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Income Tax Appellate Tribunal, KOLKATA-PATNA ‘e-COURT’, KOLKATA
Before: Shri Rajpal Yadav, Vice-(KZ) & Shri Rajesh Kumar
Per Rajpal Yadav, Vice-President (KZ):- The present two appeals are directed at the instance of Revenue against the orders of ld. Commissioner of Income Tax (Appeals), Patna-3 dated 01.03.2021 passed in Assessment Years 2016-17 and 2017-18 respectively.
2. On receipt of notices in the appeals of Revenue, the assessee has filed Cross Objections bearing C.O. Nos. 1/PAT/2022 and 2/PAT/2022.
3. The Revenue has taken seven grounds of appeal
in A.Y. 2016-17 and six grounds of appeal in A.Y. 2017-18. The grounds read as under:- A.Y. 2016-2017 (1) That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.2,00,04,931/- made by the A.O. on the ground that the Assessing Officer should have made the addition after initiating 2 & 63/PAT/2021 Assessment Years: 2016-2017 & 2017-2018 & C.O. Nos. 1 & 2/PAT/2022 (in ITA 62 & 63/PAT/2021) Assessment years: 2016-2017 & 2017-2018 Broadson Commodities Pvt. Limited the proceeding U/s 153C of the Act instead of section 153 A of the Act because the addition was based on the seized material GIB- 12, Page No. 8 found from the premises of third party.
2. In deciding that the proceeding U/s 153C should be initiated in this case, the Ld.CIT(A) has totally failed to appreciate the fact that the Warrant of Authorisation U/s 132 of the I.T. Act, 1961 was issued in the names of Shri Subhash Prasad Yadav, Smt. Lalti Devi, M/s Bansidhar Construction Pvt. Ltd., Mor Mukut Marketing Pvt. Ltd., M/s Broadson Commodiaties Pvt. Ltd. & Radhararaman Construction and Marketing Pvt. Ltd. The Warrant was issued to search the residence at Naiiyal Ghat near Gandhi Murti, Digha Patna and the documents related to the assessee company were found from this premise. Therefore, provisions of section 153 A were correctly applied.
3. The premise searched was residential premise of Shri Subhash Prasad Yadav and he was one of the Director and Key person of the assessee company.
4. The observation of the CIT(A) agreeing with the assessee that their objection was not responded to by the AO invoking the citation of GKN Driveshafit case, was also erroneous, because the AO did overrule the objection raised by the assesse in his letter dated 16.12.2019.
5. The Ld.CIT(A) has erred in ignoring the prime fact that the AO examined the creditworthiness of M/s Trailblazer Edusol (P) Ltd. by viewing its tax profile and found that it is a company which had hardly any business from A.Y.2014-15, almost zero turnover, no total income and no tangible assets, even in A.Y.2017-18 total revenue was Rs.60,84,041/- and taxable income was Rs.7,21,766/-. Therefore, the company having shareholders’ fund of Rs.50,00,94,532/- as on 31.03.2016 is paper company. The assessee never produced clarification and documentary evidence even after repeated requests during the assessment proceedings.
6. That the order of the Ld.CIT(A) being erroneous in law and on facts to be vacated and the order of the A.O. be restored. 7. That the applicant craves leave to add, alter, delete, modify the grounds of appeal before the Hon’ble ITAT.
& 63/PAT/2021 Assessment Years: 2016-2017 & 2017-2018 & C.O. Nos. 1 & 2/PAT/2022 (in ITA 62 & 63/PAT/2021) Assessment years: 2016-2017 & 2017-2018 Broadson Commodities Pvt. Limited A.Y. 2017-2018 (1) That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.5,50,00,000/- made by the A.O. on the ground that the Assessing Officer should have made the addition after initiating the proceeding U/s 153C of the Act instead of section 153 A of the Act because the addition was based on the seized material GIB- 12, Page No.8 found from the premises of third party. (2) In deciding that the proceeding U/s 153C should be initiated in this case, the Ld.CIT(A) has totally failed to appreciate the fact that the Warrant of Authorisation U/s 132 of the I.T. Act, 1961 was issued in the names of Shri Subhash Prasad Yadav, Smt. Lalti Devi, M/s Bansidhar Construction Pvt. Ltd., Mor Mukut Marketing Pvt. Ltd., M/s Broadson Commodities Pvt. Ltd. & Radhararaman Construction and Marketing Pvt. Ltd. The Warrant was issued to search the residence at Nariyal Ghat near Gandhi Murti, Digha Patna and the documents related to the assessee company were found from this premise. Therefore, provisions of section 153 A were correctly applied. (3) The premise searched was residential premise of Shri Subhash Prasad Yadav and he was one of the Director and Key person of the assessee company. (4) The observation of the CIT(A) agreeing with the assessee that their objection was not responded to by the AO invoking the citation of GKN Driveshaft case, was also erroneous, because the AO did overrule the objection raised by the assesse in his letter dated 16.12.2019. (5) That the order of the Ld.CIT(A) being erroneous in law and on facts to be vacated and the order of the A.O. be restored. (6) That the applicant craves leave to add, alter, delete, modify the grounds of appeal before the Hon’ble ITAT.
