ACIT CENTRAL CIRCLE, PANIPAT vs. KUNDAN RICE MILLS LTD., PANIPAT

per sub-section (2) of Section 153A, 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 subsection (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Commissioner. Therefore, the intention of the legislation seems to be that in case of search only the pending assessment/reassessment proceedings shall abate and the AO would assume the jurisdiction to assess or reassess the 'total income' for the entire six years period/block assessment period. The intention does not seem to be to re-open the completed/unabated assessments, unless any incriminating material is found with respect to concerned assessment year falling within last six years preceding the search. Therefore, on true interpretation of Section 153A of the Act, 1961, in case of a search under Section 132 or requisition under Section 132A and during the search any incriminating material is found, even in case of unabated/completed assessment, the AO would have the jurisdiction to assess or reassess the 'total income' taking into consideration the incriminating material collected during the search and other material which would include income declared in the returns, if any, furnished by the assessee as well as the undisclosed income. However, in case during the search no incriminating material is found, in case of completed/unabated assessment, the only remedy available to the Revenue would be to initiate the reassessment proceedings under sections 147/48 of the Act, subject to fulfilment of the conditions mentioned in sections 147/148, as in such a situation, the Revenue cannot be left with no remedy. Therefore, even in case of block assessment under section 153A and in case of unabated/completed assessment and in case no incriminating material is found during the search, the power of the Revenue to have the reassessment under sections 147/148 of the Act has to be saved, otherwise the Revenue would be left without remedy.

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is found on the basis of incriminating material, the AO would assume the jurisdiction to assess or reassess the total income for the entire six years block assessment period even in case of completed/unabated assessment. As per the second proviso to Section 153A, only pending assessment/reassessment shall stand abated and the AO would assume the jurisdiction with respect to such abated assessments. It does not provide that all completed/unabated assessments shall abate. If the submission on behalf of the Revenue is accepted, in that case, second proviso to section 153A and subsection (2) of Section 153A would be redundant and/or rewriting the said provisions, which is not permissible under the law.

i) that in case of search under Section 132 or requisition under Section 132A, the AO assumes the jurisdiction for block assessment under section 153A;

ii) all pending assessments/reassessments shall stand abated;

iii) in case any incriminating material is found/unearthed, even, in case of unabated/completed assessments, the AO would assume the jurisdiction to assess or reassess the 'total income' taking into consideration the incriminating material unearthed during the search and the other material available with the AO including the income declared in the returns; and

iv) in case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabated assessments. Meaning thereby, in respect of completed/unabated assessments, no addition can be made by the AO in absence of any incriminating material found during the course of search under Section 132 or requisition under Section 132A of the Act, 1961. However, the completed/unabated assessments can be re-opened by the AO in exercise of powers under Sections 147/148 of the Act, subject to fulfilment of the conditions as envisaged/mentioned under sections 147/148 of the Act and those powers are saved. 12 | P a g e

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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.” 13. As could be seen from the aforesaid observations of Hon’ble

Supreme Court, in case, no incriminating material is unearthed

during the search, the Assessing Officer cannot assess or

reassess income taking into consideration the other materials in

respect of completed unabated assessments. Keeping in

perspective the aforesaid ratio laid down by Hon’ble Supreme

Court, if we examine the facts involved in the present appeals, it

can be seen that the addition made by the Assessing Officer by

estimating the GP rate is not with reference to any incriminating

material found as a result of search and seizure operation

conducted on assessee. At least, there is no reference of such

material in the assessment orders. Though, before us, learned

Departmental Representative made a valiant attempt to establish

a link between the search and seizure operation conducted in

case of the assessee and the survey authorization issued in the

name of M/s. Dee Kay Trade Centre, however, we are not

convinced. Merely because simultaneously with the search and

seizure operation conducted in case of the assessee, a survey

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authorization was issued in the name of M/s. Dee Kay Trade

Centre, it will not mean that the survey authorization was based

on any incriminating material found during the search and

seizure operation. At least, the aforesaid fact is not borne out

from the assessment orders.

the assessee in the relevant assessment years, the

doubt/suspicion of the Assessing Officer is only with regard to

sales effected to two parties, viz., M/s. Dee Kay Trade Centre and

M/s. J.S. Enterprises. As regards the other purchasing parties,

no adverse material or information has been collected by the

Assessing Officer. Even, with regard to these two parties also,

there is no incriminating material found as a result of search.

