Section 153A Addition Valid Only if Based on Material Seized during search: ITAT Kolkata

Late Ghanshyam Das Agarwal Vs DCIT (ITAT Kolkata)

ITAT Kolkata held that additions u/s. 153A of the Income Tax Act could only be made on the basis of seized material found during the course of search. Thus, making additions in regular assessment without any incriminating material relating to said addition not justified.

Facts-

Shri Ghanshyam Das Agarwal (appellant) was an individual running export business under the name and style of M/s. Bharat Export. There is one another business entity of the group called M/s. Navbharat Exports Pvt. Ltd. which is a company owned by Shri Uttam Kumar Agarwal. S/o. Late Shri Ghanshyam Das Agarwal and Smt. Rita Agarwal, W/o. Shri Uttam Kumar Agarwal are directors of the said Company.

The appellant filed his return of income u/s. 139(1) declaring a loss of Rs. 4,01,96,196/- in A.Y. 2010-11 and income of Rs. 15,07,080/- in A.Y. 2012-13.

The Income Tax Department conducted a search and seizure u/s. 132 of the Income Tax Act on 24.03.2015. AO has issued notices u/s. 143(2) and 142(1) on 24.10.2016. He has passed the impugned assessment orders on 30.12.2016 in all the three assessment years. He made the additions.

Conclusion-

Held that additions under section 153A could only be made on the basis of seized material found during the course of search. He submitted that assessment years involved herein are A.Ys. 2010-11 and 2012-13. The assesseees have filed regular returns under section 139(1). The time limit to issue notice for scrutinizing their return under section 143(2) expired long back before the search carried out upon the premises of the assessee on 24.03.2015. Thus, these assessment years attained finality. They could also abate if incriminating material was found during the course of search.

FULL TEXT OF THE ORDER OF ITAT KOLKATA

The assessee, Late Ghanshyam Das Agarwal, is in appeals in IT(SS)A Nos. 4 & 5/KOL/2024 before the Tribunal against the separate orders of ld. Commissioner of Income Tax (Appeals), Kolkata-27 dated 29^th November, 2023 passed in A.Ys. 2010-11 and 2012-13, whereas the other assessee M/s. Navbharat Exports Private Limited in IT(SS)A No. 25/KOL/2024 is impugning the order of ld. Commissioner of Income Tax (Appeals), Kolkata-21 dated 28t^h December, 2022 passed in A.Y. 2010-11.

2. The ld. Counsel for the assessees has filed an application for consolidation of all these appeals because common issues are involved in these appeals. The application filed by the assessee was allowed by the Tribunal vide its order dated 20t^h June, 2024 and all these appeals were directed to be listed in ‘A’ Bench.

3. The Registry has pointed out that these appeals are time barred by 12 days. In order to explain the delay, assessees have filed application for condonation of delay, which are placed on pages no. 1 & 2 of the paper book filed by them. In these applications, it has been pleaded that in fact, the delay is of 11 days. The assessees have further pleaded that Late Ghanshyam Das Agarwal was himself looking after all his accounting, tax and litigation matters. He died on 30^th April, 2021 and there was a transitional period during which no one was there to look after these aspects. Due to this reason, the proceedings before the ld. 1st Appellate Authority could not be prosecuted in accordance with law. Son of Late Ghanshyam Das Agarwal, namely Shri Uttam Kumar Agarwal came to know about the fact, who is the Director of Navbharat Exports Private Limited also. He collected copies of all these orders and consulted with the Tax Consultant. Thereafter he has filed the appeals and this step made all the appeals time barred by 11 days.

