Case Law Details

Case Name : PCIT Vs Delhi International (Karnataka High Court)
Appeal Number : I.T.A. No. 322/2018
Date of Judgement/Order : 29/09/2021
Related Assessment Year :

PCIT Vs Delhi International (Karnataka High Court)

Facts- Assessment orders were passed u/s 143(3) read with 153A, in consequence to a search and seizure operation conducted at the premises of the assessee. The AO made certain additions and demanded tax thereon. The said assessment orders were challenged by the assessee before the Commissioner (Appeals), the said appeals came to be partly allowed. Hence, the Revenue as well as the assessee both preferred appeals before the Tribunal. The Tribunal allowed the appeals preferred by the assessee and quashed the assessment orders passed under Section 143 (3) read with 153A of the Act dismissing the appeals filed by the Revenue. Being aggrieved, the Revenue has preferred these appeals.

Conclusion- Thus, it is clear that the AO while passing the order under Section 153A read with Section 143[3] of the Act, ordinarily cannot disturb the assessment/reassessment order which has attained finality, unless the materials gathered in the course of the proceedings establishes that the finalized assessments are contrary to the material unearthed during the course of 153A proceedings. Even in case of a searched person, the same reason would hold good.

FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT

Since common and akin issues are involved in these appeals, they are heard together and disposed of by this common judgment.

Concluded assessment reassessment cannot be disturbed if no incriminating material found during search

2. These appeals are filed by the Revenue under Section 260A of the Income Tax Act, 1961 [‘Act’ for short] challenging the orders of the Income Tax Appellate Tribunal ‘C’ Bench, Bengaluru, (‘Tribunal’ for short) as shown in the cause title.

3. The appeals were admitted to consider the following substantial question of law:

In ITA Nos.322/2018 to 324/2018:

“Whether on the facts and in the circumstances of the case, the Tribunal was justified in law in quashing the assessment order passed under Section 143(3) r/w Section 153A of the Act by following the judgment of this Hon’ble High Court in the case of M/s Lancy Constructions?

In ITA Nos.354/2018 and 355/2018:

“Whether on the facts and in the circumstances of the case and in law, the Tribunal was correct in law in holding that incriminating material is necessary condition for proceedings under Section 153A of the Act by following the judgment of this Court in the case of CIT V/s. Lancy Constructions?”

“1. Whether on the facts and in the circumstances of the case and in law, the Tribunal is right in law in allowing the depreciation on capitalization of expenditure incurred during the assessment year 2007-08 and 2008-09?

2. Whether on the facts and in the circumstances of the case and in law, the Tribunal is right in law in restoring the file to assessing authority as for disallowance made by assessing authority in respect of Section 14A read with Rule 8D of the Act?

3. Whether on the facts and in the circumstances of the case and in law, the Tribunal is right in law in setting aside disallowance made under Section 40[a][ia] for non deduction of TDS on payments made to Director’s towards sitting fees by holding that the amendment will apply for A.Y.2014-15 onwards?”

In ITA No.381/2018:

“1. Whether on the facts and in the circumstances of the case and in law the Tribunal was correct in law in holding that incriminating material is necessary condition for proceedings under Section 153A of the Act by following the judgment of this Hon’ble Court in the case of CIT V/s. Lancy Constructions?

2. Whether on the facts and in the circumstances of the case, the Tribunal is right in quashing the assessment order by relying on the judgment of this Hon’ble High Court in the case of CIT V/s. Lancy Constructions [383 I TR 168]?”

In ITA Nos.197/2021 to 199/2021:

“Whether on the facts and circumstances of the case the Tribunal’s order can be said as perverse in nature in remanding the matter to CIT (A) to examine whether assessment order is based on any incriminating material seized during course of search conducted in the case of the assessee on 11.10.2012 and in the light of decision’s relied upon by it even when as per the parameters of Section 153A or 153C of the Act, assessing authority is empowered to pass assessment order in the absence of any incriminating material?”

