Income Tax Appellate Tribunal - Chennai
V.R.Venkaatachalam, Chennai vs Assessee on 17 July, 2015
आयकर अपील य अ
धकरण, 'ए' यायपीठ, चे नई
IN THE INCOME TAX APPELLATE TRIBUNAL
"A" BENCH, CHENNAI
ी चं पज
ू ार , लेखा सद य एवं
ी च ला नागे !साद, या"यक सद य के सम$
BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER &
SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER
आयकर अपील सं./ I.T.A. Nos.2634, 2635, 2636, 2637, 2638 &
2639/Mds/2014
( नधा रण वष / Assessment Years : 2006-07, 2007-08, 2008-09, 2009-
10, 2010-11 & 2011-2012)
V.R. Venkatachalam, The Assistant Commissioner of
No.25, Sir C.V. Raman Road, Vs Income Tax,
Alwarpet, Central Circle I(1),
Chennai 600 018. Chennai
[PAN: AADPV 3203H]
(अपीलाथ&/Appellant) (!'यथ&/Respondent)
अपीलाथ क ओर से / Appellant by : Ms. S. Vidya, C.A.
यथ क ओर से / Respondent by : Shri. Pathlavath Peerya, IRS, CIT
सन
ु वाई क तार ख/Date of hearing : 20.05.2015
घोषणा क तार ख /Date of Pronouncement : 17.07.2015
आदे श / O R D E R
PER CHANDRA POOJARI, ACCOUNTANT MEMBER
These six appeals by assessee's are directed against the different orders of the Commissioner of Income Tax, Chennai, passed u/s.263 of the Act dated 31.07.2014 for the above assessment years.
:- 2 -: I.T.A.Nos.2634 to 2639/Mds/2014 Since the issue in these appeals are common in nature, these appeals are clubbed, heard together, and disposed of by this common order for the sake of convenience.
2. The assessee's grievance in the appeals is with regard to invoking of jurisdiction u/s.263 of the Act by the Commissioner of Income Tax directing the Assessing Officer to pass fresh assessment order which was completed u/s.153A r.w.s. 143(3) of the Act though there was no incrementing materials found during the course of search u/s.132 of the Act.
3. The facts of the case for the A.Y 2006-2007 are that in this case original assessment was completed u/s.143(3) of the Act followed by u/s.153A r.w.s. 143(3) of the Act. Consequent to search action at the residential premises of the assessee on 18.11.2011. According to the Commissioner of Income Tax the Assessing Officer could not examine certain issues relating to investment made by the assessee in various companies and firms and the interest income received /receivable from some of the debtors. It was also noticed by the Commissioner of Income Tax that the opening capital balance for the year 2006-07 and the capital account for the subsequent years was not properly reconciled by the assessee during the course of the :- 3 -: I.T.A.Nos.2634 to 2639/Mds/2014 proceedings u/s 153A r.w.s.143(3). It was further noticed by the Commissioner of Income Tax that the Cash Flow Statement furnished by the assessee indicating drawings and justifying the cash found during the course of search at F14,50,000/- cannot be accepted as the drawings reflected in such Cash Flow Statement would not have been adequate for the assessee's life style and has accordingly proposed to estimate the drawings at a higher level and thus add back the cash found during 'search as unexplained cash since not supported by the Cash Flow Statement filed. For all these deficiencies, he has proposed that the assessment completed u/s 153A be reviewed u/s 263 as Assessing Officer could not examine the issues due to paucity of time as the information was filed before Assessing Officer only on 28.3.2014.
4. From the proposals sent by the Assessing Officer, it was noticed that the assessee has filed three Statement of Affairs for the year- 2006-07 - i) Statement of Affairs along with the return u/s 139(1) ii) During the course of proceedings u/s 143(3) and iii) During the proceedings u/s 153A in the financial year 2013-2014. All the three Statement of Affairs are different among themselves. During the course of the proceedings u/s 143(3) finalized on 31.12.2009, the Assessing Officer has analyzed the Statement of :- 4 -: I.T.A.Nos.2634 to 2639/Mds/2014 Affairs for the assessment years 2006-07 and 2007-08 and has made additions in the Asst.Year 2007-08 as below:-
'' The assessee's business is money lending and filed a statement of affairs as on 31.03.2007 Opening Balance of capital i.e as on 31.03.2006 : 13,16,06,077/- Net profit for the financial year 2006-07 was : 1,87,00,173/-
---------------------
15,03,06,250/-
Closing balance of capital as on 31.03.2007 : 15,25,96,482/-
--------------------
Difference in the Capital Account : 22,90,232/-
---------------------
The ld. Authorised Representative for assessee vide letter dated 22.12.2009 before Commissioner of Income Tax has stated that the closing balance kept with Indian Bank Porur (F3,86,774/) Bank of Baroda (F.12,12,517/-) and SB account with Egmore Benefit Society Ltd (F21,897/-) not reduced than the corresponding capital account balance figure would be F15,09,75,204/-. The difference of F6,68,954/- offered to tax.
The assessee's representative contention was not accepted by Assessing Officer while completing assessment u/s.143(3) of the Act as the assessee's business in money lending, and the assessee has not charging interest from the person to whom money has been lent. According to the Assessing Officer it can't not be distinguished whether that particular loan was interest bearing or not. Hence, the difference of F.22,90,232/- was :- 5 -: I.T.A.Nos.2634 to 2639/Mds/2014 added to the returned income. Aggrieved, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals) against original assessment order passed u/s.143(3) of the Act.
5. On appeal, the Commissioner of Income Tax (Appeals) given relief to the assessee. Further on contesting before the ITAT, the matter was set aside with the direction to the Assessing Officer to re-examine the statement of affairs vide their orders No. 986/MDS/2012 dated 12.09.2012.
6. While re-examining, comparing and contrasting the two Statement of Affairs for both the assessment years 2006-07 and 2007-08, the Assessing Officer has noticed a shortage of F1,01,97,722/- in the liability side for the assessment year 2006- 07 and F12,15,79,373/- for the assessment year 2007-08. When these differences were sought to be explained by the assessee, the assessee has come up with another revised Statement of Affairs as substantial differences in the balances of Assets and Liabilities. Thus, there was substantial discrepancies in the three Statements of Affairs which could not be examined properly by the Assessing Officer during the proceedings u/s 153A finalized on 28.3.2014. Thus, the acceptance of the Revised Statement of :- 6 -: I.T.A.Nos.2634 to 2639/Mds/2014 Affairs was suffering from defects resulting in a assessment erroneous and prejudicial to the interests of revenue. 6.1 The assessee filed revised statement of affairs for assessment year 2005-06, figures of which are basis for opening balances of assessment year 2006-07. Following major discrepancies are as under
(a) figures of loans received has been increased to ₹.15,02,54,907/- from ₹.8,70,17,359/- (difference ₹.6,32,37,548/-. The credit appearing in the books of accounts of assessee is not explained, therefore ,it would have been covered u/s.68, after allowing the assessee an opportunity to explain being difference in opening balances for assessment year 2006-07.
