Income Tax Appellate Tribunal - Mumbai
Bermaco Enrgy Ltd, Navi Mumbai vs Dcic Cc 47, Mumbai on 13 September, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL " B" BENCH, MUMBAI
BEFORE SRI MAHAVIR SINGH, JM AND SRI MANOJ KUMAR AGGARWAL, AM
ITA No. 4309/Mum/2014
(A.Y:2006-07)
M/s Bermaco Energy Ltd. The Dy. Commissioner of
D-73/1, TTC Industrial Area, MIDC Income Tax, CC -47
Mumbai
Road, Turbhe, Vs.
Navi Mumbai-400705
PAN No. AACCB7021P
Appellant .. Respondent
Assessee by .. Shri JP Bairagra, AR
Revenue by .. Shri Ravjit Singh Arneja, DR
Date of hearing .. 07-09-2017
Date of pronouncement .. 13-09-2017
ORDER
PER MAHAVIR SINGH, JM:
This appeal by the assessee is arising out of the order of CIT(A)-38 Mumbai, in appeal No. CIT(A)-38/IT-572/2011-12, dated 27-03-2014. The Assessment was framed by DCIT Circle-47, Mumbai for the A.Y. 2006-07 vide order dated 29-12-2011 under section 153C r.w.s.143(3) of the Income Tax Act, 1961(hereinafter 'the Act').
2. The first issue in this appeal of assessee is against the order of CIT(A) confirming the action of the AO in issuing notice under section 153C and completing assessment u/s 153C r.w.s. 143(3) of the Act and not holding the same as bad in law even though the assessment framed is not based on any incriminating material/document. The assessee has 2 ITA No. 4309/ Mum/2014 M/s Bermaco Energy Ltd. ( A . Y : 2 0 0 6 - 0 7 ) also raised the issue of satisfaction. For this assessee has raised following ground No. 1 to 3: -
"1. The learned CIT(A) has erred in law and in facts in not holding that the notice issued u/s. 153C and the consequential assessment are bad in law and without jurisdiction.
2. The learned CIT(A) erred in holding that there is nothing on record to say that the satisfaction is recorded only in the file of 153C and not in the file of 153A person.
3. The learned CIT(A) has erred in holding that and documents seized were belonging to the appellant and that books of account and documents seized were incriminating in nature."
3. Briefly stated facts are that a search and seizure action under section 132 of the Act was carried out on the business and residential premises of M/s Flemingo and Bermaco group of companies as well as their directors on 31-10-2009. During the course of search unaccounted cash, incriminating documents, assets etc. were found and seized. The assessee is one of the group companies and consequent to search and seizure action, a notice under section 153C of the Act was issued on 12- 04-2010. The notice under section 153C of the Act was issued for the reason that incriminating material relating to assessee was found during the course of search. The assessee filed its original return of income under section 139 of the Act on 21-11-2006, this return was filed as e- return, and the AO could have issued notice under section 143(2) of the Act on or before 30-11-2007. Since, the AO has not issued any notice under section 143(2) of the Act the assessment was not pending and stood completed under the Act as on the date of search i.e. 31-10-2009.