Since first jurisdictional issue is common in both the years, namely – & 63/PAT/2021 Assessment Years: 2016-2017 & 2017-2018 & C.O. Nos. 1 & 2/PAT/2022 (in ITA 62 & 63/PAT/2021) Assessment years: 2016-2017 & 2017-2018 Broadson Commodities Pvt. Limited (a) Whether assessment orders passed under section 153A of the Income Tax Act are valid assessment or not;
(b) Whether additions made under section 153A by the ld. Assessing Officer in both the years are sustainable or not.
We take this issue first in both the years.
Brief facts in A.Y. 2016-17 are as under:- According to the Revenue a search and seizure operation under section 132(1) and survey operation under section 133A of the Income Tax Act were conducted at various premises of Subhash Prasad Yadav Group of cases on 23.02.2018. In order to give a logical end to the search proceeding, the case of the assessee was centralized with ACIT, Central Circle-3, Patna and it has not been disputed by the assessee. A notice under section 153A of the Income Tax Act was issued on 24.06.2019. Thereafter one more notice was issued and ultimately assessee has filed its return of income on 20.12.2019 declaring total income of Rs.4,17,53,430/-. The facts stated above in A.Y. 2016-17 are also common. The assessee has filed its return of income in 2017-18 also but on 21.12.2019. It has declared total income of Rs.12,43,02,386/-. 5 & 63/PAT/2021 Assessment Years: 2016-2017 & 2017-2018 & C.O. Nos. 1 & 2/PAT/2022 (in ITA 62 & 63/PAT/2021) Assessment years: 2016-2017 & 2017-2018 Broadson Commodities Pvt. Limited
The ld. Assessing Officer has issued notices under section 143(2) and 142(1) in both the years. In A.Y. 2016-17, ld. Assessing Officer has observed that a perusal of the books of assessee, it revealed that it had shown a loan received from M/s. Trailblazer Edusol (P) Limited amounting to Rs.2,00,04,931/-. The ld. Assessing Officer was of the view that the assessee could not prove creditworthiness of M/s. Trailblazer Edusol (P) Limited and, therefore, this amount has to be treated as unsecured loan and deserves to be added under section 68 of the Income Tax Act. Accordingly, ld. Assessing Officer has made an addition of Rs.2,00,04,931/- in A.Y. 2016-17. In A.Y. 2017-18, the ld. CIT(Appeals) has observed that the assessee-company has taken a loan of Rs.1,06,02,895/- from M/s. Trailblazer Edusol (P) Limited and concurring his view with regard to A.Y. 2016-17, he made the addition of this amount as unexplained cash credit. Apart from this addition, he further observed that a document inventorized as GIB- 12, page no. 8 recovered during the search conducted on Subhash Prasad Yadav Group cases. A perusal of this document would reveal that a sum of Rs.5,50,00,000/- has been transferred to Shri Sanjay Singh (PAN has been given by the ld. Assessing Officer). Thus the ld. Assessing Officer has considered the advancement of this 6 & 63/PAT/2021 Assessment Years: 2016-2017 & 2017-2018 & C.O. Nos. 1 & 2/PAT/2022 (in ITA 62 & 63/PAT/2021) Assessment years: 2016-2017 & 2017-2018 Broadson Commodities Pvt. Limited amount or otherwise out of unexplained sources, which deserves to be assessed in the hands of the assessee. He substantively assessed it in the hands of the asessee and protectively in the hands of Shri Sanjay Singh. Accordingly ld. Assessing Officer has passed the assessment orders in both the years on 31.12.2019.
Dissatisfied with the assessment order, the assessee carried the matter in appeal before the 1st Appellate Authority. The assessee has filed detailed written submissions, which are reproduced by the ld. 1st Appellate Authority from page no. 2 upto page no. 32 of the impugned order. It also contains the remand report submitted by the ld. Assessing Officer in the appellate proceeding.
