make assessment under section 153A of the Act.

P a g e | 76 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad 6.3. It is no doubt true that section 147 also requires issuance of a notice u/s 143(2) as a pre-condition for making assessment or reassessment. However, in view of the fact that section 153A contains non-obstante clause qua section 147, the consequential requirement of issuing notice u/s 143(2) before making assessment u/s 147, also gets obliterated in an assessment u/s 153A. Moreover, section 153A directly empowers the AO to take up the assessment without acquiring any separate jurisdiction. 6.4. The ld. AR heavily relied on the judgment of the Hon'ble Supreme Court in ACIT & Anr. vs. Hotel Blue Moon (2010) 321 ITR 362 (SC) to contend that issuance of notice u/s 143(2) in search cases for making block assessment u/s 158BC has been held by the Hon’ble Apex Court to be mandatory and the same ratio would apply to the assessments made in search cases under section 153A as well. 6.5. The Hon’ble Apex Court in that case, while dealing with block assessment u/s 158BC, has held that the AO must necessarily issue notice u/s 143(2) within prescribed time for making assessment u/s

P a g e | 77 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad 158BC and any omission on the part of AO to issue such notice would render the order void. However, it is apt to note that the provision under consideration of the Hon’ble Apex Court was section 158BC. Clause (b) of section 158BC expressly provides that “the Assessing Officer shall proceed to determine the undisclosed income of the block period in the manner laid down in section 158BB and the provisions of section 142, sub-sections (2) and (3) of section 143, section 144 and section 145 shall, so far as may be, apply”. It is ostensible from the language of section 158BC(b) that section 143(2) has expressly been made applicable to block assessment u/s 158BC. However, no parallel reference to section 143(2) has been made in section 153A. A contention similar to the one raised before the Tribunal was also made before the Hon’ble Delhi High Court in Ashok Chaddha vs. ITO (2011) 337 ITR 399 (Del). Repelling such a contention, the Hon’ble Delhi High Court has categorically laid down that the issuance of notice u/s 143(2) is not a requirement for completing the assessment u/s 153A. While holding so, the Hon’ble Delhi High Court also considered the judgment of Hon'ble

P a g e | 78 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad Supreme Court in the case of Hotel Blue Moon (supra). Similar proposition has been laid down by the Hon’ble Punjab & Haryana High Court in the case of Tarsem Singla v. DCIT (2016) 385 ITR 138 (P&H) holding that no specific notice is required u/s 143(2) when notice u/s 153A(1)(a) was already given. The Hon’ble Punjab & Haryana High Court also considered the judgment in the case of Hotel Blue Moon (supra). Following the judgments in Ashok Chaddha (supra) and Tarsem Singla (supra), the Hon’ble Kerala High Court in CIT vs. Promy Kuriakose (2016) 386 ITR 597 (Ker) reiterated the proposition by holding that there is no requirement of notice u/s 143(2) for completing the assessment u/s 153C. The above referred three judgments have been considered by the Hon’ble Madras High Court in B. Kubendran v. DCIT (2021) 434 161 (Mad) and thereafter, it has been laid down that there is no specific provision in the Act requiring the assessment u/s 153A to be made after issuing notice u/s 143(2). No contrary decision of any other Hon’ble High Court, mandating the requirement of notice u/s 143(2) in making assessment u/s 153A, has been placed by the ld. AR before me.

P a g e | 79 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad 6.6. At this stage, it would be significant to note that a difference of opinion arose between two Members of the Mumbai Bench on this very issue as to whether requirement of issuing notice u/s 143(2) is there before making assessment u/s 153A? The learned Third Member in Smt. Sumanlata Bansal vs. ACIT (TM), vide his order dated 20.05.2015 (ITA Nos.525 to 530/Mum/2008), has decided the issue in favour of the Revenue by holding that the issuance of notice u/s 143(2) is not warranted while framing assessment u/s 153A. In view of the foregoing discussion, the overwhelming legal position is clear by which the four Hon’ble High Courts of the country have decided this issue against the assessee apart from the learned Third Member also approving similar view. I, therefore, answering the question in negative, hold that issuance of notice u/s 143(2) is not a mandatory jurisdictional requirement for making assessment u/s 153A so as to render the assessment order null and void in its absence. Hence, I concur with the view taken by the ld. AM on this score.