4. The appellants are companies claiming to be in the business of infrastructure facilities, provider-operating and developing airport and related infrastructure at International Airport [hereinafter referred to as ‘assessee’]. Assessment orders were passed under Section 143(3) read with 153A of the Act, in consequence to a search and seizure operation conducted at the premises of the assessee. The Assessing Officer made certain additions and demanded tax thereon. The said assessment orders were challenged by the assessee before the Commissioner of Income Tax (Appeals), the said appeals came to be partly allowed. Hence, the Revenue as well as the assessee both preferred appeals before the Tribunal. The Tribunal allowed the appeals preferred by the assessee and quashed the assessment orders passed under Section 143 (3) read with 153A of the Act dismissing the appeals filed by the Revenue. Being aggrieved, the Revenue has preferred these appeals.

5. Learned counsel for the Revenue argued that the conditions for issuance of notice under Section 153A of the Act being well settled, merely on the ground that no incriminating material was seized by the Department, the proceedings initiated under Section 153A of the Act cannot be held to be unjustifiable; the finding of the Tribunal, runs contrary to the provisions of the Act and the judicial pronouncements. Much emphasis was placed on the Co-ordinate Bench decision of this Court in the case of Canara Housing Development Company. .v. Deputy Commissioner of Income Tax Central Circle-I [2014 (49) Taxxman.com 98] inter alia citing other judgments which would be discussed infra.

6. Learned counsel for the assessee argued that the Tribunal has rightly allowed the appeals filed by the assessee. The judgment of this Court in the case of Commissioner of Income Tax .v. M/s Lancy Constructions [2016 (237) Taxman 728], is squarely applicable to the present case. The Tribunal having considered the said judgment has concluded that in the absence of any incriminating material, proceedings under Section 153A of the Act cannot be initiated and concluded and assessment cannot be reopened.

7. Distinguishing the judgment of Canara Housing Development Company supra, learned counsel submitted that the judgments of various Hon’ble High Courts on this aspect would indicate that the assessing officer while making assessment under Section 153A of the Act could make addition only on the basis of some incriminating material unearthed during the course of search or requisition of documents. In the absence of such incriminating documents found during the search, any addition made by the assessing officer is not sustainable. In this regard, host of judgments have been cited in support of his contentions.

8. We have carefully considered the rival submissions of the learned counsel for the parties and perused the material on record.

9. Section 153A of the Act reads thus:

“Assessment in case of search or requisition.

153A. (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 the 31st day of May, 2003 9 but on or before the 31st day of March, 2021, 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 and for the relevant assessment year or years referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139;

(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 and for the relevant assessment year or years :

Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years and for the relevant assessment year or years :

Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years and for the relevant assessment year or years referred to in this sub-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:

Provided also that…………

Provided also that………. 

10. In Canara Housing Development Company, supra, the coordinate Bench of this Court while considering proceedings under Section 263 of the Act vis-à-vis proceedings under Section 153A of the Act, has observed thus:

