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Facts
The Revenue filed appeals against the orders of the CIT(A) which had deleted additions made by the Assessing Officer (AO) under Section 69 of the Income Tax Act for AYs 2011-12 to 2014-15. The additions were related to share capital infused in certain companies allegedly controlled by the assessee, amounting to Rs. 6,09,00,000/-.
Held
The Tribunal held that the addition made by the AO was not based on any incriminating material found during the search. Further, the assessment order was considered time-barred due to the delayed issuance of the demand notice under Section 156 of the Act. Consequently, the appeals filed by the Revenue were dismissed.
Key Issues
Whether additions made under Section 69 of the Act based on share capital infusion are sustainable without incriminating material found during search? Whether assessment proceedings are complete without timely issuance of a demand notice under Section 156, making the assessment time-barred if issued beyond limitation?
Sections Cited
69, 69A, 153A, 132, 156, 147, 148
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI
Before: SHRI YOGESH KUMAR U.S. & SHRI MANISH AGARWAL
ORDER
PER YOGESH KUMAR, U.S. JM:
The captioned Appeals are filed by the Revenue against the orders of Ld. Commissioner of Income Tax-23 (Appeals)(‘Ld. CIT(A)’ for short), New Delhi-23, dated 30/06/2023 for the Assessment Years2011-12 to 2014-15 respectively.
The Department has raised similar grounds of Appeal in all the Appeals except changes in the amount. For the sake of convenience, the Grounds of Appeal for Assessment Year 2011-12 are reproduced as under:-
“1. The Ld. CIT(A) has erred on facts and in law in deleting the disallowance of Rs. 6,09,00,000/-made by the Assessing Officer u/s 69 of the Income-tax Act, 1961.
2. The Ld. CIT(A) has erred in deleting the addition of Rs. 6,09,00,000/- in light of the decision the Apex Court in Pr. CIT Vs. AbhisarBuildwell Pvt. Ltd. which clearly states that if any incriminating material is found then Assessing Officer would assume the jurisdiction to assess or reassess the total income.
3. The Ld. CIT(A) has erred in reaching the conclusion that the assessment is time barred as the demand notice was served after the assessment order whereas as per section 156 of the Income-tax Act, 1961 the demand notice is always consequential to the assessment order and has been served within reasonable period of time.
4. The appellant craves leave for reserving the right to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal.”
Since all the captioned Appeals are having identical issue i.e. disallowance made u/s 69A of the Income Tax Act, 1961 ('Act' for short), the captioned appeals are heard together. For the sake of convenience, brief facts of the case for Assessment Year 2011-12 are considered, which are as follows:- An assessment order u/s 153A of the Income Tax Act, 1961 ('Act' for short) was completed against the Assessee on 30/03/2015 and the income of the Assessee was assessed at Rs. 7,33,845/- as the case of the Assessee was covered in the previous search operation conducted u/s 132 of the Act in the same group on 11/05/2012. Second search and seizure proceedings u/s 132 of the Act was also conducted in Ravinder Singh Tongar Group of Cases on 18/09/2018. The case of the Assessee was also covered in the search operation conducted u/s 132 of the Act.
Assessment proceedings have been initiated against the Assessee for Assessment Year 2011-12and made addition of Rs. 6,09,00,000/- u/s 69 of the Act vide order dated 13/08/2021on the ground that the funds infused in the Company i.e. RST Group Companies are not genuine and without economic rational. The Ld. A.O. also observed that the Assessee introduced his own money in the books of his group companies through the web of shell companies
Even in the Assessment Year 2012-13 to 2014-15, the A.O. made the similar addition u/s 69 of the Act on the same pretext against the Assessee vide Assessment Orders dated 20/09/2021, 13/08/2021 and 13/08/2021 respectively.
Aggrieved by the assessment orders for Assessment Year 2011- 12 to 2014-15, the Assessee preferred Appeals before the Ld. CIT(A) and the Ld. CIT(A) vide orders dated 30/06/2023, allowed the Appeals of the Assessee. As against the orders of the Ld. CIT(A) for Assessment Year 2011-12 to 2014-15 dated 30/06/2023, the Department of Revenue preferred the captioned Appeals on the common grounds mentioned above.
The Ld. Departmental Representative addressing on the Ground No. 1 & 2 vehemently submitted that the Ld. CIT(A) has committed error in deleting the additions made by the A.O. by relying on the Judgments of the Apex Court in the case of Pr. CIT Vs. Abhisar Buildwell which clearly states that if any incriminating material is found then the A.O. would resume the jurisdiction to assess or reassess the total income of the Assessee. Further submitted that the subject additions made based on the material found during the search and the statements recorded, therefore, the Ld. CIT(A) committed error in deleting the addition observing that the additions have been made de-hors the incriminating material found during the course of search.