The ld. CIT(Appeals) has deleted the addition of Rs.2,00,04,931/- in A.Y. 2016-17 and all the additions made in A.Y. 2017-18, namely Rs.1,06,02,895/- as well as Rs.5,50,00,000/-. It is pertinent to observe that the finding of the ld. CIT(Appeals) on the point of loan taken from M/s. Trailblazer Edusol (P) Limited, which is running into two years is concerned, it is common. For the facility of reference, we are taking note of the finding of the ld. CIT(Appeals) in A.Y. 2017-18, which reads as under:- 7 & 63/PAT/2021 Assessment Years: 2016-2017 & 2017-2018 & C.O. Nos. 1 & 2/PAT/2022 (in ITA 62 & 63/PAT/2021) Assessment years: 2016-2017 & 2017-2018 Broadson Commodities Pvt. Limited “3.1. Finding and decision:- I have carefully considered the findings of the AO and the submission of the appellant. Ground No. 1, 2 & 3 relate with the initiation of proceeding u/s 153A. Ground No. 4, 5 & 6 relate with the addition of Rs.1,06,02,895/- on account of unexplained unsecure loan and Rs. 5,50,00,000/- under the head unexplained cash. Ground No. 7 to relate with noncredit of TDS, TCS and self- assessment tax. Ground No. 10-General in nature. During the course of appellate proceedings appellant raised additional ground which is as under: - “That on the facts and circumstances of the case, the Assessing officer erred in making an addition of Rs. 5,50,00,000/- on the basis of seized documents found in third party’s premises during the search proceedings ignoring the fact that the addition on the basis of such documents can only be made u/s 153C of the Act.” Accordingly, an opportunity was given to the Assessing Officer to comment upon the merit and admissibility of such additional ground. The comment of Assessing Officer duly forwarded by the JCIT(Central), Range-1, Patna was received in this office along with the copy of warrant issued in the case of the appellant. The Assessing Officer could not comment specifically on the addition of Rs.5,50,00,000/-,on the basis of documents seized during the search proceedings conducted at the premises of third party ignoring the fact that the addition on the basis of such document can only be made u/s 153C of the Act, as contended by the appellant in additional ground taken up. A copy of the remand report was provided to the appellant and appellant filed rejoinder to the remand report which is placed on record. Considering the facts and circumstances the additional ground raised
by the appellant is being admitted and being adjudicated first. The Assessing Officer vide para 4 of the assessment order has observed as under: - & 63/PAT/2021 Assessment Years: 2016-2017 & 2017-2018 & C.O. Nos. 1 & 2/PAT/2022 (in ITA 62 & 63/PAT/2021) Assessment years: 2016-2017 & 2017-2018 Broadson Commodities Pvt. Limited “As per seized document marked as GIB-12, Page No.
8. (containing a ledger copy) during the search in Subhash Prasad Yadav Group cases. Rs. 5,50,00,000/- in cash has been transferred to Shri Sanjay Singh [PAN- AIEPS1207K], The assessee was asked to explain the cash on which assessee failed to explain any thing and also could not produced any documentary evidence to prove that the cash is accounted for. Thus, it is construed that the money is unaccounted and is liable to be added back to the total income of the assessee. This amount of Rs. 5,50,00,000/- is added substantially in the hands of M/s Broadson Commodities Pvt. Ltd. and protectively in the hands of Shri Sanjay Singh. ” On perusal of said para 4 it is found that the Assessing Officer has made ad Rs. 5,50,00,000/- on account of cash transfer to Mr. Sanjay Singh holding t unaccounted transactions in absence of any explanation/evidence. The As Officer also mentioned in para 4 that the addition is made on the basis of document marked as GIB-12, Page No.-8 seized during the search from the p of Subhash Prasad Yadav. During the course of appellate proceedings ap submitted the certified copy of Panchnama. On perusal of said Panchnamait i: that the name of the appellant is mentioned under the head “Warrant in the a Address of the place of search mentioned in Punchnama is “Residential prer Sh. Subhash Prasad Yadav at Naria! Ghat, Near Gandhi Murti, Digha, Patna. Whereas the address of the appellant is different than the address mentioned in Panchnama. Further, the said Panchnama was signed by Sh. Subhash Prasasd Yadav. Therefore, it becomes clear that the seized material marked GIB-12, No.-8 was found and seized from the premises of third party. This fact is not di: by Assessing Officer either in assessment order or in Remand Report. Additional ground taken by the appellant in which appellant contended that the addition on the basis of document seized from the premises of third party should have made u/s 153C of the IT Act. Whereas, the Assessing Officer had wrongly in proceedings u/s 153A. Appellant during the course of appellate proceeding submitted written submissions and a series of judicial pronouncements of several judicial Authorities. Therefore, additional ground taken by the appellant is h admitted and being adjudicated. During the course of appellate proceedings submissions were made challenging addition of Rs. 5,50,00,000/- considering that the seized document marked GIB-12. Page No.-8 was seized from the premises of third party. Appellant also submitted several judgments of 9 & 63/PAT/2021 Assessment Years: 2016-2017 & 2017-2018 & C.O. Nos. 1 & 2/PAT/2022 (in ITA 62 & 63/PAT/2021) Assessment years: 2016-2017 & 2017-2018 Broadson Commodities Pvt. Limited Hon’ble High Court and Tribunals in which it was held that the documents seized from the third party then initiation of proceedings in the case of the assessee can only be under section 153C of the I.T. Act, 1961 and not u/s 153A of the I.T. Act.