“10. Section 153A of the Act starts with a non obstante clause. The fetters imposed upon the Assessing Officer by the strict procedure to assume jurisdiction to reopen the assessment under Sections 147 and 148, have been removed by the non obstante clause with which sub section (1) of Section 153A opens. The time-limit within which the notice under Section 148 can be issued, as provided in Section 149 has also been made inapplicable by the non obstante clause. Section 151 which requires sanction to be obtained by the Assessing Officer by issue of notice to reopen the assessment under Section 148 has also been excluded in a case covered by Section 153A. The time-limit prescribed for completion of an assessment or reassessment by Section 153 has also been done away with in a case covered by Section 153A. With all the stops having been pulled out, the Assessing Officer under Section 153A has been entrusted with the duty of bringing to tax the total income of an assessee whose case is covered by Section 153A, by even making reassessments without any fetters, if need be. Therefore, it is clear even if an assessment order is passed under Section 143(1) or 143(3) of the Act, the Assessing Officer is empowered to reopen those proceedings and reassess the total income taking note of the undisclosed income, if any, unearthed during the search. After such reopening of the assessment, the Assessing Officer is empowered to assess or reassess the total income of the aforesaid years. The condition precedent for application of Section 153A is there should be a search under Section 132. Initiation of proceedings under Section 153A is not dependent on any undisclosed income being unearthed during such search. The proviso to the aforesaid section makes it clear the assessing officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years. If any assessment proceedings are pending within the period of six assessment years referred to in the aforesaid sub-section on the date of initiation of the search under Section 132, the said proceeding shall abate. If such proceedings are already concluded by the assessing officer by initiation of proceedings under Section 153A, the legal effect is the assessment gets reopened. The block assessment roped in only the undisclosed income and the regular assessment proceedings were preserved, resulting in multiple assessments. Under Section 153A, however, the Assessing Officer has been given the power to assess or reassess the “total income” of the six assessment years in question in separate assessment orders. The Assessing Officer is empowered to reopen those proceedings and reassess the total income, taking note of the undisclosed income, if any, unearthed during the search. He has been entrusted with the duty of bringing to tax the total income of an assessee whose case is covered by Section 153A, by even making reassessments without any fetters. This means that there can be only one assessment order in respect of each of the six assessment years, in which both the disclosed and the undisclosed income would be brought to tax. When once the proceedings are initiated under Section 153A of the Act, the legal effect is even in case where the assessment order is passed it stands reopened. In the eye of law there is no order of assessment. Re-opened means to deal with or begin with again. It means the Assessing Officer shall assess or reassess the total income of six assessment years. Once the assessment is reopened, the assessing authority can take note of the income disclosed in the earlier return, any undisclosed income found during search or and also any other income which is not disclosed in the earlier return or which is not unearthed during the search, in order to find out what is the “total income” of each year and then pass the assessment order. Therefore, the Commissioner by virtue of the power conferred under Section 263 of the Act gets no jurisdiction to initiate proceedings under the said provision because the condition precedent for initiating proceedings under Section 263 is any order passed under the Act by the Assessing officer is erroneous insofar as it is prejudicial to the interest of the revenue. Once the order passed by the Assessing officer gets reopened, there is no order which can be said to be erroneous insofar as it is prejudicial to the interest of the revenue which confers jurisdiction on the Commissioner to exercise the power of the jurisdiction.

11. ……………………. On the contrary, it is expressly provided under Section 153A of the Act the Assessing Officer shall assess or reassess the “total income” of six assessment years which means the said total income includes income which was returned in the earlier return, the income which was unearthed during search and income which is not the subject matter of aforesaid two income….”

11. In M/s Lancy Constructions supra, the Co­ordinate Bench of this Court where one of us (Hon’ble SSJ) was a member, has observed thus:

“5. We agree with the opinion of the Tribunal that additions could not have been made by the Assessing Officer without rejecting the books of account of the assessee, and also without there being any adverse comment made by the Assessing Officer with regard to the books of account that were maintained by the assessee, which were duly audited.

6. In our view, if assessment is allowed to be reopened on the basis of search, in which no incriminating material had been found, and merely on the basis of further investigating the books of accounts which had been already submitted by the assessee and accepted by the Assessing Officer at the time of regular assessment, the same would amount to the Revenue getting a second opportunity to reopen the concluded assessment, which is not permissible under the law. Merely because search is conducted in the premises of the assessee, would not entitle the Revenue to initiate the process of reassessment, for which there is a separate procedure prescribed in the statute. It is only when the conditions prescribed for reassessment are fulfilled that a concluded assessment can be reopened. The very same accounts which were submitted by the assesseee, on the basis of which assessment had been concluded, cannot be reappreciated by the Assessing Officer merely because a search had been conducted in the premises of the assessee.”

12. In Commissioner of Income Tax V/s. IBC Knowledge Park (P) Ltd., [(2016) 385 ITR 346 (Kar.), the coordinate Bench of this Court has referred to the decisions of M/s Lancy Constructions supra as well as Canara Housing Development Company supra along with other judgments cited at the Bar and has observed that the relevant sections as well as judicial precedents would enunciate that, Section 158BD of the Act deals with undisclosed income of a third party. However, insofar as the incriminating material of the searched person or other person detected during the course of search is concerned, the same can be considered during the course of assessment. Further, such incriminating material must relate to undisclosed income which would empower the assessing officer to upset or disturb a concluded assessment. Otherwise, a concluded assessment would be disturbed without there being any basis for doing so which is impermissible in law. Even in the case of the searched person, the same reason would hold good as in the case of any other person. It has been held that detection or the existence of incriminating material is a must for disturbing the assessment already made and concluded but at the same time, search can be at three stages: (i) when reassessment is reinitiated; (ii) at the stage during the course of reassessment; (iii) where reassessment is altered by a different assessment in respect of the searched person or in respect of a third party.