The Ld. Departmental Representative relying on the assessment orders sought for allowing the Ground No. 1 & 2 of the Revenue in all the Appeals.
We have heard both the parties and perused the material available on record. The additions have been deleted by the Ld. CIT(A) for more than one reasons. The Ld. CIT(A) has deleted the addition on merits as well by following the ratio laid down by the Hon'ble Supreme Court in Abhisar Buildwell. Therelevant portions of the Ld. CIT(A) are as under:
“Findings and decisions
“9. Ground No.1 and 6 are being general in nature is not required to separately adjudicated upon.
10. Ground No.2, 3, 4 and 5 are related to total additions of Rs.6,09,00,000/- on account of unexplained investment u/s 69 of the Act. The appellant has argued that the addition is not tenable on the various grounds which is discussed below.
11. The Assessing Officer has made an addition of Rs. 6,09,00,000/- u/s 69 of the I.T Act, 1961. The share capital was received in the following companies.
Sr. No. Name of company Total amount of fund infused on (Rs.) 1 AdharshilaBuildcon Private Limited 90,00,000 2 Cira Facility Management India Pvt. Ltd. 20,00,000 3 HBR Commodities Pvt. Ltd. 89,00,000 4 Laudable Apparels Private Limited 1,10,00,000 5 People Infotech Private Limited 1,40,00,000 6 Sukhehain Estates Private Limited 20,00,000 7 Tanwar Electronics Private Limited 10,00,000 8 83,00,000 SwarnRatan Estates Pvt. Ltd. 9 M/s Greater Noida Hostels and 47,00,000 Infrastructure Pvt. Ltd. Total 609,00,000
12. The share capital was received from various companies mentioned in para-10.2 of the assessment order.
13. The Assessing Officer made addition on the ground that the above referred nine I companies are actually controlled by the appellant. It has been argued that the above referred nine companies have received the share application money from various shell companies and subsequently forfeited them. The Assessing Officer is of the view that even though the appellant is not the director or the shareholder in the above companies, the appellant controlled these companies through family members. Therefore, the Assessing Officer concluded that the money received in these companies belongs to the appellant and hence addition u/s 69 was made in the case of the appellant individual.
14. From perusal of the assessment order, it is seen that the additions is not based on any incriminating material found during the course of search on the appellant. The appellant has placed reliance on the ratio of the decision of Hon'ble Delhi High Court in the case of Pr.CIT Vs. Kabul Chawla 61 Taxmann.com 421,
This decision of Hon'ble Delhi High Court came up for consideration of the Hon'ble Supreme Court in the case of Pr.CIT Vs. AbhisarBuildwell Pvt. Ltd. in Civil Appeal No. 6580 of 2021 and other connected appeals. The apex court vide its order dated 24.04.2022 has upheld the above referred order of Delhi High Court by holding as under:-
2459Del/2023 DCIT Vs. Ravindra Singh "8. For the reasons stated herein below, we are in complete agreement with the view taken by the Delhi High Court in the case of Kabul Chawla (supra) and the Gujarat High Court in the case of Saumya Construction (supra), taking the view that no addition can be made in respect of completed assessment in absence of any incriminating material.
9 While considering the issue Involved, one has to consider the object and purpose of insertion of Section 153A in the Act, 1961 and when there shall be a block assessment under Section 153A of the Act, 1961.
9.1 That prior to insertion of Section 153A in the statute, the relevant provision for block assessment was under Section 158BA of the Act, 1961. The erstwhile scheme of block assessment under Section 158BA envisaged assessment of 'undisclosed income' for two reasons, firstly that there were two parallel assessments envisaged under the erstwhile regime, i.e., (i) block assessment under section 158BA to assess the 'undisclosed income' and (ii) regular assessment in accordance with the provisions of the Act to make assessment qua income other than undisclosed income. Secondly, that the 'undisclosed income was chargeable to tax at a special rate of 60% under section 113 whereas income other than 'undisclosed income' was required to be assessed under regular assessment procedure and was taxable at normal rate. Therefore, section 153A came to be inserted and brought on the statute. Under Section 153A regime, the intention of the legislation was to do away with the scheme of two parallel assessments and tax the 'undisclosed' income too at the normal rate of tax as against any special rate. Thus, after introduction of Section 153A and in case of search, there shall be block-assessment for six years. Search assessments/ block assessments under Section 153A are triggered by conducting of a valid search under Section 132 of the Act, 1961. The very purpose of search, which is a prerequisite/ trigger for invoking the provisions of sections 153A/153C is detection of undisclosed income by undertaking extraordinary power of search and seizure, Le., the Income which cannot be detected in ordinary course of regular assessment. Thus, the foundation for making search assessments under Section 153A/153C can be said to be the existence of incriminating material showing undisclosed income detected as a result of search.
