M/s. Brindavan Phosphates pvt. Ltd, Bangalore V. Deputy Commissioner of Income Tax, Bangalore

ITA 117/BANG/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7286 (ITAT-BANGALORE)
• Duration Of Justice: 10 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-11-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 19-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B K
• Assessee Lawyers: V SRINIVASAN
• Keywords: Depreciation; Search and seizure; Question of law; Bad and doubtful debts; Deemed dividend; Block assessment; Reason to believe
• Section: 143(3); 153A; 132

Judgement Text

ITA.117/BANG/2017 PAGE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BENGALURU BENCH 'C', BENGALURU BEFORE SHRI. INTURI RAMA RAO, ACCOUNTANT MEMBER AND SHRI. LALIT KUMAR, JUDICIAL MEMBER I.T.A NO.117/BANG/2017 (ASSESSMENT YEAR : 2010-11) M/S. BRINDAVAN PHOSPHATES P. LTD, NO.5/1 & 5/3, 1 ST MAIN, JAYAMAHAL EXTENSION, BENGALURU .. APPELLANT PAN : AAACB7371C V. DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE -2(3), BENGALURU .. RESPONDENT ASSESSEE BY : SHRI. V. SRINIVASAN, ADVOCATE REVENUE BY : SHRI. B. K. PANDA, CIT HEARD ON : 07.11.2017 PRONOUNCED ON : 21.11.2017 O R D E R PER LALIT KUMAR, JUDICIAL MEMBER : THE PRESENT APPEAL IS FILED BY THE ASSESSEE AGAINS T THE ORDER OF THE CIT (A) -11, BENGALURU, DT.30.11.2016, FOR THE ASSESSMENT YEAR 2010-11. 02. GROUND NO.1 IS GENERAL NEEDING NO ADJUDICATION. ITA.117/BANG/2017 PAGE - 2 03. GROUND NOS.2 AND 2.1 ARE WITH RESPECT TO THE VA LIDITY OF ASSESSMENT ORDER PASSED U/S.153A R.W.S. 143(3) OF T HE ACT. AT THE TIME OF HEARING, THE LD. AR FOR THE ASSESSEE HAS SU BMITTED THAT THE ASSESSEE IS NOT PRESSING THESE GROUNDS AND THE SAME MAY BE DISMISSED AS NOT PRESSED. THE LD. DR HAS NO OBJECTION AND AC CORDINGLY THE GROUND NOS.2 AND 2.1 ARE DISMISSED AS NOT PRESSED. 04. GROUND NOS.3, 3.1 AND 3.2 ARE REPRODUCED HERE U NDER : 3. THE LD. CIT (A) IS NOT JUSTIFIED IN SUSTAINING T HE DISALLOWANCE OF RS.2,98,709/- OUT OF THE ORIGINAL D ISALLOWANCE OF RS.27,69,619/- BEING THE BAD DEBTS CLAIMED BY THE A PPELLANT UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANT S CASE. 3.1 THE LEARNED CIT (A) OUGHT TO HAVE APPRECIATED T HAT THE AFORESAID DISALLOWANCE MADE WAS NOT BASED ON ANY IN CRIMINATING MATERIALS FOUND DURING THE COURSE OF SEARCH AND THE REFORE, THE IMPUGNED ADDITION MADE IN COURSE OF THE PROCEEDINGS U/S.153A OF THE ACT, WAS OPPOSED TO LAW AND FACTS OF THE APPELL ANTS CASE AND HENCE, THE SAME DESERVES TO BE DELETED. 3.2. THE LEARNED CIT (A) FAILED TO APPRECIATE THAT THE AFORESAID AMOUNTS WERE WRITTEN OFF BY THE APPELLANT AND THE S AME CONSTITUTED LOSS INCIDENTAL TO BUSINESS AND THEREFORE, THE SAME OUGHT TO HAVE BEEN ALLOWED UNDER THE FACTS AND IN THE CIRCUMSTANC ES OF THE APPELLANTS CASE. 05. BRIEF FACTS ARE THAT A SEARCH U/S.132 WAS CARRI ED OUT IN THE ASSESSEES PREMISES. DURING THE COURSE OF ASSESSME NT PROCEEDINGS, THE AO EXAMINED THE ISSUE RELATING TO THE CLAIM OF BAD DEBTS WRITTEN OFF BY THE ASSESSEE TO THE EXTENT OF