13. In Principal Commissioner of Income Tax and Another V/s. BMR Energy Ltd. (ITA No.358/2018 and connected cases DD.08.01.2019), a coordinate bench of this Court has held that the judgment reported in the case of Canara Housing Development Company supra was not even considered in M/s Lancy Constructions supra and the latter decision was discussed at the stage of admission without even notice to the assessee. It has been observed that in M/s Lancy Constructions, the High Court was of the view that no substantial question of law would arise for consideration in the appeal and as such, the judgment reported in the case of M/s Lancy Constructions does not render the true position in law and it cannot be considered as a precedent. Accordingly, the order of the Tribunal based on the case of M/s Lancy Constructions was set aside and remanded to the Tribunal for fresh consideration in accordance with law.

14. In the case of Principal Commissioner of Income Tax V/s. Ramesh Bhai Jivraj Desai [(2020) 121 Taxxman.com 333 (Gujrat)], it has been held that having regard to the materials on record, the Tribunal is right in holding that once it is held that the assessment has attained finality, then the assessing officer, while passing independent assessment order under Section 153A read with 143 (3) of the Act cannot disturb the assessment/reassessment which has attained finality, unless the materials gathered in the course of proceedings under Section 153A of the Act establish that the reliefs granted in the final assessment/reassessment were contrary to the facts coming during the course of Section 153A proceedings.

15. The Hon’ble High Court of Gujarat in Principal Commissioner of Income Tax-4 V/s. Saumya Constructions (P) Ltd. [2017 81 Taxxman.com 292 (Gujarat)], has held thus:

“14. Essentially, therefore, both the provisions contemplate search and requisition where the assessee is not likely to disclose his income. It appears that the object of both the provisions is to unearth the income which the assessee has not or is not likely to disclose.

15. On a plain reading of Sectioin153A of the Act, it is evident that the trigger point for exercise of powers thereunder is a search under Section 132 or a requisition under Section 132A of the Act. Once a search or requisition is made, a mandate is cast upon the assessing officer to issue notice under Section 153A of the Act to the person, requiring him to furnish the return of income in respect of each assessment year falling within six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made and assess or reassess the same. Since the assessment under Section 153A of the Act is linked with search and requisition under Sections 132 and 132A of the Act, it is evident that the object of the section is to bring to tax the undisclosed income which is found during the course of or pursuant to the search or requisition. However, instead of the earlier regime of block assessment whereby, it was only the undisclosed income of the block period that was assessed, Section 153A of the Act seeks to assess the total income for the assessment year, which is clear from the first proviso thereto which provides that the assessing officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years. The second proviso makes the intention of the legislature clear as the same provides that assessment or reassessment, if any, relating to the six assessment years referred to in the sub-section pending on the date of initiation of search under Section 132 or requisition under section 132A, as the case may be, shall abate. Sub-Section (2) of Section 153A of the Act provides that if any proceeding or any order of assessment or reassessment made under sub-Section (1) is annulled in appeal or any other legal provision, then the assessment or reassessment relating to any assessment year which had abated under the second proviso would stand revived. The proviso thereto says that such revival shall cease to have effect if such order of annulment is set aside. Thus, any proceeding of assessment or reassessment falling within the six assessment years prior to the search or requisition stands abated and the total income of the assessee is required to be determined under Section 153A of the Act. Similarly, sub-section (2) provides for revival of any assessment or reassessment which stood abated, if any proceeding or any order of assessment or reassessment made under Section 153A of the Act is annulled in appeal or any other proceeding.”