3 ITA No. 4309/ Mum/2014M/s Bermaco Energy Ltd. ( A . Y : 2 0 0 6 - 0 7 ) Before us, the learned Counsel for the assessee stated that this assessment has not abated in term of second proviso to section 153C of the Act. The assessee along with original return of income filed complete audited accounts wherein the unsecured loan of Rs. 1.50 crore is clearly depicted. The AO during the course of assessment proceedings under section 153C r.w.s. 143(2) of the Act required the assessee to explain the unsecured loans and in the absence of explanation he added the same as unexplained cash credits under section 68 of the Act. Aggrieved, assessee preferred the appeal before CIT(A), who on merits confirmed the action of AO making addition of unexplained cash credits. The assessee before CIT(A) also raised the issue of jurisdiction under section 153C of the Act, he also confirmed the assumption of jurisdiction by the AO vide Para 7, 7.1, 7.2, 7.3 as under: -
"7.0 I have carefully examined the facts of the case, the stand taken by the A.O in the assessment order and in the remand report, the grounds of appeal, the written submissions filed by the appellant during the hearing proceedings and the rejoinder to the remand report. In this group of cases, a search & seizure action u/s.132(1) of the Act was carried out on 31.10.2009 and Shri Viren Ahuja who is the promoter director of the group had admitted undisclosed income u/s.132(4) of the Act. Appellant is a closely connected case wherein the affairs of the appellant are also controlled and managed by Shri Viren Ahuja. Since the case of the appellant was also centralized along with the other group of cases of Flemingo I Bermaco which included the case of Shri Viren Ahula, the same A.O exercised jurisdiction in respect of all the cases of the group. It is envisaged uls.153C of the Act that 4 ITA No. 4309/ Mum/2014 M/s Bermaco Energy Ltd. ( A . Y : 2 0 0 6 - 0 7 ) any money, bullion, jewellery or other valuable article or thing or books of account or documents seized belong to a person other than the persons referred to in section 153A of the Act, then the books of account or documents or assets seized or requisitioned shall be handed over to the A.O having jurisdiction over such other person and that A.O shall proceed against such other person and issue notices to such other person so as to assess or reassess income of such other person in accordance with the provisions of section 153A of the Act. The books of account and documents seized in this group are in the custody of the same officer who has jurisdiction over the persons subjected to search & seizure proceedings and also over the appellant against whom proceedings uls.153C of the Act are invoked. Since the officer is common in respect of the cases where proceedings have been initiated uls.153A of the Act as well as u/s.153C of the Act, there was no requirement of handing over the materials to another A.O. Therefore, the A.O was justified in taking into account of the factual information about the group of cases available in his possession and the books of account and other documents that were seized during the search & seizure operations so as to arrive at a prima facie decision to initiate proceedings u/s 153C of the Act. Initiation of proceedings u/s.153C of the Act is only the first step in the process of enquiry to establish any undisclosed income attributable to any other person referred to in section 153C of the Act. In this case, the A.O has followed the due process of enquiry and 5 ITA No. 4309/ Mum/2014 M/s Bermaco Energy Ltd. ( A . Y : 2 0 0 6 - 0 7 ) investigation and the conclusions arrived at are supported by the findings in the assessment order.
7.1 Quantification of undisclosed income or discovery of undisclosed income is not a precondition for the issue of notice u/s 153C of the Act unlike section 158BD of the Act. In the remand report, the A.O has clearly identified the books of account and the documents belonging to the appellant The appellants argument that these documents pertain to the appellant and they do not belong to the appellant is ill founded. The term 'pertain' gives a meaning that only the information contained in the document relates to the person and not the document as such. Whereas in this case, seized material such as trial balance, profit and loss account, balance sheet, details of unsecured loan, ledger account in the books of account of MJs.Bermaco Energy Ltd. etc. cannot be said to be only pertaining and not belonging to the appellant The appellant is the owner of the books of account and the document seized and therefore, the said books of account and the document belong to it. The appellant's books of account and document and the loose sheets belonging to the appellant (16 loose papers of seized material exhibited as Annexure A-iS and page nos.1 to 5 of seized material exhibited as Annexure A-21 containing trail balance, profit and loss account and balance sheet of the appellant, ledger in the books of appellant, details of unsecured loan taken by the appellant from IFSL Ltd. etc.) are found in the premises of M/s.Flemingo / Bermaco Group (joint warrant of authorization) while conducting search operation 6 ITA No. 4309/ Mum/2014 M/s Bermaco Energy Ltd. ( A . Y : 2 0 0 6 - 0 7 ) u/s.132 of the Act and the same have been seized and are handed over to the A.O In this case, the A.O of 153A person and the A of 153C person are one and the same. It is also seen that the A 0 has duly recorded reasons for arriving at his satisfaction to show that the above books of account and documents belong to the appellant. At this stage, it is sufficient that the A.O merely records satisfaction with reference to the ownership of the books of account / documents and there is no need for him to establish that the books of account and documents seized also reflect undisclosed income. Even the AD of 153C person need not establish undisclosed income prior to the issue of notice u/si 53C of the Act. However, a question would arise as to what would happen if there is no discovery of income out of the seized materials after the issue of notice u/s.153C of the Act. It is held in the case of SSP Aviation Ltd. vs. DCIT (346 FIR 177) (Delhi) that the A.O may drop the proceedings in such circumstances. The procedure and the rationale behind the issue of notice u/s. 1 53C of the Act have been described in detail in the case of SSP Aviation Ltd. referred supra which is reproduced as under:
