PCIT Vs Speciality Paper Ltd. (Bombay High Court)
The Bombay High Court rejected a batch of appeals filed by the Revenue under Section 260A of the Income Tax Act, 1961, arising from a common order of the Mumbai Bench of the Income Tax Appellate Tribunal dated 21.03.2018. The dispute concerned assessments made under Section 153C in cases where the original assessments had not abated and where no incriminating material was referred to by the Assessing Officer as having been found during the search. The Tribunal had followed the Bombay High Court’s decision in Commissioner of Income Tax vs. Continental Warehousing Corporation (Nhava Sheva) Ltd. and held that additions could not be made in unabated assessments in the absence of incriminating material.
Before the High Court, the Revenue raised a common question of law as to whether the Tribunal was justified in holding that no additions could be made in respect of unabated assessments when the Assessing Officer had not referred to any incriminating material seized during the search. The Revenue also pointed out that the Supreme Court had admitted the Revenue’s Special Leave Petition concerning Continental Warehousing Corporation (Nhava Sheva) Ltd.
The Revenue relied upon the Supreme Court’s decision in Principal Commissioner of Income-tax, Central-3 Vs. Abhisar Buildwell (P.) Ltd., which considered the interpretation of Sections 153A, 132 and 143. The Supreme Court held that, in cases of completed or unabated assessments, the Assessing Officer could not make an addition in the absence of incriminating material found during a search under Section 132 or requisition under Section 132A. Where incriminating material was found, the Assessing Officer could assess or reassess total income by taking into consideration such material and other material available with the Assessing Officer.
The Supreme Court further held that where no incriminating material was unearthed during the search, the Assessing Officer could not assess or reassess completed or unabated assessments by relying on other material. However, such completed or unabated assessments could still be reopened under Sections 147/148, subject to fulfilment of the conditions prescribed under those provisions.
The Bombay High Court noted that its earlier view in Commissioner of Income Tax vs. Continental Warehousing Corporation (Nhava Sheva) Ltd. had consequently received approval from the Supreme Court. In that earlier decision, the High Court had held that finalised assessments could not be disturbed under Section 153A where no incriminating material was found during the search. The Tribunal had applied that principle to the Section 153C assessments involved in the present appeals, taking into account the proviso to Section 153C concerning the date on which the Assessing Officer received the books of account, documents or assets seized or requisitioned.
In light of the authoritative pronouncement in Abhisar Buildwell (P.) Ltd., the Bombay High Court held that the question raised by the Revenue did not arise for consideration. The Court nevertheless clarified that completed or unabated assessments could be reopened by the Assessing Officer under Sections 147/148, subject to fulfilment of the statutory conditions and as otherwise permissible in law. The contentions of the parties concerning such reopening were expressly kept open.
Accordingly, the Bombay High Court rejected the Revenue’s appeals and made no order as to costs.
Cases Discussed
- Principal Commissioner of Income-tax, Central-3 Vs. Abhisar Buildwell (P.) Ltd. (Supreme Court), [2023] 149 taxmann.com 399(SC)
- Commissioner of Income Tax vs. Continental Warehousing Corporation (Nhava Sheva) Ltd. (Bombay High Court), 374 ITR 645 (Bom.)
FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT
1. This is a batch of appeals under Section 260A of the Income Tax Act, 1961 (for short, “the Act”) circulated on behalf of the Revenue, which arises from a common judgment and order passed by the Income Tax Appellate Tribunal, Mumbai Bench (for short, “the Tribunal”) dated 21 March 2018 in a batch of Income Tax Appeals.
2. Before the Tribunal, disputes had arisen from the order passed by the Commissioner of Income Tax (Appeal) taking a view that in the absence of any incriminating material found in the course of search, no additions are permissible in the assessments made under Section 153 (C) of the Act in years, where the original assessments do not abate, following the decision of this Court in Commissioner of Income Tax vs. Continental Warehousing Corporation (Nhava Sheva) Ltd.1.