P a g e | 80 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad 7.1. Now, I take up the second question as to whether the learned CIT(A) was justified in holding that no addition, based otherwise than on an incriminating document or material etc. found during the course of search, can be made in the assessment relating to any assessment year falling within the period of six assessment years as prescribed u/s 153A of the Act which is not pending on the date of initiation of the search. 7.2. Tersely stated, the return for the assessment year 2011-12 was originally filed by the assessee on 30.09.2011. Though no scrutiny assessment was made u/s 143(3), but the return was processed u/s 143(1) and the time for issuing notice u/s 143(2) expired on 30.09.2012. As against that, the search and seizure action was taken up on 05.12.2013 i.e. after the lapse of period for issuing notice u/s 143(2). No incriminating material connected with the addition of Rs.2.50 crore was found during the course of search. The assessee contended before the ld. CIT(A) that the AO was debarred from making the addition in such circumstances. The ld. CIT(A) accepted the assessee’s contention. When the matter travelled to the Tribunal, the ld. AM relied on certain

P a g e | 81 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad decisions of the Hon’ble jurisdictional High Court to jettison the assessee’s contention urging to limit the scope of assessment proceedings u/s 153A only to the incriminating material found during the course of search because the assessment for the year under consideration was not pending on the date of search and had abated. Au contraire, the ld. JM also relied on certain other judgments to fortify the assessee’s contention on this count. 7.3. I have heard the both sides in extenso on this issue. Patently, there are two sets of view of the Hon’ble High Courts on the scope of assessment u/s 153A of an assessment year which was not pending on the date of search either because of its prior completion or because of no time left for taking it up. The Hon’ble Delhi High Court in the case of CIT vs. Kabul Chawla (2016) 380 ITR 573 (Del) has held that : `Completed assessments can be interfered with by the AO while making the assessment under Section 153A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered

P a g e | 82 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad in the course of search which were not produced or not already disclosed or made known in the course of original assessment.’ Similar view has been reiterated by some other High Courts, including, the Hon’ble Bombay High Court in CIT vs. Continental Warehousing Corporation (2015) 374 ITR 645 (Bom) and the Hon’ble Delhi High Court in Pr.CIT & Ors. vs. Meeta Gutgutia (2017) 395 ITR 526 (Del).

7.4. As opposed to that, there are certain High Courts, including the Hon’ble jurisdictional High Court, canvassing a view in favour of the Revenue holding that the scope of assessments u/s 153A, for the years whose assessments already stood completed on the date of search, is not restricted only to the incriminating material found during the course of search but also to the material available at the time of original filing of the return. The Hon’ble Allahabad High Court in CIT vs. Rajesh Kumar Arora (2014) 367 ITR 517 (All) 15 contrasted the position of assessment u/s 158BC covered Chapter XIV-B of the Act with that of the assessment u/s 153A. It observed that whereas only the undisclosed income found during the course of search was required to be assessed 82

P a g e | 83 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad under the block assessment proceedings and the regular assessment proceedings were preserved, there is only one assessment of total disclosed or undisclosed income in respect of each of the six assessment years under section 153A. Once again, this issue came to be decided similarly by the Hon’ble Allahabad jurisdictional High Court in CIT & Ors. vs. Kesarwani Zarda Bhandar Sahson & Ors. (2016) 97 CCH 0377 (All HC). The Hon’ble Kerala High Court in E.N. Gopakumar vs. CIT (2016) 390 ITR 131 (Ker) was confronted with the similar issue in which the assessee relied on the judgments favouring it including Kabul Chawla (supra) and Continental Warehousing Corporation (supra). The Hon’ble High Court preferred to go with the view against the assessee.