"The judgment of this court in Saraya Industries Ltd. (2008) 306 ITR 189 (Delhi) was relied upon by Mr. Bajpai, in support of his contention that the seizure of the document must be of such nature that even closed assessments for six years could be reopened and this requirement postulates that the provisions of Section 153C can be set in motion only if there is a finding that the 7 ITA No. 4309/ Mum/2014 M/s Bermaco Energy Ltd. ( A . Y : 2 0 0 6 - 0 7 ) seized document or books of account or valuable article represents the undisclosed income of the other person. The said decision does not assist the petitioner. The section merely enables the revenue authorities to investigate into the contents of the document seized, which belongs to a person other than the person searched so that it can be ascertained whether the transaction or the income embedded in the document has been accounted for in the case of the appropriate person S It is aimed at ensuring that income does not escape assessment in the hands of any other person merely because he has not been searched under Section 132 of the Act. It is only a first step to the enquiry, which is to follow. The Assessing Officer who has reached the satisfaction that the document relates to a person other than the searched person can do nothing except to forward the document to the Assessing Officer having jurisdiction over the other person and thereafter it is for the Assessing Officer having jurisdiction over the other person to follow the procedure prescribed by Section 153A in an attempt to ensure that the income reflected by the document has been accounted for by such other person. If he is so satisfied after obtaining the returns from such other person for the six assessment years, the proceedings will have to be closed. If the returns filed by the other person for the period of six years does not show that the 8 ITA No. 4309/ Mum/2014 M/s Bermaco Energy Ltd. ( A . Y : 2 0 0 6 - 0 7 ) income reflected in the document has been accounted for, additions will be accordingly made after following the procedure prescribed by law and after giving adequate opportunity of being heard to such other person. That, in sum and substance, is the position.
It will be seen that whereas section 1588D refers to the satisfaction of the Assessing Officer that any gundisclosed income"
belongs to any person other than the searched person. section 153C(1) in contrast refers merely to the satisfaction of the Assessing Officer that the valuable article or books of account or document "belongf to a person other than the searched person. The latter prevision does not refer to any undisclosed income at all.
The machinery provided in section 153C read with section 153A merely facilitates an enquiry regarding the existence or otherwise of undisclosed income in the hands of the person other than the searched person. The starting point of the enquiry is the seizure of the valuable article or books of account or document, which according to the satisfaction reached by the Assessing Officer, belongs to a person other than the searched person. It is necessary to notice the difference between the two provisions in order to deal with the contention put forward by the learned counsel for the petitioner that the seizure itself is 9 ITA No. 4309/ Mum/2014 M/s Bermaco Energy Ltd. ( A . Y : 2 0 0 6 - 0 7 ) invalid or illegal on the ground that there could not have been any satisfaction before issuing the warrant of authorization under section 132 of the Act that the petitioner had earned undisclosed income because the income reflected in the seized documents, namely, the collaboration agreement dated August 24, 2006, and the assignment agreement dated July 21, 2006, had already been taken note of in the account books of the petitioner This is a debatable issue as is apparent from the submission of the Revenue. They have submitted to the contrary. It cannot be said that the seizure of the documents was unwarranted or contrary to law. As noticed above, the Revenue has highlighted that finalization and audit of accounts was after the date of the search.
The accounts for the year ended March 31, 2009, now relied upon by the petitioner, were finalized after the search on January 5, 2009. Seizure has to be judged in the perspective and the facts known and within the knowledge when it was made. On that date, the Revenue was riot in a position to know whether any income from the transaction had been disclosed by the petitioner in its books of account for the year ended March 31, 2009. In the very nature of things, the warrant of authorization of the search under section 132 could not have been issued on the footing that there was undisclosed income in the case of the petitioner simply because 10 ITA No. 4309/ Mum/2014 M/s Bermaco Energy Ltd. ( A . Y : 2 0 0 6 - 0 7 ) action under section 132 was taken not against the petitioner, but against the Pun group of companies Section 153C postulates that while conducting the search on the person in whose name the search warrant is issued under section 132, some valuable article or books of account or document is seized, which does not belong to the searched person but is seen to belong to any other person, the procedure stated therein should be followed. Therefore, nothing is to be gained from saying that the pre-conditions mentioned in clauses (a), (b) and (c) of subsection (1) of section 132 have not been satisfied vis-a-vis the petitioner so as to confer legality upon the seizure of the documents in question. In our opinion, it is not necessary for the Revenue authorities to have masons to believe that the petitioner would not produce any books of account or document or that the petitioner is in possession of any money, bullion, jeweler,' or other valuable article or thing which it had not or will not disclose for the purpose of the assessment proceedings. The petitioner was not searched. Search was on a third person and the validity of the seizure has to be examined with reference to the said person searched. At the time when the Assessing Officer having jurisdiction over the searched person reaches the satisfaction that the document belongs to a person other than the searched person, it is not necessary for him 11 ITA No. 4309/ Mum/2014 M/s Bermaco Energy Ltd. ( A . Y : 2 0 0 6 - 0 7 ) to also reach a firm conclusion/opinion that the document shows undisclosed income belonging to such other person. That is a matter for enquiry, which is to be conducted in the manner prescribed by section 153C.
