Income Tax Appellate Tribunal - Agra
K.S. Food Products, Gwalior vs Department Of Income Tax on 10 May, 2013
IN THE INCOME TAX APPELLATE TRIBUNAL
AGRA BENCH, AGRA
BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND
SHRI A.L. GEHLOT, ACCOUNTANT MEMBER
ITA No.519/Agra/2012
Assessment Year: 2004-05
Asstt. Commissioner of Income Tax, vs. M/s. K.S. Food Products,
Circle-2, Gwalior. Jiwaji Ganj, Morena (M.P.)
(PAN : AABFK 9917 F).
C.O. No.10/Agra/2013
(ITA No.519/Agra/2012)
Assessment Year: 2004-05
M/s. K.S. Food Products, vs. Asstt. Commissioner of Income Tax,
Jiwaji Ganj, Morena (M.P.). Circle-2, Gwalior.
(PAN : AABFK 9917 F).
(Appellant) (Respondent)
Revenue by : Shri Waseem Arshad, Sr. D.R.
Assessee by : Shri S.K. Garg, Advocate
Date of hearing : 10.05.2013
Date of pronouncement : 17.05.2013
ORDER
PER A.L. GEHLOT, ACCOUNTANT MEMBER:
Appeal by the Revenue and Cross Objection by the assessee have been filed against the order dated 31.08.2012 passed by the ld. CIT(A), Gwalior for the Assessment Year 2004-05.
2 ITA No.519/Agra/2012 & CO No.10/Agra/2013A.Y. 2004-05 ITA No.519/Agra/2012 by the Revenue
2. The Revenue has raised the following grounds of appeal:-
"1. Whether on the facts and in the circumstances of the case, the CIT(A) was right in law and on facts in cancelling the assessment completed by the AO under section 143(3)/153A of the Income Tax Act, 1961 despite the fact that under section 153A of the Income Tax Act, 1961, the AO has to make assessment of the total income of the assessee for each of the six assessment years as per provisions of section 142 to 145 of the ACT i.e. on the basis of material or evidence on the record furnished by assessee; on the basis of evidence gathered by the Department either during the course of search in the form of incriminating documents, books of accounts etc. or by investigations carried out by the department before/after the search and during the assessment proceedings ?
2. Whether of the facts and in the circumstances of the case, the CIT(A) was right in law and on facts in holding that section 153A of the Income Tax Act, 1961 does not empower the A.O. to go into the areas other than the areas in respect of which some material or documents or assets have been found during the course of search proceedings ?
3. Whether on the facts and in the circumstances of the case, the CIT(A) was right in law and on the facts in holding that items of regular assessment cannot be added back in the proceedings under section 153A or 153C of the Income Tax Act, 1961, when no incriminating documents are found in respect of the disallowed amounts during the course of search proceedings."
C.O. No.10/Agra/2013 by the assessee
3. In the Cross Objection, the grounds raised are in support of the order of CIT(A). The Cross Objection is time barred by four days for which the ld.
Departmental Representative has no objection in condoning the delay. We, therefore, condone the delay of four days in the interest of justice.
3 ITA No.519/Agra/2012 & CO No.10/Agra/2013A.Y. 2004-05
4. The brief facts of the case are that a search action under section 132 of the Income Tax Act, 1961 ('the Act' hereinafter) has been carried out on 11.03.2010.
The A.O. noticed that the assessee company is an associate company of K.S. Oil Limited Group in which search under section 132 of the Act has been carried out on 11.03.20-10. The A.O. noticed that during the course of search proceedings conducted in K.S. Oils Group, it was revealed that group has initially been engaged in manufacturing and trading of edible oil. They have made huge unaccounted purchases and sales either themselves or through brokers. They have also formed several dummy concerns, companies and other entities to carry out business operation for generating unaccounted income. The A.O. at page nos.2 to 4 noted list of such associate companies of K.S. Oils group. The A.O. has also noted that K.S. Oils Limited was having undisclosed bank accounts. The A.O. at page no.5 & 6 has also noted that in K.S. Oils Limited Group some surrender were made of which details of statement of the party recorded were reproduced. On the basis of above observation made in respect of K.S. Oils Limited Group, the A.O. on a perusal of assessee's Balance Sheet noticed the following liabilities :- (Page no.7)
(i) Partners Capital Account - Rs.13,80,770/-
(ii) Unsecured Loans - Rs.28,36,730/-
(iii) Sundry Creditors - Rs.11.85,95,936/-
(iv) Advance from customers - Ras.2,53,768/-
4
ITA No.519/Agra/2012 &
CO No.10/Agra/2013
A.Y. 2004-05
5. The A.O. made addition of above liabilities Rs.28,72,532/- under section 68 of the Act. Similarly, the A.O. noticed that threw was a sundry creditors of Rs.11,85,95,936/-. This amount has also been added by the A.O. under section 68.
of the Act. The A.O. also made addition of Rs.92,79,830/- invoking section 40A(2)(b) of the Act. The A.O. also made addition of Rs.31,13,602/- on account of rejecting assessee's deprecation claim. The A.O. has also made addition of Rs.2,53,768/- on account of advance from customers. The total income computed by the A.O. is as under :- (Page no.8) RETURN INCOME Rs. 2,76,250/-
Add Partners capital u/s 68 of the I.T. Act Rs. 28,72,532/-
Add Unsecured loan u/s 68 of the IT Act Rs. 28,36,730/- Add Sundry creditors u/s 68 of the IT Act Rs. 11,85,95,936/- Add Disallowance u/s 40A(2)(b) of the IT Rs. 92,79,830/- Act Add Disallowance of depreciation Rs. 31,13,602/- Add Advances from customers u/s 68 of Rs. 2,53,768/- the IT Act Total = Rs. 13,72,28,648/-
6. Before the CIT(A) the assessee has challenged the order of A.O. on the ground that the A.O. has made the addition whereas no incriminating documents or materials were found during the course of search. The CIT(A) allowed the assessee's ground of appeal as under :- (Para nos.3.3 to 3.7, pages nos.4, 5, 6 & 7) "3.3 However, the appellant's objection to completion of assessment u/s 153A by making various additions on the basis of items disclosed in its balance sheet & trading account in the absence of any 5 ITA No.519/Agra/2012 & CO No.10/Agra/2013 A.Y. 2004-05 incriminating material found or seized & that too before the date given for final hearing are found acceptable. The appellant has field return u/s 153A on 16.09.2011 which is same as filed on 21.10.2004 in due course for pre-search period. On receipt of notice u/s 143(2) issued on 16.09.2011, the appellant has submitted before the A.O. that no incriminating documents have been found during the course of search relating to the year under consideration. If there are some, the appellant be made aware of the same for their compliance and explanation. On 26.09.2011, the appellant has also submitted the audit report and balance sheet for F. Yrs. 2003-04, 04-05 & 2005-06, as desired by the A.O. Therefore, A.O. has issued detailed questionnaire/notice u/s 142(1) on 31.10.2011 asking for details regarding addition to fixed assets, unsecured loan, gross profit, sundry creditors etc. on the basis of return and balance sheet of the appellant. As regards, seized documents, it states as under:-
"9. As photocopies of the seized materials have already been taken, therefore, you are requested to please explain each and every transaction of the seized material which pertains to the year under consideration. You are also requested to please furnish the year wise brake up of all the seized material in respective assessment years."