7.5. On going through the above position, it is lucid that there are two schools of thought on this issue. Por una parte, the view of the Hon’ble jurisdictional High Court and some other Hon’ble High Courts in favaour of the Revenue is that the scope of the unabated (already completed) assessments u/s 153A of the Act is not confined only to the 83

P a g e | 84 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad incriminating material found during the course of search but also to the already declared particulars; por otra parte some other High Courts including the Hon’ble Delhi High Court have canvassed a view in favour of the assessee by holding that the completed assessments can be interfered with by the AO while making the assessment under Section 153A only on the basis of some incriminating material unearthed during the course of search. It is axiomatic as is fortified by Article 227 of the Constitution of India that the law declared by a jurisdictional High Court is binding on all the subordinate Courts and authorities or Tribunal functioning under its superintendence throughout the territories in relation to which it exercises jurisdiction. It is simple and plain that when discordant views are rendered by different High Courts, an inferior authority under one of such High Courts is bound to follow its jurisdictional High Court. Howsoever appealing or convincing the other view may appear, but in the judicial hierarchy, such a view has to make a place for the view of the jurisdictional High Court. It is only for the Hon’ble Supreme Court to take a final call on the view of the

P a g e | 85 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad jurisdictional High Court. Until that is done, the same remains binding on all the authorities under the jurisdiction of the High Court. Any contrary course of action of suo motu disregarding the view of the jurisdictional High Court destroys the fabric of judicial discipline leading to chaos. 7.6. At this occasion, it is pertinent to mention that the undersigned authored the Delhi Tribunal order in Kabul Chawla [since reported at (2014) 151 ITD 0055 (Delhi)], which got approval of the Hon’ble Delhi High Court supra. Later on, similar issue came up for consideration before the undersigned in a Third member case in HBN Dairies & Allied Ltd. vs. ACIT (2018) 195 TTJ 0969 (Del) (TM). The issue was again decided in favour of the assessee. But, in view of the fact that the Hon’ble jurisdictional Allahabad High Court has decided this issue in favour of the Revenue, there is no question of proceeding with any contrary view, which has to bow before that of the Hon’ble jurisdictional High Court.

P a g e | 86 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad 7.7. The principle of following a view in favour of the assessee when contrary views are available, applies to the authorities acting under a neutral High Court, namely, which has not expressed any opinion – for or against - on that point. Once the jurisdictional High Court decides a particular issue in a particular manner, that manner has to be mandatorily followed by all the authorities acting under its jurisdiction. In that view of the matter, I am bound to go with the view taken by the Hon’ble jurisdictional High Court.

7.8. The ld. AR contended that the judgment in Rajesh Kumar Arora (supra) need not be followed for two reasons viz., first, the ratio of the decision is not applicable to the facts of the case and second, the Hon'ble Supreme Court has overruled it by upholding the contrary view of the Hon’ble Delhi High Court in the case of Meeta Gutgutia (supra).

7.9. The first raison d’etre was elaborated by stating that the proposition laid down in Rajesh Kumar Arora (supra) is that the AO has power to reassess the return of income of assessee not only for the undisclosed

P a g e | 87 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad income which was found during the course of search but also the income with regard to the material that was already available on record. Relying on the judgment of Hon’ble Bombay High Court in the case of CIT vs. Jet Airways (I) Ltd. (2011) 331 ITR 236 (Bom), the ld. AR contended that the existence of some undisclosed income emanating from the incriminating material is a pre-requisite for assessing further income w.r.t. the material already available on record. If no addition on account of any undisclosed income is made, the AO would be debarred from making any addition on the basis of material already on record. It was submitted that since the assessee had already declared the creditor of Rs.2.50 crore in its Balance Sheet and no addition on the basis of any incriminating material was made by the AO, there was no scope left for making the addition even if the ratio in Rajesh Kumar Arora (supra) was followed.