The fact that the procedure envisaged by section 153C is somewhat cumbersome and that the person other than the searched person is put to some inconvenience cannot be an argument to hold that the entire proceedings are bad in law.
7.2 The appellant also submitted that the A.O instead of recording the satisfaction in the case of 153A person recorded the satisfaction only in the case of 153C person and therefore, the entire proceedings is vitiated. This contention of the appellant is not acceptable. There is nothing on record to say that the satisfaction is recorded only in the file of 153C person and not in the file of 153A person. On verification of assessment records, it is seen that the satisfaction note in this case is a separate loose sheet and it is kept in a separate folder including the satisfaction note of other cases in the group. I am of the opinion that it does not matter whether the satisfaction note is kept in a separate folder or in the assessment records of the searched person. It is learnt from the A.O that since joint warrant of authorization was issued in the case of 153A persons, there was difficulty in choosing a particular case wherein the satisfaction note should be placed and therefore, the satisfaction notes were kept in a separate folder. I do not find any infirmity in 12 ITA No. 4309/ Mum/2014 M/s Bermaco Energy Ltd. ( A . Y : 2 0 0 6 - 0 7 ) the action of the A.O. In view of above, the contention of the appellant is found to be untenable.
7.3 Further, it may also be mentioned that the books of account and documents seized are incriminating in nature. The authorized officer on the basis of the findings during the course of search showed that the loan capital introduced in the books of account is not genuine and this lead the A.O to raise a question regarding the genuineness of the same in terms of section 68 of the Act. In the light of the above factual information and the other materials in possession of the A.O, it is hereby held that initiation of proceedings u/s.153C of the Act and assuming the jurisdiction by the NO in terms of section 153C of the Act in respect of the appellant are valid. Accordingly, the ground nos.1 & 3 are hereby dismissed."
Aggrieved, assessee came in second appeal before Tribunal.
4. Before us, the learned Counsel for the assessee narrated the facts that the assessee has filed original return of income for AY 2006-07 on 14-11-2006 and no assessment for assessment year 2006-07 was pending as on the date of search i.e. 31-10-2009. The learned Counsel for the assessee stated that from the assessment order it can be gathered that only addition made by AO while completing assessment under section 153C r.w.s.143(3) of the Act was unexplained cash credit of Rs. 1.50 crores and that information was also noted by the AO from the audited accounts of the assessee and the addition is not based on any incriminating material found during the course of search. The learned Counsel for the assessee stated that the assessment for AY 2006-07 was completed and no assessment has been abated as the period for 13 ITA No. 4309/ Mum/2014 M/s Bermaco Energy Ltd. ( A . Y : 2 0 0 6 - 0 7 ) issuance of notice under section 143(2) elapsed on 30-09-2007 whereas, search took place on 31-10-2009. The learned Counsel for the assessee drew our attention to page 80 and 81 of assessee's paper book wherein remand report of ACIT Center Circle 47 Mumbai dated 21-02-2014 vide No. ACIT-47/rr on FDFS/13-14 is filed by the assessee and as the relevant Para 8 reads as under: -
"8. This objection of the assessee is found incorrect after verifying the records available in this office. There is an annexure No.A-15 congaing 16 loose papers (seized vide Panchanama dtd. 02.11.2009 at D73/I, TTC Industrial Area, Turbhe Navi Mumbai-74) in which all pages belongs to the assessee i.e. M/s Bermaco Energy Ltd. Apart from this in annexure No. A-21 page No.1 to 5 as ledger accounts in the books of the assessee. These documents belongs to the assessee and this evident from documents (for sample some of the copies are attached). Further, the undersign is attaching the copy of the satisfaction note recoded by the AO to initiate search assessment proceedings under section 153 read with section 143(3) of the Act."