10. On a plain reading of Section 153A of the Act, 1961, it is evident that once search or requisition is made, a mandate is cast upon the AO to issue notice under Section 153 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. Section 153A of the Act reads as under:-
"1534. Assessment in case of search or requisition (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 132-A after the 31 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 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 referred to in this sub-section pending on the date of initiation of the search under Section 132 or making of requisition under Section 132-A, as the case may be, shall abate.
(2) If any proceeding initiated or any order of assessment or reassessment made under sub-section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) or Section 153, the assessment o 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,
(1) save as otherwise provided in this section, Section 153-B and Section 153-C, provisions of this Act shall apply to the assessment made under this section;
(ii) in an assessment or reassessment made in respect of an assessment year under ta section, the tax shall be chargeable at the rate or rates as applicable to su assessment year."
11. As per the provisions of Section 153A, in case of a search under Section 132 or requisition under Section 132A, the AO gets the jurisdiction to assess or reassess the 'total income in respect of each assessment year falling within six assessment years. However, it is required to be noted that as per the second proviso to Section 153A, the assessment or re- assessment, if any, relating to any assessment year falling within the period of six assessment years pending on the date of initiation of the search under Section 132 or making of requisition under Section 132A, as the case may be, shall abate. As per sub-section (2) of Section 153A, if any proceeding initiated or any order or assessment or reassessment made under sub-section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) or section 153, the assessment or reassessment relating to any assessment year which was abated under the second 2459Del/2023 DCIT Vs. Ravindra Singh proviso to sub-section (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Commissioner. Therefore, the intention of the legislation seems to be that in case of search only the pending assessment/ reassessment proceedings shall abate and the AD would assume the jurisdiction to assess or reassess the 'total income' for the entire six years period/block assessment period. The intention does not seem to be to re- open the completed/unabated assessments, unless any incriminating material is found with respect to concerned assessment year falling within last six years preceding the search. Therefore, on true interpretation of Section 153A of the Act, 1961, in case of a search under Section 132 or requisition under Section 132A and during the search any incriminating material is found, even in case of unabated/completed assessment, the AO would have the jurisdiction to assessee or reassess the 'total income' taking into consideration the incriminating material collected during the search and other material which would include income declared in the returns, if any, furnished by the assessee as well as the undisclosed income. However, in case during the search no incriminating material is found, in case of completed/unabated assessment, the only remedy available to the Revenue would be to initiate the reassessment proceedings under section 147/48 of the Act, subject to fulfilment of the conditions mentioned in section 147/148, as in such a situation, the Revenue cannot be left with no remedy. Therefore, even in case of unabated/completed assessment and in case no incriminating material is found during the search, the power of the Revenue to have the reassessment under section 147/148 of the Act has to be saved, otherwise the Revenue would be left without remedy.
12. If the submission on behalf of the Revenue that in case of search even where no incriminating material is found during the course of search, even in case of unabated/completed assessment, the AO can assess or reassess the income/total income taking into consideration the other material is accepted, in that case, there will be two assessment orders, which shall not be permissible under the law. At the cost of repetition, it is observed that the assessment under Section 153A of the Act is linked with the search and requisition under Section 132 and 132A of the Act. The object of Section 153A is to bring under tax the undisclosed income which is found during the course of search or pursuant to search or requisition. Therefore, only in a case where the undisclosed income is found on the basis of incriminating material, the AO would assume the jurisdiction to assess or reassess the total income for the entire six years block assessment period even in case of completed/unabated assessment. As per the second proviso to Section 153A only pending assessment/reassessment shall stand abated and the AO would assume the jurisdiction with respect to such abated assessments. It does not provide that all completed/ unabated assessments shall abate. If the submission on behalf of the Revenue is accepted, in that case, second proviso to section 153A and sub-section (2) of Section 153A would be redundant and/or re-writing the said provisions, which is not permissible under the law.
13. For the reasons stated hereinabove, we are in complete agreement with the view taken by the Delhi High Court in the case of Kabul Chawla (supra) and the Gujarat High Court in the case of Saumya Construction (supra) and the decisions of the other High Courts taking the view that no addition can be made in respect of the completed assessments in absence of any incriminating material.