4. With the assistance of the ld. Representatives, we have gone through the record carefully. Sub-section 5 of Section 253 contemplates that the Tribunal may admit an appeal or permit filing of memorandum of cross- objections after expiry of relevant period, if it is satisfied that there was a sufficient cause for not presenting it within that period. This expression sufficient cause employed in the section has also been used identically in sub-section 3 of section 249 of Income Tax Act, which provides powers to the ld. Commissioner to condone the delay in filing the appeal before the Commissioner. Similarly, it has been used in section 5 of Indian Limitation Act, 1963. Whenever interpretation and construction of this expression has fallen for consideration before Hon’ble High Court as well as before the Hon’ble Supreme Court, then, Hon’ble Court were unanimous in their conclusion that this expression is to be used liberally. We may make reference to the following observations of the Hon’ble Supreme court from the decision in the case of Collector Land Acquisition Vs. Mst. Katiji & Others, 1987 AIR 1353:

1. Ordinarily a litigant does not stand to benefit by lodging an appeal late.

2. Refusing to condone delay can result in a meritorious matter being thrown out at the very threshold and cause of justice being defeated. As against this when delay is condoned the highest that can happen is that a cause would be decided on merits after hearing the parties.

3. “Every day’s delay must be explained” does not mean that a pedantic approach should be made. Why not every hour’s delay, every second’s delay? The doctrine must be applied in a rational common sense pragmatic manner.

4. When substantial justice and technical considerations are pitted against each other, cause of substantial justice deserves to be preferred for the other side cannot claim to have vested right in injustice being done because of a non-deliberate delay.

5. There is no presumption that delay is occasioned deliberately, or on account of culpable negligence, or on account of mala fides. A litigant does not stand to benefit by resorting to delay. In fact he runs a serious risk.

6. It must be grasped that judiciary is respected not on account of its power to legalize injustice on technical grounds but because it is capable of removing injustice and is expected to do so.

5. Similarly, we would like to make reference to authoritative pronouncement of Hon’ble Supreme Court in the case of N. Balakrisknan Vs. M. Krishnamurtky (supra). It reads as under:

“Rule of limitation are not meant to destroy the right of parties. They are meant to see that parties do not resort to dilatory tactics, but seek their remedy promptly. The object of providing a legal remedy is to repair the damage caused by reason of legal injury. Law of limitation fixes a life-span for such legal remedy for the redress of the legal injury so suffered. Time is precious and the wasted time would never revisit. During efflux of time newer causes would sprout up necessitating newer persons to seek legal remedy by approaching the courts. So a life span must be fixed for each remedy. Unending period for launching the remedy may lead to unending uncertainty and consequential anarchy. Law of limitation is thus founded on public policy. It is enshrined in the maxim Interest reipublicaeut up sit finislitium (it is for the general welfare that a period be putt to litigation). Rules of limitation are not meant to destroy the right of the parties. They are meant to see that parties do not resort to dilatory tactics but seek their remedy promptly. The idea is that every legal remedy must be kept alive for a legislatively fixed period of time. A court knows that refusal to condone delay would result foreclosing a suitor from putting forth his cause. There is no presumption that delay in approaching the court is always deliberate. This Court has held that the words “sufficient cause” under Section 5 of the Limitation Act should receive a liberal construction so as to advance substantial justice vide Shakuntala Devi lain Vs. Kuntal Kumari [AIR 1969 SC 575] and State of West Bengal Vs. The Administrator, Howrah Municipality [AIR 1972 SC 749]. It must be remembered that in every case of delay there can be some lapse on the part of the litigant concerned. That alone is not enough to turn down his plea and to shut the door against him. If the explanation does not smack of mala fides or it is not put forth as part of a dilatory strategy the court must show utmost consideration to the suitor. But when there is reasonable ground to think that the delay was occasioned by the party deliberately to gain time then the court should lean against acceptance of the explanation. While condoning delay the Could should not forget the opposite party altogether. It must be borne in mind that he is a looser and he too would have incurred quiet a large litigation expenses. It would be a salutary guideline that when courts condone the delay due to laches on the part of the applicant the court shall compensate the opposite party for his loss”.

6. We do not deem it necessary to re-cite or recapitulate the proposition laid down in other decisions. It is suffice to say that the Hon’ble Courts are unanimous in their approach to propound that whenever the reasons assigned by an applicant for explaining the condonation of delay, then such reasons are to be construed with a justice oriented approach.

7. In the light of above, if we peruse the application for condonation of delay, then, it would reveal that the assessees have not delayed their appeals as a strategy to litigate with the Department. These delays have occurred on account of bonafide lapse. It is pertinent to note that by making the appeal time barred, assessees will not gain anything. Therefore, on due consideration of the facts and circumstances, we condone the brief delay of eleven days in filling these appeals.