(b) Figures for opening balance of loan given for assessment year 2006-07 has been increased to ₹43,25,53,096/-
(28,97,14,166/- +65,78,171/-+ 1,00,000/-+13,61,60,759/-) from ₹.21,06,23,375/- (difference ₹ 22,19,29,721/-) liable to be considered as un-explained investment.
6.2. Comparison of three statement of affairs for assessment year 2006-2007 has shown following discrepancies.
a) The first SOA shows loan received (balance) of ₹15,83,40,723/-, the second does not show any balance on this account and in third SOA the balance of loan received has been decreased to ₹5,32,54,907/-. It implies that either the assessee has repaid ₹10,50,85,816/- (if compared with the SOA filed along with return u/s 139) / repaid ₹9,70,00,000/- (if compared with the final SOA filed on 28/03/2014) or the balances shown are not true. The sources of repayment have not been verified due to scarcity of time. The bank books filed by the assessee for assessment year 2006-07 do not show any such repayment of loan.
therefore. it may be presumed that the assessee has repaid from undisclosed sources. It may be noted that the assessee has never produced complete books of accounts so that the source could have been ascertained.
:- 7 -: I.T.A.Nos.2634 to 2639/Mds/2014
b) Originally the total balance of loan paid was shown at ₹28,55,32,805/-. In second statement of affairs shown loan paid balance amounting to ₹11,69,94,360/- and it has now been increased to ₹ 31,39,82,017/-(133369665+ 36578171 +100000+ 143934181). The difference is visible. The assessee has even changed the balance with M/s. TCP which was earlier shown as ₹11,69,94,360/- and now it is shown at ₹13,33,69,665/-. The filed copy of account of banks in the books of assessee does not explain the difference and the source of payment of ₹11,85,71,079/- (43,25,53,096 - 31,39,82,017/- ) is not explainable from the bank statements.
6.3 Comparison of three statement of affairs for assessment year 2007-08 shown following discrepancies.:
(a) Originally, the statement of affairs for AY 2007-08 showed balance of loan received of ₹38,96,40,723/- (liability side of SOA). The second SOA did not include this item at all but in third statement of affairs filed on 28/03/2014, the balance on this account has been shown at ₹33,70,54,907/-.
Although there is increase in loan received balances if compared with the SOA for AY 2006-07 filed on 28/03/2014, yet difference balances shown in statement of affairs originally filed and the SOA filed on 28/03/2014 is not explainable.
(b) Balances of loan paid was shown at ₹ 52,45,95,954/- in SOA originally filed which stood reduced to ₹1,33,75,858/-. Now in the statement of affairs filed on 28/03/2014, it has been increased to ₹54,71,54,871/-. No explanation is filed by the assessee for such difference and sources of investment
(c) On 11/04/2006, there is a deposit of ₹5,21,898/-. The assessee has credit it as 'other income' but it is not reflected from the statement of taxable income. This amount has escaped assessment. Similarly, there is another credit of ₹25,000/- on 19/09/2006.
(d) The assessee had given list of balances of loan received and paid during the assessment proceedings u/s 143(3) taken up against return filed u/s 139(1). The assessee has furnished a list of such loan paid and loan received balances as per SOA filed on 28/03/2014. It is noticed that there is huge :- 8 -: I.T.A.Nos.2634 to 2639/Mds/2014 difference in the total as well as individual name wise details of loan received and paid when compared with the list given earlier. A comparison is given hereunder:-
Details for Loans As per old SOA As per New SOA
Received filed alongwith filed
return u/s.139(1)
Balances as on 31.03.2007
1 A.Koteewaran Loan 500000
2 A. Kuberan Loan 1000000
3 Appu Hotels Ltd 2813000
4 Baba Enterprises Loan 5552000
5 Karnataka Breweries & 8700000 8700000
Distilleries P. Ltd
6 MBDL Loand 500000
7 N. Neelavathi Loan 500000
8 Poovaiammal Loan 132243
9 Sapthagiri Enterprises 3000000 20000000
loan
10 S. Lakshmi Narayani 450000
Ammal Loan
11 S. Pushapavalli Loan 500000
12 Thirumagal Mills Loan 592200
13 Udayar Investments & 26893650
Consultancy Co. P. Ltd
14 Vijay Televisions Ltd 5600000
15 VRV Imports & 4740421 3448566
Exports P. Ltd.
16 E.K Lingamoorthy 1500000 1500000
17 Kavitha Narendran 600000
18 KMB Granites 22000000 22000000
19 K. Nalliappan 700000
20 K. Neelavathy 2000000 2000000
21 Kumbakonam Kannan 3740000
22 K. Yusuff Basha 3800000 3800000
23 Marrs Granities 1000000
24 M.S.Meiyappan 150000
25 Natarajan Nandagopal 658458
26 N. Chandrasekar 212410
27 P. Yasodha 3000000 3000000
28 Raghava Enterprises Pl 25300000
Ltd
29 Ravikumar Industries 5000000
30 R.Gandhi 500000
31 R.G.Narendran 400000
32 Salem Basha 14806341 13806341
:- 9 -: I.T.A.Nos.2634 to 2639/Mds/2014
33 Salem KMB 10000000 10000000
Constructions
34 Shri. Ramdhas Estates 11800000 11800000
P.Ltd
35 Sundaram Finance Ltd 130000000 1300000000
36 Sundaram Home 700000000 70000000
Fiance Ltd
37 Swasti Chem Pvt. Ltd 4000000 4000000
38 Trident Granities 2000000
39 V. Kannan 15000000
40 D.K. audikeshvulu 20000000
41 The Narasimha mills 10000000
ltd
42 Sapthagiri enterprises 3000000
Total 389640723 337054907
Loan paid balance as on 31.03.2007
Sl. Details for loans received As per old As per
No SOA filed New SOA
along with filed
return
u/s.139(1)
1 7th Channel communications 3600000
2 Aalwel Fabs 500000
3 Anchor Breweries Ltd 20070
4 Andal Loan 10770508
5 A.N. Ramesh Babu 500000
6 Arihan Shelters India Ltd 30000000 30000000
7 Arudhathi loan 46225777
8 A.S. Thillainayam loan 504438
9 A.V.L. Narayanswamy loan 100000
10 A.V.M . Productions 15000000 15000000
11 C.M.K. Reddy loan 300000
12 Cosy Realtors P. Ltd 1080000 1371302
13 Diamond District 405000
14 Freezing products 165600
15 G. Babu loan 300000 300000
16 G. Hemadri babu 50000000 50000000
17 G. Sulochana loan 1500000 1500000
18 Indira M. Kameswaran loan 1000000 1000000
19 Jayshree holdings pvt. ltd 17000000 21297064
20 J.K. Puri loan 500000
21 Karur Manoharan loan 500000
22 K.M. Ameenuddin loan 500000
:- 10 -: I.T.A.Nos.2634 to 2639/Mds/2014
23 Master Hari Venkataraman 350000
24 Matrix Foundations P. Ltd 1245600 3299571
25 Meera papers ltd 5000000
26 M.G. Enterprises Loan 4007762
27 M. Nithiyandam loan 300000
28 Mookambika Realotrs pvt ltd 14921500 19336595
29 M. Radha loan 1075500
30 Nauzer Nowraji Bangalore 3000000 3000000
31 N.P.V. Ramasamy Udayar 21296379 21176379
(HUF)
32 NVK Arumugam loan 800000
33 Padma loan 1570400
34 Promoters contribution to 57974008
TCP ltd
35 Radha Venkatachalam loan 53168130 53168131
36 Ramaniklal Gosalia & Co 50000000 50000000
37 Ramraj associates loan 2489885
38 R. Kalalam loan 2022894 2022894
39 Sabari Steels loan 900000
40 Samyuktha loan 320000 5820000
41 Sengutuvan loan 2077502 21577502