14.In view of the above and for the reasons stated above, it is concluded as under: i) that in case of search under Section 132 or requisition under Section 132A, the AD assumes the jurisdiction for block assessment under section 1534; ii) All pending assessments/reassessments shall stand abated; iii) In case any incriminating material is found/unearthed, even, in case of unabated/completed assessments, the AD would assume the jurisdiction to assess or reassess the total income taking into consideration the incriminating material unearthed during the search and the other material available with the AO including the income declared in the returns; and iv)in case no incriminating material is unearthed during the search, the AD cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabated assessments. thereby, in respect of completed/unabated assessments, no addition can be made by the AD in absence of Meaning any incriminating material found during the course of search under Section 132 or requisition under Section 132A of the Act, 1961. However, the completed/unabated assessments can be re-opened by the AO in exercise of powers under Section 147/148 of the Act, subject to fulfilment of the conditions as envisaged/mentioned under sections 147/148 of the Act and those powers are saved.
The question involved in the present set of appeals and review petition is answered accordingly in terms of the above and the appeals and review petition preferred by the Revenue are hereby dismissed. No costs."
In view of the above decision of the Hon'ble Supreme Court, the addition made by the Assessing Officer not based upon any incriminating documents is liable to be deleted.
17. It is held that the addition of Rs.60900000/- was not based upon any incriminating material. Therefore, the addition is liable to be dismissed on this ground alone.
The addition is not sustainable even on other grounds. 18. There was a search on 11.05.2012 on above mentioned nine companies. Consequent to the search, assessment order u/s 153A was passed on 30.03.2015. Alongwith the nine companies, the appellant was also searched. No addition was made in the case of the appellant in his assessment order u/s 153A dated 30.03.2015. The copies of such assessment orders have been reproduced above with the reply of the appellant.
From perusal of the assessment order in the above cases, it is seen that the Assessing Officer has not made any addition on account of share capital/ share application money received by the appellant. It has been informed that there was no revision u/s 263 against the assessment orders dated 30.03.2015 of either the appellant or the nine companies.
The issue of receipt of share application money therefore reached finality. Before, re-opening such completed search assessments u/s 153A, it is required that incriminating material should be brought on record. However, from perusal of the assessment order it is seen that there is probably no incriminating
material. The issue that has reached finality cannot again be re- opened on the basis of surmises and conjectures devoid of any incriminating material.
The Assessing Officer therefore, could not have re-opened the case of the appellant u/s 153A which was clearly beyond six years in the absence of any incriminating material. On this ground also the addition is liable to be deleted.
22. Another issue that has been raised by the appellant is the issue of demand notice u/s 156 of the Act beyond the period of limitation and thus, making the assessment order time barred.
In this case, the impugned assessment order was passed on 13.08.2021. The demand notice was issued for the first time on 03.01.2023 vide DIN No.ITBA/COM/M/17/2022- 23/1048427958(1). The limitation date for passing the assessment order was 30.09.2021. The demand notice, therefore, was issued and served to the appellant beyond the period of limitation.
It has been argued by the appellant that assessment order is incomplete without the notice of demand u/s 156. Alongwith the assessment order, the demand notice is required to be served within the limitation period. Assessment proceedings are complete if and only if both assessment order and the consequential demand notice is served on the appellant. In the absence of the demand notice, the assessment proceedings is incomplete. On such arguments the appellant stated that as the demand notice is served beyond the limitation period therefore, assessment is time barred. Based on such arguments, the appellant stated that the order of the Assessing Officer is required to be dismissed and appeal of the appellant is required to be allowed. The appellant also relied upon certain decisions of Hon'ble Supreme Court in support of his arguments.
The issue has been examined. The Assessing Officer vide his letter dated 30.08.2022.
"In this matter, it is submitted that on perusal of the ITBA Portal it is seen that no notice of demand is served on the assessee. Further, on perusal of the case record there is no proof of service of demand notice."
26. Thus, the Assessing Officer has confirmed that there was no demand notice served to the appellant atleast till 30.08.2022. It is also a matter of record that the demand notice was served on the appellant for the first time on 03.01.2023. Thus in this case while the assessment order was passed on 13.08.2021, the notice of demand u/s 156 was served on 03.01.2023. The issue of completion of assessment proceedings has been deliberated upon and decided in many cases.
Judgmentsxxxx
"In this matter, it is submitted that on perusal of the ITBA Portal it is seen that no notice of demand is served on the assessee. Further, on perusal of the case record there is no proof of service of demand notice."