3. In Commissioner of Income Tax vs. Continental Warehousing Corporation (supra), before this Court, an issue which had fell for consideration of this Court, was ‘whether in a case where pursuant to issuance of a notice under Section 153A assessments are abated, Assessing Officer retains original jurisdiction as well as jurisdiction conferred on him under Section 153A, for which assessments be made for each of six assessment years separately’. This Court, considering the relevant provisions, held that no addition can be made in respect of unabated assessments which have become final, if no incriminating material was found during search. The relevant observations as made by the Court are required to be noted which read thus:-
“29. We are not in agreement with Mr. Pinto that these observations are made in passing or that they are not binding on us because the essential controversy before the Bench was somewhat different. He urges that was only in relation to the legality and validity of the order of the Commissioner under section 263 of the IT Act. Had that been the case, the Division Bench was not required to trace out the history of section 153A of the IT Act and the power that is conferred thereunder. When the Revenue argued before the Division Bench that the power under section 153A can be invoked and exercised even in cases where the second proviso to sub-section (1) is not applicable that the Division Bench was required to express a specific opinion. The provision deals with those cases where assessment or reassessment, if any, relating to the assessment years falling within the period of six assessment years referred to in sub-section (1) of section 153A were pending. If they were pending on the date of the initiation of the search under section 132 or making of requisition under section 132A, as the case may be, they abate. It is only pending proceedings that would abate and not where there are orders made of assessment or reassessment and which are in force on the date of initiation of the search or making of the requisition. As that specific argument was canvassed and dealt with by the Division Bench and that is how it was called upon to interpret section 153A of the IT Act, then, each of the above conclusions rendered by the Division Bench would bind us.
30. Even otherwise, we agree with the Division Bench when it observes as above with regard to the ambit and scope of the powers conferred under section 153A of the Act. Since we are not required to trace out the history and we can do nothing better than to reproduce the observations and conclusions as above that we are not repeating the same. Even if the exercise of power under section 153A is permissible still the provision cannot be read in the manner suggested by Mr. Pinto. Not only the finalised assessment cannot be touched by resorting to those provisions, but even while exercising the power can be exercised where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after 31st March, 2003. There is a mandate to issue notices under section 153(1)(a) and 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. Thus, the crucial words “search” and “requisition” appear in the substantive provision and the provisos. That would throw light on the issue of applicability of the provision. It being enacted to a search or requisition that its construction would have to be accordingly. That is the conclusion reached by the Division Bench in Murli Agro (supra) with which we respectfully agree. These are the conclusions which can be reached and upon reading of the legal provisions in question.”
4. On the aforesaid premise and referring to the decision of this Court in Commissioner of Income Tax vs. Continental Warehousing Corporation (supra), the Tribunal rejected the appeals filed by the Revenue against the orders passed by the CIT (Appeals). The relevant observations made by the Tribunal are required to be noted which read thus:-
“2. In all the appeals, the sum and substance of the dispute arises from the decision of the CIT(A) in holding that in the absence of any incriminating material found in the course of search, no additions are permissible in the assessments made u/s. 153C of the Income Tax Act, 1961 (in short ‘the Act’) in years where the original assessments do not abate, following the ratio of the judgment of the Hon’ble Bombay High Court in the case of CIT vs. Continental Warehousing Corporation (Nhava Sheva Ltd.) (374 ITR 645).
7. On the other hand, the learned representative for the assessee furnished a year-wise chart of additions made and contended that the finding of the CIT(A) that none of the additions were based on any incriminating material found during the course of search is fair and proper and, therefore, the ratio of the judgment of the Hon’ble Bombay High Court in the case of Continental Warehousing Corporation (Nhava Sheva Ltd) (supra) has been aptly applied. Even with regard to the adoption of date of 19.11.2012, the learned representative asserted that the action of CIT(A) is correct in law inasmuch as it was for the Assessing Officer to demonstrate if the date was not correct.