42 Sri Ramachandra Educational 3817238 3817238
and health trust
43 Sterling computer loan 2000000
44 Sunil Yunus Zia 10000000 10000000
45 S. K. Varatharaj loan 1000000
46 Swadesamitran Ltd Loan 2785000
47 T. Amudha loan 5130758
48 Tanchem imports & Exports 10052263 10052263
p. Ltd
49 Thiruballa Realtors P. Ltd 6600000 62638850
50 Thiruballa Realtors P. Ltd 26706360 29360819
51 Transworld properties P. Ltd 5500000
52 Trivitron Medical Systems P. 5000000 5000000
Ltd
53 TVRSS Enterprises 18223932
54 Vivek Gover loan 1314450
55 Woods Indian Negotiations 550000
56 Binny Ltd 17500000 17500000
57 Virion Chemicals & 5425000
Distilleries Ltd
58 Advance for land 37437564
59 TCP 18686728
60 Thiruvalluvar textiles p. ltd 51878171
61 Jagathra holdings p. ltd 100000
62 Four square realtors p. ltd 15519
63 Sun breeze realtors p. ltd 15519
:- 11 -: I.T.A.Nos.2634 to 2639/Mds/2014
Total 524595954 547154871
(f) The assessee vide his letter dated 26.03.2014 has submitted that the is not able to furnish evidences for sources of fund invested in shares of M/s. Thiruvalluvaar Textiles Private Ltd. For this, he has offered ₹1,26,000/- for taxation. This addition has not been made.
(g) There is no reason for exclusion of certain parties from the lists mentioned above and inclusion of new entries. There is also no reason mentioned by the assessee to deviate from the figures originally shown as loan received and loan paid''.
7. The Commissioner of Income Tax observed the he had examined the records and gone through the discrepancies pointed out by the Assessing Officer in the statement of affairs in the proposals u/s.263 and compared the same with the explanation and the statements filed by the assessee. The Commissioner of Income Tax observed that the assessee had furnished statement of affairs with the original return filed u/s.139(1) and subsequently the same were revised during the course of proceedings u/s.143(3) and later 153A on 28.03.2014. However, the assessee could not explain the discrepancies among the three statement of affairs filed during the proceedings u/s.153A. According to Commissioner of Income Tax even though, it was stated that the books of accounts seized on 29.1.1985, 18.12.1985, 17.08.1990 and 25.11.1999 were not yet returned to the assessee, it was not clear as to why copies of the same were not taken by the assessee. This cannot be an explanation for not filing a proper :- 12 -: I.T.A.Nos.2634 to 2639/Mds/2014 Statement of Affairs. Further the Commissioner of Income Tax noticed that the assessee was a Director or Partner in about 28 companies and he has been extending loans to various persons in substantial sums as part of his money lending business. It was not clear from the Statement of Affairs that all the investments in the firms and companies were properly reflected in the books of account and also reflected the loans given by him to various persons. Thus, according to Commissioner of Income Tax it was essential that the three Statement of Affairs filed at different times shall be properly reconciled and a finality be brought to tax.
8. The Commissioner of Income Tax further observed that the Assessing Officer should have merged all the three Statements of Affairs filed and constructed a tentative Trial Balance from the balances under each account. After balancing the Trial balance, the Assessing Officer should have independently verified with each creditor or debtor to ascertain the balances by calling for statement of the assessee in the respective books. The Assessing Officer should also have verified the investments made with different entity separately and also ascertain the quantum of investment made with reference to the purchase documents etc. While doing so, the incomes received from such loans, investments and properties should :- 13 -: I.T.A.Nos.2634 to 2639/Mds/2014 be verified and taken into account from the respective account. Similarly, wherever the assessee has borrowed the monies, the Statement of Accounts should be obtained from the creditors along with the interest paid. It was also to be ascertained whether the assessee was following Cash method of accounting or Mercantile method of accounting to arrive at the correct balances and correct incomes /expenditures from each of the assets as well as loans However, this is a very elaborate exercise involving not only the assessment years 2006-07 and 2007-08 but also subsequent assessment years and this could not have been completed in the three days available for the Assessing Officer before the proceedings are completed in time on 31.3.2014. Hence, the proceedings u/ 153A r.w.s. 143(3) finalized on 29.03.2014 are set aside with the direction to re- examine all the assets and liabilities bearing in the Balance Sheet on the above mentioned lines and also to arrive the correct income. Since the assessment was being set aside for re-examining and reworking out the statement of affairs for the assessment year 2006-07 and the same will have a cascading effect on the subsequent assessment year, the assessment year 2007-08 to 2012-13 were also set aside for carrying out the same exercise in the Statement of Affairs. Further, a true picture on Statement of Affairs :- 14 -: I.T.A.Nos.2634 to 2639/Mds/2014 was also essential to ascertain the sources and nature of use of properties purchased, for determining the Wealth Tax liability. When this proposition was put forth to the Authorized Representative for assessee, he has also fairly conceded that the Statement of Affairs needs to be examined in detail. For this reason, this assessment was set aside for fresh examination of the Statement of Affairs by the Assessing Officer in the lines discussed above and also to arrive at the interest incomes from all the loans given and also, the interest paid on the loans borrowed.
9. The next issue is that the Commissioner of Income Tax considered inadequate drawings for personal consumption and its impact on the cash flow starting from the Asst.Year 2006-07. The assessee has claimed F1,20,000/- has been withdrawn by him and coupled with the drawings by the other family members who are also assessed to tax, it was claimed that the total drawings were adequate for making their personal and family needs.
9.1 The Commissioner of Income Tax observed that the assessee claimed that the companies and firms in which the assessee was a Director or Partner have been meeting the expenditure on transportation, telephones etc. With these observations, the assessee :- 15 -: I.T.A.Nos.2634 to 2639/Mds/2014 has argued that the Cash Flow Statement for the Asst. year 2006-07 and also for the subsequent Asst. Years and thus claimed that the cash found during the search at F14,51,000/- fully explained.