7.10. The argument of ld. AR is primarily based on the judgment in Jet Airways (supra), in which the Hon’ble Bombay High Court held that the AO may assess or re-assess the income u/s 147 of the Act in respect of 87

P a g e | 88 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad any issue which comes to his notice subsequently in the course of proceedings though the reasons for such issue were not included in the notice but where the alleged escaped income that formed the basis of reasons for re-assessment ceased to exist, it was not open to independently assess some other income. The Hon’ble High Court in that case was interpreting section 147, which provides that: “If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of section 148 to 153, assess or re-assess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of proceedings”. It is, therefore, overt that the use of the words `and also’ in the language of section 147 categorically makes the existence of an income arising out of reasons for re-assessment as a sine qua non for including any other income which comes to the notice of the AO during the course of reassessment proceedings. The important point to accentuate is that a judgment is not interpreted like a legal provision.

P a g e | 89 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad Each and every word used in a provision carries meaning and has to be brought to its logical conclusion. On the other hand, what is important or has a binding force in a judgment is its ratio decidendi and not any orbiter dicta. The ratio decidendi of a judgment is an expression of opinion by the Court on the question raised before it for consideration and decision. On the other hand, certain passing remarks made by a Court while answering such question are orbiter dicta, which carry only persuasive value rather than the binding force.

7.11. Now I turn to the judgment in Rajesh Kumar Arora (supra) for finding out its ratio. During the course of assessment proceedings u/s 153A in that case, the AO found that a gift was received by the minor children from various persons which was a sham transaction and the assessee failed to prove the genuineness of this gift. That was the only reason with the AO to make the addition while completing assessment u/s 153A. The assessee contended before the higher authorities that the transaction of gift was duly recorded. The Tribunal deleted the addition on the ground that the subject matter of the addition was a gift received 89

P a g e | 90 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad by the assessee and no incriminating material in relation to such gift was found during the course of search. The Revenue raised the following substantial questions of law as arising from the Tribunal order:

“1. Whether ITAT has erred in law in dismissing the appeal of the department and holding that no addition can be made for gift in assessment completed under section 153A unless some incriminating material was found during the course of search, thus ignoring the provisions of law as contained in section 153A which required the Assessing Officer to assess or reassess the total income as defined in section 2(45) of the Income Tax Act, 1961. 2. Whether the order of the ITAT is perverse in as much as it has ignored the provisions of law as contained in proviso (b) of sub-sec.(1) of section 153A which required the Assessing Officer to assess or reassess the total income.” 7.12. It is thus, clear that the only subject matter of addition by the AO u/s 153A of the Act in that case was the transaction of gift, which had originally been declared but the assessee could not prove its genuineness in the proceedings u/s 153A and further no incriminating material was found during the course of search. It was in that backdrop that the Hon’ble High Court, deciding the issue in favour of the Revenue, answered the question by holding that the ITAT erred in holding that no addition could be made for gift in the assessment completed u/s 153A because no incriminating material was found during the course of 90

P a g e | 91 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad search. It held that `we are of the opinion that in cases where the assessment or reassessment proceedings have already been completed and assessment orders have been passed, which were subsisting when the search was made, the Assessing Officer would be competent to reopen the assessment proceeding already made and determine the total income of the assessee. The Assessing Officer, while exercising the power under Section 153A of the Act, would make assessment and compute the total income of the assessee including the undisclosed income, notwithstanding the assessee had filed the return before the date of search which stood processed under Section 143(1)(a) of the Act.’ In view of the fact that the only issue for consideration by the Hon’ble High Court was the sustainability or otherwise of an addition in the absence of any incriminating material found during the course of search, its ratio decidendi is that `in cases where the assessment … have already been completed…, which were subsisting when the search was made, the Assessing Officer would be competent to reopen the assessment proceeding already made and determine the total income of the

P a g e | 92 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad assessee’. The reference in the last line to make assessment and compute the total income of the assessee including the undisclosed income, is obiter dictum. It is more so when the setting of this observation is seen after discussion in the earlier para about the block assessment under Chapter XIV-B which talks of assessing the undisclosed income only vis-à-vis the assessment u/s 153A providing for making assessment for both the disclosed as well as undisclosed income. I, therefore, hold the argument advanced by ld. AR on this score as sans merit.