8. In IT(SS)A No. 4/KOL/2024, the assessee has taken eight grounds of appeal, whereas in IT(SS)A. No. 5/KOL/2024, he has taken four grounds of appeal. In the case of Navbharat Exports Private Limited in IT(SS)A. No. 25/KOL/2024, the assessee has taken six grounds of appeal. Apart from these regular grounds of appeals taken by the assessees, an application for additional grounds of appeal is being filed in IT(SS)A. No. 4/KOL/2024. By way of the additional grounds, the assessee has sought to raise the following grounds of appeal:-

(1) For that denial of business loss suffered to the tune of Rs.4,20,02,566/- from the activity of purchase and sale was not justified in law in the assessment framed u/s 143(3) r.w. sec. 153A inasmuch as it is a settled position of law that items of regular assessment cannot be a subject matter of assessment framed u/s 153A.

(ii) For that the addition made by the AO towards sundry creditors of Rs.7,56,94,789/- in the hands of the assessee was not justified on the ground that the said figure was not being reflected in the books of Navbharat Exports (P) Ltd. in the assessment framed u/s 143(3) r.w. sec. 153A inasmuch as it is a settled position of law that items of regular assessment cannot be a subject matter of assessment framed u/s 153A.

(iii) For that the ld. CIT(A) ought to have quashed the entire assessment proceedings as the ld.AO was not justified in making the additions w.r.t. the items of regular assessment in the proceedings u/s 153A when no incriminating materials were found during search in respect of the subject matter of additions made.

9. The ld. Counsel for the assessee submitted that this issue will go to the root of the matter and ultimately effect the taxability of the assessee. The grounds are jurisdictional grounds based upon the latest judgment of the Hon’ble Supreme Court in the case of PCIT -vs.- Abhisar Buildwell (P) Limited [149 com 399]. He relied upon the judgment of the Hon’ble Supreme Court in the case of National Thermal Power Company Limited reported in 229 ITR 383 and submitted that these grounds be taken up for adjudication on merit.

10. The ld. CIT(DR), on the other hand, submitted that the assessee has not raised these grounds of appeal in the original grounds, hence they be not permitted to raise these grounds.

11. We have duly considered the rival contentions. Basically, what assessee sought to plead is about the scope of assessment under section 153A of the Income Tax Act. This controversy has recently been silenced by the Hon’ble Supreme Court in the case of Abhisar Buildwell (P) Limited (supra), wherein the scope of assessment under section 153A has been propounded, therefore, this is jurisdictional aspect, which can be entertained, even without specifically pleaded in the grounds of appeal. On the strength of the Hon’ble Supreme Court’s decision, it can always be argued that additions made by the ld. Assessing Officer are not sustainable in an assessment made u/s 153A in the given facts and circumstance. We allow this application for additional grounds of appeal and permit the assessee to raise these pleas.

12. The facts on all vital points are common in all these appeals. For the facility of reference, we are taking up the facts from A.Y. 2010-11 from the assessment order passed in the case of Late Ghanshyam Das Agarwal. Brief facts are that Shri Ghanshyam Das Agarwal was an individual running export business under the name and style of M/s. Bharat Export. There is one another business entity of the group called M/s. Navbharat Exports Pvt. Ltd., which is a Company and Shri Uttam Kumar Agarwal. S/o. Late Shri Ghanshyam Das Agarwal and Smt. Rita Agarwal, W/o. Shri Uttam Kumar Agarwal are directors of the said Company. Late Shri Ghanshyam Das Agarwal has filed his return of income under section 139(1) for A.Ys. 2010-11 and 2012-13 on 15.10.2010 and 29.03.2013 declaring a loss of Rs.4,01,96,196/- in A.Y. 2010-11 and income of Rs.15,07,080/- in A.Y. 2012-13. Similarly in the case of Navbharat Exports Pvt. Limited, original return was filed under section 139(1) on 15.10.2010, wherein loss of Rs.1,01,64,478/- was shown. The Income Tax Department has carried out a search and seizure operation under section 132 of the Income Tax Act on 24.03.2015. According to the ld. Assessing Officer, various papers and documents belonging to the assessees under Identification mark NVE/1 to NVE/4 and NVE/PD/1 were seized and impounded. He issued a notice under section 153A on 22.06.2016. In response to this, returns of income were filed on 21.07.2016, wherein assessees have reiterated their incomes declared under section 139(1) of the Income Tax Act. The ld. Assessing Officer has issued notices under sections 143(2) and 142(1) on 24.10.2016. he has passed the impugned assessment orders on 30.12.2016 in all the three assessment years. He made the additions. In order to appreciate the argument of the ld. Counsel for the assessee about scope of assessment under section 153A, vis-à-vis the angle with which ld. Assessing Officer has passed the assessment order, we deem it appropriate to take note the complete assessment order passed in A.Y. 2010-11, which is a very brief assessment order running into three pages only. The assessment order in the case of Ghanshyam Das Agarwal reads as under:-