10. The Commissioner of Income Tax observed that the Assessing Officer has not accepted the explanation of the assessee that cash withdrawn for personal consumption was adequate as the assessee's personal expenditure for the period 1.4.2011 to date of search 18.11.2011 stands at F4,60,000/-. It was contention of the Assessing Officer that if the assessee has spent F4,60,000/- from April to 18.11.2011, the date of search i.e. seven and half months, the expenditure could have been much more than the withdrawals of the assessee in the earlier years too, than what have been shown in books. Hence, he has interpolated the probable expenditure incurred by the assessee in the earlier years by applying the Cost Inflation Index method inversely as given below:-
"Examination of these cash accounts revealed that the assessee has never withdrew cash for house-hold expenses like food and clothing. This issue was discussed with the ld. Authorised Representative for assessee. The ld. Authorised Representative for assessee filed a revised cash tally. This cash tally has been found not acceptable, since besides other abnormalities, the cash receipts for each year does not match with the cash book and the withdrawal for household expenses is not reflected with the cash book. The expenditure on house hold expenses although not reflected from the cash account was estimated by :- 16 -: I.T.A.Nos.2634 to 2639/Mds/2014 assessee. The cash withdrawal for financial year 2006-07 to 2011-12 (upto date of search) have been claimed to be ₹1,80,000/-, ₹2,40,000/-, ₹3,00,000/-, ₹3,60,000/-, ₹4,20,000/- and ₹4,60,000/-(upto DOS) respectively. The cash withdrawal from 01/04/2011 to 18/11/2011 (for 7.5 month) has been claimed to be ₹4,60,000/-. On the basis of claimed household expenses for search year, the house-hold expenses for earlier years were estimated to be ₹40,10,028/-by applying cost inflation ratio as under:
Asst. Year Estimate of C.I. ratio Assessee's requirement of claim of assessee withdrawal 2006-07 465977.1 0.957611 120000 2007-08 486603.8 0.941924 180000 2008-09 516606.4 0.946735 240000 2009-10 545671.3 0.920886 300000 2010-11 592550.3 0.888889 360000 2011-12 666619.1 0.905732 420000 2012-13 736000.00 736000 * upto date of search Total 4010028 * ₹4,60,000 X12/7.5
11. The Commissioner of Income Tax observed that the Assessing Officer as well as the explanations furnished by the ld. Authorised Representative for assessee with reference to the inadequacy or adequacy of the drawings. The Commissioner of Income Tax did not approve the methodology adopted by the Assessing Officer for arriving at the expenditure of the earlier years with reference to the expenditure of the current year. The reverse interpolation of the Cost Inflation Index was neither :- 17 -: I.T.A.Nos.2634 to 2639/Mds/2014 scientific nor sanctioned by the statute, as the expenditures need not remain constant in each year. However, the Assessing Officer should have examined the adequacy of the drawings for meeting the personal expenditure of the assessee on year to year basis as the contents of expenditure was likely to change from year to year. Hence, this issue was also set aside with a direction to the Assessing Officer to ascertain the details of personal expenditure in the Asst.Year 2011-12 and come to a reasonable conclusion about the amount of personal expenses incurred. Thereon, he may decide the justification and explanation for the cash found during search at F14,78,000/- and the same may be decided on independent merits in the relevant Assessment year. Similar is the position in other assessment years. Against this, the assessee is in appeal before us.
12. The ld. Authorised Representative for assessee submitted that the assessee was engaged in the money lending business and was also a partner in various firms and was a director in companies. A search and seizure operation was carried out in the group cases of Trivitron group of companies on 18th November, 2011 at the office, factory and residential house of Directors. In the case of the assessee search was conducted at :- 18 -: I.T.A.Nos.2634 to 2639/Mds/2014 his residence. During the course of search operations, the Income Tax department had seized cash amounting to F14,50,000/- and jewellery valuing 4234 grams (net). There were no other material, books or other documents found/seized during the said search operations. A sworn statement was recorded from the assessee on the date of search questioning the source of the cash and the jewellery seized. The assessee gave an impromptu statement that he possessed about F 15 to 20 lakhs of which F 10 lakhs were collected from his friends and well wishers for the construction activity of the Pollachi Narasimhar Temple and the same had to be handed over to the temple authorities. The assessee had also stated that there was adequate cash balance available with him as per the books of accounts. Regarding the jewellery he had replied that those jewellery belonged to his mother, (late) Mrs Kamalam and his wife Mrs Radha Venkataachalam and they had already declared jewellery to the tune of 5516.35 grams of net weight under VDIS'
97. Consequent to the search operations, notice u/s.153A of the Act was issued for the AYs 2006-07 to 2011-12 and the assessments were completed u/s. 153A r.w.s.143(3) of the act on 28th March, 2014 accepting the original returned/ assessed :- 19 -: I.T.A.Nos.2634 to 2639/Mds/2014 income, without making any additions. Later the Commissioner of Income Tax- Central-I invoked Sec 263 stating that the assessment was held to be erroneous and prejudicial to the interest of revenue. It was also stated in the notice u/s 263 that the Assessing Officer, due to paucity of time, had not verified the loan balances and hence the assessment was treated as erroneous and prejudicial to the interests of revenue and accordingly an order u/s 263 of the Act was passed by the Commissioner of Income Act on 31.7.2014.
13. In this connection, ld. Authorised Representative for assessee submitted the following:-
(i) During the course of search operations, there was no incriminating material found by the Income Tax Department other than the cash and the jewellery as stated supra.
(ii) During the course of Sec 153A proceedings, the Assessing Officer had called for various details and the same were filed, of which, among others was the Statement of Affairs and the bank statements.
(iii) The assessee had filed statements of affairs pertaining to the money lending business, along with the original return of :- 20 -: I.T.A.Nos.2634 to 2639/Mds/2014 income on 26/10/2006 for AY 2006-07 and on 31/10/2007 for AY 2007-08. These returns (ie., AY 2006-07 and AY 2007-08) were duly subjected to scrutiny vide orders u/s 143(3) dated 28/11/2008 and 31/12/2009 and AY 2007-08) were duly subjected to scrutiny vide orders u/s 143(3) dated 28/11/2008 and 31/12/2009 for AY 2006-07 and AY 2007-08 respectively, after examining the loan balances contained thereon together with their confirmation of balances. These details were admittedly available in the file of the assessing officer while completing the search assessment proceedings u/s 153A of the IT Act. During the course of search assessment proceedings, the assessee had filed the statement of affairs in respect of his personal assets and liabilities.
(iv) Later a combined statement of affairs was filed before the Assessing Officer as per his directions during the course of search assessment proceedings on 26th March 2014.