RS.27,69,619/- IN ITS BOOKS OF ACCOUNT. THE AO IN HIS ORDER U/S.143(3) R.W.S.153A MADE A ITA.117/BANG/2017 PAGE - 3 DISALLOWANCE OF RS.27,69,616/- ON THE GROUND THAT T HE AMOUNT CLAIMED AS BAD DEBTS CANNOT BE ALLOWED AS THEY DID NOT REPR ESENT ANY AMOUNT THAT WAS OFFERED TO TAX IN THE EARLIER YEAR. THE A O ALSO OBSERVED THAT THE CLAIM COULD NOT BE CONSIDERED AS A REVENUE LOSS SINCE THE DETAILED FURNISHED BY THE ASSESSEE SHOWED THAT THEY WERE DEP OSITS MADE AND THE SAME WOULD BE ONLY A CAPITAL LOSS. ACCORDINGLY , THE AO DISALLOWED A SUM OF RS.27,69,616/- AND ADDED THE SA ME TO THE RETURNED INCOME OF THE ASSESSEE. BEING AGGRIEVED B Y THE ABOVE DISALLOWANCE OF CLAIM TOWARDS BAD DEBTS WRITTEN OFF , THE ASSESSEE FILED AN APPEAL BEFORE THE CIT (A). 06. THE CIT (A) IN THE APPEAL BEFORE HIM, AFTER CON SIDERING THE ISSUE AT LENGTH, DELETED THE DISALLOWANCE TO THE EX TENT OF RS.24,70,907/- AND CONFIRMED THE ADDITION TO THE TU NE OF RS.2,98,709/-. IN PARA 6.2.10, THE CIT (A) HAS HEL D AS UNDER : 6.2.10 THE NEXT DISALLOWANCES MADE BY THE A.O ARE I N RESPECT OF THE AMOUNTS WRITTEN OFF AGAINST MAHALAKSHMI EXPRESS CARRIERS OF RS.1,76,809/- AND SECURITY DEPOSIT OF RS.1,11,900/- AND A FURTHER SUM OF RS.10,000/- IN RESPECT OF WHICH NO DETAILS W ERE FURNISHED BY THE APPELLANT. HERE ALSO, THE APPELLANT CLAIMS THAT THE SAME IS LOSS INCIDENTAL TO BUSINESS. HOWEVER, FROM THE LED GER ACCOUNTS FILED AND EXPLANATION FURNISHED, I FIND THAT THE AP PELLANT HAS NOT BEEN ABLE TO ESTABLISH THAT THESE AMOUNTS WERE INCU RRED FOR PURPOSES OF BUSINESS. HENCE, I FIND NO REASON TO I NTERFERE WITH THE ORDER OF THE A.O. THESE DISALLOWANCES ARE CONF IRMED. BEING FURTHER AGGRIEVED BY THE CONFIRMATION OF THE ADDITION TO THE TUNE OF RS.2,98,709/- BY THE CIT (A), THE ASSESSEE IS IN APPEAL BEFORE US WITH THE GROUNDS REPRODUCED HERE IN ABOVE. ITA.117/BANG/2017 PAGE - 4 07. BEFORE US, IT WAS THE CONTENTION OF THE LD. AR BEFORE US THAT NO INCRIMINATING MATERIAL WAS FOUND DURING THE COURSE OF SEARCH AND THEREFORE THE ADDITION MADE BY THE AO AND CONFIRMED BY THE CIT (A) IN RESPECT OF BAD DEBTS WERE WITHOUT ANY BASIS. IT WAS SUBMITTED THAT THE SEARCH WAS CARRIED OUT PURSUANT TO WARRANTS OF AUTHORISATION ISSUED BY THE DIT (INV), AGRA. THE PREMISES OF SRI. S. N. LADHANI, AT BENGALURU AND THE ASSESSEE COMPANY WHICH ARE ABUTTI NG TO EACH OTHER WERE SEARCHED SIMULTANEOUSLY. THE LD. AR SUBMITS T HAT THE WARRANT OF AUTHORISATION TO SEARCH SRI. S. N. LADHANI WAS O NLY SHOWED WHILE THERE IS A DOUBT WHETHER THERE WAS ANY WARRANT ISSU ED TO SEARCH THE ASSESSEE COMPANY AT ALL. THE LD. AR RELIED UPON TH E ORDER OF THE COORDINATE BENCH IN THE CONNECTED MATTER OF SMT. VI DYA DEVI LADHANI V. ACIT [ITA NOS.118 TO 120/BANG/2017, DT.07.04.201 7, WHEREIN AFTER REFERRING TO A CATENA OF JUDGMENTS, THE TRIBU NAL CAME TO THE CONCLUSION AS UNDER : 10. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL A RELEVANT MATERIAL ON RECORD. THE SEARCH UNDER SECTION 132 OF THE ACT WAS CONDUCTED ON 18.12.2012 IN THE CASES OF THE ASSESSEE. THERE IS N O DISPUTE THAT THE ASSESSEES WERE HOLDING MORE THAN 10% OF VOTING POWE R IN THE COMPANY VIZ. BBPL AND ARE DIRECTORS OF THE SAID COM PANY ALONG WITH THEIR HUSBANDS. IT IS ALSO A MATTER OF FACT THAT NO INCRIMINATING MATERIAL WAS FOUND OR SEIZED DURING THE COURSE OF S EARCH IN RESPECT OF ANY PAYMENT, ADVANCE, LOAN OR OTHER BENEFITS BY THE SAID COMPANY I.E. BBPL TO THE ASSESSEE. ONLY DURING THE COURSE OF ASS ESSMENT PROCEEDINGS UNDER SECTION 153A OF THE ACT THE ASSES SING OFFICER FOUND FROM THE LEDGER ACCOUNTS THAT BBPL HAS PAID THE INC OME TAX LIABILITIES OF THE ASSESSEES FOR THESE ASSESSMENT YEARS. THE AS SESSEE EXPLAINED THAT SINCE THE ASSESSEE WAS NOT HAVING ANY SEPARATE FACILITY OF ONLINE PAYMENT THEREFORE THE PAYMENT WAS MADE BY USING THE BBPL ACCOUNT HOWEVER WHILE DECIDING THIS LEGAL ISSUE THIS ASPECT ON THE MERITS OF THE ITA.117/BANG/2017 PAGE - 5 ISSUE IS NOT RELEVANT. IT IS ALSO NOT IN DISPUTE TH AT AS ON THE DATE OF SEARCH I.E. 18.12.2012 THE ASSESSMENT FOR THE ASSES SMENT YEARS 2009- 10 TO 2011-12 WERE NOT PENDING AS THE LIMITATION FO R ISSUING THE NOTICE UNDER SECTION 143(2) WAS ALREADY EXPIRED. TH EREFORE FOR THESE THREE YEARS IN BOTH CASES THE REGULAR ASSESSMENTS STAND CONCLUDED AS ON THE DATE OF SEARCH. 11. IN PURSUANT TO THE SEARCH ACTION UNDER SECTION 132, THE ASSESSING OFFICER SHALL ASSESS OR REASSESS THE TOTAL INCOME O F SIX YEARS IMMEDIATELY PRECEDING ASSESSMENT YEAR RELEVANT TO T HE PREVIOUS YEAR IN WHICH SEARCH IS CONDUCTED OR REQUISITION IS MADE . ANY ASSESSMENT PERTAINING TO THESE SIX ASSESSMENT YEARS PENDING ON THE DATE OF INITIATION OF SEARCH UNDER SECTION 132 IS LIABLE TO BE ABATED AND THEREFORE THE PROCEEDINGS UNDER SECTION 153A IN RES PECT OF THE SAID ASSESSMENT YEAR WOULD BE IN THE NATURE OF ASSESSMEN T. UNDISPUTEDLY THE CASE OF THE ASSESSEE THE ASSESSMENTS WERE ALREA DY CONCLUDED AND THEY WERE NOT PENDING AS ON 18.12.2012 AND THEREFOR E, THE PROCEEDINGS UNDER SECTION 153A WOULD BE IN THE NATU RE OF REASSESSMENT IN WHICH APART FROM THE UNDISCLOSED IN COME UNEARTHED DURING THE SEARCH AND SEIZURE PROCEEDINGS, THE ASSE SSING OFFICER CAN REASSESS ONLY INCOME WHICH WAS DISCLOSED BY THE ASS ESSEE IN THE ORIGINAL ASSESSMENT. THUS IT IS CLEAR THAT NO ADDIT ION COULD BE MADE TO THE INCOME ALREADY ASSESSED BY THE ASSESSING OFFICE R EXCEPT THE ADDITION BASED ON THE SEIZED MATERIAL. 12. IN THE CASE OF CIT VS. LANCY CONSTRUCTIONS (SUP RA), THE HON'BLE HIGH COURT HAS HELD THAT IN THE ABSENCE OF ANY INCR IMINATING DOCUMENTS HAVING BEEN FOUND, THE SAME ACCOUNTS OF THE ASSESSEE WERE REASSESSED BY MAKING FURTHER INVESTIGATION WHICH WA S NOT PERMISSIBLE AS THE SAME WOULD AMOUNT TO REOPENING OF A CONCLUDE D ASSESSMENT WITHOUT THERE BEING ANY ADDITIONAL MATERIAL FOUND A T THE TIME OF SEARCH. THUS THE HON'BLE HIGH COURT HAS OBSERVED TH AT IT WOULD GIVE THE REVENUE A SECOND OPPORTUNITY TO REOPEN THE CONC LUDED ASSESSMENT WHICH IS IMPERMISSIBLE IN LAW. THE HON'BLE HIGH COU RT HAS FURTHER OBSERVED THAT MERELY BECAUSE A SEARCH IS CONDUCTED IN THE PREMISES OF ASSESSEE