“ASSESSMENT ORDER

A search & seizure operation u/s. 132 of the I.T. Act, 1961 was conducted on 24.03.2015 in the residential & business premises of the various persons and companies belonging to the NAV BHARAT GROUP [IMPORTER GROUP], During the course of search at the premises cum office premises various papers & documents belonging to the assessee under identification mark NVE/1 to NVE/4 & NVE/PD/1 were seized /impounded. After search the jurisdiction of the assessee has been centralized for coordinated investigation with the undersigned vide order u/s.127 passed by the respective jurisdictional Commissioner of Income Tax.

2. In consequence to that search, assessee’s cases for the assessment years 2009-10 to 2014-15 were taken up for assessment u/s 153A of the Income Tax Act, 1961 and A. Y. 2015-16 as per CBDT Guideline. Notice to that effect u/s 153A was issued on 22.06.2016 for the A.Y. 2010-11 asking the assessee to file return of income. Return of Income for the assessment year 2010-11 was filed on 21.07.2016 showing total loss of Rs. 4,01,93,990/- and there was no upward revision of the income declared in the original return for A.Y. 2010-11 filed on 15.10.2010. Returned income u/s 153A and u/s 139(1) as shown as under:

3. Notice u/s 143(2) and u/s. 142(1) were issued on 24.10.2016 along-with questionnaire. In response to the said notice, Sri Harshit Agarwal, FCA, the A/R of the assessee appeared ‘and explained the return. Books of accounts and bank accounts maintained and the case is discussed with the A/R. Total income is computed after the following discussion:

Loss of Rs. 4,20,02,566/- in properitorship firm M/s Bharat Export

4.a. During the course of Search & Seizure operation, a bank account No. 010200000949 with Axis Bank Ltd, Metroplaza, S F Road, Siliguri in the name of M/s Bharat Export was found and inventoried. Examination of the Bank Account reveals that, an amount of Rs.8,03,96,636/- was deposited on 31.12.2009. In a written submission assessee disclosed that a sale of Rs. 8,03,96,636/- was made during the year and all the sales were made to Nordbell Commercial Ltd, (Address:- Akara Building, 24 Decastro Street, British Virgin Road). It was further submitted that during the year, purchased of Rs.11,75,61,145/- was made and all the purchases were made from M/s Nav Bharat Exports Pvt Ltd.

4.b It is seen that assessee had shown sales of Iron Ore Fines at Rs.8,03,96,636/ and corresponding purchases of Iron Ore Fines of Rs. 13,83,45,145/- in the P & L Accounts of M/s Bharat Exports and finally booked a loss of Rs. 4,20,02,566/-.

4.c. At the very outset, it is to be mentioned here that M/s Bharat Exports had shown a purchase of Rs. 13,83,45,145/-from M/s Nav Bharat Exports Pvt Ltd, whereas M/s Nav Bharat Exports Pvt Ltd booked a sale of Rs. 11,75,61,145/- to M/s Bharat Exports. This difference was not explained and substantiated by the assessee although, it has been categorically admitted in the written submission that all the purchases were made from M/s Nav Bharat Exports Pvt Ltd.