In response, vide letter dated 11.11.2011, the appellant has submitted as under:-
"8. To the best of my knowledge or belief no documents have been seized by the department relating to the concern. As regards other seized material we have taken the copies of seized material and nothing incriminating has been found so as to disclose any undisclosed income as regards the assessee from the seized material. Please let us know which loose paper or document seized from which premises (as searches were conducted in several locations) requires a specific show cause for us to explain so that its explanation could be given. As regards the assessee it can give an explanation in respect of each and every seized material unless the same is a dumb document or it does not pertain to the assessee."
A.O. has again issued detailed questionnaire on 18.11.2011 asking for further details on various items of balance sheet etc. In 6 ITA No.519/Agra/2012 & CO No.10/Agra/2013 A.Y. 2004-05 respect of seized documents, para 9 of the questionnaire is same as mentioned in previous notice/questionnaire. Thus, no specific seized document, much less incriminating, has been found, seized or brought on record by the A.O. in case of the appellant pertaining to the year under consideration. In the assessment order also A.O. has made discussion about list of 61 dummy concerns with bank accounts, undisclosed bank accounts & unaccounted business transactions of Rs.46,20,98,097/- (pages 2-5 of the assessment order) pertaining to K.S. Oils Ltd., but none of them belongs or pertains to the appellant for the year under consideration nor there is any material on record proving appellant's connection with these dummy concerns or undisclosed bank accounts or unaccounted transactions.
3.4 It is further seen from records that the appellant has filed return for the assessment year under consideration in due course on 21.10.2004 declaring income of Rs.2,76,250/- which is same as per return now filed u/s 153A on 16.09.2011 after the search operations on 11.03.2010. Assessment order u/s 143(3) has also been passed on 6.12.2006 by ITO, 2(2), Gwalior assessing total income at Rs.4,25,590/- along with agricultural income of Rs.14,294/- after making additions on estimated basis for disallowance of diesel & fuel expenses, hammali expenses, freight, general repair expenses etc. Vide appeal order dated 17.10.2011 in appeal No. 641/IT/06- 07/GWL, relief of Rs.70,000/- been granted out of addition made of Rs.95,000/- by the A.O. 3.5 It has been held by various courts Manish Maheshwari Vs. ACIT & Another, Indore Construction Pvt. Ltd. Vs. CIT (2007) 289 ITR 341 (SC), M/s S.K. Jain Vs ACIT (2010) 14 ITJ 434 (Indore Tribunal), LMJ International Ltd. Vs. Dy. CIT (2008) 119 TTJ (KOL) 214, Anil Kumar Bhatia Vs. ACIT (2010) 1 ITR (Trib) 484 (Del) that jurisdiction to assess u/s 153A arises only due to search. Therefore, A.O. cannot disturb the finality of concluded assessments without any material to indicate undisclosed income of the year found during the course of search. The scheme of the ACT is very clear - regular assessments are made in items of Sec.139, 142 & 143; concluded assessments can be reopened as per Section 147 & 148 in case A.O. has reasons to believe that the income chargeable to tax has escaped assessment; and the provisions of Section 153A to 153C can be 7 ITA No.519/Agra/2012 & CO No.10/Agra/2013 A.Y. 2004-05 resorted to for the assessment of undisclosed income in search cases. All the three procedures of assessment operate in different fields and have different purpose to be fulfilled altogether. Items of regular assessment cannot be added back in the proceedings u/s 153A/C when no incriminating documents are found in respect of the disallowed amounts in the search proceedings. Chapter XIV-B does not authorize the A.O. to review the assessment completed unless and until there is any direct or indirect or clinching evidence to indicate that the appellant has withheld or had not disclosed any income. Section 153A does not empower the A.O. to go into the areas other than areas in respect of which some material or documents or assets have been found. In the appellant's case, original assessment has already been completed u/s 143(3) in respect of return for the year filed in due course before search and as per records, no material, much less incriminating, has been found, in search thereafter; thus no addition can be made. The additions made by the A.O. for partner's capital, sundry creditors, unsecured loans, advances from customers, disallowance of depreciation and disallowance u/s 40A(2)(b), for want of confirmations etc. being all relating to regular assessment, are not found sustainable by respectfully following the decisions of various higher appellate authorities, as mentioned above.
3.6 It is further seen from perusal of records that the A.O. has issued last questionnaire/notice served on the appellant on 24.11.2011, fixing the case for hearing on 28.11.2011. However, for the reasons best known to him, A.O. has passed the impugned order under appeal on 25.11.2011, i.e. before the date fixed for hearing and giving the appellant opportunity to explain the various issues, as asked for vide the notice/questionnaire. This is totally against principles of natural justice envisaged in the statute. It is also to bring on record that no day-to-day regular order sheets have been written/maintained by the A.O. during entire course of assessment proceedings. This fact has also been admitted by the A.O. during the course of appeal proceedings, as per discussion held with him. As per records, the appellant is found to have details, as asked for vide different questionnaires issued by the A.O. Thereafter, no further query has been raised by the A.O nor further explanation/verification sought or done. However, the appellant's submissions, as made & 8 ITA No.519/Agra/2012 & CO No.10/Agra/2013 A.Y. 2004-05 found placed on record, have not been accepted by the A.O. without any justification for the same.
3.7 After Perusal of records, submissions and facts of the case, assessment completed by the A.O. resulting into various additions made is not found to be sustainable in the eyes of the law. The same is, hereby, cancelled. Accordingly, merits of the addition made are not being adjudicated hereupon."