WOULD NOT ENTITLE THE REVENUE TO INITIATE THE PROCESS OF REASSESSMENT FOR WHICH THERE IS A SEPARATE PROCEDUR E PRESCRIBED IN THE STATUTE. IT IS ONLY WHEN THE CONDITIONS PRESCRI BED FOR REASSESSMENT ARE FULFILLED THAT A CONCLUDED ASSESSMENT CAN BE RE OPENED. IN THE SUBSEQUENT DECISION IN THE CASE OF CIT VS. IBC KNOW LEDGE PARK PVT. LTD. (SUPRA), THE HON'BLE JURISDICTIONAL HIGH COURT AFTER CONSIDERING ITA.117/BANG/2017 PAGE - 6 THE DECISION IN THE CASE OF CANARA HOUSING DEVELOPM ENT CO. VS. DCIT (SURPA) AS WELL AS IN THE CASE OF CIT VS. LANC Y CONSTRUCTIONS (SUPRA) AND THE DECISION OF HON'BLE DELHI HIGH COUR T IN THE CASE OF CIT VS. ANIL KUMAR BHATIA 352 ITR 493 (DELHI) HAS H ELD IN PARAS 45, 49 AND 54 TO 56 AS UNDER : 45. SECTIONS 153A, 153B AND 153C WERE INSERTED BY THE FINANCE ACT, 2003, WITH EFFECT FROM 1/6/2003. THEY HAVE REP LACED THE POST- SEARCH BLOCK ASSESSMENT SCHEME IN RESPECT OF ANY SE ARCH OR REQUISITION MADE AFTER 31/5/2003. SUB-SECTION (1) O F SECTION 153A INTER ALIA DEALS WITH ASSESSMENT IN CASE OF SEARCH OR REQUISITION. IT BEGINS WITH A NON-OBSTANTE CLAUSE AND STATES THAT N OTWITHSTANDING ANYTHING CONTAINED IN SECTIONS 139, 147, 148, 149, 151 AND 153, IN THE CASE OF A PERSON WHERE A SEARCH IS INITIATED UNDER SECTION 132 OR BOOKS OF ACCOUNT, OTHER DOCUMENTS OR ANY VALUABLE A SSETS ARE REQUISITIONED UNDER SECTION 132A, THE ASSESSING OFF ICER SHALL ISSUE NOTICE TO SUCH PERSON REQUIRING HIM TO FURNISH WITH IN SUCH PERIOD, AS MAY BE SPECIFIED IN THE NOTICE, RETURN OF INCOME IN RESPECT OF EACH ASSESSMENT YEAR FALLING WITHIN SIX ASSESSMENT YEARS REFERRED TO IN CLAUSE (B) OF SECTION 153(1) IN THE PRESCRIBED FORM AND VERIFIED IN THE PRESCRIBED MANNER AND SETTING FORTH SUCH OTHER PART ICULARS AS MAY BE PRESCRIBED AND THE PROVISIONS OF THE ACT SHALL, SO FAR AS MAY BE, APPLY ACCORDINGLY AS IF SUCH RETURN WERE A RETURN REQUIRE D TO BE FURNISHED UNDER SECTION 139. THE ASSESSING OFFICER CAN ASSESS OR REASSESS THE TOTAL INCOME OF SIX ASSESSMENT YEARS IMMEDIATELY PR ECEDING THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WH ICH SUCH SEARCH IS CONDUCTED OR REQUISITION IS MADE. HOWEVER, ASSESSME NT OR REASSESSMENT, IF ANY, RELATING TO ANY ASSESSMENT YE AR FALLING WITHIN THE PERIOD OF SIX ASSESSMENT YEARS REFERRED TO IN THIS SUB-SECTION PENDING ON THE DATE OF INITIATION OF THE SEARCH UNDER SECTI ON 132 OR MAKING OF REQUISITION UNDER SECTION 132A, AS THE CASE MAY BE, SHALL ABATE. THE EXPLANATION STATES, SAVE AS OTHERWISE PROVIDED IN S ECTIONS 153A, 153B AND 153C, ALL OTHER PROVISIONS OF THE ACT SHALL APP LY TO THE ASSESSMENT MADE UNDER SECTION 153A. SECTION 153B SPEAKS ABOUT TIME LIMIT FOR COMPLETION OF ASSESSMENT UNDER SECTION 153A. 46.. 47.. 