4.d. Shri Ganshyam Das Agarwala is a director of M/s Nav Bharat Exports Pvt Ltd as disclosed in the Income Tax Return of the Company for the A.Y 2010-11. Therefore, M/s Bharat Exports, the proprietorship concern of assessee is being a related party of M/s Nav Bharat Exports Pvt Ltd within the meaning of 40A(2)(b) of the I T act, 1961. Accordingly, the purchases are forming ‘related party’ transactions’ and required to be disclosed in the accounts as well as in the Tax Audit Report. However, such related party’ transactions have not been disclosed in the accounts as well as in the Tax Audit Report of both the party so related. It is also very important to mention that in the Tax Audit report vide serial no 28A, all assessee is required to disclose quantitative details of opening stock, purchases, sales, dosing stock & shortage of trading goods. No such quantitative details has been disclosed by the both the parties in their respective Tax Audit Report.

4.e. In view of the above, the loss of Rs.4,20,02,566/- on account of purchase & sale of Iron Ore Fines, prima facie, appeared to be doubtful and accordingly, assessee was requested to substantiate the availability of goods & its. movement from one place to another by producing conclusive evidences including stock registers of the two concerns. In response, Ld. A/R produced a copy commercial invoice and transaction advice of the bank and nothing else which have been examined. It is seen, that 39789.925 Metric Tonnes of Iron Ore Fines was loaded from Mangalore Port, India to be discharged at Main Port in China, which was the final destination and the invoice was drawn in the name of M/s Bharat Exports being a exporter to M/s Nordbell Commercial Ltd, of British Virgin Islands, being/consignee. In the P & L account, assessee had debited clearing & forwarding expenses of Rs. 29,25,398/- and Shipping Charges of Rs. 17,02,982/- but not a single supporting document was produced to substantiate the genuineness of expenditure and no TDS was made from these payments. It is also not explained as to why the material was sent to China when the consignee belongs to British Virgin Islands.

4.f. From the ‘transaction advice’ issued by the Axis Bank Ltd; S.F. Road, Siliguri, it is seen that the amount of Rs.8.03,61636/-was credited in the account no 5490101200000949 of M/s Bharat Exports and the money was sent by BNP Parivas (Suisse) SA, Bank Ganeva, Switzerland, being the “drawee”. The assessee did not adduce any plausible explanation as to why the amount was transferred from Switzerland when goods was delivered to China and Consignee was from British Virgin Islands.

4.g. Coming back to the audited accounts of both the parties, it is seen that the assessee is showing Sundry Creditors in the mane of M/s Nav Bharat Exports Pvt Ltd for an amount of Rs. 7,56,94,783/- in the Balance Sheet of M/s Bharat Exports as on 31.03.2010, but this figure is not appearing of M/s Nav Bharat Exports Pvt Ltd as Sundry Debtors as on 31.03.2010 vide schedule ” E” of the accounts.

4.h. The above facts and figures clearly points to the facts that the loss was not genuinely •incurred as the assessee failed to prove and substantiate the loss by any degree of proof of the evidence. The money was received from a foreign party at Genva, Switzerland, but the immediate nexus or even the proximate nexus of such money to alleged sale has never been proved. On the other hand, the existence of the goods actually dispatched to China remained unproved and unsubstantiated. Full Proofs & fact relating to entire episode of purchase & sale was not disclosed by the assessee fully & fairly. The conduct of assessee proves his malafide intention of booking such bogus loss. Accordingly, the loss is held not genuine, bogus and not allowable in the eye of law and therefore disallowed. Carryforward of such loss which remain unabsorbed in this year as claimed by the assessee is also disallowed. By booking such bogus loss, assessee has submitted inaccurate particulars of income and therefore, penalty U/s 271(1)(c) is initiated.

5. It has been explained in earlier para that an amount of Rs.8,03,61636/- was credited in the bank account of assessee and therefore, assessee become the owner of such money and the money was remitted by BNP Paribas ( Swisse) SA, Genava, Switzerland. The identity and creditworthiness of the money remitter, its relation with the assessee and the purpose of such remittance and the nexus of the transaction with the business of the assessee have never been proved. Since the assessee failed to explain about the nature & source of acquisition of said money and or whatever explanation offered by the assessee, is in no way, satisfactory to be attributable to overseas sale proceeds as claimed by assessee, the entire amount is added to the total income of the assessee u/s 69A of the I.T. Act, 1961 as ” Unexplained money”. Penalty proceeding u/s 271(1)(c) is initiated for concealment of income.