16. In the decision of E.N. Gopakumar V/s. Commissioner of Income Tax (Central) [(2016) 75 Taxxman.com 215 (Kerala)], the Hon’ble High Court of Kerala has held that Section 153A is a provision which deals with assessment in case of search or requisition. Section153A (1) (a) authorizes the issuance of notice calling for filing of returns. Once that is done, it is well within the jurisdiction of the assessing authority to proceed with any lawful modes of assessment as prescribed in the Act. The statute nowhere makes it conditional that the department has to unearth some incriminating material to conclude some method against the assessee in events where the assessment is triggered by a notice under Section 153A (1)(a) of the Act. When such notice is triggered following the search, the assessment proceedings can be concluded in any manner known to law including under Section 143(3) of the Act or even144 of the Act, if need be. Assessment proceedings can be concluded even without any incriminating material being available against the assessee in the search under Section 132 of the Act on the basis of which the notice was issued under Section 153A (1)(a) of the Act.

17. The Hon’ble High Court of Allahabad in the case of Commissioner of Income Tax, Central, Kanpur .v. Raj Kumar Arora [(2014) 52 Taxmann.com 172 (Allahabad)], has held thus:

“8. Section 153A of the Act along with Section 153B and 153C replaced the “Post Search Block Assessment Scheme” in respect of any search under Section 132A or requisition under Section 132A made after 31.05.2003. CBDT explained these provisions through circular dated 5.9.2003, which is reported in (2003) 263 ITR (St) 62. The said circular is as under:

………….

10. Under the block assessment proceeding under Chapter XIV-B only the undisclosed income found during the search and seizure operation were required to be assessed and the regular assessment proceedings were preserved. The introduction of Section 153A of the Act provides a departure from this proceeding. Under Section 153A of the Act, the Assessing Officer has been given the power to assess or reassess the total income of the assessment years in question in separate assessment orders. Consequently, there would be only one assessment order in respect of six assessment years in which total disclosed or undisclosed income would be brought to tax. Consequently, even though an assessment order has been passed under Section 143(1) (a) or under Section 143(3) of the Act, the Assessing Officer would be required to reopen these proceedings and reassess the total income taking notice of undisclosed income even found during the search and seizure operation. The fetter imposed upon the Assessing Officer under Sections 147 and 148 of the Act have been removed by the non obstante clause under Section 153A of the Act.

Consequently, we are of the opinion that in cases where the assessment or reassessment proceedings have already been completed and assessment orders have been passed, which were subsisting when the search was made, the Assessing Officer would be competent to reopen the assessment proceeding already made and determine the total income of the assessee. The Assessing Officer, while exercising the power under Section 153A of the Act, would make assessment and compute the total income of the assessee including the undisclosed income, notwithstanding the assessee had filed the return before the date of search which stood processed under Section 143(1)(a) of the Act.

11. In the light of the aforesaid, the reasons given by the Tribunal that no material was found during the search cannot be sustained, since we have held that the Assessing Officer has the power to reassess the returns of the assessee not only for the undisclosed income, which was found during the search operation but also with regard to the material that was available at the time of the original assessment. We find that the Tribunal dismissed the appeal while relying upon the decision of a Coordinate Bench of the Tribunal in the case of Anil Kumar Bhatia Vs. ACIT (2010) 1 ITR (Trib.) 484 (Delhi). We find that the said decision of the Coordinate Bench of the Tribunal was set aside by the Delhi High Court in Commissioner of Income Tax Vs. Anil Kumar Bhatia (2012) 24 taxmann.com 98 (Delhi). We find that the Tribunal only dismissed the appeal on this legal issue and had not considered the matter on merits.”

18. In Commissioner of Income Tax V/s. Kabul Chawla [(2016) 380 ITR 573 (Delhi)], Hon’ble Delhi High Court considering the decision in CIT V/s. Anil Kumar Bhatia [(2013) 352 ITR 493 (Del)], has held thus:

“21. Therefore it is clear that the decision in CIT V/s. Anil Kumar Bhatia (supra) does not deal with a situation where, as in the present case, no incriminating material was found during the search conducted under Section 132 of the Act.”

19. It is significant to note that the Co-ordinate Bench of this Court in Canara Housing Development Company supra relied upon by the Revenue has also been considered in Kabul Chawla supra and has held thus:

“26. In the High Court the question was whether the CIT could invoke the power under Section 263 of the Act once the proceedings under Section 153A was initiated. The High Court in Canara Housing (supra) answered the question in the negative. It referred to the decision of this Court in CIT v. Anil Kumar Bhatia (supra) and came to the conclusion that once proceedings are initiated under Section 153A of the Act the legal effect was that even where an assessment order is passed, it would stand reopened. In the eye of law there was no order of assessment. It meant that the AO “shall assess or reassess the total income of six assessment years.