7. Since the CIT(A) decided the legal issue in favour of the assessee, therefore, he did not adjudicate the ground on merit.
8. We have heard the ld. Representatives of the parties and records perused.
The crux of the matter to be examined in the case under consideration is in respect of making search assessment under section 153A of the Act where no incriminating materials were found during the course of search. To examine this issue, we would like to see the scheme of various assessments under the Act.
8.1 Chapter XIV of the Act deals with the procedure for regular assessment. It begins with section 139, which makes it obligatory for a person who is assessable under the Act and whose income exceeds the maximum limit shall furnish return of his income in the prescribed form. Assessment can be made on the basis of return filed under section 139 of the Act. On the basis of the evidence adduced. Best judgment under section144 of the Act. Income escaped assessment and assessment 9 ITA No.519/Agra/2012 & CO No.10/Agra/2013 A.Y. 2004-05 in case of search. The word assessment must be under stood in each section of the Act with reference to the context in which it is used. Section 142 of the Act prescribes the procedure of inquiry before assessment. This section confers power upon the assessing authority to make inquiry by issuing notice upon the assessee for the compliance of the requirements of the Act. After furnishing of the return under section 139 or in response to a notice under section 142, the assessing authority shall make assessment. Under section 147 of the Act if the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceeding. However, before making such escaped assessment or reassessment or re computation under section 147 of the Act, the Assessing Officer shall serve notice to the assessee as required under section 148 of the Act. Section 153 of the Act specifies the limit within which assessment or reassessment shall be completed.
8.2 Assessment in case of search is provided in section 153A of the Act. Section 132 of the Act lays down the provisions of search and seizure. Under this section, the Director General or Director or Chief Commissioner or Commissioner or Joint Commissioner may be empowered by the Board to make search, and seizure when 10 ITA No.519/Agra/2012 & CO No.10/Agra/2013 A.Y. 2004-05 they have reason to believe that any person to whom summonses or notices have been issued under the provisions of the Act referred to therein have failed to produce books of account or any other documents relevant for any assessment proceeding. The provision of section 132 underwent a series of amendments with a view to enlarge the power of search and seizure vested in the income-tax authority.
By subsequent amendment the power of search and seizure vested in the Inspecting Assistant Commissioner also. Sub-section (3) of section 132 empowers the taxing authorities to take possession or control of the seized articles. By the 1991 amendment, the operation of the prohibitory order passed can also be extended with the approval of the Commissioner.
8.3 In the year 1995, the special procedure for assessment of search cases was introduced by the Finance Act, 1995 (22 of 1995). Chapter XIV-B containing section 158B to section 158BH was inserted. Under the said scheme, the undisclosed income detected as a result of search initiated after 30-6-1995, is assessed separately as the income of the designated period (block) consisting of 10 previous years or six years as the case may be prior to the previous year in which the search was conducted and also the period of current previous year up to the date of search. The undisclosed income is taxed at a flat rate of 60 per cent. Under this provision, the authority competent to make the block assessment shall be an 11 ITA No.519/Agra/2012 & CO No.10/Agra/2013 A.Y. 2004-05 Assessing Officer not below the rank of the Assistant Commissioner and the time-
limit for completion of block assessment is within one year from the end of the month in which the authorization for Search under section 132 and requisition under section 132A was executed.
8.4 In 2003, new provisions, i.e., sections 153A, 153B and 153C in Chapter XIV have been inserted in the Finance Act, 2003 relating to assessment in the case of search or requisition made on or after June, 1, 2003, specifying the time-limit for completion of assessment or reassessment of income. By virtue of the aforesaid amendments, the assessment in the case of search or Requisition made on or after 1-6-2003, is to be governed by the provisions contained in the new sections 153A, 153B and 153C and not by the provisions contained in Chapter XIV-B, i.e., sections 158B to section 158BH. For better appreciation, sections 153A, 153B and 153C are reproduced here in below:
"153A. Assessment in case of search or requisition (1)Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after 31-5-2003, the Assessing Officer shall--
(a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years referred to in clause
(b), in the prescribed form and verified in the prescribed manner and 12 ITA No.519/Agra/2012 & CO No.10/Agra/2013 A.Y. 2004-05 setting forth such other particulars as may be prescribed and the provisions of
(b) this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139;
(c) (b) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made:
(d) Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years:
(e) Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this section pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate."
8.5 For giving effect to the above newly inserted provision section 158BI has also been inserted by the Finance Act of 2003 which provides that the provisions of Chapter XIV-B, section 158B to section 158BH, shall not apply where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A of the Act after 31-5-2003.
8.6 From a reading of the provisions of section 153A, it is clear that this provision provides for assessments of undisclosed income of a block period in a case where search is conducted. In other words, in a case where search is conducted there shall be block assessments for the period comprising previous years relevant to six assessment years preceding the previous year in which the 13 ITA No.519/Agra/2012 & CO No.10/Agra/2013 A.Y. 2004-05 search was conducted and also includes the period up to the date of commencement of such search. In such cases, the Assessing Officer shall issue notice to the assessee requiring him to furnish return of income in respect of the six assessment years immediately preceding the assessment year relevant to the previous year in which the search was conducted under section 132 or requisition was made under section 132A. The Assessing Officer shall assess or reassess the total income of each of these six assessment years. Section 153B provides the time limit for completion of assessment. It provides that the Assessing Officer shall make the order of assessment or reassessment in respect of the each assessment year falling within the six assessment years under section 153A within a period of two years from the end of the financial year in which search under section 132 or requisition under section 132A was executed.
8.7 The scope and effect of sections 153A, 153B, 153C and 158BI have been explained elaborately by a departmental Circular No.7 of 2003, dated 05.09.2003 (see [2003] 263 ITR (St.) 62), which is reproduced here in below (page 106):
"65.1 The existing provisions of the Chapter XIV-B provide for a single assessment of undisclosed income of a block period, which means the period comprising previous years relevant to six assessment years preceding the previous year in which the search was conducted and also includes the period up to the date of the commencement of such search, and lay down the manner in which such income is to be computed.14 ITA No.519/Agra/2012 & CO No.10/Agra/2013
A.Y. 2004-05 65.2 The Finance Act, 2003, has provided that the provisions of this Chapter shall not apply where a search is initiated under section 132, or books of account, other documents or any assets are requisitioned under section 132A after 31-5-2003, by inserting a new section 158BI in the Income-tax Act.