6. Assessed us/ 143(3) /153A of the I.T. Act on a total income of Rs.8,21,67,827/-.

Interest u/s 234A, 234B 234C is charged as per law. Penalty u/s 271(1)(c) is initiated for submitting inaccurate particulars of income as well as concealment of income”.

13. Before rebutting to the facts mentioned in this order, we would observe that assessment orders in rest of the two appeals impugned herein are on the identical lines. Ld. Counsel for the assessee while impugning the orders of the revenue authorities contended that the Hon’ble Supreme Court in the case of Abhisar Buildwell (P) Limited (supra) has propounded that additions under section 153A could only be made on the basis of seized material found during the course of search. He submitted that assessment years involved herein are A.Ys. 2010-11 and 2012-13. The assesseees have filed regular returns under section 139(1). The time limit to issue notice for scrutinizing their return under section 143(2) expired long back before the search carried out upon the premises of the assessee on 24.03.2015. Thus, these assessment years attained finality. They could also abate if incriminating material was found during the course of search. For buttressing his contention, he relied upon the judgment of the Hon’ble Delhi High Court in the case of CIT -vs.- Kabul Chawala (2015) 61 taxmann.com 412 (Delhi). He submitted that there are series of judgment on this aspect and Hon’ble Supreme Court has recently upheld this decision of the Hon’ble Delhi High Court along with the decision of the Hon’ble Gujarat High Court in the case of Saumya Construction.

14. The ld. CIT(DR) was unable to controvert the propositions laid down in the judgment as well as to factum of non-availability of any seized materials on whose basis additions were made by the ld. Assessing Officer in all these impugned orders.

15. The Hon’ble Delhi High Court after considering host of decisions propounded following propositions in the concluding paragraph of the judgment, which read as under:-

“Summary of the legal position

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.

Conclusion

38. The present appeals concern AYs, 2002-03, 2005-06 and 2006-07.On the date of the search the said assessments already stood completed. Since no incriminating material was unearthed during the search, no additions could have been made to the income already assessed.

39. The question framed by the Court is answered in favour of the Assessee and against the Revenue.

40. The appeals are accordingly dismissed but in the circumstances no orders as to costs”.

16. This judgment and other judgments on this school of thought have fallen for consideration of the Hon’ble Supreme Court, who concurred with the Hon’ble Delhi High Court as well as Hon’ble Gujrat High Court. The relevant part of the finding of the Hon’ble Supreme Court in this aspect reads as under:-

“11. As per the provisions of Section 153A, in case of a search under Section 132 or requisition under Section 132A, the AO gets the jurisdiction to assess or reassess the ‘total income’ in respect of each assessment year falling within six assessment years. However, it is required to be noted that as per the second proviso to Section 153A, the 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 making of requisition under Section 132A, as the case may be, shall abate. As per sub-section (2) of Section 153A, if any proceeding initiated or any order of assessment or reassessment made under sub-section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) or section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to sub- section (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Commissioner. Therefore, the intention of the legislation seems to be that in case of search only the pending assessment/reassessment proceedings shall abate and the AO would assume the jurisdiction to assess or reassess the ‘total income’ for the entire six years period/block assessment period. The intention does not seem to be to re-open the completed/unabated assessments, unless any incriminating material is found with respect to concerned assessment year falling within last six years preceding the search. Therefore, on true interpretation of Section 153A of the Act, 1961, in case of a search under Section 132 or requisition under Section 132A and during the search any incriminating material is found, even in case of unabated/completed assessment, the AO would have the jurisdiction to assess or reassess the ‘total income’ taking into consideration the incriminating material collected during the search and other material which would include income declared in the returns, if any, furnished by the assessee as well as the undisclosed income. However, in case during the search no incriminating material is found, in case of completed/unabated assessment, the only remedy available to the Revenue would be to initiate the reassessment proceedings under sections 147/48 of the Act, subject to fulfilment of the conditions mentioned in sections 147/148, as in such a situation, the Revenue cannot be left with no remedy. Therefore, even in case of block assessment under section 153A and in case of unabated/completed assessment and in case no incriminating material is found during the search, the power of the Revenue to have the reassessment under sections 147/148 of the Act has to be saved, otherwise the Revenue would be left without remedy.