48.. ITA.117/BANG/2017 PAGE - 7 49. ON A CONJOINT READING OF THE AFORESAID PROVISIO NS, IT BECOMES CLEAR THAT A SEARCH CAN TAKE PLACE ONLY WHEN A CONC ERNED OFFICER HAS INFORMATION AND REASON TO BELIEVE THAT ANY PERSON I S IN POSSESSION OF ANY VALUABLE ASSETS, WHICH HAS NOT BEEN OR WOULD NO T BE DISCLOSED UNDER THE ACT. IN SUCH A CASE, A SEARCH CAN TAKE PL ACE. FOLLOWING THE SEARCH, IF ANY BOOKS OF ACCOUNT, OTHER DOCUMENTS, A NY VALUABLE ASSETS IS OR ARE FOUND IN THE POSSESSION OR CONTROL OF ANY PERSON IN THE COURSE OF A SEARCH, THEN THE BOOKS OF ACCOUNT OR OTHER DOC UMENTS OR VALUABLE ASSETS COULD BE SEIZED. UNDER SECTION 153A, THE SAT ISFACTION REGARDING AN INFERENCE OF LIABILITY MUST BE RECORDED. THE ASS ESSING OFFICER HAS TO ISSUE NOTICE TO THE ASSESSEE I.E., THE PERSON SE ARCHED FOR THE PURPOSE OF ASSESSMENT OR REASSESSMENT OF THE TOTAL INCOME O F SIX ASSESSMENT YEARS IMMEDIATELY PRECEDING THE ASSESSMENT YEAR REL EVANT TO THE PREVIOUS YEAR IN WHICH SUCH SEARCH IS CONDUCTED. SE CTION 153C AS ALREADY NOTED, DEALS WITH ASSESSMENT OF INCOME OF A NY OTHER PERSON, WHEN THE ASSESSING OFFICER IS SATISFIED THAT THE BO OKS OF ACCOUNT OR DOCUMENTS OR VALUABLE ASSETS SEIZED OR REQUISITIONE D HAVE A BEARING ON THE DETERMINATION OF THE TOTAL INCOME OF SUCH OT HER PERSON FOR THE RELEVANT ASSESSMENT YEAR OR YEARS REFERRED TO UNDER SUB-SECTION(1) OF SECTION 153A OF THE ACT. IN SUCH A CASE, THE ASSESS ING OFFICER HAS TO ISSUE NOTICE TO ASSESS OR REASSESS INCOME OF OTHER PERSON UNDER SECTION 153A OF THE ACT. THUS, THE FACT THAT SEARCH HAS BEEN CONDUCTED WOULD NOT JUSTIFY ISSUANCE OF NOTICE UNDER SECTION 153A. IF IT IS ONLY DURING A VALID SEARCH WHEN CERTAIN INCRIMINATING MA TERIALS ARE DETECTED, NOTICE COULD BE ISSUED. 50. 51. 52.. 53.. 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 PA RTY. HOWEVER, INSOFAR AS THE INCRIMINATING MATERIAL OF THE SEARCH ED PERSON OR OTHER PERSON DETECTED DURING THE COURSE OF SEARCH IS CONC ERNED, THE SAME CAN BE CONSIDERED DURING THE COURSE OF ASSESSMENT. FURTHER, SUCH INCRIMINATING MATERIAL MUST RELATE TO UNDISCLOSED I NCOME WHICH WOULD ITA.117/BANG/2017 PAGE - 8 EMPOWER THE ASSESSING OFFICER TO UPSET OR DISTURB A CONCLUDED ASSESSMENT OF THE OTHER PERSON. OTHERWISE, A CONCLU DED ASSESSMENT WOULD BE DISTURBED WITHOUT THERE BEING ANY BASIS FO R DOING SO WHICH IS IMPERMISSIBLE IN LAW. EVEN IN CASE OF A SEARCHED PE RSON, THE SAME REASON WOULD HOLD GOOD AS IN CASE OF ANY OTHER PERS ON. AS OBSERVED BY US, DETECTION OR THE EXISTENCE OF INCRIMINATING MATERIAL IS A MUST FOR DISTURBING THE ASSESSMENT ALREADY MADE AND CONC LUDED. 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 REASSE SSMENT IS ALTERED BY A DIFFERENT ASSESSMENT IN RESPECT OF SEARCHED PE RSON OR IN RESPECT OF THIRD PARTY. IN THIS REGARD, REFERENCE MAY BE MA DE 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 CIRCULA R DATED 31.12.2015 VIDE NO.24/2015.THE RELEVANT EXTRACT OF THE CIRCULA R FOR READY REFERENCE CAN BE EXTRACTED AS UNDER: 'THE ISSUE OF RECORDING OF SATISFACTION FOR THE PUR POSES OF SECTION 158BD/153C HAS BEEN SUBJECT MATTER OF LITIGATION. 