5. The learned Counsel for the assessee further referred to Page 105 of assessee's paper book wherein satisfaction note drawn by Dy. Commissioner of Income Tax (DCIT) Centre Circle-9, Mumbai is enclosed and the relevant satisfaction note which was read out by the learned Counsel for the assessee and same is reproduced as under: -
"Search & Seizure action u/s. 132 of the IT Act 1961 was carried out at the residence and business premises of M/s. Flemingo/Bermaco Group on 31- 10-2009 by the DDIT(Inv,) Unit-11(3), Mumbai.14 ITA No. 4309/ Mum/2014
M/s Bermaco Energy Ltd. ( A . Y : 2 0 0 6 - 0 7 ) The assessee was connected with the Flemingo/Bermaco Group of cases arid the directors who were covered u/s. 153A of the search company were also involved in the above company.
Further during the course of search action the following incriminating documents were found and seized which had great bearing in the assessments covered u/s. 153A of the Bermaco Group Companies.
1) Annexure A/15 :- This annexure contains 16 pages containing final accounts of M/s. Bermaco Energy Ltd.
2) Annexure A/21 :- Pages 1 to S containing ledger accounts of M/s. Bermaco Enegy Ltd. for period 1-4-
2009to 1-11-2009.
In view of the above, I am satisfied that the above seized documents found at the premises of assessee covered u/s. 153A belongs to person other than the person referred in section 153C the above assessee becomes liable to be governed by section 153C and hence it is proposed to assess the case as per the provisions of section 153C.
Sd/ (Vinod Kumar) Dy. Commissioner of Income Tax CC-9, Mumbai"
6. The learned Counsel for the assessee after reading these documents referred to page 82 to 104 wherein 16 loose papers was seized by the departments and which pertains to AY 2009-10 but this particular loan of IFSL Limited of Rs. 1.50 crores pertain to AY 2006-07. Actually, according to the learned Counsel, this loan is carry forward from 15 ITA No. 4309/ Mum/2014 M/s Bermaco Energy Ltd. ( A . Y : 2 0 0 6 - 0 7 ) AY 2006-07 and no seized document relating to AY 2006-07 was seized by the Revenue. According to him, it means that no seized material pertain to AY 2006-07. Further, the learned Counsel for the assessee stated that allegations of Revenue that IFSL limited is existent, is without any basis. He stated that IFSL is very much functioning as it can be seen from the records available with the Registrar of Companies (ROC). Assessee's Counsel drew our attention to the documents procured from the ROC which shows that the IFSL limited is an existing company and the assessee has filed extract from ROC website confirming that IFSL Limited is on its record and also copy of ROC return filed on 31-03-2011 which is enclosed at pages 67 to 69 of assessee's paper book. The learned Counsel for the assessee argued that web report of ROC clearly reveals that the IFSL has filed its return for FY 2008-09 which was revised on 07-09-2012 and IFSL has filed its Form No. of 23ACA for FY ending 31-03-2011. Even the permanent account No. of the IFSL given by the assessee i.e. AAACI4383H. The learned Counsel for the assessee in view of the above facts argued that once there is no such material available in the seized record relevant to AY and assessment has not abated, the matter cannot be reassessed invoking the provisions of section 153C of the Act.
7. On the other hand the learned CIT-DR made only one submission that Hon'ble ITAT Mumbai Special Bench in the case of All Cargo Global logistics Ltd. vs. DCIT (2012) 23 ITR(T) 106 (Mum) had held that where in pursuant to notice issued u/s 153A of the Act and assessments are abated, the AO retains original jurisdiction as well as jurisdiction conferred on him u/s 153A for which assessments shall be made for each of six assessment years separately. It was further held that in cases of abated assessment where addition to income that has already been assessed, assessment u/s 153A or 153C of the Act will be made on the basis of incriminating material i.e. books of account, other documents, 16 ITA No. 4309/ Mum/2014 M/s Bermaco Energy Ltd. ( A . Y : 2 0 0 6 - 0 7 ) assets etc. found in the course of search but not produced in the course of original assessment or undisclosed income or property discovered in the search. The learned CIT DR also argued that in the present case before us, the remand report contains seized materials which are copies of accounts in the books of assessee and accordingly, once the Tribunal under section 153C of the Act has clearly held the books of account means even the ledger extracts. In the present case, the seizure was of accounts of the assessee. Hence, he requested for confirmation of assumption of jurisdiction by the AO. In view of this, the learned CIT DR stated that on the basis of assumption of jurisdiction, the AO rightly framed the assessment based on incriminating material under section 153C of the Act. The AO has rightly assumed jurisdiction on the basis of incriminating material even during the course of search, he argued.