(v) The Assessing Officer completed the 153A proceedings for the AYs 2006-07 to AY 2011-12 without making additions as he was apparently and admittedly convinced that the assessments for the Asst Years 2006-07 and 2007-08 were duly completed u/s :- 21 -: I.T.A.Nos.2634 to 2639/Mds/2014 143(3) after thorough verification of loan balances, among others, and by giving due credence to the undisputed fact that there was no search material found during the course of search relatable to the Asst Years 2006-07 to 2011-12.
(vi) The cash found during the course of search operations was added as the income of the assessee in the year of search i.e in Asst Year 2012-13. During the course of assessment proceedings, the assessee had filed a cash book without considering the cash drawn for his personal expenses and the total of the cash available with himself and his family members was F30 lakhs (approx). Later on, when the Assessing Officer asked for the drawings for his personal expenditure, the assessee had stated that expenses like telephone, electricity etc., were taken care by the company in which he is the managing director and the same was included in the Form 16 as perquisite. The personal expenses like food and clothing were met by the assessee from the cash balance. The assessee filed a combined cash book of himself and his family members considering the drawings for the personal expenses like food and clothing and arrived at the cash balance of F10 lakhs (approx).
(vii) However, the Assessing Officer did accept to the :- 22 -: I.T.A.Nos.2634 to 2639/Mds/2014 assessee's submission but did not agree to the quantum of the drawings made by the assessee. Accordingly, the Assessing Officer applied the Cost Inflation ratio for the drawings ought to have been made by the assessee from AYs 2006-07 up to the date of search and arrived at an estimated drawings of F37,34,028/- and concluded that the assessee is not left with any cash as on the date of search as per books of accounts and accordingly the assessee did not have any source to explain the cash seized in the sum of F14,50,000/- thereby leading to an addition u/s.69A of the act for the AY 2012-13. A copy of the scrutiny assessment order u/ s 143(3) of the Act for the Asst Year 2012-13 (i.e the year of search) is enclosed in Page Nos.25-
30 of the Paper Book. Hence it was submitted that effectively the adequacy / inadequacy of drawings had been examined in detail by the Assessing Officer during the course of search assessment proceedings and hence on this account, the provisions of section 263 of the Act could not be invoked by the Commissioner for Income Tax.
(viii) The Jewellery found during the course of search operations was not added as the income of the assessee for any of the years from AY 2006-07 to AY 2011-12. In fact detailed :- 23 -: I.T.A.Nos.2634 to 2639/Mds/2014 questionnaire were given by the Learned AO for the Asst Year 2012-13 with a show cause notice as to why the Jewellery found during the course of search should not be added as undisclosed income of the assessee for the Asst Year 2012- 13. On going through the detailed replies given by the assessee in this regard, no addition was made by the Assessing Officer for the Asst Year 2012-2013.
14. According to ld. Authorised Representative for assessee:-
(i) there was no incriminating material found during the course of search operations other than the cash and jewellery. A copy of the panchanama was enclosed in Page Nos. 31-37 of the Paper Book.
(ii) The assessments for the Asst Years 2006-07 and 2007-08 were duly completed u/s.143(3) after thorough verification of loan balances together with their confirmations.
(iii) The proceedings u/s/153A were concluded for the AYs 2006-07 to AY s 2011-12 without making additions, as the AO was apparently convinced that the loan balances reflected in the statement of affairs were duly examined in detail for the Asst Years 2006-07 and 2007-08 during scrutiny assessment proceedings and more so in view of the fact that, admittedly, there was no incriminating material found during the course of search relatable to Asst Years 2006-07 to 2011-12 for making any addition in any manner whatsoever loan balances reflected in the statement of affairs were duly examined in detail for the Asst Years 2006-07 and 2007-08 during scrutiny assessment proceedings and more so in view of the fact that, admittedly, there was no incriminating material found during the course of search relatable to Asst Years 2006-07 to 2011-12 for making any addition in any manner whatsoever.
(iv) While this is so, the Commissioner of Income Tax-
Central-I erred in setting aside the entire assessment :- 24 -: I.T.A.Nos.2634 to 2639/Mds/2014 proceedings to the file of the AO for review of the Statement of Affairs filed during the course of Sec 153A proceedings.
15. The ld. Authorised Representative for assessee placed reliance on the decision of the Special Bench of the Mumbai Bench rendered in the case of CIT vs All Cargo Global Logistics Ltd in ITA Nos. 5018 to 5022 & 5059/M/2010 which was recently affirmed by the Bombay High Court in the case of CIT vs Continental warehousing Corporation in ITA no. 523 of 2013, dated 21st April, 2015. The operative portion of the judgement of Bombay High Court is as follows:-
"a) In assessments that are abated, the AO retains the original jurisdiction as well as jurisdiction conferred on him u/s. 153A for which assessments shall be made for each of the six assessment years separately;
b) In other cases, in addition to the income that has already been assessed, the assessment u/s.153A will be made on the basis of incriminating material, which in the context of relevant provisions means - (i) books of account, other documents, found in the course of search but not produced in the course of original assessment, and (ii) undisclosed income or property discovered in the course of search.
15.1 The ld. Authorised Representative for assessee further submitted that as per the provisions of Sec 263 of the Income Tax Act, 1961, the orders can be revised by the Commissioner of Income Tax if the Commissioner of Income Tax considers that the order passed by the AO is erroneous and prejudicial to the interests of the revenue. The bare reading of the section makes it :- 25 -: I.T.A.Nos.2634 to 2639/Mds/2014 clear that for an order to be revised, there should be satisfaction of dual conditions i.e (i) the order should be erroneous and (ii) it should be prejudicial to the interests of the revenue. Applying the ratio of the decision of the Bombay High court as stated above, the assessment could be framed only based on the incriminating material found during the search operations and not otherwise. Hence, the Assessing Officer had rightly applied the ratio decidendi in the case of All Cargo Logistics by placing reliance on the order of the Mumbai Tribunal Special Bench and accordingly decided not to make any addition for the Asst Years 2006-07 to 2011-12. The ld. Authorised Representative for assessee submitted that the Assessing Officer had taken one possible view in the eyes of law and accordingly made a decision not to make any addition. Hence, it cannot be construed that the order is erroneous within the meaning of section 263 of the Act and accordingly invoking of jurisdiction u/s 263 of the Act by the CIT was null and void. Reliance was placed in this regard on the decision of Supreme Court in the case of Malabar Industrial Co. Ltd (2000) 243 ITR 83 (SC), in which it observed that ''a bare reading of this provision makes it clear that the pre-requisite to the exercise of jurisdiction by the Commissioner suo motu under it, is that :- 26 -: I.T.A.Nos.2634 to 2639/Mds/2014 the order of the Income-tax Officer is erroneous in so far as it is prejudicial to the interests of the Revenue. The Commissioner has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. If one of them is absent - if the order of the Income-tax Officer is erroneous but is not prejudicial to the Revenue or if it is not erroneous but is prejudicial to the Revenue - recourse cannot be had to Sec. 263(1) of the act''. 15.2 Moreover, the notice u/s 263 of the Income Tax Act, 1961 received by the assessee from the office of the Commissioner of Income Tax-Central I, it was stated that there was no adequate inquiry made by the Assessing Officer on the Statement of Affairs filed by the assessee due to paucity of time. This proves that the provisions of Sec 263 of the Income Tax Act, 1961 are invoked by the CIT as in his opinion that the inquiry made was inadequate. It is submitted that this reason cannot be the subject matter of revision proceedings u/s 263 of the Act. Reliance was placed in this regard on the decision of Delhi High Court rendered in the case of CIT vs. Sunbeam Auto Ltd (2011) reported in 332 ITR
167.