Once the assessment is reopened, the assessing authority can take note of the income disclosed in the earlier return, any undisclosed income found during search or and also any other income which is not disclosed in the earlier return or which is not unearthed during the search, in order to find out what is the “total income” of each year and then pass the assessment order.”

27. It is important to note that Canara Housing was also a case where some material was unearthed during the search. Further, the High Court was clear that the addition to the income already disclosed would have to be based on some material unearthed during the search. This is clear from the observation in para 9 of the decision to the effect: “The AO is empowered to reopen those proceedings and reassess the total income, taking note of the undisclosed income, if any, unearthed during the search.” It was further observed that in the facts of that case if the CIT had come across any income that the AO had not taken note of while passing the earlier order, “the said material can be furnished to the assessing authority” who will take note of it while determining total income.”

20. In Principal Commissioner of Income Tax and Others V/s. Meeta Gutgutia Prop. Ferns ‘N’ Patels and Others [(2017) 295 CTR 0466 (Del)], Hon’ble High Court of Delhi while considering the substantial question of law relating to invoking of Section 153A of the Act has analyzed the catena of judgments more particularly, Smt. Dayawanti Gupta V/s. CIT [(1954) 26 ITR 736 (SC)J and Kabul Chawla supra and held that there was a clear admission by the assessee in Dayawanti Gupta supra of a failure in maintaining regular books of accounts, on the basis of material recovered during search, the additions were made for all the years. The Hon’ble Court held that what weighed with the Court in the said decision was the “habitual concealing of income and indulging in clandestine operations”. Thus, it has been held that the distinguishing factors of Dayawanti Gupta supra, do not detract from the settled legal position in Kabul Chawla supra which has been followed by several High Courts and thereby recorded a finding that the Tribunal was justified in holding that invoking of Section 153A by the Revenue for the assessment years concerned therein was without any legal basis as there was no incriminating material qua each of those assessment years. In the judgment of Kabul Chawla supra, the Hon’ble High Court of Delhi has referred to the decision of the Rajasthan High Court in Jai Steel (India), Jodhpur V/s. ACIT [(2013) 36 Taxman 523 (Raj)] and also took note of the decision of the Bombay High Court in Commissioner of Income Tax V/s. Continental Warehousing Corporation (Nhava Sheva) Ltd. [(2015) 58 taxmann.com 78 (Bom)] which accepted the plea that if no incriminating material was found during the course of search in respect of an issue, then no additions in respect of any issue can be made to the assessment Section 153A and 153C of the Act. The legal position has been summarized in Kabul Chawla supra as under:

“37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under:

i. Once a search takes place under Section 132 of the Act, notice under Section 153 A (1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place.

ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise.

iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the ‘total income’ of the. aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs “in which both the disclosed and the undisclosed income would be brought to tax”.

iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment “can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material.”

v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word ‘assess’ in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word ‘reassess’ to completed assessment proceedings.

vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO.

vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment.”

21. The Judgment of Meeta Gutgutia, supra was challenged before the Hon’ble Apex Court by the Revenue and Special Leave Petition has been dismissed condoning the delay. Thus, the judgment of the Hon’ble High Court of Delhi in Meeta Gutgutia has reached finality.

22. The Hon’ble High Court of Judicature at Bombay, Nagpur Bench in the case of Commissioner of Income Tax V/s. Murli Agro Products Ltd., [ITA No.36/2009, D.D. 29.10.2010] has held thus:

“9. What Section 153A contemplates is that, notwithstanding the regular provisions for assessment/reassessment contained in the IT Act, where search is conducted under Section 132 or requisition is made under Section 132A on or after 31/5/2003 in the case of any person, the Assessing Officer shall issue notice to such person requiring him to furnish return of income within the time stipulated therein, in respect of six assessment years immediately preceding the assessment year relevant to the previous year in which the search is conducted or requisition is made and thereafter assess or reassess the total income for those assessment years. The second proviso to Section 153A provides for abatement of assessment/reassessment proceedings which are pending on the date of search/requisition. Section 153A(2) provides that when the assessment made under Section 153(A)(1) is annulled, the assessment or reassessment that stood abated shall stand revived.