Thus, the Assessing Officer has confirmed that there was no demand notice served to the appellant atleast till 30.08.2022. It is also a matter of record that the demand notice was served on the appellant for the first time on 03.01.2023. Thus in this case while the assessment order was passed on 13.08.2021, the notice of demand u/s 156 was served on 03.01.2023. The issue of completion of assessment proceedings has been deliberated upon and decided in many cases.
to 32 Judgmentsxxxxxxxx . . 33. The CBDT had issued circular no.29 dated 08.08.1978 wherein it was directed the Assessing Officer will issue the demand notice alongwith the assessment order. The full text of the circular is as under:-
"The delay in service of demand notices has been a subject of repeated criticism by the C & AG and the PAC. With a view to avoiding such lapses in future, the Boare have decided that the following procedure should be strictly followed :-
(1) The ITO shall do the following jobs simultaneously (a) Sign the assessment order, the assessment form, the demand notice and challan/refund voucher; and (b) make necessary entries in the Demand & Collection Register. (2) The assessment order shall be dated only at the time of making entries in the D & CR and not on the date when the order is dictated or typed out.
(3) The demand notice shall be served as expeditiously as possible and in any case within a fortnight of the date of assessment. (4) The date of service of demand notice should invariably be noted in the relevant column of the Demand & Collection Register.
(5) The Income-tax Officer shall inspect the Demand and Collection Register by the 4th of the succeeding month with a view to: (a) ensuring that the date of service of demand notice has been noted against the relevant entry in the Demand & Collection Register in each case in which the notice has been served; (b) finding reasons why demand notices could not be served in other cases; and (c) taking suitable steps to serve the remaining demand notices without any further delay.
(6) The IAC shall inspect the Demand and Collection Register on the 7th of the following month and test check that statistics furnished in the MPR tally with the entries made in the Register. He will also ensure that: (a) all the relevant entries have been made in the Register; and (b) the totals of the various columns have been struck. The IAC will sign the Register in token of having made the inspection.
(7) The above instructions regarding signing of orders, assessment forms etc., making of entries in D & CR and service of Demand Notices shall also apply mutatis mutandis to all other statutory orders.
10. The unreasonable and inordinate delay in issue and service of demand notice is clearly in violation of the above circular of the CBDT.
Thus, the various decisions of higher appellate authorities including the Hon'ble Apex Court have held that the assessment proceedings is complete only upon the issue of order of assessment and notice of demand. In the instant case, the demand notice was issued for the first time on 03.01.2022 which was much beyond the period of limitation of completion of assessment proceedings. Therefore, it is held that the assessment order was barred by limitation.
As the assessment order was time barred, therefore, the addition made by the Assessing Officer of Rs.6,09,00,000/- is deleted.”
We have gone through the assessment order. The ld. A.O. made the addition u/s 69 of the Act on the ground that the Assessee failed to prove the transactions entered into books of his group companies, therefore,opined that the amount received remained unexplained and treated the same as undisclosed income of the Assessee which routed in the group concern, as the source of the investment remained unexplained, the same has been added in the total income of the Assessee in all the Assessment Years.
9. The main allegation of the A.O. that the Companies from which the Assessee received the share capitals are actually controlled by the Assessee. It is the case of the A.O. that the said Companies have received the share application money from various shell companies and subsequently forfeited them and though the Assessee was not a Director or share holder in the above Companies, the Assessee controlled those Companies through family members, therefore, A.O. made the additionu/s 69 o the Act on the ground that the money received from those Companies belongs to the Assessee. The Ld. CIT(A) after verifying the material available on record found that the additionmade by the A.O. are not based on any incriminating material found during the course of search. Even before us, the Revenue has not brought anything on record to controvert the said findings of the Ld. CIT(A) and not brought anything on record to show that the addition has been made based on the incriminating material found during the course of the search.
10. The Hon'ble Supreme Court in the case of PCIT Vs. Abhisar Buildwell in Civil Appeal No. 6580/2021 and other connected Appeals vide order dated 24/02/2022 held as under:-
"8. For the reasons stated herein below, we are in complete agreement with the view taken by the Delhi High Court in the case of Kabul Chawla (supra) and the Gujarat High Court in the case of Saumya Construction (supra), taking the view that no addition can be made in respect of completed assessment in absence of any incriminating material.
While considering the issue involved, one has to consider the object and purpose of insertion of Section 153A in the Act, 1961 and when there shall be a block assessment under Section 153A of the Act, 1961.