:- 27 -: I.T.A.Nos.2634 to 2639/Mds/2014 15.3 The ld. Authorised Representative for assessee humbly submitted that the issues raised by the CIT in the show cause notice can be stated as "not considered by the Assessing Officer"
only on the assessment which was completed u/s.143(3).The CIT cannot invoke the provisions of section 263 on the assessment completed u/s 153A r.w.s 143(3) dated 28/03/2014 for the assessment years 2006-07 and 2007-08 since the same was barred by limitation.
15.4 The ld. Authorised Representative for assessee further relied to the decision of the Jurisdictional High Court in the case of CIT v Shriram Engineering Construction Company Ltd [2011] 330 ITR 568 (Mad) wherein it was held that the period of limitation applicable for revision u/s.263 commences from the dates of the original assessment and not from the date of order of rectification u/s.154. It was further held that what was sought to be revised was the assessment order and not the rectification order passed because the rectification order was passed for the limited purpose of reduction of deduction u/s.80-IA, therefore the revision was barred by limitation.
15.5 The ld. Authorised Representative for assessee relied on the :- 28 -: I.T.A.Nos.2634 to 2639/Mds/2014 above decisions, it can be construed that the CIT can invoke the provisions of Sec 263 for assessment year 2006-07 and assessment year 2007-08 for the assessments completed on 28/11/2008 and 31/12/2009 for assessment year 2006-07 and assessment year 2007-08 respectively and not for assessments completed on 28/03/2014 for the said years. Hence it is barred by limitation.
15.6 The ld. Authorised Representative for assessee prayed for dismissing the appeals by invoking of jurisdiction u/s.263 of the Act passed by the Commissioner of Income Tax.
16. The Departmental Representative relied on the order of the Commissioner of Income Tax and specifically stated that a true picture of statement of affairs was essential to ascertain the sources and nature of use of properties purchased, for determining the Wealth Tax liability. The ld. Authorised Representative for assessee before the Commissioner of Income Tax has also fairly conceded that the statement of affairs needs to be examined in detail. For this reason, the assessment was set aside for fresh examination of the statement of affairs by the Assessing Officer and also to arrive at the interest incomes from all the loans given and also, the interest paid on the :- 29 -: I.T.A.Nos.2634 to 2639/Mds/2014 loans borrowed.
17. We have heard both the sides and perused the material on record. In this case for the assessment year 2006-07, the original assessment was completed u/s.143(3) of the Act on 28.11.2008. Later on, there was a search action u/s.132 of the Act at the residential premises on 18.11.2011. Consequent to search action the assessment for the assessment year 2006-07 was framed u/s.153A r.w.s.143(3) of the Act vide order dated 28.03.2014, wherein the Assessing Officer computed assessed income at F3,12,33,973/- as he did in u/s.143(3) of the Act. In other words, there was no addition of whatsoever to the returned income consequent to search action. However, as evident from the para one of order passed by the Commissioner of Income Tax passed u/s.263 of the Act, the Assessing Officer could not examine certain issues relating to the investments made by the assessee in various companies and firms and interest incomes received/ receivable from some of the debtors. It was also noticed that the opening capital balance for the year 2006-07 and the capital account for the subsequent years was not properly reconciled by the assessee during the course of the proceedings u/s.153A r.w.s. 143(3). It was further noticed by the Assessing Officer that the Cash Flow Statement furnished by :- 30 -: I.T.A.Nos.2634 to 2639/Mds/2014 the assessee indicating drawings and justifying the cash found during the course of search at F14,50,000/- cannot be accepted as the drawings reflected in such Cash Flow Statement would not have been adequate for the assessee's life style and the Assessing Officer has accordingly proposed to estimate the drawings at a higher level and thus add back the cash found during search as unexplained cash since not supported by the Cash Flow Statement filed. For all these deficiencies, the Assessing Officer has proposed that the assessment completed u/s.153A be reviewed u/s.263 by Commissioner of Income Tax as he could not examine the issues due to paucity of time as the information was filed before him only on 28.03.2014.
18. Thus based on the above proposition, the assessment recorded was called for and the same was examined by the Commissioner of Income Tax and issued notice u/s.263 on 20.06.2014. After the proposals sent by the Assessing Officer, it was noticed that the assessee has filed three Statement of Affairs for the year- 2006-07 - i) Statement of Affairs along with the return u/s 139(1) ii) During the course of proceedings u/s 143(3) and iii) During the proceedings u/s 153A in the financial year 2013-2014. All the three Statement of Affairs are different among themselves.
:- 31 -: I.T.A.Nos.2634 to 2639/Mds/2014 During the course of the proceedings u/s 143(3) finalized on 31.12.2009, the Assessing Officer has analyzed the Statement of Affairs for the assessment years 2006-07 and 2007-08 and has made additions in the Asst.Year 2007-08 as below:-
'' The assessee's business is money lending and filed a statement of affairs as on 31.03.2007 Opening Balance of capital i.e as on 31.03.2006 : 13,16,06,077/- Net profit for the financial year 2006-07 was : 1,87,00,173/-
---------------------
15,03,06,250/-
Closing balance of capital as on 31.03.2007 : 15,25,96,482/-
--------------------
Difference in the Capital Account : 22,90,232/-
---------------------
The ld. Authorised Representative for assessee vide letter dated 22.12.2009 before the Commissioner of Income Tax has stated that the closing balance kept with Indian Bank Porur (F3,86,774/-), Bank of Baroda (F.12,12,517/-) and SB account with Egmore Benefit Society Ltd (F21,897/-) not reduced than the corresponding capital account balance figure would be F15,09,75,204/- The difference of F6,68,954/- offered to tax. The assessee's representative contention was not be accepted by Commissioner of Income Tax as the assessee's business in money lending, and the assessee has not charging interest from the person to whom money has been lent. According to the Commissioner of Income tax it can't not be distinguished whether :- 32 -: I.T.A.Nos.2634 to 2639/Mds/2014 that particular loan was interest bearing or not. Hence, the difference of F.22,90,232/- was added to the returned income. Thus, it was also on record that original assessment order passed u/s.143(3) of the Act for the assessment year 2007-08 on 31.12.2009 was subject matter of the appeal before the Commissioner of Income Tax (Appeals) as well as before the Tribunal. The Tribunal in ITA No.986/Mds/2012 vide its order dated 12.09.2012, directed the Assessing Officer to re-examine the statement of affairs filed by the assessee.