In the instant case no incriminating document was found and seized from premises of the appellant. In fact, it is noticed in the remand report submitted by Assessing Officer that a search warrant was issued in which the name of appellant is mentioned with the names of other persons. However, no search ct be conducted in the appellant premises as it was sealed by the State Govt. Autho Accordingly, appellant's contention is that only search warrant has been issued in appellant’s name but no search could take place and no Panchnama was drawn in the case of appellant which established that no document has been se zed toit premise of the appellant. It is evidentially clear that the seized document mar GIB- 12, Page No.-8 was found and seized from the premises of third party and for making addition on the basis of any material found during the course of search at the premise of third party, the procedure laid down u/s 153C of the Act is to be followed. Hon’ble ITAT Delhi Bench in the case of Mr. Trilok Chandra Choudhary Vs ACIT, Central Circle-26, New Delhi has held that if the documents/material found and seized from the premises of third party then “The assessment under section 153C could have been made after completion of the assessment under section 153A of the Act. The Act has provided separate provisions , for making assessment in case of material found in the course of the search from the premises of the assessee as well as the material found in the course of search at the premises of the third party. The Assessing Officer is required to follow the procedure laid down in the Act for making the assessment and he cannot devise his own procedure for shortcut methods. In our considered opinion, when the case of the assessee is covered under the provision of section 153 of the Act and if reliance is placed on the incriminating material found during the course of search of third-party, then provision of section153C of the Act would be applicable and have to be adhered to. Thus, in the instant case, the Assessing Officer was required to first complete the proceedings under section 153A in hand, which were initiated by way of notice dated 30/06/2014 and thereafter, he was at liberty to take action under section 153C of the Act for bringing the material found from the premise of third party. ” In the instant case the Assessing Officer has made addition based on the seized material GIB-12, Page No.-8 found from the premises & 63/PAT/2021 Assessment Years: 2016-2017 & 2017-2018 & C.O. Nos. 1 & 2/PAT/2022 (in ITA 62 & 63/PAT/2021) Assessment years: 2016-2017 & 2017-2018 Broadson Commodities Pvt. Limited of third party after initiation of proceedings u/s 153A of the I.T. Act. Assessing Officer should have made such addition after initiating the proceedings u/s 153C of the Act. In light of the discussion made above it is found that the action of the Assessing Officer in this regard is not sustainable. Therefore, the additional ground taken by the appellant is admitted and allowed and the addition of Rs.5,50,00,000/- made by the Assessing Officer is deleted, accordingly Ground No. 5 & 6 are allowed. The Grounds No. 1 to 3 relate with the initiation of proceedings u/s 153A of the I.T. Act. In the instant case search warrant was issued in the case of appellant which mentioned the name of the appellant. However, no actual search had been conducted for the reason being that appellant's premise was sealed by the State Govt. Authority. Appellant’s contention in this regard is that when no search was conducted in terms of provisions of section 132 of I.T. Act then mere issue of search warrant does not automatically certify all the pre conditions required to be certified as mentioned in section 132 and section 13A of the I.T. Act. Appellant relied upon several Judicial Pronouncement i.e.
Bansilal B. Raisoni & Sons v/s Assistant Commissioner of Income Tax, Central Circle-I, Nashik [2019] 101 tax.mann.com 20 (Bombay) 2. CIT v/s Wipro Finance Ltd. [2009] 176 Taxman 233 (Karnataka) 3. Dr. Mansukh Kanjibhai Shah v/s Asstt. CIT [2010] 41 DTR 353] 4. Regency Mahavir Properties v/s Asstt. CIT [2018] 89 taxmann.com 44/169 ITD 35 (Mumbai- Trib) In all above case laws, it was held that in order to issue notice u/s 153A of the A there must be initiation of search and mere search authorization could not be sufficient. Further, in the case of PCIT(Central), New Delhi Vs Meeta Gutgutia [201 96 Taxmann.com 468 [SC] it was held that section 153A is indeed an extreme potent power which enables the Revenue to re-open at least six years assessments earlier to the year of search, it is not to be exercised lightly. If there no incriminating material found in the business premises of the assessee u/s 132 the Act, invocation of Sec 153A in the name of the third party is not justified. Further in the case of 11 & 63/PAT/2021 Assessment Years: 2016-2017 & 2017-2018 & C.O. Nos. 1 & 2/PAT/2022 (in ITA 62 & 63/PAT/2021) Assessment years: 2016-2017 & 2017-2018 Broadson Commodities Pvt. Limited Kabul Chawla v/s Commissioner of Income-tax (Central)-III [2015) 61 taxmann.com 412 (Delhi)-it is held that Completed assessments can be interfered with by Assessing Officer while making assessment under section 153 only on basis of some incriminating material unearthed during course of search which was not produced or not already disclosed or made known in course of origin assessment. The case of appellant is squarely covered up with several judicial pronouncement discussed as above. In this case appellant has filed objection regarding the initiation of the proceeding u/s 153A of the Act dated 20.12.2019 but the Assessing Office had not disposed of the objection filed by the appellant by passing a speaking order. Further, Assessing Officer in his assessment order made an addition of Rs.1,06,02,895/- under the head disallowance of unsecured loan, in para 3 of the assessment order the Assessing Officer has discussed that on examination of book of the assessee it is found that an amount of Rs. 1,06,0? 895/- has shown loan received from M/s Trailblazer Edusol Pvt. Ltd. and in absence of any explanation Assessing Officer made addition of the same on account of undisclosed unsecure loan. !n fact, on verification/examination of the ledger account submitted and the submission it is observed that the appellant had not received any amount from M/s. Trailblazer Edusol Pvt. Ltd. during the year, rather they have refunded Rs.One Crore during the year. From the above, it is clear that the Assessing Officer has made wrong addition in the hands of appellant. Therefore, Grounds No. 1 to 4 are hereby allowed and accordingly addition made of Rs.1,06,02,895/- is hereby deleted”.