9.1 That prior to insertion of Section 153A in the statute, the relevant provision for block assessment was under Section 158BA of the Act, 1961. The erstwhile scheme of block assessment under Section 158BA envisaged assessment of 'undisclosed income' for two reasons, firstly that there were two parallel assessments envisaged under the erstwhile regime, i.e., (i) block assessment under section 158BA to assess the 'undisclosed income' and (ii) regular assessment in accordance with the provisions of the Act to make assessment qua income other than undisclosed income. Secondly, that the 'undisclosed income' was chargeable to tax at a special rate of 60% under section 113 whereas income other than 'undisclosed income' was required to be assessed under regular assessment procedure and was taxable at normal rate. Therefore, section 153A came to be inserted and brought on the statute. Under Section 153A regime, the intention of the legislation was to do away with the scheme of two parallel assessments and tax the 'undisclosed' income too at the normal rate of tax as against any special rate. Thus, after introduction of Section 153A and in case of search, there shall be block-assessment for six years. Search assessments/ block assessments under Section 153A are triggered by conducting of a valid search under Section 132 of the Act, 1961. The very purpose of search, which is a prerequisite/ trigger for invoking the provisions of sections 153A/153C is detection of undisclosed income by undertaking extraordinary power of search and seizure, i.e., the income which cannot be detected in ordinary course of regular assessment. Thus, the foundation for making search assessments under Section 153A/1530 can be said to be the existence of incriminating material showing undisclosed income detected as a result of search.
requisition is made, a mandate is cast upon the AO to issue notice under Section 153 of the On a plain reading of Section 153A of the Act, 1961, it is evident that once search or 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. Section 153A of the Act reads as under:-
"153A. Assessment in case of search or requisition- (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 132-A after the 31 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 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 referred to in this sub-section pending on the date of initiation of the search under Section 132 or making of requisition under Section 132-A, as the case may be, shall abate.
(2) If any proceeding initiated or any order of assessment or reassessment made under sub-section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) or Section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to sub-section (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Commissioner:
Provided that such revival shall cease to have effect, if such order of annulment is set aside.
Explanation. For the removal of doubts, it is hereby declared that, - (1) save as otherwise provided in this section, Section 153-B and Section 153-C, all provisions of this Act shall apply to the assessment made under this section; (ii) in an assessment or reassessment made in respect of an assessment year under this section, the tax shall be chargeable at the rate or rates as applicable to such assessment year."
As per the provisons of Section 153(A), in case of a search u/s 132 or requisition under Section 132A, the AO gets the jurisdiction to assess or reassess the total As per the provisions of Section 1534, in case of a search under Section 132 or income' in respect of each assessment year falling within six assessment years. However, it is required to be noted that as per the second proviso to Section 153A, the assessment or re assessment, if any, relating to any assessment year falling within the period of six assessment years pending on the date of initiation of the search under Section 132 or making of requisition under Section 132A, as the case may be, shall abate. As per sub-section (2) of Section 153A, if any proceeding initiated or any order or assessment or reassessment made under sub-section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) or section 153, the assessment or reassessment relating to any assessment year which was 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. Therefore, the intention of the legislation seems to be that in case of search only the pending assessment/ reassessment proceedings shall abate and the AO would assume the jurisdiction to assess or reassess the total income for the entire six years period/block assessment period. The intention does not seem to be to re-open the completed/unabated assessments, unless any incriminating material is found with respect to concerned assessment year falling within last six years preceding the search. Therefore, on true interpretation of Section 153A of the Act, 1961, in case of a search under Section 132 or requisition under Section 132A and during the search any incriminating material is found, even in case of unabated/completed assessment, the AO would have the jurisdiction to assessee or reassess the 'total income taking into consideration the incriminating material collected during the search and other material which would include income declared in the returns, if any. furnished by the assessee as well as the undisclosed income. However, in case during the search no incriminating material is found, in case of completed/unabated assessment, the only remedy available to the Revenue would be to initiate the reassessment proceedings under section 147/48 of the Act, subject to fulfilment of the conditions mentioned in section 147/148, as in such a situation, the Revenue cannot be left with no remedy. Therefore, even in case of unabated/completed assessment and in case no incriminating material is found during the search, the power of the Revenue to have the reassessment under section 147/148 of the Act has to be saved, otherwise the Revenue would be left without remedy.
If the submission on behalf of the Revenue that in case of search even where по incriminating material is found during the course of search, even in case of unabated/completed assessment, the AO can assess or reassess the income/total income taking into consideration the other material is accepted, in that case, there will be two assessment orders, which shall not be permissible under the law. At the cost of repetition, it is observed that the assessment under Section 153A of the Act is linked with the search and requisition under Section 132 and 132A of the Act. The object of Section 153A is to bring under tax the undisclosed income which is found during the course of search or pursuant to search or requisition. Therefore, only in a case where the undisclosed income is found on the basis of incriminating material, the AO would assume the jurisdiction to assess or reassess the total income for the entire six years block 2459Del/2023 DCIT Vs. Ravindra Singh assessment period even in case of completed/unabated assessment. As per the second proviso to Section 153A only pending assessment/reassessment shall stand abated and the AO would assume the jurisdiction with respect to such abated assessments. It does not provide that all completed/ unabated assessments shall abate. If the submission on behalf of the Revenue is accepted, in that case, second proviso to section 153A and sub-section (2) of Section 153A would be redundant and/or re-writing the said provisions, which is not permissible under the law.