2. THE HON'BLE SUPREME COURT IN THE CASE OF M/S CAL CUTTA KNITWEARS IN ITS DETAILED JUDGMENT IN CIVIL APPEAL NO.3958 OF 2014 DATED 12.3.2014(AVAILABLE IN NJRS AT 2014- LL-0312-51) HA S LAID DOWN THAT FOR THE PURPOSE OF SECTION 158BD OF THE ACT, RECORD ING OF A SATISFACTION NOTE IS A PREREQUISITE AND THE SATISFA CTION NOTE MUST BE PREPARED BY THE AO BEFORE HE TRANSMITS THE RECORD T O THE OTHER AO WHO HAS JURISDICTION OVER SUCH OTHER PERSON U/S 158 BD. THE HON'BLE COURT HELD THAT 'THE SATISFACTION NOTE COULD BE PREPARED AT ANY OF THE FOLLOWING STAGES: (A) AT THE TIME OF OR ALONG WITH THE INITIATION OF PROCEEDINGS AGAINST THE SEARCHED PERSON UNDER SECTION 158BC OF THE ACT; OR (B) IN THE COURSE OF THE ASSESSMENT PROCEEDINGS UND ER SECTION 158BC OF THE ACT; OR (C) IMMEDIATELY AFTER THE ASSESSMENT PROCEEDINGS AR E COMPLETED UNDER SECTION 158BC OF THE ACT OF THE SEARCHED PERSON.' ITA.117/BANG/2017 PAGE - 9 2. SEVERAL HIGH COURTS HAVE HELD THAT THE PROVISION S OF SECTION 153C OF THE ACT ARE SUBSTANTIALLY SIMILAR/PARI-MATERIA T O THE PROVISIONS OF SECTION 158BD OF THE ACT AND THEREFORE, THE ABOVE G UIDELINES OF THE HON'BLE SC, APPLY TO PROCEEDINGS U/S 153C OF THE IT ACT, FOR THE PURPOSES OF ASSESSMENT OF INCOME OF OTHER THAN THE SEARCHED PERSON. THIS VIEW HAS BEEN ACCEPTED BY CBDT. 3. THE GUIDELINES OF THE HON'BLE SUPREME COURT AS R EFERRED TO IN PARA 2 ABOVE, WITH REGARD TO RECORDING OF SATISFACTION N OTE, MAY BE BROUGHT TO THE NOTICE OF ALL FOR STRICT COMPLIANCE. IT IS F URTHER CLARIFIED THAT EVEN IF THE AO OF THE SEARCHED PERSON AND THE 'OTHE R PERSON' IS ONE AND THE SAME, THEN ALSO HE IS REQUIRED TO RECORD HI S SATISFACTION AS HAS BEEN HELD BY THE COURTS. 4. IN VIEW OF THE ABOVE, FILING OF APPEALS ON THE I SSUE OF RECORDING OF SATISFACTION NOTE SHOULD ALSO BE DECIDED IN THE LIG HT OF THE ABOVE JUDGMENT. ACCORDINGLY, THE BOARD HEREBY DIRECTS THA T PENDING LITIGATION WITH REGARD TO RECORDING OF SATISFACTION NOTE UNDER SECTION 158BD/153C SHOULD BE WITHDRAWN/NOT PRESSED IF IT DO ES NOT MEET THE GUIDELINES LAID DOWN BY THE APEX COURT.' AS PER THE AFORESAID CIRCULAR, AT THE TIME OF OR ALONG WITH INITIATION O F THE PROCEEDINGS, AGAINST THE SEARCHED PERSON OR THIRD PARTY UNDER SE CTION 153C OR IN THE COURSE OF ASSESSMENT PROCEEDINGS UNDER SECTION 153C OF THE ACT OR IMMEDIATELY AFTER THE ASSESSMENT PROCEEDINGS ARE COMPLETED UNDER SECTION 153C OF THE ACT, RECORDING OF SATISFACTION IS REQUIRED. 55. IF THE OBSERVATIONS MADE BY THE TRIBUNAL ARE CO NSIDERED IN THIS REGARD, IT IS NOTED BY THE TRIBUNAL THAT IT IS NOT NECESSARY THAT SATISFACTION SHOULD BE RECORDED THAT DOCUMENTS OR V ALUABLE ASSETS FOUND IN THE COURSE OF SEARCH SHOWED UNDISCLOSED IN COME. IN VIEW OF THE AFORESAID DISCUSSION, WE DO NOT THINK THAT SUCH CAN BE THE CORRECT POSITION OF LAW. 56. FURTHER, IN THE JUDGMENTS REFERRED TO BY THE LE ARNED COUNSEL FOR THE REVENUE, WHERE INCRIMINATING MATERIAL LEADING T O UNDISCLOSED INCOME OF ANOTHER ASSESSEE WAS DETECTED IN A SEARCH OPERATION, IN THOSE CASES, REOPENING OF THE CONCLUDED ASSESSMENT HAVE TAKEN PLACE. THERE HAS BEEN NO SINGLE DECISION CITED BY THE LEAR NED COUNSEL FOR THE REVENUE WHERE THE ASSUMPTION OF JURISDICTION OF THE ASSESSING OFFICER IS IN THE ABSENCE OF ANY INCRIMINATING MATERIAL OR UNDISCLOSED INCOME