The ld. CIT(DR) while impugning the order of the ld. CIT(Appeals) submitted that no doubt factum of actual search carried out upon the assessee is not ascertainable from the record but search was carried out at the premises of Shri Subhash Prasad Yadav & others. He is the Director and key person of the assessee-company, therefore, addition in the hands of the assessee could be made on the basis of documents recovered from the 12 & 63/PAT/2021 Assessment Years: 2016-2017 & 2017-2018 & C.O. Nos. 1 & 2/PAT/2022 (in ITA 62 & 63/PAT/2021) Assessment years: 2016-2017 & 2017-2018 Broadson Commodities Pvt. Limited premises of the Director, the key person. The ld. CIT(Appeals) has erred in deleting the addition of Rs.5,50,00,000/-, which is based on a seized document found at the premises of Shri Subhash Prasad Yadav.
The ld. Counsel for the assessee, on the other hand, relied upon his detailed submissions made before the ld. CIT(Appeals), which has been reproduced. He raised two- folds of submission. In his first-fold of submission, he contended that no doubt, there was an authorisation against the name of the assessee but actual search at the premises of the assessee in Kolkata was not carried out. He took us through the copy of the authorisation, which has been placed on record and submitted that this authorisation has been reproduced by the ld. 1st Appellate Authority while taking note of the submission of the assessee on pages no. 14 & 15 of the impugned order in A.Y. 2017-18. He submitted that in Column no. A of the Panchnama, which exhibits issuance of a warrant in the case of - (a) name of assessee is discernable against this column where an warrant was issued but in column (b), details of the places on which this warrant was executed and premises of the assessee is not discernable in column (b). Therefore, no actual search was carried out at the premises of the assessee and if no search was carried out, then, merely on the 13 & 63/PAT/2021 Assessment Years: 2016-2017 & 2017-2018 & C.O. Nos. 1 & 2/PAT/2022 (in ITA 62 & 63/PAT/2021) Assessment years: 2016-2017 & 2017-2018 Broadson Commodities Pvt. Limited issuance of authorisation to initiate the search an assessment under section 153A cannot be made. For buttressing his contention, he relied upon the following judgments:- 1. The Bombay High Court in the case of Bansilal B. Raisoni& Sons Assistant Commissioner of Income Tax, Central Circle-1, Nashik [2C 101 taxmann.com 20 (Bombay) held that- "In order to issue notice under sub-section (1) of section 153A, there must be initiation of search in case of not and mere search authorisation would not be sufficient - Held, yes
The Karnataka High Court in the case of CIT v/s Wipro Finance Ltd. [2009] 176 Taxman 233 (Karnataka) held that- “the expression ‘search initiated’ means search taken or search commenced or making beginning of the search. It cannot be held that signing of authorisation by the Income Tax authority would amount to initiation of search. The signing of authorisation would amount to taking a decision by the said authority to initiate search in the case of the assessee but not initiation of search itself. ”
Further in the case of Dr. Mansukh Kanjibhai Shah v/s Asstt. CIT [2010] 41 DTR 353], it was held that- mere issue of warrant of authorization without there being search of the premises mentioned in the warrant of authorization would be meaningless and would not serve the purpose of section 132, therefore, actual search shall have to be carried out necessarily before proceeding u/s 153A of the Act.
& 63/PAT/2021 Assessment Years: 2016-2017 & 2017-2018 & C.O. Nos. 1 & 2/PAT/2022 (in ITA 62 & 63/PAT/2021) Assessment years: 2016-2017 & 2017-2018 Broadson Commodities Pvt. Limited 4.Further in the case of Regency Mahavir Properties v/s Asstt. CIT [2018] 89 taxmann.com 44/169 ITD 35 (Mumbai- Trib), it was held that in order to initiate proceedings u/s 153A, a search in the premises of the assessee is requirement. Without a search, initiation of proceedings u/s 153A is bad in law.