12. Once it is held that the assessment finalized on 29.12.2000 has attained finality, then the deduction allowed under section 80 HHC of the Income-tax Act as well as the loss computed under the assessment dated 29-12­2000 would attain finality. In such a case, the A.O. while passing the independent assessment order under Section 153A read with Section 143(3) of the IT. Act could not have disturbed the assessment/reassessment order which has attained finality, unless the materials gathered in the course of the proceedings under Section 153A of the Income-tax Act establish that the reliefs granted under the finalised assessment/reassessment were contrary to the facts unearthed during the course of 153A proceedings.

13. In the present case, there is nothing on record to suggest that any material was unearthed during the search or during the 153A proceedings which would show that the relief under Section 80HHC was erroneous. In such a case, the A.O. while passing the assessment order under Section 153A read with Section 143(3) could not have disturbed the assessment order finalised on 29.12.2000 relating to Section 80HHC deduction and consequently the C.I.T. could not have invoked jurisdiction under Section 263 of the Act.”

23. In the case of Commissioner of Income Tax V/s. Continental Warehousing Corporation [(2015) 374 ITR 0645 (BOM)], an endeavor made by the Revenue contending that the ambit and scope of powers conferred on Assessing Officer under Section 153A of the Act was not properly appreciated in Murli Agro Products Ltd., and the same requires re-consideration was negated and the law laid down in Murli Agro Products Ltd., supra, was followed.

24. It is relevant to refer to the dicta pronounced by the High Court of Judicature at Bombay in the case of Murli Agro Products Ltd., supra wherein the Hon’ble High Court of Bombay in para 12 has held thus:

“12. Once it is held that the assessment finalized on 29.12.2000 has attained finality, then the deduction allowed under section 80 HHC of the Income-tax Act as well as the loss computed under the assessment dated 29-12­2000 would attain finality. In such a case, the A.O. while passing the independent assessment order under Section 153A read with Section 143(3) of the IT. Act could not have disturbed the assessment/ reassessment order which has attained finality, unless the materials gathered in the course of the proceedings under Section 153A of the Income-tax Act establish that the reliefs granted under the finalised assessment/reassessment were contrary to the facts unearthed during the course of 153A proceedings.”

25. Similarly, the Hon’ble High Court of Gujarat in the case of Ramesh Bhai Jivraj Desai supra, in paragraph 6 has held as under:

“6. Thus, having regard to the materials on record, the Tribunal is right in holding that once it is held that the assessment has attained finality, then, the Assessing Officer, while passing independent assessment order under Section 153A read with Section 143(3) of the Act cannot disturb the assessment/reassessment, which has attained finality unless the materials gathered in the course of the proceedings under Section 153A of the Act establish that the reliefs granted in the final assessment/reassessment were contrary to the facts coming during the course of Section 153A proceedings.

26. In the light of these judgments, we have analyzed Section 153A of the Act vis-à-vis the material on record. Strong reliance was placed by the Revenue on the Canara Housing Development Company supra, in support of the contention that search under Section 132 of the Act is sine qua non for initiation of proceedings under Section 153A of the Act but it is not dependent on any undisclosed income being unearthed during search. There is no cavil on this proposition that search under Section 132 or requisition under 132A is a condition precedent for invoking Section 153A of the Act, the assessing officer can assess or re-assess the total income with respect to six assessment years separately immediately preceding the assessment year relevant to the previous years in which the search was conducted or requisition was made but the controversy rests on whether the incriminating material is a condition precedent for invoking Section 153A?.

27. It is discernable from the memorandum explaining the provisions in the Finance Bill 2003 [260 ITR [ST] 14 at page 219] that it is to overcome the difficulty leading to prolonged litigation inasmuch as “undisclosed income”, the legislature by Finance Act, 2003, decided to discard Chapter XIV-B provisions and introduced Sections 153A, 153B and 153C in the Act. Section 153A would contemplate that on initiation of proceedings under said Section 153A, the assessment/reassessment proceedings that are pending on the date of conducting search under Section 132 or making requisition under Section 132A of the Act stand abated and not the assessment/reassessment already finalized. The CBDT Circular No.8/2003 dated 18.09.2003 clarifies that on initiation of proceedings under Section 153A of the Act, the proceedings pending in appeal, revision/application against finalized assessment shall not abate. It is clarified in the said CBDT Circular that the then existing provisions of Chapter XIV-B provided for a single assessment of the 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 laid down the manner in which such income is to be computed. 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 May 31st 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. Thus, it is clarified that the appeal, revision or rectification proceedings pending on the date of initiation of search under Section 132 shall not abate.