HAVING BEEN DETECTED DURING THE COURSE OF SEARCH LE ADING TO REOPENING ITA.117/BANG/2017 PAGE - 10 OF A CONCLUDED ASSESSMENT. IN THE INSTANT CASE, THO UGH DOCUMENTS BELONGING TO THE ASSESSEE WERE SEIZED AT THE TIME O F SEARCH OPERATION, THERE WAS NO INCRIMINATING MATERIAL FOUND LEADING T O UNDISCLOSED INCOME. THEREFORE, ASSESSMENT OF INCOME OF THE ASSE SSEE WAS UNWARRANTED. CONSEQUENTLY, NO SATISFACTION WAS RECO RDED IN THE CASE OF THE ASSESSEE. WE ANSWER SUBSTANTIAL QUESTION OF LAW NO.2 BY HOLDING THAT THE TRIBUNAL WAS NOT CORRECT IN HOLDIN G THAT THE ASSESSMENT UNDER SECTION 153C WAS VALID DESPITE THE RE BEING NO SATISFACTION RECORDED TO THE EFFECT THAT THE DOCUME NTS FOUND DURING THE SEARCH ON 17/06/2008 WERE INCRIMINATING IN NATURE A ND PRIMA FACIE REPRESENTED UNDISCLOSED INCOME. THUS IT IS CLEAR T HAT THE HON'BLE HIGH COURT HAVING CONSIDERED THE DECISION OF CANARA HOUSING DEVELOPMENT CO. VS. DCIT (SURPA) AND AFTER HAVING B EEN UNDERSTOOD THE SAME HAS CLEARLY LAID DOWN THE PRINCIPLE THAT A CONCLUDED ASSESSMENT CANNOT BE DISTURBED WITHOUT THERE BEING ANY EXISTENE OF INCRIMINATING MATERIAL. 13. THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. KABUL CHAWLA (SUPRA), AFTER CONSIDERING ALL THE RELEVANT DECISIONS ON THIS POINT HAS HELD IN PARAS 35 TO 38 AS UNDER : 35. IN CIT V. CONTINENTAL WAREHOUSING CORPORATION (NHAVA SHEVA) LTD. [2015] 374 ITR 645/232 TAXMAN 270/58 TAXMANN.C OM 78 (BOM.) THE QUESTION ADDRESSED BY THE BOMBAY HIGH COURT WAS WHETHER THE SCOPE OF ASSESSMENT UNDER SECTION 153A ENCOMPASSES ADDITIONS, NOT BASED ON ANY INCRIMINATING MATERIAL FOUND DURING TH E COURSE OF SEARCH? IT WAS HELD THAT NO ADDITION COULD BE MADE IN RESPECT OF THE ASSESSMENTS THAT HAD BECOME FINAL IN THE EVENT NO I NCRIMINATING MATERIAL WAS FOUND DURING SEARCH. THE BOMBAY HIGH C OURT RELIED ON THE EARLIER DECISION IN MURLI AGRO PRODUCTS LTD. (S UPRA) AND DISCUSSED THE SCOPE AND AMBIT OF THE PROCEEDINGS FOR ASSESSME NT AND REASSESSMENT OF TOTAL INCOME UNDER SECTION 153A (1) OF THE ACT AND THE PROVISOS THERETO. ONE OF THE SPECIFIC PLEAS TAK EN BY THE ASSESSEE WAS THAT IF NO INCRIMINATING MATERIAL WAS FOUND DUR ING THE COURSE OF SEARCH IN RESPECT OF AN ISSUE THEN NO ADDITION IN R ESPECT OF ANY ISSUE CAN BE MADE TO THE ASSESSMENT UNDER SECTIONS 153A A ND 153C. IT WAS OBSERVED THAT THE ASSESSMENT OR REASSESSMENT UNDER SECTION 153A ARISES ONLY WHEN A SEARCH HAS BEEN INITIATED AND CO NDUCTED AND, THEREFORE, 'SUCH AN ASSESSMENT HAS A VITAL LINK WIT H THE INITIATION AND CONDUCT OF THE SEARCH.' THE COURT THEN REPRODUCED AND AFFIRMED THE DECISION OF THE SPECIAL BENCH OF THE ITAT IN ALL CARGO GLOBAL LOGISTICS LTD . V. DY CIT ITA.117/BANG/2017 PAGE - 11 [2012] 23 TAXMANN.COM 103/137 ITD 287 (MUM.) (SB) A ND ANSWERED THE QUESTION AS REGARDS THE SCOPE OF THE ASSESSMENT OF TOTAL INCOME AS UNDER: '53. . . . . . . . WE ARE OF THE VIEW THAT FOR ANSW ERING THIS QUESTION, GUIDANCE WILL HAVE TO BE SOUGHT FROM SECTION 132(1) . IF ANY BOOKS OF ACCOUNT OR OTHER DOCUMENTS RELEVANT TO THE ASSESSME NT