19. Inspite of this, now the Commissioner of Income Tax wanted to review the order of the Assessing Officer passed u/s.153A r.w.s 143(3) dated 28.03.2014. First of all u/s.263 of the Act, the Commissioner of Income Tax must call for examining the records of the proceedings under Act and after examining the same if he came to a conclusion that the order passed by the Assessing Officer to be erroneous in so far as it is prejudicial to the interest of revenue, then he can revise the assessment order u/s.263 of the Act and issue notice. There should be independent application of mind by Commissioner of Income Tax himself. He cannot solely act upon the proposal sent by Assessing Officer so as to rectify any omission on the :- 33 -: I.T.A.Nos.2634 to 2639/Mds/2014 part of the Assessing Officer since the Assessing Officer has the remedy to rectify the same under the Act. From the proceedings u/s.263 of the Act in the present case, it is evident from the first para of the impugned order that the Commissioner of Income Tax acted upon the proposal sent by the Assessing Officer which is not permitted u/s.263 of the Act.
20. Further issue raised by the Commissioner of Income Tax is subject matter of appeal in respect of original assessment passed u/s.143(3) of the Act before the Tribunal for the assessment year 2007-08. The original assessment order passed u/s.143(3) was set aside by the Tribunal and remitted back to the file of the Assessing Officer to re-examine vide Tribunal order in ITA No.986/Mds/2012, dated 12.09.2012. So there is no doubt whatsoever as regards the matter covered by the assessment order which have been perused by the assessee in appeal on earlier occasion. The power of revision conferred on the Commissioner of Income Tax was restricted to the order passed by the Assessing Officer. It is further to be noted that whatever the order Tribunal passed, the order of the Assessing Officer ceases to exist and merges in the order of the Tribunal and thereafter, the Tribunal order stands and is operative and :- 34 -: I.T.A.Nos.2634 to 2639/Mds/2014 not the original assessment order. Then it is to be noted that Commissioner of Income Tax through proceedings u/s.263 cannot sit over on the order of the Tribunal so as to decide what is right or wrong. In other words, in respect of any issue which was subject matter of the appeal before the Tribunal and the Tribunal decided it one way or other, the Commissioner of Income Tax would not take up the same issue in proceedings u/s.263 of the Act as held by jurisdictional High Court in the case of CIT vs. Farida Prime Tannery, 259 ITR 342 (Mad). The Commissioner of Income Tax observed in its order at para 5 that while re-examining, comparing and contrasting the two Statement of Affairs for both the assessment years 2006-07 and 2007-08, the Assessing Officer has noticed a shortage of F1,01,97,722/- in the liability side for the assessment year 2006-07 and F12,15,79,373/- for the assessment year 2007-08. When these differences were sought to be explained by the assessee, the assessee has come up with another revised Statement of Affairs as substantial differences in the balances of Assets and Liabilities.
There was substantial discrepancies in the three Statements of Affairs which could not be examined properly by the Assessing Officer during the proceedings u/s 153A finalized on 28.3.2014.
:- 35 -: I.T.A.Nos.2634 to 2639/Mds/2014 Thus, the acceptance of the Revised Statement of Affairs was suffering from defects resulting in a assessment erroneous and prejudicial to the interests of revenue. The Commissioner of Income Tax in its order u/s.263 wanted to review the giving effect order to Tribunal order by Assessing Officer which is not possible. If there is any error in giving effect order by the Assessing Officer, that order is to be reviewed and not the order passed u/s.153A r.w.s.143(3) of the Act. There is no dispute that Section 153A is applicable in this case. Hence, the Assessing Officer is obliged to issue notice under section 153A in respect of six preceding years, preceding the year in which search etc. has been initiated. Thereafter, he has to assess or reassesses the total income of these six years. It is obligatory on the part of the Assessing Officer 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. 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 second proviso which states that pending assessment or reassessment on the date of initiation of search shall abate. This means that an assessment :- 36 -: I.T.A.Nos.2634 to 2639/Mds/2014 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 under section 153A. The case of 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 revenue 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 under section 153A. In other words these two assessments merge 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 interpreted 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 assessees where one or more of such assessments has or have been completed before the date of initiation of search. This is hardly of any relevance in view clear and unambiguous words used by the Legislature. This interpretation does not cause any absurd etc. results.
:- 37 -: I.T.A.Nos.2634 to 2639/Mds/2014 There is no casus omisus 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 are manifold, the foremost being that the provision under section. 153A should be read in conjunction with the provision contained in section 132(1), the reason being that the later 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.
21. Before proceeding further, one may now examine the provisions contained in sub-section (2) of section 153. It provides that if any assessment made under sub-section (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 assessee 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 assessments and their fate depends upon subsequent orders in appeal. On consideration of the provision and the submissions, it is found 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 assessee, :- 38 -: I.T.A.Nos.2634 to 2639/Mds/2014 though not specifically stated, would be that on annulment of the assessment made under section 153(1), the Assessing Officer 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.
22. The provision contained in section 132(1) empowers the officer to issue a warrant of search of the premises of a person where anyone 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, ea lied as undisclosed income or property. The provision in section 132(1) does 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 :- 39 -: I.T.A.Nos.2634 to 2639/Mds/2014 will have to be taken into account.
23. Having held so, an assessment or reassessment under section 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. A search can be authorized 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, one proceeds to literally interpret to provision in section 153A as it exists and read it alongside the provision contained in section 132(1) of the Act.
24. The provision comes into operation if a search or requisition is initiated after 31.05.2003. On satisfaction of this condition, the Assessing Officer 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 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 Assessing Officer 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 :- 40 -: I.T.A.Nos.2634 to 2639/Mds/2014 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 under section 153(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.
25. The question now is - what is the scope of assessment or reassessment of total income under section I53A(1)(b) and the first proviso? For answering this question, guidance will have to be sought from section 132(1). If any books of account or other documents relevant to the assessment had not been produced in the course of original assessment and found in the course of search, 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 provision. Similar position will obtain in a case :- 41 -: I.T.A.Nos.2634 to 2639/Mds/2014 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 under section 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 Assessing Officer, (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.
26. The interpretation is to be made considering the principles of literal interpretation and reading the relevant provisions together. This interpretation does not in any manner give results which can be said to be ultra vires. It also does not give any absurd or unjust results.
27. Thus in assessment that are abated, the Assessing Officer retains the original jurisdiction as well as jurisdiction conferred on him under section 153A for which assessments shall be made for each of :- 42 -: I.T.A.Nos.2634 to 2639/Mds/2014 the six assessment years separately and in other cases, in addition to the income that has already been assessed, the assessment under section 153A will be made on the basis of incriminating material, which in the context of relevant provisions means - books of account,, other document, found in the course of search but not produced in the course of original assessment, and undisclosed income or property discovered in the course of search.