28. Section 153B provides for the time limit for completion of search assessments.

29. 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 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 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.

30. Thus, it is clear that the Assessing Officer while passing the order under Section 153A read with Section 143[3] of the Act, ordinarily cannot disturb the assessment/reassessment order which has attained finality, unless the materials gathered in the course of the proceedings establishes that the finalized assessments are contrary to the material unearthed during the course of 153A proceedings, as held by the Co-ordinate Bench of this Court in the case of IBC Knowledge Park (P) Ltd., supra. A concluded assessment could not be disturbed without there being any basis for doing so which is impermissible in law. Even in case of a searched person, the same reason would hold good. As observed in Canara Housing Development Company supra, the Assessing Officer is empowered to assess or reassess the total income of six assessment years i.e., the income which was returned in the earlier return, the income which was unearthed during search and also any income which was not disclosed in the earlier return or which was not unearthed during the search by separate assessment orders but in our considered view the completed assessments should be subject to the safeguards provided in IBC Knowledge Park (P) Ltd. supra.

“54. On a consideration of the relevant sections as well as judicial precedent referred to above, what emerges is that, Section 158BD of the Act deals with undisclosed income of a third party. However, insofar as the incriminating material of the searched person or other person detected during the course of search is concerned, the same can be considered during the course of assessment. Further, such incriminating material must relate to undisclosed income which would empower the Assessing Officer to upset or disturb a concluded assessment of the other person. Otherwise, a concluded assessment would be disturbed without there being any basis for doing so which is impermissible in law. Even in case of a searched person, the same reason would hold good as in case of any other person. As observed by us, detection or the existence of incriminating material is a must for disturbing the assessment already made and concluded. But, at the same time, such can be at three stages: one, at the stage when the re­assessment is initiated, the second, at the stage during the course of re­assessment and third, at a stage where the re­assessment is altered by a different assessment in respect of searched person or in respect of third party. In this regard, reference may be made to the decision of Apex Court in case of M/s.Calcutta Knitwear (supra) and based on the said decision, the CBDT has also issued circular dated 31.12.2015 vide No.24/2015.The relevant extract of the circular for ready reference can be extracted as under:

‘……………….. ’”

As regards the pending assessments are concerned only one assessment shall be made separately for each assessment year on the basis of the income unearthed during search and any other material existing or brought on the record of the Assessing Officer. Even in the absence of any incriminating material abated assessment or reassessment could be done. The returns filed under Section 139 of the Act gets replaced by the returns filed under Section 153A[1] of the Act. Pending proceedings in appeal, revision/application shall not abate subsequent to initiation of Section 153A proceedings. Further, recording of satisfaction under Section 153A may not be necessary unlike Section 153C of the Act which mandates recording of satisfaction.

For the reasons aforesaid, substantial question of law in ITA Nos.322/2018 to 324/2018, 354/2018 and 355/2018, substantial question of law No.1 in ITA Nos.380/2018, 382/2018 to 385/2018 and 197/2021 to 199/2021 and substantial question of law Nos.1 and 2 in ITA No.381/2018 are answered in favour of the assessee and against the Revenue.

Substantial question of Law No.2 in ITA Nos.380/2018, 383/2018 to 385/2018 is squarely covered by the ruling of the coordinate Bench of this Court in ITA No.352/2018 and connected matters (DD 25.05.2021) wherein the said substantial question of law has been answered in favour of the assessee and against the Revenue.

Substantial question of law No.2 in ITA No.382/2018 and substantial question of law No.3 in ITA Nos.380/2018, 383/2018 to 385/2018 does not arise for our consideration since the same are not pressed by the Revenue.

Appeals stand disposed of accordingly.

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