8. We have heard the rival contentions and gone through the facts and circumstances of the case. The above facts are undisputed that the Revenue has seized the alleged incriminating material containing Annexure No. A-15, 16 loose papers vide Panchnama dtd. 02-11-2009 and Annexure No.A-21 pages No. 1 to 5 of the Ledger Accounts in the books of accounts of the assessee. We have gone through these pages consisting of pages 1 to 16 and pages 1 to 5 of Annexure A-15 and Annexure A-21 respectively. We find from these papers seized during the course of search that these are copies of balance sheet, trial balance, Profit and Loss account for the FY 2008-09. Further the 16 loose papers are the papers of trial balance including copy of accounts of various parties for the AY 2008-09. These papers are actually tallied and compared with the books of account by the assessee and by the AO and found nothing incriminating in the same, rather the addition is based on the audited accounts of the assessee which is already enclosed in the regular return of income of the assessee and assessment for the same has already attained finality. In view of these facts, we are of the view that 17 ITA No. 4309/ Mum/2014 M/s Bermaco Energy Ltd. ( A . Y : 2 0 0 6 - 0 7 ) these papers cannot be teemed as incriminating material which give jurisdiction to the AO to frame assessment u/s 153C of the Act. We find that this issue is deliberated by the Hon'ble Bombay High Court in the case of CIT vs Continental Warehousing Corporation (Nhava Sheva) Ltd. (2015) 374 ITR 645 (Bom).
9. We find that this issue now stands covered in favour of assessee and against the Revenue by the decision of Hon'ble Bombay High Court in the case of Continental Warehousing Corporation (Nhava Sheva) Ltd. (supra), wherein considering the judgment of the Special Bench of the Mumbai Tribunal in the case of All Cargo Global Logistics 137 ITD 287(SB) (Mum), considered this issue that, whether there is scope of assessment u/s. 153A of the Act in respect to completed assessment which is limited only to undisclosed income and undisclosed assets found during the course of search or not? Hon'ble High Court held that on a plain reading of section 153 of the Act it becomes clear that on initiation of the proceedings u/s. 153A of the Act, it is only the assessment/reassessment proceedings that are pending on the date of conducting search u/s. 132 of the Act stand abated and not the assessments/reassessments already final for those assessment years covered u/s. 153A of the Act. Hon'ble High Court also discussed the CBDT Circular No. 8 of 2003 dated 18.09.2003 reported in 263 ITR (st.) 61 at page 107 wherein CBDT has clarified that on initiation of proceedings u/s. 153A of the Act the proceedings pending in appeal, revision or rectification proceedings against final assessment shall not abate. It is only because the final assessments do not abate the appeal, revision or rectification pending against final assessments would not abate. Therefore, Hon'ble High Court rejected the arguments of the Revenue that on initiation of proceedings u/s. 153A of the Act, the reassessment final for assessment years covered u/s. 153A of the Act stands abated. Only the pending assessments get revived u/s. 153A of 18 ITA No. 4309/ Mum/2014 M/s Bermaco Energy Ltd. ( A . Y : 2 0 0 6 - 0 7 ) the Act. Hon'ble High Court further held that once assessment has attained finality, then the AO while passing independent assessment order u/s. 153A/143(3) of the Act could not disturb the assessment order which has attained finality unless the material gathered in the course of search u/s. 132/153A of the Act established that the finality attained in the assessment were contrary to the facts unearthed during the course of search. The relevant portion of the judgment reads as under: -
"31. We, therefore, hold that the Special Bench's understanding of the legal provision is not perverse nor does it suffer from any error of law apparent on the face of the record. The Special Bench in that regard held as under:-
"The provision under section 153A is applicable where a search or requisition is initiated after 31.5.2003. In such a case the AO is obliged to issue notice u/s 153A in respect of 6 preceding years, preceding the year in which search etc. has been initiated. Thereafter he has to assess or reassess the total income of these six years. It is obligatory on the part of the AO to assess or reassess total income of the six years as provided in section 153A(1)(b) and reiterated in the 1st proviso to this section. The second proviso states that the assessment or reassessment pending on the date of initiation of the search or requisition shall abate. We find that there is no divergence of views in so far as the provision contained in section 153A till the 1st proviso. The divergence starts from the 19 ITA No. 4309/ Mum/2014 M/s Bermaco Energy Ltd. ( A . Y : 2 0 0 6 - 0 7 ) second proviso which states that pending assessment or reassessment on the date of initiation of search shall abate. This means that an assessment or reassessment