Because of this fact only, the Assessing Officer instead of

disallowing the entire sales effected to the parties, has proceeded

to make additions enhancing the GP rate. In any case of the

matter, the additions made by the Assessing Officer by enhancing

the GP rate is purely based on estimation and guess work and not

as a result of any incriminating material found during search and

seizure operation. That being the factual position emerging on

record, applying the ratio laid down by the Hon’ble Supreme 14 | P a g e

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Court in case of PCIT Vs. Abhisar Buildwell Pvt. Ltd. (supra), no

addition can be made in the assessment under section 153A of

the Act. Thus, on the aforesaid reasoning alone, the additions

made by the Assessing Officer would not be sustainable.

case on merits as well. As discussed earlier, the additions made

by estimating the GP rate is based on the reasoning that two

parties to whom the assessee had effected sales are not traceable

and appear to be non-genuine. It is evident, though, the

Assessing Officer has stated that the parties were not found at the

given address, however, it is a fact on record that the proprietor of

both the concerned parties is having PAN issued by the

department. Thus, it is a fact that the concerned part is on the

rolls of the department. It is further evident, in course of

assessment proceeding, the Assessing Officer has issued notices

under section 133(6) of the Act to various banks, wherein, the

concerned purchasing parties were having their accounts. In

response to the notices issued under section 133(6) of the Act, the

concerned banks have provided details of bank accounts of the

concerned parties/entities. On verifying these bank accounts

statements, the Assessing Officer has noticed that just prior to 15 | P a g e

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issuance of cheques to the assessee, cash deposits have been

made in bank accounts. The Assessing Officer has further stated

that from the photograph of the proprietor in the bank account, it

does not appear that party will be having a turnover of more than

Rs.70 crores. The aforesaid reasonings of the Assessing Officer

are totally irrelevant. When the concerned parties are having so

many bank accounts, it has to be believed that the parties were in

existence at the relevant point of time, as the bank accounts

reveal regular transaction. In any case of the matter, though, the

Assessing Officer has disbelieved the sales effected by the

assessee to the aforesaid two parties, however, consciously, he

has not disallowed the entire sales made to the parties but has

estimated the GP rate. This presupposes that, to some extent, the

Assessing Officer believed that sales were, indeed, effected by the

assessee, though, the parties to whom the assessee sold goods

remained unverified.

applied GP rate of 6.7% to entire sales turnover of the assessee.

This, in our view, is unacceptable, as, except two parties, the

Assessing Officer has not found anything adverse in respect of

sales made to others. Therefore, he should not have applied the 16 | P a g e

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GP rate of 6.75% to entire sales turnover. To that extent, learned

Commissioner (Appeals) was justified in reversing the decision of

the Assessing Officer. However, insofar as the applicability of the

GP rate of 6.75% to sales effected to M/s. Dee Kay Trade Centre

and M/s. J.S. Enterprises are concerned, there is no difference in

the products sold by the assessee to all the parties. Therefore, if

the GP shown by the assessee in respect of sales effected to other

parties is acceptable, there is no reason why the same GP rate will

not apply to the sales effected to M/s. Dee Kay Trade Centre and

M/s. J.S. Enterprises. This is so because, when there is similarity

in the products sold, there cannot be much difference in the GP

rate. For the aforesaid reasons, we hold that the additions

sustained by learned Commissioner (Appeals) in different

assessment years under dispute deserves to be deleted.

Accordingly, we do so.

Revenue’s appeals are dismissed.

Order pronounced in the open court on 16th May, 2023

Sd/- Sd/- (M. BALAGANESH) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 16th May, 2023. RK/- 17 | P a g e

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