For the reasons stated hereinabove, we are in complete agreement with the view taken by the Delhi High Court in the case of Kabul Chawla (supra) and the Gujarat High Court in the case of Saumya Construction (supra) and the decisions of the other High Courts taking the view that no addition can be made in respect of the completed assessments in absence of any incriminating material.
14. In view of the above and for the reasons stated above, it is concluded as under: ⅰ) that in case of search under Section 132 or requisition under Section 132A, the AO assumes the jurisdiction for block assessment under section 153A;
ii) All pending assessments/reassessments shall stand abated; in case any incriminating material is found/unearthed, even, in case of unabated/completed assessments, the AO would assume the jurisdiction to assess or reassess the 'total income' taking into consideration the incriminating material unearthed during the search and the other material available with the AO including the income declared in the returns; and iv) in case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabated assessments. Meaning thereby, in respect of completed/unabated assessments, no addition can be made by the AO in absence of any incriminating material found during the course of search under Section 132 or requisition under Section 132A of the Act, 1961. However, the completed/unabated assessments can be re-opened by the AO in exercise of powers under Section 147/148 of the Act, subject to fulfilment of the conditions as envisaged/mentioned under sections 147/148 of the Act and those powers are saved.
The question involved in the present set of appeals and review petition is answered accordingly in terms of the above and the appeals and review petition preferred by the Revenue are hereby dismissed. No costs."
11. By respectfully following the order of the Hon’ble Apex Court in the case of Abhisar Build well (supra), we find no reason to interfere with the findings of the Ld. CIT(A) as the addition has been made for Assessment Year 2011-12 to 2014-15 de-hors the incriminating material found during the course of search. Accordingly, the Ground No. 1 & 2 of the Revenue in all the captioned Appeals are dismissed.
12. The Ld. Departmental Representative addressing on the Ground No. 3 of the Appeal contended that the Ld. CIT(A) has committed error in reaching the conclusion that the assessmentsaretime barred as tax demand Notice was served after the assessment order, however, as per Section 156 of the Act, the demand notice is always consequential to the assessment order and has been served within the reasonable period of time,therefore, the date of demand notice cannot be construed as date of assessment order and the assessment order has been passed well within the limitation. Thus submitted that the order of the Ld. CIT(A) is erroneous which requires to be reversed.
13. Per contra, the Ld. Assessee's Representative submitted that though the assessment order has been passed well within the limitation prescribed in the Act, however, the assessment order was not coupled with the demand notice and the demand notice was not issued along with the assessment order. Further submitted that the Demand Notice has been issued for the first time on 03/01/2023 and the Limitation for passing the Assessment Order was 30/09/2021.Therefore, the Ld. CIT(A) has rightly held that the assessment order is time barred.
We have heard both the parties and perused the material available on record. It is the specific case of the Assessee that though the assessment orders have been passed within the period of limitation (i.e. 13/08/2021, 20/09/2021, 13/08/2021 and 13/08/2021 for Assessment Year 2011-12 to 2014-15 respectively, the demand notice was issued for the first time only on 03/01/2023, which is beyond the period of limitation for completion of assessment proceedings.
15. For the purpose of deciding the issues, the undisputed details and date of passing the assessment orders and issueance of demand notice are mentioned as under:-
A.Y A.O. order Demand notice served on 2011-12 13/08/2021 03/01/2023 2012-13 20/09/2021 03/01/2023 2014-15 13/08/2021 03/01/2023 2013-14 13/08/2021 03/01/2023
16. During the first appellate proceedings, in order to examine the above issue, the Ld. CIT(A) has called for the Report from the A.O. The Ld. A.O. vide letter dated 30/08/2022, clarified the fact that,there is no proof of service of demand notice. The relevant portion of the reply of the A.O. is reproduced as under:-
"In this matter, it is submitted that on perusal of the ITBA Portal it is seen that no notice of demand is served on the assessee. Further, on perusal of the case record there is no proof of service of demand notice."
Thus, as per the admission the A.O. himself that there was no service of demand notice to the Assessee at least as on 30/08/2022. It is the matter of record that the demand notice were served on the Assessee for the first time on 03/01/2023 and the said fact has not been disputed by the Revenue. It is well settled law that the assessment proceedings come to an end on the date of issue of notice of demand u/s 156 of the Act and the assessment order shall follow with the issuance of notice of demand which marks the completion of the assessment.