7.13. The second contention put forth by the ld. AR was that the decision of the Hon’ble jurisdictional High Court on the point stands overruled by the judgment of Hon'ble Supreme Court in Pr.CIT vs. Meeta Gutgutia (2018) 257 Taxman 441 (SC). I find it relevant to mention that the Hon’ble Delhi High Court in Meeta Gutgutia (supra) followed the view taken in Kabul Chawla (supra). The Revenue preferred Special Leave Petition before the Hon'ble Supreme Court, which came to be dismissed.

P a g e | 93 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad 7.14. Article 136 of the Constitution of India with the marginal note “Special leave to appeal by the Hon'ble Supreme Court” provides that: `(1) Notwithstanding anything in this Chapter, the Supreme Court may, in its discretion, grant special leave to appeal from any judgment, decree, determination, sentence or order in any cause or matter passed or made by any court or tribunal in the territory of India.’ This Article deals with the discretion of the Hon'ble Supreme Court in granting special leave to appeal from any judgment. Once a SLP is filed, the Hon'ble Supreme Court may either grant the special leave to appeal or dismiss it. In case, the special leave to file an appeal is granted, then the SLP gets converted into an appeal. On the other hand, the dismissal of a SLP can be either without assigning any reasons or with reasons. If no reasons are adduced by the Hon'ble Supreme Court and the SLP is dismissed, it does not amount to any declaration of law by the Hon'ble Supreme Court in terms of Article 141 of the Constitution having binding force on all Courts within territory of India nor does the judgment impugned before it gets merged with the order dismissing the

P a g e | 94 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad SLP. This is not a dismissal of the appeal, but of the leave to file appeal. If the SLP is dismissed by means of reasoned order, then it is a declaration of law by the Hon'ble Supreme Court having binding force under Article 141 of Constitution but will still not attract the doctrine of merger. In Kunhayammed & Ors. vs. State of Kerala & Anr. (2000) 245 ITR 360 (SC), the Forest Tribunal considering the provisions of Kerala Private Forests (Vesting and Assignment) Act, 1971 held that the land of the appellants therein did not vest in the Government. The State of Kerala approached the Hon’ble High Court through an appeal which was dismissed. The State of Kerala filed a petition for special leave under Article 136 of the Constitution which was dismissed by an order reading “Special Leave Petition is dismissed on merits”. The State of Kerala filed an application for Review before the Hon’ble Kerala High Court seeking Review of its earlier order. A preliminary objection was raised before the Hon’ble High Court as to the maintainability of the Review petition because of the dismissal of the SLP against it. The Hon’ble High Court overruled the preliminary objection. When the

P a g e | 95 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad matter came up for hearing before the Hon'ble Supreme Court, it held that mere rejection of SLP by a non-speaking order does not take away the jurisdiction of the High Court or the Tribunal to review its own order. Almost identical issue was raised before the Hon'ble Supreme Court in Bakshi Dev Raj & Anr. vs. Sudheer Kumar (Civil Appeal Nos.4641-4642 of 2009). Vide judgment dated 04.08.2011, the Hon'ble Supreme Court has taken a similar view as in Kunhayanned & Ors. (supra) by specifically holding that the expression `Dismissed on merits’ used while dismissing the SLP is equivalent of dismissal of SLP by a non-speaking order. More recently, a Larger Bench of the Hon'ble Supreme Court in Khoday Distilleries Ltd. and Ors. Vs. Sri Mahadeshwara SSK Ltd. (Civil Appeal No.2432/2019 arising out of SLP No.490/2012) has reiterated similar view vide its judgment dated 01.03.2019. On an overview of the legal position emanating from the above judgments, it becomes sparklingly clear that the dismissal of a SLP with remarks, such as, “Special Leave Petition is dismissed on merits” or “Dismissed on merits” does neither amount of any declaration

P a g e | 96 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad of law by the Hon'ble Supreme Court magnetizing Article 141 of the Constitution nor lead to the merger of the judgment impugned in the special leave petition.