65.3 Further three new sections 153A, 153B and 153C have been inserted in the Income-tax Act to provide for assessment in case of search, or making requisition.
65.4 The new section 153A provides the procedure for completion of assessment where a search is initiated under section 132 or books of account, or other documents or any assets are requisitioned under section 132A after 31-5-2003. In such cases, the Assessing Officer shall issue notice to such person requiring him to furnish, within such period as may be specified in the notice, return of income in respect of six assessment years immediately preceding the assessment year relevant to the previous year in which the search was conducted under section 132 or requisition was made under section 132A.
65.5 The Assessing Officer shall assess or reassess the total income of each of these six assessment years. Assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years pending on the date of initiation of the search under section 132 or requisition under section 132A, as the case may be, shall abate. It is clarified that the appeal, revision or rectification proceedings pending on the date of initiation of search under section 132 or requisition shall not abate. Save as otherwise provided in the proposed section 153A, section 153B and section 153C, all other provisions of this Act shall apply to the assessment or reassessment made under section 153A. It is also clarified that assessment or reassessment made under section 153A shall be subject to interest, penalty and prosecution, if applicable. In the assessment or reassessment made in respect of an assessment year under this section, the tax shall be chargeable at the rate or rates as applicable to such assessment year.
65.6 The new section 153B provides for the time-limit for completion of search assessments. It provides that the Assessing Officer shall make an 15 ITA No.519/Agra/2012 & CO No.10/Agra/2013 A.Y. 2004-05 order of assessment or reassessment in respect of each assessment year, falling within, six assessment years under section 153A within a period of two years from the end of the financial year in which the last of the authorizations for search under section 132 or for requisition under section 132A was executed.
65.7 This section also provides that assessment in respect of the assessment year relevant to the previous year in which the search is conducted under section 132 or requisition is made under section 132A shall be completed within a period of two years from the end of the financial year in which the last of the authorizations for search under section 132 or for requisition under section 132A, as the case may be, was executed.
65.8 It also provides that in computing the period of limitation for completion of such assessment or reassessment, the period during which the assessment proceeding is stayed by an order or injunction of any court; or the period commencing from the day on which the Assessing Officer directs the assessee to get his accounts audited under sub-section (2A) of section 142 and ending on the day on which the assessee is required to furnish a report of such audit under that sub-section, or the time taken in reopening the whole or any part of the proceeding or giving an opportunity to the assessee of being re-heard under the proviso to section 129, or in a case where an application made before the Settlement Commission under section 245C is rejected by it or is not allowed to be proceeded with by it, the period commencing on the date on which such application is made and ending with the date on which the order under sub-section (1) of section 245D is received by the Commissioner under sub-section (2) of that section, shall be excluded. If, after the exclusion of the aforesaid period, the period of limitation available to the Assessing Officer for making an order of assessment or reassessment, as the case may be is less than sixty days, such remaining period shall be extended to sixty days and the period of limitation shall be deemed to be extended accordingly 65.9 The new section 153C provides that where an Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belong or belongs to a person other than the person referred to in section 153A, then the books of account, or documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and 16 ITA No.519/Agra/2012 & CO No.10/Agra/2013 A.Y. 2004-05 that Assessing Officer shall proceed against such other person and issue such other person notice and assess or reassess income of such other person in accordance with the provisions of section 153A.
65.10 An appeal against the order of assessment or reassessment under section 153A shall lie with the Commissioner of Income-tax (Appeals).
65.11 Consequential amendments have also been made in sections 132, 132B, 140A, 234A, 234B, 246A and 276CC to give reference to section 153A in these sections.
65.12 These amendments will take effect from 1-6-2003."
8.8 From a bare reading of the provisions of sections 153A, 153B and 153C of the Act and the Departmental Circular dated 5-9-2003 (see [2003] 263 ITR (St.)
62), it is manifestly clear that after 31-5-2003, the earlier provision of block assessment in the case of search initiated against the assessee, shall not apply.
Instead, the provision that there shall be assessments on undisclosed income comprising previous years relating to six assessment years preceding in which the search was conducted, shall apply.
8.9 The second proviso to section 153A makes it clear that assessment or reassessment relating to any assessment year falling within the period of six assessment years pending on the date of initiation of the search under section 132 or requisition under section 132A shall abate. The word "abate" or "abatement"
has not been defined in the Act or in circular. The words "abate" According to 17 ITA No.519/Agra/2012 & CO No.10/Agra/2013 A.Y. 2004-05 Chamber Dictionary means demolition or to put an end to. The Law of Lexicon defines the word "abate" which means to throw down, destroy or quash or to nullify. According to Black Dictionary the word "abatement" means the act of eliminating or nullifying or suspension or defeat of pending action. It means, if on the date of initiation of search or requisition under section 132 or 132A any assessment or reassessment proceeding is initiated relating to any assessment year falling within the period of six assessment years, it shall stand abated and assessing authority cannot and shall not proceed with such pending assessment after initiation of search or requisition as contemplated herein above.
8.10 To examine the scope of search assessment under section 153A of the Act we have to see the basis and reasons for this assessment which are provided in section 132 and 132A of the Act, for the purpose of ready reference the same are reproduced (from 2009 Act) as under:-
[Search and seizure.]