In his next fold of submission, he contended that if no search was conducted at the premises of the assessee, then, there would not be any discovery of incriminating material, which could enable the ld. Assessing Officer to make an addition in an assessment passed under section 153A of the Income Tax Act. For buttressing this submission, he put reliance upon the judgment of the Hon’ble Supreme Court in the case of PCIT-Vs.- Abhisar Buildwell Pvt. Ltd. (149 taxmann.com 399).
As far as the allegation of the ld. Assessing Officer that a document inventorized as GIB-12 was found during the course of search and, therefore, addition deserves to be made. He submitted that this document was not found at the premises of the assessee even the ld. Assessing Officer has alleged that it was found during the course of search in the Group of Subhash Prasad Yadav. This Group contains a large number of assessees and if any incriminating material was found qua the assessee, then, for that year, 153(C) assessment ought to have been initiated. According to the ld. Counsel for the 15 & 63/PAT/2021 Assessment Years: 2016-2017 & 2017-2018 & C.O. Nos. 1 & 2/PAT/2022 (in ITA 62 & 63/PAT/2021) Assessment years: 2016-2017 & 2017-2018 Broadson Commodities Pvt. Limited assessee, all these propositions have been duly raised before the ld. 1st Appellate Authority and ld. CIT(Appeals) has accepted them. The only error, which ld. 1st Appellate Authority has committed that assessment orders passed under section 153A deserves to be quashed instead of deleting the additions because if no search is being made, then, no assessment could have been passed. He took us through the finding of the ld. CIT(Appeals) extracted supra and emphasized that ld. 1st Appellate Authority has accepted the factum that search was not conducted upon the premises of assessee but ld. CIT(Appeals) construed this factum in such a manner that no incriminating material was found and, therefore, no addition deserves to be made in the hands of asseessee.
We have duly considered the rival contentions and gone through the record carefully. As far as the first fold of the dispute is concerned, whether addition under section 153A in the absence of any discovery of incriminating material could be made or not is concerned, we are of the view that the Hon’ble Supreme Court has silenced this controversy in the case of PCIT- Vs.- Abhisar Buildwell Pvt. Ltd. (149 taxmann.com 399) and held that no addition is sustainable in the assessment under section 153A without discovery of any 16 & 63/PAT/2021 Assessment Years: 2016-2017 & 2017-2018 & C.O. Nos. 1 & 2/PAT/2022 (in ITA 62 & 63/PAT/2021) Assessment years: 2016-2017 & 2017-2018 Broadson Commodities Pvt. Limited incriminating material. This aspect was first considered by the Hon’ble Delhi High Court in the case of CIT V. Kabul Chawla (380 ITR 573). In order to buttress our finding, we deem it appropriate to take note the decision of the Hon’ble Delhi High Court in the case of CIT V. Kabul Chawla (380 ITR 573) and decision of the Hon’ble Gujarat High Court in the case of Saumya Construction. These two decisions have been upheld by the Hon’ble Supreme Court in the case of Abhisar Buildwell Pvt. Limited. Hon’ble Delhi High Court in the case of Kabul Chawla has propounded seven circumstances, which emerges out of interpretation of section 153A. We deem it appropriate to take note of the relevant discussions in these decisions.
First we refer to the decision of Hon’ble Delhi High Court in the case of CIT v-vs.- Kabul Chawla, 380 ITR 573 (Del.). Hon’ble Delhi High Court after detailed analysis has summarized the following legal position: 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(l) 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. & 63/PAT/2021 Assessment Years: 2016-2017 & 2017-2018 & C.O. Nos. 1 & 2/PAT/2022 (in ITA 62 & 63/PAT/2021) Assessment years: 2016-2017 & 2017-2018 Broadson Commodities Pvt. Limited
(ii) Assessments and reassessments pending on the date of the search shall abate. The total income for such A.Y.s will have to be computed by the AOs as afresh 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 AY & 63/PAT/2021 Assessment Years: 2016-2017 & 2017-2018 & C.O. Nos. 1 & 2/PAT/2022 (in ITA 62 & 63/PAT/2021) Assessment years: 2016-2017 & 2017-2018 Broadson Commodities Pvt. Limited on the basis of the findings of the search and any other material existing or brought on the record of the AO. (vi) 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."
Now we take note of the relevant part of the Hon’ble High Court’s decision in the case of Saumya Construction. Hon'ble Gujrat High Court has also considered the decision of Hon'ble Delhi High Court in the case of CIT Vs. Kabul Chawla (supra). Hon'ble Gujarat High Court framed the following question of law in the case of Pr.CIT Vs. Saumya Construction (supra): "(a) Whether the order of Tribunal is right in law and on facts in deleting the addition made in assessment made u/s 153A of the Act? (b) Whether the Tribunal is right in law in holding that the addition should be based on the incriminating material found during the course of search under new procedure of assessment u/s 153A which is different from earlier procedure u/s 158BC r.w.s. 158BB of the Act and by reading into the section, the words 'the incriminating material found during the course of search' which are not there in section 153A? & 63/PAT/2021 Assessment Years: 2016-2017 & 2017-2018 & C.O. Nos. 1 & 2/PAT/2022 (in ITA 62 & 63/PAT/2021) Assessment years: 2016-2017 & 2017-2018 Broadson Commodities Pvt. Limited (c) Whether the Tribunal erred in relying on the ITAT order in Sanjay Aggarwal v. DCIT (2014) 47 Taxmann.Com 210 (Del) which has interpreted undisclosed income unearthed during the search to imply incriminating material, as against the finding of the Delhi High Court in Filatex India Ltd. v. CIT- IV (2015) 229 Taxman 555 wherein it is held that during the assessment u/s 153A additions need not be restricted or limited to incriminating material found during the course of search?"