pending on the date of initiation of search shall cease to exist and no further action shall be taken thereon. The assessment shall now be made u/s 153A. The case of Ld. Counsel for the assessee is that necessary corollary to this provision is that completed assessment shall not abate. These assessments become final except in so far and to the extent as undisclosed income is found in the course of search. On the other hand, it has been argued by the Ld. Standing Counsel that abatement of pending assessment is only for the purpose of avoiding two assessments for the same year, one being regular assessment and the other being assessment u/s 153A. In other words these two assessments coalesce into one assessment. The second proviso does not contain any word or words to the effect that no reassessment shall be made in respect of a completed assessment. The language is clear in this behalf and therefore literal interpretation should be followed. Such interpretation does not produce manifestly absurd or unjust results as section 153A (i)(b) and the first proviso clearly provide for assessment or reassessment of all six years. It may cause hardship to some assesses where one or more of such assessments has or have been completed 20 ITA No. 4309/ Mum/2014 M/s Bermaco Energy Ltd. ( A . Y : 2 0 0 6 - 0 7 ) before the date of initiation of search. This is hardly of any relevance in view of clear and unambiguous words used by the legislature. This interpretation does not cause any absurd etc. results. There is no casus omissus and supplying any would be against the legislative intent and against the very rule in this behalf that it should be supplied for the purpose of achieving legislative intent. The submissions of the Ld. Counsels are manifold, the foremost being that the provision u/s 153A should be read in conjunction with the provision contained in section 132(1), the reason being that the latter deals with search and seizure and the former deals with assessment in case of search etc, thus, the two are inextricably linked with each other.
Before proceeding further, we may now examine the provision contained in sub-section (2) of section 153, which has been dealt with by Ld. Counsel. It provides that if any assessment made under subsection (1) is annulled in appeal etc., then the abated assessment revives.
However, if such annulment is further nullified, the assessment again abates. The case of the Ld. Counsel is that this provision further shows that completed assessments stand on a different footing from the pending assessments because appeals etc. proceedings continue to remain in force in case of completed 21 ITA No. 4309/ Mum/2014 M/s Bermaco Energy Ltd. ( A . Y : 2 0 0 6 - 0 7 ) assessments and their fate depends upon subsequent orders in appeal. On consideration of the provision and the submissions, we find that this provision also makes it clear that the abatement of pending proceedings is not of such permanent nature that they cease to exist for all times to come. The interpretation of the Ld. Counsel, though not specifically stated, would be that on annulment of the assessment made u/s 153(1), the AO gets the jurisdiction to assess the total income which was vested in him earlier independent of the search and which came to an end due to initiation of the search.
The provision contained in section 132 (1) empowers the officer to issue a warrant of search of the premises of a person where any one or more of conditions mentioned therein is or are satisfied, i.e. - a) summons or notice has been issued to produce books of account or other documents but such books of account or documents have not been produced, b) summons or notice has been or might be issued, he will not produce the books of account or other documents mentioned therein, or c) he is in possession of any money or bullion etc. which represents wholly or partly the income or property which has not been and which would not be disclosed for the purpose of assessment, called as undisclosed income or property. We find that the provision in section 132 (1) does 22 ITA No. 4309/ Mum/2014 M/s Bermaco Energy Ltd. ( A . Y : 2 0 0 6 - 0 7 ) not use the word "incriminating document". Clauses (a) and (b) of section 132(1) employ the words "books of account or other documents". For harmonious interpretation of this provision with provision contained in section 153A, all the three conditions on satisfaction of which a warrant of search can be issued will have to be taken into account.
Having held so, an assessment or reassessment u/s 153A arises only when a search has been initiated and conducted.
Therefore, such an assessment has a vital link with the initiation and conduct of the search. We have mentioned that a search can be authorised on satisfaction of one of the three conditions enumerated earlier. Therefore, while interpreting the provision contained in section 153A, all these conditions will have to be taken into account. With this, we proceed to literally interpret to provision in 153A as it exists and read it alongside the provision contained in section 132(1).