132. (1) Where the 84[Director General or Director] or the 85[Chief Commissioner or Commissioner] 86-87[or Additional Director or Additional Commissioner] 88[or Joint Director or Joint Commissioner] in consequence of information89 in his possession, has reason to believe89 that--
(a) any person to whom a summons under sub-section (1) of section 37 of the Indian Income-tax Act, 1922 (11 of 1922), or under sub-section (1) of section 131 of this Act, or a notice under sub-section (4) of section 22 of the Indian Income-tax Act, 1922, or under sub-section (1) of section 142 of this Act was issued to produce, or cause to be produced, any books of account or other 18 ITA No.519/Agra/2012 & CO No.10/Agra/2013 A.Y. 2004-05 documents has omitted or failed to produce, or cause to be produced, such books of account or other documents as required by such summons or notice, or
(b) any person to whom a summons or notice as aforesaid has been or might be issued will not, or would not, produce or cause to be produced, any books of account or other documents which will be useful for, or relevant to, any proceeding under the Indian Income-tax Act, 1922 (11 of 1922), or under this Act, or
(c) any person is in possession of any money, bullion, jewellery or other valuable article or thing90 and such money, bullion, jewellery or other valuable article or thing represents either wholly or partly income or property 91[which has not been, or would not be, disclosed90] for the purposes of the Indian Income-tax Act, 1922 (11 of 1922), or this Act (hereinafter in this section referred to as the undisclosed income or property), 92 [then,--
(A) the 93[Director General or Director] or the 94[Chief Commissioner or Commissioner], as the case may be, may authorise any 94a[Additional Director or Additional Commissioner or] 95[Joint Director], 96[Joint Commissioner], 97 [Assistant Director 98[or Deputy Director]], 99[Assistant Commissioner 98[or Deputy Commissioner] or Income-tax Officer], or (B) such 94a[Additional Director or Additional Commissioner or] 95[Joint Director], or 96[Joint Commissioner], as the case may be, may authorise any 97[Assistant Director 98[or Deputy Director]], 99[Assistant Commissioner 98[or Deputy Commissioner] or Income-tax Officer], (the officer so authorised in all cases being hereinafter referred to as the authorised officer) to--]
(i) enter and search1 any 2[building, place, vessel, vehicle or aircraft] where he has reason to suspect that such books of account, other documents, money, bullion, jewellery or other valuable article or thing are kept;
(ii) break open the lock of any door, box, locker, safe, almirah or other receptacle for exercising the powers conferred by clause (i) where the keys thereof are not available;
3[(iia) search any person who has got out of, or is about to get into, or is in, the building, place, vessel, vehicle or aircraft, if the authorised officer has reason to suspect that such person has secreted about his person any such books of account, other documents, money, bullion, jewellery or other valuable article or thing;] 4 [(iib) require any person who is found to be in possession or control of any books of account or other documents maintained in the form of electronic record as defined in clause (t) of sub-section (1) of section 2 of the 19 ITA No.519/Agra/2012 & CO No.10/Agra/2013 A.Y. 2004-05 Information Technology Act, 2000 (21 of 2000)5, to afford the authorised officer the necessary facility to inspect such books of account or other documents;]
(iii) seize6 any such6 books of account, other documents, money, bullion, jewellery or other valuable article or thing found as a result of such search:
7[Provided that bullion, jewellery or other valuable article or thing, being stock-in-trade of the business, found as a result of such search shall not be seized but the authorised officer shall make a note or inventory of such stock-in-trade of the business;]
(iv) place marks of identification on any books of account or other documents or make or cause to be made extracts or copies therefrom;
(v) make a note or an inventory of any such money, bullion, jewellery or other valuable article or thing :8
[Provided that where any building, place, vessel, vehicle or aircraft referred to in clause (i) is within the area of jurisdiction of any 9[Chief Commissioner or Commissioner], but such 9[Chief Commissioner or Commissioner] has no jurisdiction over the person referred to in clause (a) or clause (b) or clause (c), then, notwithstanding anything contained in section 10[120], it shall be competent for him to exercise the powers under this sub-section in all cases where he has reason to believe that any delay in getting the authorisation from the 11[Chief Commissioner or Commissioner] having jurisdiction over such person may be prejudicial to the interests of the revenue :] 12 [Provided further that where it is not possible or practicable to take physical possession of any valuable article or thing and remove it to a safe place due to its volume, weight or other physical characteristics or due to its being of a dangerous nature, the authorised officer may serve an order on the owner or the person who is in immediate possession or control thereof that he shall not remove, part with or otherwise deal with it, except with the previous permission of such authorised officer and such action of the authorised officer shall be deemed to be seizure of such valuable article or thing under clause (iii):] 13 [Provided also that nothing contained in the second proviso shall apply in case of any valuable article or thing, being stock-in-trade of the business:] 13a [Provided also that no authorisation shall be issued by the Additional Director or Additional Commissioner or Joint Director or Joint Commissioner on or after the 1st day of October, 2009 unless he has been empowered by the Board to do so.] 20 ITA No.519/Agra/2012 & CO No.10/Agra/2013 A.Y. 2004-05 14 [(1A) Where any 15[Chief Commissioner or Commissioner], in consequence of information in his possession, has reason to suspect that any books of account, other documents, money, bullion, jewellery or other valuable article or thing in respect of which an officer has been authorised by the 16[Director General or Director] or any other 17[Chief Commissioner or [Commissioner] or 18[Additional Director or Additional Commissioner] 19[or Joint Director or Joint Commissioner] to take action under clauses (i) to (v) of sub-section (1) are or is kept in any building, place, vessel, vehicle or aircraft not mentioned in the authorisation under sub-section (1), such 20[Chief Commissioner or Commissioner] may, notwithstanding anything contained in section 21[120], authorise the said officer to take action under any of the clauses aforesaid in respect of such building, place, vessel, vehicle or aircraft.] (2) The authorised officer may requisition the services of any police officer or of any officer of the Central Government, or of both, to assist him for all or any of the purposes specified in sub-section (1) 22[or sub-section (1A)] and it shall be the duty of every such officer to comply with such requisition.
(3) The authorised officer may, where it is not practicable23 to seize any such books of account, other documents, money, bullion, jewellery or other valuable article or thing, 24[for reasons other than those mentioned in the second proviso to sub-section (1),] serve an order on the owner or the person who is in immediate possession23 or control thereof that he shall not remove, part with or otherwise deal with it except with the previous permission of such officer and such officer may take such steps as may be necessary for ensuring compliance with this sub-section.25
[Explanation.--For the removal of doubts, it is hereby declared that serving of an order as aforesaid under this sub-section shall not be deemed to be seizure of such books of account, other documents, money, bullion, jewellery or other valuable article or thing under clause (iii) of sub-section (1).] (4) The authorised officer may, during the course of the search or seizure, examine on oath any person who is found to be in possession or control of any books of account, documents, money, bullion, jewellery or other valuable article or thing and any statement made by such person during such examination may thereafter be used in evidence in any proceeding under the Indian Income-tax Act, 1922 (11 of 1922), or under this Act.