28. The above view was taken by Special Bench, Mumbai in the case of CIT vs. All Cargo Global Logistics Ltd (supra). 28.1 Further, it is to be noted that for the assessment year 2006- 2007 assessment was completed u/s.143(3) of the Act on 31.12.2009 and later on assessment was reopened consequent to search action u/s.153A of the Act on 28.03.2014. The assessee filed statement of affairs that original return filed u/s.139(1) of the Act and also same was revised during the course of proceedings u/s.143(3) of the Act. Later once again during the assessment proceedings u/s.153A of the Act, the Commissioner of Income Tax observed that there were difference between three statements filed by the assessee when compared to each other. The Commissioner of Income Tax wanted to bring difference between these statements for taxation. Thus, it means that there was no incriminating material found during the :- 43 -: I.T.A.Nos.2634 to 2639/Mds/2014 course of search action u/s.132 of the Act.
28.2. In view of the above, the original assessment order for the assessment year 2006-2007 was already completed u/s.143(3) of the Act. Hence the assessment u/s.153A to be made on the basis of incriminating material, which means books of account, other documents, found in the course of search but not produced in the course of original assessment, and undisclosed income or property discovered in the course of search. It was admitted fact in this case that there was no incriminating material discovered in the course of search action. There was also no allegation that the assessee has failed to produce books of accounts and documents in the course of original documents. It is also a fact that recorded by Commissioner of Income Tax that the Assessing Officer failed to examine the books of accounts produced by him due to paucity of time and the Assessing Officer proposed the Commissioner of Income Tax to review the order u/s.153A of the Act.
29. In our opinion, the Commissioner of Income Tax wanted to do the things indirectly which cannot be done directly. Further, he mentioned in the order that the Assessing Officer examined :- 44 -: I.T.A.Nos.2634 to 2639/Mds/2014 the statement of affairs for the assessment years 2006-07 and 2007-08 during the course of assessment u/s.143(3) of the Act finalised on 31.12.2009 and he wanted to review the same which is nothing but causing roving inquiry which is not permitted u/s.263 of the Act.
30. To conclude, the Commissioner of Income Tax has not independently arrived satisfaction with the order of the Assessing Officer as erroneous and prejudicial to the interest of the Revenue. The Commissioner of Income Tax u/s.263 cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer and it was only when an order is erroneous that the section will be attracted. In the present case there is no incorrect assumption of facts or an incorrect application of law by the Assessing Officer. The Assessing Officer has applied his mind to the seized material while framing assessment for the year 2006-07 u/s.153A of the Act. The Commissioner of Income Tax cannot expect to correct the assessment order passed u/s.153A of the Act duly considered the seized material and in the present case the Commissioner of Income Tax wanted to consider the statement of affairs filed by the assessee during the course of assessment u/s.153A though it was not part of the seized material and it cannot be considered for framing assessment u/s.153A :- 45 -: I.T.A.Nos.2634 to 2639/Mds/2014 of the Act as assessment for the assessment year 2006-07 has already been completed u/s.143(3) and re-assessment u/s.153A be made only on the basis of incriminating material found in the course of search but not produced in the course of original assessment. In the present case, the Commissioner of Income Tax categorically observed whatever statements on record were already produced by the assessee both in the course of original assessment u/s.143(3) and also in assessment proceedings u/s.153A of the Act. The Assessing Officer adopted one of the course permissible under law and he has taken one view that the Commissioner of Income Tax does not agree which cannot be treated as error unless the view taken by the Assessing Officer is unsustainable under law. Moreover, while making assessment the Assessing Officer examined the accounts, made enquiries, applied his mind to the facts and circumstances of the case and determined the income, the Commissioner of Income Tax while exercising his power u/s.263 is not permitted to substitute his estimate of income in place of the income estimated by the Assessing Officer. In our opinion, the Assessing Officer exercises quasi-judicial power vested in his hands and if he exercises such power in accordance with law and arrive at a conclusion, such conclusion cannot be termed to be erroneous simply because the Commissioner of Income Tax wanted :- 46 -: I.T.A.Nos.2634 to 2639/Mds/2014 to do further enquiry as he has not satisfied with the enquiry made by the Assessing Officer. In the present case, the Assessing Officer made enquiry both in the course of original assessment u/s.143(3) for the assessment year 2006-07 and also during the course of assessment u/s.153A of the Act and the assessee has given a detailed explanation to Assessing Officer to consider the same after being satisfied by the explanation given by the assessee, he adopted not to make any addition.
31. Further, as held by jurisdictional High Court in the case of Mariam Aysha vs. Commissioner of Agricultural Income Tax 104 ITR 381 that consent cannot give jurisdiction is an essential principle of law. The taxing authority can act only if there is power under the statute to do so. Being so, the contention of the Departmental Representative cannot be accepted that before the Commissioner of Income Tax, the assessee has conceded that the statement of affairs needs to be examined, so that revision of jurisdiction u/s.263 is appropriate. In our opinion this is not a fit case for revision u/s.263 of the Act and we are cancelling the order passed u/s.263 for the year 2006-07.
32. The revision order passed for the assessment years 2007-08, :- 47 -: I.T.A.Nos.2634 to 2639/Mds/2014 2008-09, 2009-10, 2010-11 and 2011-12 were mere aftermath to the order passed u/s.263 for the assessment year 2006-07. The Commissioner of Income Tax himself agreed that findings for assessment year 2006-07 having cascading effect on the subsequent assessment years i.e from 2007-08 to 2012-2013. Since, we have cancelled the revision order for the assessment year 2006-07 on the basis on which revision order for the other assessment year was framed, these orders cannot stand on their own leg, in view of the cancellation of the revision order of the assessment year 2006-07. Thus, all the other orders passed u/s.263 by Commissioner of Income Tax are annulled.
33. In the result, the appeals of the assessee in ITA Nos. 2634 to 2639/Mds/2014 are allowed.
Order pronounced on Friday, the 17th day of July, 2015, at Chennai.
Sd/- Sd/-
(च ला नागे !साद ) (चं पज
ू ार )
(CHALLA NAGENDRA PRASAD) (CHANDRA POOJARI)
या"यक सद य/ JUDICIAL MEMBER लेखा सद य/ ACCOUNTANT MEMBER
चे#नई/Chennai.
$दनांक/Dated:17.07.2015.
KV
आदे श क त'ल(प अ)े(षत/Copy to: 1. अपीलाथ /Appellant 2. यथ / Respondent 3. आयकर आय+ ु त (अपील)/CIT(A) 4. आयकर आय+ ु त/CIT 5. (वभागीय त न.ध/DR 6. गाड फाईल/GF.
:- 48 -: I.T.A.Nos.2634 to 2639/Mds/2014