7.15. I advert to the decision in Meeta Gutgutia (supra), which is the trump card of the ld. AR for bolstering the proposition that the view of the Hon’ble jurisdictional High Court in Rajesh Kumar Arora (supra) has been overruled by the Hon’ble Summit Court. The same has been reported as Pr.CIT vs. Meeta Gutgutia (2018) 257 Taxman 441 (SC) with its full text reading as under:

“1. Delay condoned. 2. We do not find any merit in this petition. The special leave petition is, accordingly, dismissed. 3. Pending application stands disposed of.” 7.16. It can be easily seen that the Hon'ble Supreme Court has simply dismissed the SLP filed by the Revenue finding no merit in the same. It is not a case of the Hon'ble Supreme Court either considering and deciding the issue on merits in an appeal or giving reasons at the stage of

P a g e | 97 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad dismissal of SLP. Applying the principles laid down by the Hon'ble Supreme Court in the three cases discussed above, there remains no doubt whatsoever that the dismissal of SLP in Meeta Gutgutia (supra) with the remarks - `We do not find any merit in this petition. The special leave petition is, accordingly, dismissed’ - are no different from the remarks “Special Leave Petition is dismissed on merits” or “Dismissed on merits”, which have been held by the Hon’ble Apex Court as dismissal of SLP without reasons, not leading to any declaration of law by the Hon'ble Supreme Court. In the hue of the above discussion, the judgment of the Hon’ble Delhi High Court in Meeta Gutgutia (supra) cannot be construed to have either been affirmed by the Hon’ble Supreme Court or merged in the order dismissing the SLP against it. This judgment, ergo, ranks pari passu with Kabul Chawla (supra) and other judgments of Hon’ble High Courts deciding the issue in favour of assessee, without getting elevated to the status of that of the Hon'ble Supreme Court. The sequitur is that the ratio decidendi laid down by the Hon’ble jurisdictional High Court in Rajesh Kumar Arora (supra) still

P a g e | 98 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad holds the field and is binding on all the authorities under the jurisdiction of the Hon’ble Allahabad High Court. In view of the foregoing discussion and respectfully following the binding precedent, I agree with the learned AM that there is no legal impediment in making an addition, otherwise than on the basis of any incriminating material found during search, in an assessment u/s 153A for a year whose assessment was not pending on the date of search. 8.1. Now, I take up the third question as to whether the ld. CIT(A) was justified in deleting the addition of Rs.2.50 crore rather than restoring the matter to the file of AO for a fresh consideration. In this regard, it is observed that the ld. AM, for the reasons given in his opinion, restored the matter of addition of Rs.2.50 crore to the file of the AO for a fresh adjudication after allowing adequate opportunity of hearing to the assessee. The ld. JM countenanced the deletion of the addition on the two legal issues discussed above, viz., the failure of the AO to issue notice u/s 143(2) before making assessment u/s 153A and the addition being not based on any incriminating material. Neither did he go into the

P a g e | 99 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad merits of the addition, nor record his disagreement with the ld. AM on the issue of restoration of the matter to the AO. In the absence of any difference of opinion between the ld. Members on this issue, a fortiori, is that the view taken by the ld. AM restoring the matter to the AO for fresh decision will prevail as the same has not been dissented with by the ld. JM. I answer this question in negative by holding that the ld. CIT(A) was not justified in deleting the addition. Rather he should have restored the matter to the file of AO.

Sd/- [R.S. SYAL] VICE PRESIDENT Dated, 12th April, 2022. GCVSR Copy forwarded to: 1. Appellant 2. Respondent 99

P a g e | 100 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad 3. CIT 4. CIT (A) 5. DR, ITAT आदेशानुसार/ BY ORDER,

// True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune

P a g e | 101 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad IN THE INCOME TAX APPELLATE TRIBUNAL ALLAHABAD BENCH “DB”, ALLAHABAD

BEFORE SHRI.VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ITA No.103/ALLD/2017 Assessment Year: 2011-12