12. If the submission on behalf of the Revenue that in case of search even where no incriminating material is found during the course of search, even in case of unabated/completed assessment, the AO can assess or reassess the income/total income taking into consideration the other material is accepted, in that case, there will be two assessment orders, which shall not be permissible under the law. At the cost of repetition, it is observed that the assessment under Section 153A of the Act is linked with the search and requisition under Sections 132 and 132A of the Act. The object of Section 153A is to bring under tax the undisclosed income which is found during the course of search or pursuant to search or requisition. Therefore, only in a case where the undisclosed income is found on the basis of incriminating material, the AO would assume the jurisdiction to assess or reassess the total income for the entire six years block assessment period even in case of completed/unabated assessment. As per the second proviso to Section 153A, only pending assessment/reassessment shall stand abated and the AO would assume the jurisdiction with respect to such abated assessments. It does not provide that all completed/unabated assessments shall abate. If the submission on behalf of the Revenue is accepted, in that case, second proviso to section 153A and sub- section (2) of Section 153A would be redundant and/or re- writing the said provisions, which is not permissible under the law.

13. For the reasons stated hereinabove, we are in complete agreement with the view taken by the Delhi High Court in the case of Kabul Chawla (supra) and the Gujarat High Court in the case of Saumya Construction (supra) and the decisions of the other High Courts taking the view that no addition can be made in respect of the completed assessments in absence of any incriminating material”.

17. In the light of above propositions of law, let us evaluate the assessment orders passed by the ld. Assessing Officer impugned herein in these appeals. We have taken cognizance the assessment order passed in the case of Late Ghanshyam Das Agarwal (A.Y. 2010-11). A perusal of the above judgment would reveal that ld. Assessing Officer has not referred any seized material except Bank account with Axis Bank Limited, Metro Plaza, S.F. Road, Siliguri. He further observed that an amount of Rs.8,03,61,636/- was deposited on 31.12.2009. Now this account has duly been disclosed by the assessee to the Department. The details available in this account are part of the regular accounts, on the basis of which, return was filed by the assessee claiming a loss of Rs.4,01,96,196/-. The ld. Assessing Officer has just passed the assessment order as if he has redetermined the income under a regular scrutiny assessment. There is no narration of any seized material. We have perused the assessment of Shri Ghanshyam Das Agarwal in A.Y. 2012-13. In this year also, he has re-examined the issue of capital gain disallowance of land improvement expenses. All these issues could have been borne in a scrutiny assessment. Had notice under section 143(2) been issued. The details of these issues have not unearthed during the course of search.

18. As far as Navbharat Exports Private Limited is concerned, it is just a consequence of Late Shri Ghanshyam Das Agarwal in A.Y. 2010-11. The losses have been disallowed there. Similar losses have been disallowed here. The ld. Assessing Officer has nowhere referred which material unearthed during the course of search and that was not disclosed in the regular return of the assessee.

19. As far as the impugned orders of the ld. CIT(Appeals) are concerned, the assessee did not appear before the ld. 1st Appellate Authority, therefore, their appeals were dismissed for want of prosecution. We could have set aside the issues to the file of ld. CIT(Appeals) if there is something for adjudication. After the judgment of the Hon’ble Supreme Court in the case of Abhisar Buildwell (P) Limited (supra), these additions are not sustainable.

Therefore, there is no idea to enhance the multiplicity of litigation by remitting these issues to the file of ld. CIT(Appeals).

20. In the result, we allow all the appeals of the assessees and delete the additions/ disallowance of losses made by the ld. Assessing Officer in all these three assessment orders, which were made beyond the scope of section 153A of the Income Tax Act.

Order pronounced in the open Court on 07/08/2024.