21 ITA No.519/Agra/2012 & CO No.10/Agra/2013A.Y. 2004-05 25a [Explanation.--For the removal of doubts, it is hereby declared that the exami- nation of any person under this sub-section may be not merely in respect of any books of account, other documents or assets found as a result of the search, but also in respect of all matters relevant for the purposes of any investigation connected with any proceeding under the Indian Income-tax Act, 1922 (11 of 1922), or under this Act.] 26 [(4A) Where any books of account, other documents, money, bullion, jewellery or other valuable article or thing are or is found in the possession or control of any person in the course of a search, it may be presumed--
(i) that such books of account, other documents, money, bullion, jewellery or other valuable article or thing belong or belongs to such person ;
(ii) that the contents of such books of account and other documents are true ;
and
(iii) that the signature and every other part of such books of account and other documents which purport to be in the handwriting of any particular person or which may reasonably be assumed to have been signed by, or to be in the handwriting of, any particular person, are in that person's handwriting, and in the case of a document stamped, executed or attested, that it was duly stamped and executed or attested by the person by whom it purports to have been so executed or attested.] 27 (5) [***] (6) 28[***] (7) 29[***] (8) The books of account or other documents seized under sub-section (1) 30[or sub-section (1A)] shall not be retained by the authorised officer for a period exceeding 31[thirty days from the date of the order of assessment under 32[section 153A or] clause (c) of section 158BC] unless the reasons for retaining the same are recorded by him in writing and the approval of the 33[Chief Commissioner, Commissioner, Director General or Director] for such retention is obtained :
Provided that the 33[Chief Commissioner, Commissioner, Director General or Director] shall not authorise the retention of the books of account and other documents for a period exceeding thirty days after all the proceedings under the Indian Income-tax Act, 1922 (11 of 1922), or this Act in respect of the years for which the books of account or other documents are relevant are completed.22 ITA No.519/Agra/2012 & CO No.10/Agra/2013
A.Y. 2004-05 34 [(8A) An order under sub-section (3) shall not be in force for a period exceeding sixty days from the date of the order.] (9) The person from whose custody any books of account or other documents are seized under sub-section (1) 35[or sub-section (1A)] may make copies thereof, or take extracts therefrom, in the presence of the authorised officer or any other person empowered by him in this behalf, at such place and time as the authorised officer may appoint in this behalf.36
[(9A) Where the authorised officer has no jurisdiction over the person referred to in clause (a) or clause (b) or clause (c) of sub-section (1), the books of account or other documents, or any money, bullion, jewellery or other valuable article or thing (hereafter in this section and in sections 132A and 132B referred to as the assets) seized under that sub-section shall be handed over by the authorised officer to the Assessing Officer having jurisdiction over such person within a period of sixty days from the date on which the last of the authorisations for search was executed and thereupon the powers exercisable by the authorised officer under sub-section (8) or sub-section (9) shall be exercisable by such Assessing Officer.] (10) If a person legally entitled to the books of account or other documents seized under sub-section (1) 37[or sub-section (1A)] objects for any reason to the approval given by the 38[Chief Commissioner, Commissioner, Director General or Director] under sub-section (8), he may make an application to the Board stating therein the reasons for such objection and requesting for the return of the books of account or other documents 39[and the Board may, after giving the applicant an opportunity of being heard, pass such orders as it thinks fit].
(11) 40[***] (11A) 41[***] (12) 42[***] 43 [(13) The provisions of the Code of Criminal Procedure, 1973 (2 of 1974), relating to searches and seizure shall apply, so far as may be, to searches and seizure under sub-section (1) or sub-section (1A).] 44 (14) The Board may make rules in relation to any search or seizure under this section ; in particular, and without prejudice to the generality of the foregoing power, such rules may provide for the procedure to be followed by the authorised officer--
23 ITA No.519/Agra/2012 & CO No.10/Agra/2013A.Y. 2004-05
(i) for obtaining ingress into 45[any building, place, vessel, vehicle or aircraft] to be searched where free ingress thereto is not available ;
(ii) for ensuring safe custody of any books of account or other documents or assets seized.
46[Explanation 1.--For the purposes of sub-section (9A), "execution of an authorisation for search" shall have the same meaning as assigned to it in Explanation 2 to section 158BE.] Explanation 2.--In this section, the word "proceeding" means any proceeding in respect of any year, whether under the Indian Income-tax Act, 1922 (11 of 1922), or this Act, which may be pending on the date on which a search is authorised under this section or which may have been completed on or before such date and includes also all proceedings under this Act which may be commenced after such date in respect of any year.]"
"47 [Powers to requisition books of account, etc. 48 132A. 49(1) Where the 50[Director General or Director] or the 51[Chief Commissioner or Commissioner], in consequence of information in his possession, has reason to believe that--
(a) any person to whom a summons under sub-section (1) of section 37 of the Indian Income-tax Act, 1922 (11 of 1922), or under sub-section (1) of section 131 of this Act, or a notice under sub-section (4) of section 22 of the Indian Income-tax Act, 1922, or under sub-section (1) of section 142 of this Act was issued to produce, or cause to be produced, any books of account or other documents has omitted or failed to produce, or cause to be produced, such books of account or other documents, as required by such summons or notice and the said books of account or other documents have been taken into custody by any officer or authority52 under any other law for the time being in force, or
(b) any books of account or other documents will be useful for, or relevant to, any proceeding under the Indian Income-tax Act, 1922 (11 of 1922), or under this Act and any person to whom a summons or notice as aforesaid has been or might be issued will not, or would not, produce or cause to be produced, such books of account or other documents on the return of such books of account or other documents by any officer or authority by whom or which such books of account or other documents have been taken into custody under any other law for the time being in force, or 24 ITA No.519/Agra/2012 & CO No.10/Agra/2013 A.Y. 2004-05
(c) any assets represent either wholly or partly income or property which has not been, or would not have been, disclosed for the purposes of the Indian Income-tax Act, 1922 (11 of 1922), or this Act by any person from whose possession or control such assets have been taken into custody by any officer or authority under any other law for the time being in force, then, the [Director General or Director] or the [Chief Commissioner or Commissioner] may authorise any [Additional Director, Additional Commissioner,] [Joint Director], 56[Joint Commissioner], [Assistant Director 58[or Deputy Director]], 59[Assistant Commissioner [or Deputy Commissioner] or Income-tax Officer] (hereafter in this section and in sub-section (2) of section 278D referred to as the requisitioning officer) to require the officer or authority referred to in clause (a) or clause (b) or clause (c), as the case may be, to deliver such books of account, other documents or assets to the requisitioning officer.