The Assistant Commissioner of Sunshine Infraestate Private Income-tax, Central Circle, v. Limited Allahabad, U.P. 17, Industrial Area, Naini, Allahabad, U.P. PAN: AANCS9247H (Appellant) (Respondent) C.O.No. 22/Alld/2017 (arising out of ITA No.103/ALLD/2017) Assessment Year: 2011-12 Sunshine Infraestate Private Limited The Assistant 17, Industrial Area, Naini, Allahabad, v. Commissioner of Income- U.P. tax, Central Circle, Allahabad, U.P. PAN: AANCS9247H (Appellant) (Respondent)

Appellant by: Shri Ramendra Kumar Vishwakarma, CIT DR Respondent by: None Date of hearing: 29.04. 2022 Date of pronouncement: 04.05. 2022

P a g e | 102 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad O R D E R

PER SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER:

Since there was a difference of opinion between the ld. Members constituting the Division Bench of Income Tax Appellate Tribunal, Allahabad Bench, Allahabad, the matter was referred to Hon’ble President for nomination of Third Member u/s 255(4) of the Income-tax Act, 1961. Both the ld. Members framed separate questions of differences. 2. Hon’ble President , Income Tax Appellate Tribunal nominated Shri R. S. Syal , Hon’ble Vice President as Third Member. Since, separate questions of differences were framed by both the ld. Members, the Hon’ble Vice President, in consultation and concurrence with both the parties, finalized the following question of differences, for adjudication: a)Whether on the facts and in law , the issuance of notice u/s 143(2) is a mandatory jurisdictional requirement for making assessment u/s 153A of the Act, in the absence of which the assessment order became null and void? b) Whether on the facts and in law, the ld. CIT(A) was justified in holding that no addition , based otherwise than on an incriminating document or material etc. found during the course of search, can be made in the assessment relating to any assessment year falling within the period of six assessment years as prescribed u/s 153A of the Act which is not pending on the date of initiation of the search? c) Whether on the facts and in law, the ld. CIT(A) was justified in deleting the addition rather than restoring the matter to the Assessing Officer for a fresh decision? 3. The Hon’ble Vice President vide his appellate order dated 12.04.2012 has concurred with the view taken ld. Accountant Member on the first two questions of differences at para 2(a) and 2(b) above, by answering both the questions in negative. The Hon’ble Vice 102

P a g e | 103 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad President vide answering question of differences at para 2(c) above, has concurred with the findings of ld. Accountant Member by observing the following: “8.1 Now, I take up the third question as to whether the ld. CIT(A) was justified in deleting the addition of Rs. 2.50 crore rather than restoring the matter to the file of AO for a fresh consideration. In this regard, it is observed that the ld. AM, for the reasons given in his opinion, restored the matter of addition of Rs. 2.50 crore to the file of the AO for a fresh adjudication after allowing adequate opportunity of hearing to the assessee. The ld. JM countenanced the deletion of addition on the two legal issues discussed above, viz., the failure of the AO to issue notice u/s 143(2) before making assessment u/s 153A and the addition being not based on any incriminating material. Neither did he go into the merits of the addition , nor record his disagreement with the ld. AM on the issue of restoration of the matter to the AO. In the absence of any difference of opinion between the ld. Members on this issue , a fortiori, is that the view taken by the ld. AM restoring the matter to the AO for fresh decision will prevail as the same has not been dissented with by the ld. JM. I answer this question in negative by holding that the ld. CIT(A) was not justified in deleting the addition . Rather he should have restored the matter to the file of AO. 9. The Registry of the Tribunal is directed to list this matter before the Division Bench for passing an order in accordance with the majority view.” 4. Therefore, in accordance with the majority view, the appeal of the Revenue is partly allowed for statistical purposes, while the C.O. filed by the assessee is dismissed. Order pronounced on 04/05/2022 in Open Court at Allahabad

Sd/- Sd/- [VIJAY PAL RAO] [RAMIT KOCHAR] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 04/05/2022

P a g e | 104 ITA No. 103/Alld/2017 and C.O.No. 22/Alld/2017 (arising out of ITA No. 103/Alld/2017) Assessment Year 2011-12 Sunshine Infraestate Private Limited,Allahabad