The provision comes into operation if a search or requisition is initiated after 31.5.2003. On satisfaction of this condition, the AO is under obligation to issue notice to the person requiring him to furnish the return of income of six years immediately preceding the year of search. The word used is "shall" and, thus, there is no option 23 ITA No. 4309/ Mum/2014 M/s Bermaco Energy Ltd. ( A . Y : 2 0 0 6 - 0 7 ) but to issue such a notice. Thereafter he has to assess or reassess total income of these six years. In this respect also, the word used is "shall" and, therefore, the AO has no option but to assess or reassess the total income of these six years. The pending proceedings shall abate. This means that out of six years, if any assessment or reassessment is pending on the date of initiation of the search, it shall abate. In other words pending proceedings will not be proceeded with thereafter. The assessment has now to be made u/s 153A (1)(b) and the first proviso. It also means that only one assessment will be made under the aforesaid provisions as the two proceedings i.e. assessment or reassessment proceedings and proceedings under this provision merge into one. If assessment made under sub-section (1) is annulled in appeal or other legal proceedings, then the abated assessment or reassessment shall revive. This means that the assessment or reassessment, which had abated, shall be made, for which extension of time has been provided under section 153B.
The question now is - what is the scope of assessment or reassessment of total income u/s 153A (1) (b) and the first proviso? We are of the view that for answering this question, guidance will have to be sought from section 132(1). If any books of account or other documents 24 ITA No. 4309/ Mum/2014 M/s Bermaco Energy Ltd. ( A . Y : 2 0 0 6 - 0 7 ) relevant to the assessment had not been produced in the course of original assessment and found in the course of search in our humble opinion such books of account or other documents have to be taken into account while making assessment or reassessment of total income under the aforesaid provision. Similar position will obtain in a case where undisclosed income or undisclosed property has been found as a consequence of search. In other words, harmonious interpretation will produce the following results: -
a) In so far as pending assessments are concerned, the jurisdiction to make original assessment and assessment u/s 153A merge into one and only one assessment for each assessment year shall be made separately on the basis of the findings of the search and any other material existing or brought on the record of the AO,
(b) in respect of non-abated assessments, the assessment will be made on the basis of books of account or other documents not produced in the course of original assessment but found in the course of search, and undisclosed income or undisclosed property discovered in the course of search."
10. We have examined the details and noticed that notice u/s 143(2) of the Act became time barred as on 30.11.2007, whereas search took 25 ITA No. 4309/ Mum/2014 M/s Bermaco Energy Ltd. ( A . Y : 2 0 0 6 - 0 7 ) place much later on 31.10-2009. Therefore, it follows that as on the date of search, there was no pending assessment. Subsequently, the A.O. initiated proceedings under s. 153A and in the assessment completed under s. 143(3) r.w.s 153A without any incriminating material found during the course of search and addition of Rs. 1.50 crore was made on the basis of disclosed loan of this amount in the audited accounts. Once this is the position the issue is clearly covered in favour of assessee and against the Revenue by the decision of Hon'ble Bombay High Court in the case of Continental Warehousing Corporation (Nhava Sheva) Ltd. (Supra). Respectfully, following the same and in the given facts, we are of the view that this loan of Rs. 1.50 crore accounted for in the balance sheet for the year ending 31-03-2006 is disclosed in the return of income as evidence by the audited accounts and which has not been abated, the amount of loan cannot be added. Accordingly, we reverse the orders of CIT(A) as well as that of the AO and delete the addition made by the AO. This jurisdictional issue of the assessee's appeal is allowed.
11. As the issue of assessee's appeal on jurisdiction is allowed, the issues on merits need no adjudication. Accordingly, the appeal of the assessee is allowed.
12. In the result, the appeal of assessee is allowed.
Order pronounced in the open court on 13-09-2017.
Sd/- Sd/-
(MANOJ KUMAR AGGARWAL) (MAHAVIR SINGH)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai, Dated: 13-09-2017
Sudip Sarkar /Sr.PS
Copy of the Order forwarded to:
1. The Appellant
2. The Respondent.
3. The CIT (A), Mumbai.
4. CIT
26
ITA No. 4309/ Mum/2014
M/s Bermaco Energy Ltd. ( A . Y : 2 0 0 6 - 0 7 )
5. DR, ITAT, Mumbai
6. Guard file.
//True Copy//
BY ORDER,
Assistant Registrar
ITAT, MUMBAI