Hon'ble Court concurred with the decision of Hon'ble Delhi High Court. We deem it appropriate to take note of relevant part of the decision, which reads as under: "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 of 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 be connected with something found 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 153 A 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 20 & 63/PAT/2021 Assessment Years: 2016-2017 & 2017-2018 & C.O. Nos. 1 & 2/PAT/2022 (in ITA 62 & 63/PAT/2021) Assessment years: 2016-2017 & 2017-2018 Broadson Commodities Pvt. Limited 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 held by the Rajasthan High Court in the case of Jai Steel (India) (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.
17. In the facts of the present case, a search came to be conducted on 07.10.2009 and the notice was issued to the assessee under section 153A of the Act for assessment year 2006-07 on 04.08.2010. In response to the notice, the assessee filed return of income on 18.11.2010. In terms of section 153B, the assessment was required to be completed within a period of two years from the end of the financial year in which the search came to be carried out, namely, on or before 31st March, 2012. Here, insofar as the impugned addition is concerned, the notice in respect thereof came to be issued on 19.12.2011 seeking an explanation from the assessee. The assessee gave its response by & 63/PAT/2021 Assessment Years: 2016-2017 & 2017-2018 & C.O. Nos. 1 & 2/PAT/2022 (in ITA 62 & 63/PAT/2021) Assessment years: 2016-2017 & 2017-2018 Broadson Commodities Pvt. Limited reply dated 21.12.2011 calling upon the Assessing Officer to provide copies of statements recorded on oath of Shri Rohit P. Modi and Smt. Pareshaben K. Modi during the search as well as the copies of the documents upon which the department placed reliance for the purpose of making the proposed addition as well as the copy of the explanation given by Shri Rohit P. Modi and Smt. Pareshaben K. Modi regarding the on-money received, copies of the assessment orders in case of said persons and also requested the Assessing Officer to permit him to cross-examine the said persons. The Assessing Officer issued summons to the said persons, however, they were out of station and it was not known as to when they would return. In this backdrop, without affording any opportunity to the assessee to cross-examine the said persons, the Assessing Officer made the addition in question.
In this case, it is not the case of the appellant that any incriminating material in respect of the assessment year under consideration was found during the course of search. At the relevant time when the notice came to be issued under section 153A of the Act, the assessee filed its return of income. Much later, at the fag end of the period within which the order under section 153A of the Act was to be made, in other words, when the limit for framing the assessment as provided under section 153 was about to expire, the notice has been issued in the present case seeking to make the proposed addition of Rs.l 1,05,51,000/- on the basis of the material which was not found during the course of search, but on the basis of a statement of another person. In the opinion of this court, in a case like the present one, where an assessment has been framed earlier and no assessment or reassessment was pending on the & 63/PAT/2021 Assessment Years: 2016-2017 & 2017-2018 & C.O. Nos. 1 & 2/PAT/2022 (in ITA 62 & 63/PAT/2021) Assessment years: 2016-2017 & 2017-2018 Broadson Commodities Pvt. Limited date of initiation of search under section 132 or making of requisition under section 132A, while computing the total income of the assessee under section 153A of the Act, additions or disallowances can be made only on the basis of the incriminating material found during the search or requisition. In the present case, it is an admitted position that no incriminating material was found during the course of search, however, it is on the basis of some material collected by the Assessing Officer much subsequent to the search, that the impugned additions came to be made.
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 all 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, an 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), Jodhpur (supra). Besides, as rightly pointed out by the learned counsel for the respondent, the controversy involved in the present case stands & 63/PAT/2021 Assessment Years: 2016-2017 & 2017-2018 & C.O. Nos. 1 & 2/PAT/2022 (in ITA 62 & 63/PAT/2021) Assessment years: 2016-2017 & 2017-2018 Broadson Commodities Pvt. Limited concluded by the decision of this court in the case of 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.
For the foregoing reasons, it is not possible to state that the impugned order passed by the Tribunal suffers from any legal infirmity so as to give rise to a question of law, much less, a substantial question of law, warranting interference. The appeal, therefore, fails and is, accordingly, dismissed."