The Hon'ble Apex Court in Kalyan Kumar Ray (1991) 191 ITR 634 (SC), held as under:-
"Assessment involves determination of income and tax. It laid down that 'Assessment' is one integrated process involving not only the assessment of the crucial for the assessee as the former. Again the Hon'ble Summit Court in Auto and Metal Engineers vs.
UOI (1998) 229 ITR 399 (SC) has held that the process of assessment involves (i) filing of the return of income under s. 139 or under s. 142 in response to a notice issued under s. 142(1); (ii) inquiry by the AO in accordance with the provisions of ss. 142 and 143; (iii) making of the order of assessment by the AO under s. 143(3) or s. 144; and (iv) issuing of the notice of demand under s. 1 56 on the basis of the order of assessment. The process of assessment thus commences with the filing of the return or where the return is not filed, by the issuance by the AO of notice to file the return under s. 142(1) and it culminates with the issuance of the notice of demand under s.
On going through the above precedents, it is manifested that the assessment proceedings come to an end on the issue of notice of demand u/s 156 of the Act. Once a notice of demand is issued, the AO becomes functus officio in so far as the completion of assessment is concerned. It consequently follows that issue of notice of demand marks the completion of the assessment.
19.Hon'ble High Court of Karnatakain the case of CIT (Intl. Taxation), Bengaluru Vs. Cisco Systems Services B.V. (India Branch), (ITA No. 427/2022, 428/2022 and 429/2022) decided the similar issue wherein the draft assessment order u/s 144(C) of the Act was passed on 28.12.2018. Alongwith the draft assessment order, the demand notice u/s 156 of the Act was also issued and served on the assessee.
The Hon'ble Karnataka High Court confirmed the view of the Bangalore Tribunal that the issuance of demand notice is fatal to the assessment proceedings on the ground that when the notice of demand u/s 156 of the Act was issued the assessment proceedings became complete. In arriving such conclusion the Hon'ble Court relied upon the decision of Hon'ble Supreme Court in the case of Kalyan Kumar Ray vs CIT (Supra) and Vijay Television Pvt. Ltd. vs DRP (2014)
369 ITR 113 (Mad.).
20. The CBDT had issued circular no.29 dated 08.08.1978, wherein it
was directed the Assessing Officer will issue the demand notice along with the assessment order. The said relevant portion of the said circular is reproduced as under:-
"The delay in service of demand notices has been a subject of repeated criticism by the C & AG and the PAC. With a view to avoiding such lapses in future, the Boare have decided that the following procedure should be strictly followed :- (1) The ITO shall do the following jobs simultaneously (a) Sign the assessment order, the assessment form, the demand notice and challan/refund voucher; and (b) make necessary entries in the Demand & Collection Register. (2) The assessment order shall be dated only at the time of making entries in the D & CR and not on the date when the order is dictated or typed out.
(3) The demand notice shall be served as expeditiously as possible and in any case within a fortnight of the date of assessment. (4) The date of service of demand notice should invariably be noted in the relevant column of the Demand & Collection Register.
(5) The Income-tax Officer shall inspect the Demand and Collection Register by the 4th of the succeeding month with a view to: (a) ensuring that the date of service of demand notice has been noted against the relevant entry in the Demand & Collection Register in each case in which the notice has been served; (b) finding reasons why demand notices could not be served in other cases; and (c) taking suitable steps to serve the remaining demand notices without any further delay.
(6) The IAC shall inspect the Demand and Collection Register on the 7th of the following month and test check that statistics furnished in the MPR tally with the entries made in the Register. He will also ensure that: (a) all the relevant entries have been made in the Register; and (b) the totals of the various columns have been struck. The IAC will sign the Register in token of having made the inspection.
(7) The above instructions regarding signing of orders, assessment forms etc., making of entries in D & CR and service of Demand
Notices shall also apply mutatis mutandis to all other statutory orders.
21. In the issue in hand though the assessment orders have been passed on 13/08/2021, 20/09/2021, 13/08/2021 and 13/08/2021 for Assessment Year 2011-12 to 2014-15 respectively, the Notice of Demand was issued for the first time only on 03/01/2023, which is barred by limitation in view of the above discussed settled position of law. Therefore, we find no error or infirmity in the order of the Ld. CIT(A) holding that the assessment ordersare barred by limitation.Thus, we find no merits in the Ground No. 3 of the Revenue, accordingly, Ground No. 3 of the Revenue in all the Appeals are dismissed.
In the result, the Appeals of the Revenue in I.T.A. No. dismissed.