(2) On a requisition being made under sub-section (1), the officer or authority referred to in clause (a) or clause (b) or clause (c), as the case may be, of that sub-
section shall deliver the books of account, other documents or assets to the requisitioning officer either forthwith or when such officer or authority is of the opinion that it is no longer necessary to retain the same in his or its custody.
(3) Where any books of account, other documents or assets have been delivered to the requisitioning officer, the provisions of sub-sections (4A) to (14) (both inclusive) of section 132 and section 132B shall, so far as may be, apply as if such books of account, other documents or assets had been seized under sub-section (1) of section 132 by the requisitioning officer from the custody of the person referred to in clause (a) or clause (b) or clause (c), as the case may be, of sub-section (1) of this section and as if for the words "the authorised officer" occurring in any of the aforesaid sub-sections (4A) to (14), the words "the requisitioning officer" were substituted.] 8.11 In the light of above legal position, after above discussions and after reading sections 132, 132A, 153A, 153B, 153C of the Act and the Departmental Circular 25 ITA No.519/Agra/2012 & CO No.10/Agra/2013 A.Y. 2004-05 dated 5-9-2003, we find that assessment of income in case of search under section 153A is to assess or reassess income for specified period. In this regard, we would like to refer the following decisions:-
All Cargo Global Logistics Ltd. vs. Deputy Commissioner of Income- tax, Central Circle-44 [2012] 23 taxmann.com 103 (Mum.) (SB).
8.12 In this case during the course of appellate proceedings, a Special Bench was constituted to determine the question as to whether the scope of assessment under section 153A encompasses additions, not based on any incriminating material found during the course of search. The I.T.A.T. 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 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 reassess 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 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 26 ITA No.519/Agra/2012 & CO No.10/Agra/2013 A.Y. 2004-05 being regular assessment and the other being assessment under section 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 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 of clear and unambiguous words used by the Legislature. This interpretation does not cause any absurd etc. results. 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. [Para 48] 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, 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.[Para 49) 27 ITA No.519/Agra/2012 & CO No.10/Agra/2013 A.Y. 2004-05 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. 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 will have to be taken into account. [Para 50] 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).[Para 51] The provision comes into operation if a search or requisition is initiated after 31.5.2003. 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 assessment or reassessment is pending on the date of initiation of the search, it shall abate. In other words pending proceedings will not be 28 ITA No.519/Agra/2012 & CO No.10/Agra/2013 A.Y. 2004-05 proceeded with thereafter. The assessment has now to be made under section 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. [Para 52] The question now is - what is the scope of assessment or reassessment of total income under section 153A(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. 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 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. [Para 53] The interpretation placed by the Tribunal takes into account 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. [Para 56] Thus, question raised before the Special Bench No.1 is answered as under:
29 ITA No.519/Agra/2012 & CO No.10/Agra/2013A.Y. 2004-05
(a) 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 the six assessment years separately;
(b) 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 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." [Para 58] Commissioner of Income-tax (Central), Kanpur vs. Smt. Shaila Agarwal [2011] 16 taxmann.com 232 (All.) 8.13 The brief facts of this case were that the assessee filed a return for the assessment year 2002-03 on 31-12-2002 declaring income of Rs.3,66,438/-. The case was selected for scrutiny, on which a notice under section 143(2) was issued.
On 10-11-2004 the assessee was required to produce the donors along with evidence, the source of gifts and the relationship between the donors and the donee in respect of gifts of Rs.99,00,000. On 30-3-2005 an assessment of Rs.1,16,65,376 was made under section 143(3). The Commissioner (Appeals) dismissed the appeal on 22-5-2006, and confirmed the addition of Rs.99,99,000, as unexplained credit on account of bogus gifts. A relief of Rs.1,20,000 was given on account of low withdrawals out of Rs.2,40,000, which was added by the Assessing Officer. After the decision of the appeal by the Commissioner (Appeals) on 22-5-2006 a search under section 132 was carried out on 17-10-2006. A notice under section 153A 30 ITA No.519/Agra/2012 & CO No.10/Agra/2013 A.Y. 2004-05 was issued to the assessee on 26-9-2007, as a result of search and seizure, calling the assessee to file return for six assessment years including assessment year 2002-
03. The Tribunal, hearing the appeal against the order of the Commissioner (Appeals) dated 22-5-2006 allowed the appeals accepting the arguments made on behalf of assessee that once a notice under section 153A has been issued after search and seizure operations, as per the provisions of section 153A, all the assessments of the six preceding assessment years prior to the date of search have to abate and that even the completed and concluded assessments should stand merged in the fresh assessment to be made by the Assessing Officer under section 153A in pursuance of the search. On appeal the court held that as under:-
"A plain reading of section 153A would show that where notice under this section is issued as result of any search under section 132, assessment or reassessment if any relating to any assessment year falling within the period of six assessment years referred to under section 153, pending on the date of initiation of search under section 132 or requisition under section 132A shall abate. The words, pending on the date of initiation of search under section 132, or making of requisition under section 132A, as the case may be, has to be assigned simple and plain meaning. Where the assessment or re-assessment is finalised, there are no pending proceedings to be abated, and restored to the file of the Assessing Officer. To abate means to diminish or to take away. [Para 12] The word 'abatement' is referable to something, which is pending alive, or is subject to deduction. The abatement refers to suspension or termination of the proceedings either of the main action, or the proceedings ancillary or collateral to it. The word is commonly used in the legislations, which provide for abatement of action/ suit; abatement of legacies; abatement of nuisance; and all actions for such nature, which have the pendency or 31 ITA No.519/Agra/2012 & CO No.10/Agra/2013 A.Y. 2004-05 continuance. The proceedings, which have already terminated are not liable for abatement unless statute expressly provides for such consequence thereof. [Para 13] The word 'pending' occurring in the second proviso to section 153A of the Act, is also significant. It is qualified by the words 'on the date of initiation of the search', and makes it abundantly clear that only such assessment or reassessment proceedings are liable to abate. [Para 14] The pendency of an appeal in the