It is also pertinent to note that, in the case of Kabul Chawla (supra), the Hon’ble Delhi High Court in its concluding paragraph has observed that, on the date of the search, the assessments for assessment years 2002-03, 2005-06 and 2006-07 already stood completed and the returns in these years were accepted under Section 143(1) of the Act and these acceptance of returns processed under Section 143(1) of the Act was construed by the Hon’ble Delhi Court as completion of assessments and as acceptance of return, according to the Hon’ble Delhi High Court, could be tinkered with if some incriminating material was found at the premises of the assessee. & 63/PAT/2021 Assessment Years: 2016-2017 & 2017-2018 & C.O. Nos. 1 & 2/PAT/2022 (in ITA 62 & 63/PAT/2021) Assessment years: 2016-2017 & 2017-2018 Broadson Commodities Pvt. Limited 18. The Hon’ble Supreme Court in the case of PCIT –vs.- Abhisar Buildwell Pvt. Limited has concurred with both these decisions of the Hon’ble High Courts. The relevant part of the Hon’ble Supreme Court’s decision reads as under:-
“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 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 25 & 63/PAT/2021 Assessment Years: 2016-2017 & 2017-2018 & C.O. Nos. 1 & 2/PAT/2022 (in ITA 62 & 63/PAT/2021) Assessment years: 2016-2017 & 2017-2018 Broadson Commodities Pvt. Limited 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 fulfillment 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. 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 & 63/PAT/2021 Assessment Years: 2016-2017 & 2017-2018 & C.O. Nos. 1 & 2/PAT/2022 (in ITA 62 & 63/PAT/2021) Assessment years: 2016-2017 & 2017-2018 Broadson Commodities Pvt. Limited 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 Sections 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 subsection (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. & 63/PAT/2021 Assessment Years: 2016-2017 & 2017-2018 & C.O. Nos. 1 & 2/PAT/2022 (in ITA 62 & 63/PAT/2021) Assessment years: 2016-2017 & 2017-2018 Broadson Commodities Pvt. Limited 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; (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 & 63/PAT/2021 Assessment Years: 2016-2017 & 2017-2018 & C.O. Nos. 1 & 2/PAT/2022 (in ITA 62 & 63/PAT/2021) Assessment years: 2016-2017 & 2017-2018 Broadson Commodities Pvt. Limited AO in exercise of powers under Sections 147/148 of the Act, subject to fulfillment 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”.
The ld. 1st Appellate Authority has rightly held that no material was discovered during the course of search, which can be termed as incriminating material, therefore, no addition in both the years is sustainable. The ld. 1st Appellate Authority has rightly deleted the additions.
20. As far as the second fold of submission is concerned, that mere authorisation of an warrant would not be construed as if search has been conducted upon the assessee. For example, an authorisation has been issued for two persons, namely ‘A’ and ‘B’, but actual search was only carried out on ‘B’, then in the case of ‘A’, no assessment could be passed under section 153A. The assessee has relied upon three decisions, namely (i) Delhi High Court in the case of Bansilal B. Raisoni & Sons –vs.- ACIT, Central Circle-1, Nashik [2019] 101 & 63/PAT/2021 Assessment Years: 2016-2017 & 2017-2018 & C.O. Nos. 1 & 2/PAT/2022 (in ITA 62 & 63/PAT/2021) Assessment years: 2016-2017 & 2017-2018 Broadson Commodities Pvt. Limited taxmann.com 20 (Bombay); (ii) CIT –vs.- Wipro Finance Limited (2009) 176 taxman 233 (Karnataka High Court) as well as two decisions of the Tribunal. The Hon’ble High Courts as well as of the Tribunal are unanimous to the proposition that if no effective search has been conducted, then, on the basis of mere authorisation of the search, it would not be construed that search has been initiated. A perusal of the Panchnama reproduced by the ld. CIT(Appeals) on page no. 15 would reveal that search was conducted on the residential premises of Subhash Prasad Yadav at Narial Ghat, Near Gandhi Murti, Digha, Patna. The official premises of the assessee is of Kolkata, which is discernable from the name and address of the assessee in the cause title of the assessment order. Therefore, no search was conducted upon the assessee and consequentially no addition ought to have been made, rather both the assessment orders passed under section 153A are not sustainable in the eyes of law.
Taking into consideration the detailed written submissions filed by the assessee before the ld. CIT(Appeals) coupled with the finding of the ld. CIT(Appeals). We are of the view that the ld. 1st Appellate Authority ought to have quashed both the assessment orders instead of simply deleting the additions. 30 & 63/PAT/2021 Assessment Years: 2016-2017 & 2017-2018 & C.O. Nos. 1 & 2/PAT/2022 (in ITA 62 & 63/PAT/2021) Assessment years: 2016-2017 & 2017-2018 Broadson Commodities Pvt. Limited Accordingly, we allow the Cross Objections and quash both the assessment orders and affirm the order of ld. CIT(Appeals).
In the result, both the appeals of Revenue are dismissed, whereas the Cross Objections filed by the assessee are allowed. Order pronounced in the open Court on 30.08.2023.