8. We have carefully considered the rival submissions. Insofar as the legal position is concerned, it is quite well-settled by the judgment of the Hon’ble Bombay High Court in the case of Continental Warehousing Corporation (Nhava Sheva Ltd.) (supra). Presently, we are dealing with an assessee whose assessment has been made by invoking Sec. 153C of the Act, i.e. a person other than the person searched and referred to in Sec. 153A of the Act. In the case of such a person, the proviso to Sec. 153C of the Act provides as under:-
“Provided that in case of such other person, the reference to the date of initiation of the search under section 132 or making of requisition under section 132A in the second proviso to sub-section (1) of section 153A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person.”
Notably, second proviso to Sec. 153A(1) of the Act prescribes the guide as to under which circumstances the original assessment or reassessment for the prescribed six assessment years shall abate. With respect to an assessee covered u/s. 153C of the Act, the prescription of second proviso to Sec. 153A(1) of the Act has to be applied taking into account the first proviso to Sec. 153C of the Act, which we have reproduced above.”
5. It is on such backdrop, the present appeals were filed raising the question of law which is common in all these appeals, which reads thus:-
“Whether on the facts and in the circumstances of the case and in law, the Hon’ble ITAT was justified in the finding that no additions can be made in respect of unabated assessments when the AO has not referred to any incriminating material seized in search proceedings and also in not appreciating that Hon’ble Supreme Court has admitted SLP filed by the Revenue in the case of M/s. Continental Warehousing Corporation (Nhava Sheva) Ltd. 64 taxman, Com 34 on the similar issue?”
6. Mr. Suresh Kumar, learned counsel for the Revenue has drawn our attention to the decision of the Supreme Court in Principal Commissioner of Income-tax, Central-3 Vs. Abhisar Buildwell (P.) Ltd.2 to submit that the issue involving interpretation of the provisions of Section 153A read with Sections 132 and 143 had fell for consideration of the Supreme Court, which had arisen from the decision of this Court as also from the decisions of the other High Courts. The Supreme Court held that in respect of completed assessments/ unabated assessments, no addition can be made by Assessing Officer in absence of any incriminating material found during course of search under Section 1322024:BHC-OS:12482 or requisition under Section 132A. It is also, however, held that completed/ unabated assessments can be reopened by Assessing Officer in exercise of powers under Section 147/148 subject to fulfillment of conditions as envisaged under Section 147/148 and those powers were saved. The conclusions of the Supreme Court as set out in paragraph 14 are required to be noted which read thus:-
“14. In view of the above and for the reasons stated above, it is concluded as under:
(i) that in case of search under Section 132 or requisition under Section 132A, the AO assumes the jurisdiction for block assessment under section 153A;
(ii) all pending assessments/reassessments shall stand abated;
(iii) in case any incriminating material is found/unearthed, even, in case of unabated/completed assessments, the AO would assume the jurisdiction to assess or reassess the ‘total income’ taking into consideration the incriminating material unearthed during the search and the other material available with the AO including the income declared in the returns; and
(iv) in case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabated assessments. Meaning thereby, in respect of completed/unabated assessments, no addition can be made by the AO in absence of any incriminating material found during the course of search under Section 132 or requisition under Section 132A of the Act, 1961. However, the completed/unabated assessments can be re-opened by the AO in exercise of powers under Sections 147/148 of the Act, subject to fulfilment of the conditions as envisaged/mentioned under sections 147/148 of the Act and those powers are saved.
The question involved in the present set of appeals and review petition is answered accordingly in terms of the above and the appeals and review petition preferred by the Revenue are hereby dismissed. No costs.”
7. Thus, the view of this Court in Commissioner of Income Tax vs. Continental Warehousing Corporation (supra) has found approval of the Supreme Court. In view of the authoritative pronouncement of the Supreme Court in Principal Commissioner of Income-tax, Central-3 Vs. Abhisar Buildwell (P.) Ltd. (supra), the question of law as raised by the revenue would not arise for consideration. However, it is clarified that the completed/unabated assessments can be reopened by the Assessing Officer in exercise of powers under Section 147/148 of the Act subject to fulfillment of conditions as envisaged under the said provisions and as may be permissible in law. All contentions of the parties in that regard are expressly kept open.
8. The appeals are accordingly rejected. No costs.
Notes:
1 374 ITR 645 (Bom.)
2 [2023] 149 taxmann.com 399(SC)