Tribunal against the order of assessment against which an appeal has been decided by Commissioner (Appeals) is not a continuation of the proceedings of assessment. An appeal under the Income-tax Act lies to the Appellate Tribunal on a question of law. Even if it is pending on the date of search, no such intention has indicated by the Tribunal arises out of the provisions of second proviso to section 153A, to abate the proceedings, which have been completed, or concluded, and to restore assessment to the file of the Assessing Officer. [Para 15] This is no force in the submission that where a notice under section 153A has been given after the search operations under section 132, for filing assessment for the block period of 6 years, and if such period includes any of the assessment year, the abatement of assessment and re-assessment proceedings, to give way to reassessment considering the additions in the assessment under section 153A, will also include the assessment or re- assessment, which has been completed. If as a result of search, some undisclosed income is found to have escaped assessment, the Assessing Officer, may initiate steps for reassessment after sanction of competent authority, within the prescribed period of limitation. [Para 16] The second proviso to section 153A of the Act, refers to abatement of the pending assessment or re-assessment proceedings. The word 'pending' does not operate any such interpretation, that wherever the appeal against such assessment or reassessment is pending, the same along with assessment or reassessment proceedings is liable to be abated. The principles of interpretation of taxing statutes do not permit the Court to interpret the second proviso to section 153A in a manner that where the assessment or reassessment proceedings are complete, and the matter is pending in appeal in the Tribunal, the entire proceedings will abate. [Para 19] 32 ITA No.519/Agra/2012 & CO No.10/Agra/2013 A.Y. 2004-05 There is another aspect to the matter, namely that the abatement of any proceedings has serious causes and effect in as much as the abatement of the proceedings, takes away all the consequences that arise thereafter. In the present case, after deducting bogus gifts in the regular assessment proceedings, the proceedings for penalty were drawn under section 271(1)(c). The material found in the search may be a ground for notice and assessment under section 153A but that would not efface or terminate all the consequence, which has arisen out of the regular assessment or reassessment resulting into the demand or proceedings of penalty. [Para 20] For the aforesaid reasons, the Tribunal had erred in law in abating the regular assessment proceedings, which had become final, and restoring them as a consequence of search under section 132, and notice under section 153A to the file of the Assessing Officer." [Para 21] 8.14. With above back grounds of discussions, if we consider the facts of the case under consideration, we notice that in response, vide letter dated 11.11.2011, the assessee submitted that to the best of assessee's knowledge or belief no documents have been seized by the department relating to the concern. As regards other seized material, it was submitted that nothing incriminating has been found so as to disclose any undisclosed income as regards the assessee from the seized material.
The assessee seeks clarification from the A.O. saying that please let them know which loose paper or document seized from which premises (as searches were conducted in several locations) requires a specific show-cause to explain so that its explanation could be given. As regards the assessee, it can give an explanation in respect of each and every seized material unless the same is a dumb document or it does not pertain to the assessee. But the A.O. failed to point any material in this 33 ITA No.519/Agra/2012 & CO No.10/Agra/2013 A.Y. 2004-05 regard. The A.O. has again issued detailed questionnaire on 18.11.2011 asking for further details on various items of balance sheet etc. In respect of seized documents, para 9 of the questionnaire is same as mentioned in previous notice/questionnaire. On the basis of the facts, the CIT(A) found that no specific seized document, much less incriminating, has been found, seized or brought on record by the A.O. in case of the assessee pertaining to the year under consideration. The CIT(A) noticed that in the assessment order the A.O. has made discussion about list of 61 dummy concerns with bank accounts, undisclosed bank accounts & unaccounted business transactions of Rs.46,20,98,097/- (pages 2-5 of the assessment order) pertaining to K.S. Oils Ltd., but none of them belongs or pertains to the assessee for the year under consideration nor there is any material on record proving assessee's connection with these dummy concerns or undisclosed bank accounts or unaccounted transactions. The A.O. referred the material/incriminating material in respect of the group, K.S. Oils Limited as noted by the CIT(A) in his order and same is stated above and not a single document has been pointed out relating to the assessee even after specifically asked by the assessee. The admitted facts are that no incriminating documents or material were found during the course of search in the case of the assessee. The Revenue has failed to point out any contrary material to the facts recorded and finding given 34 ITA No.519/Agra/2012 & CO No.10/Agra/2013 A.Y. 2004-05 thereon by the CIT(A). Therefore, as per the detailed discussions made above, the additions are not warranted in the hands of the assessee.
8.15 The CIT(A) noticed that the assessee has filed return for the assessment year under consideration in due course on 21.10.2004 declaring income of Rs.2,76,250/-
which is same as per return filed u/s. 153A on 16.09.2011 after the search operations on 11.03.2010. Assessment order u/s. 143(3) has also been passed on 6.12.2006 by ITO, 2(2), Gwalior assessing total income at Rs.4,25,590/- along with agricultural income of Rs.14,294/- after making additions on estimated basis for disallowance of diesel & fuel expenses, hammali expenses, freight, general repair expenses etc. Vide appeal order dated 17.10.2011 in appeal No.641/IT/06- 07/GWL, relief of Rs.70,000/- has been granted out of addition made of Rs.95,000/- by the A.O. In the light of judgment of Hon'ble Allahabad High Court in the case of Commissioner of Income-tax (Central), Kanpur vs. Smt. Shaila Agarwal [2011] 16 taxmann.com 232 (All.) and All Cargo Global Logistics Limited vs. Deputy Commissioner of Income-tax, Central Circle-44 [2012] 23 taxmann.com 103 (Mum.) (SB), there are no pending proceedings to be abated, therefore, routine additions are not warranted.35 ITA No.519/Agra/2012 & CO No.10/Agra/2013
A.Y. 2004-05
9. In the light of the above discussions, we notice that the CIT(A) has rightly decided the issue in favour of the assessee. In the light of the detailed discussions made as above, we confirm the order of CIT(A) on the issue.
10. Since we confirmed the order of CIT(A) on the legal issue and CIT(A) has also not adjudicated the ground on merit, therefore, we are also not expressing any opinion in respect of merit of the case.
11. Since the Cross Objection is in support of the order of CIT(A), in the light of the fact, the Cross Objection filed by the assessee has become infructuous.
12. In the result, appeal of the Revenue is dismissed and in view of it Cross Objection of the assessee has become infructuous.
(Order pronounced in the open Court)
Sd/- Sd/-
(BHAVNESH SAINI) (A.L. GEHLOT)
Judicial Member Accountant Member
PBN/*
Copy of the order forwarded to:
1. Appellant
2. Respondent
3. CIT (Appeals) concerned
4. CIT concerned
5. D.R. ITAT, Agra bench, Agra By Order
6. Guard File Sr. Private Secretary
Income-tax Appellate Tribunal, Agra
True Copy