HAD NOT BEEN PRODUCED IN THE COURSE OF ORIGINAL ASSESSMENT AND F OUND IN THE COURSE OF SEARCH IN OUR HUMBLE OPINION SUCH BOOKS OF ACCOU NT OR OTHER DOCUMENTS HAVE TO BE TAKEN INTO ACCOUNT WHILE MAKIN G ASSESSMENT OR REASSESSMENT OF TOTAL INCOME UNDER THE AFORESAID PR OVISION. SIMILAR POSITION WILL OBTAIN IN A CASE WHERE UNDISCLOSED IN COME OR UNDISCLOSED PROPERTY HAS BEEN FOUND AS A CONSEQUENC E OF SEARCH. IN OTHER WORDS, HARMONIOUS INTERPRETATION WILL PRODUCE THE FOLLOWING RESULTS: (A) INSOFAR AS PENDING ASSESSMENTS ARE CONCERNED, T HE JURISDICTION TO MAKE ORIGINAL ASSESSMENT AND ASSESSMENT U/S 153A ME RGE INTO ONE AND ONLY ONE ASSESSMENT FOR EACH ASSESSMENT YEAR SH ALL BE MADE SEPARATELY ON THE BASIS OF THE FINDINGS OF THE SEAR CH AND ANY OTHER MATERIAL EXISTING OR BROUGHT ON THE RECORD OF THE A O, (B) IN RESPECT OF NON-ABATED ASSESSMENTS, THE ASSES SMENT WILL BE MADE ON THE BASIS OF BOOKS OF ACCOUNT OR OTHER DOCUMENTS NOT PRODUCED IN THE COURSE OF ORIGINAL ASSESSMENT BUT FOUND IN THE COURSE OF SEARCH, AND UNDISCLOSED INCOME OR UNDISCLOSED PROPERTY DISC OVERED IN THE COURSE OF SEARCH' 36. ULTIMATELY IN CONTINENTAL WAREHOUSING CORPORATI ON (NHAVA SHEVA) LTD. (SUPRA), THE BOMBAY HIGH COURT ANSWERED THE QUESTION FRAMED BY IT AS UNDER: 'A. IN ASSESSMENTS THAT ARE ABATED, THE AO RETAINS THE ORIGINAL JURISDICTION AS WELL AS JURISDICTION CONFERRED ON H IM U/S 153AFOR WHICH ASSESSMENTS SHALL BE MADE FOR EACH OF THE SIX ASSESSMENT YEARS SEPARATELY; B. IN OTHER CASES, IN ADDITION TO THE INCOME THAT H AS ALREADY BEEN ASSESSED, THE ASSESSMENT U/S 153A WILL BE MADE ON T HE BASIS OF INCRIMINATING MATERIAL, WHICH IN THE CONTEXT OF REL EVANT PROVISIONS MEANS - (I) BOOKS OF ACCOUNT, OTHER DOCUMENTS, FOUN D IN THE COURSE OF SEARCH BUT NOT PRODUCED IN THE COURSE OF ORIGINAL A SSESSMENT, AND (II) ITA.117/BANG/2017 PAGE - 12 UNDISCLOSED INCOME OR PROPERTY DISCOVERED IN THE CO URSE OF SEARCH.' 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 EXPLA INED IN THE AFOREMENTIONED DECISIONS, THE LEGAL POSITION THAT E MERGES IS AS UNDER: I. ONCE A SEARCH TAKES PLACE UNDER SECTION 132 OF T HE ACT, NOTICE UNDER SECTION 153 A(1) WILL HAVE TO BE MANDATORILY ISSUED TO THE PERSON SEARCHED REQUIRING HIM TO FILE RETURNS FOR S IX AYS IMMEDIATELY PRECEDING THE PREVIOUS YEAR RELEVANT TO THE AY IN W HICH THE SEARCH TAKES PLACE. II. ASSESSMENTS AND REASSESSMENTS PENDING ON THE DA TE OF THE SEARCH SHALL ABATE. THE TOTAL INCOME FOR SUCH AYS WILL HAV E TO BE COMPUTED BY THE AOS AS A FRESH EXERCISE. III. THE AO WILL EX ERCISE NORMAL ASSESSMENT POWERS IN RESPECT OF THE SIX YEARS PREVI OUS TO THE RELEVANT AY IN WHICH THE SEARCH TAKES PLACE. THE AO HAS THE POWER TO ASSESS AND REASSESS THE 'TOTAL INCOME' OF THE AFOREMENTION ED SIX YEARS IN SEPARATE ASSESSMENT ORDERS FOR EACH OF THE SIX YEAR S. 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 UNDISCLOSE D INCOME WOULD BE BROUGHT TO TAX'. IV. ALTHOUGH SECTION 153 A DOES NO T SAY THAT ADDITIONS SHOULD BE STRICTLY MADE ON THE BASIS OF EVIDENCE FO UND IN THE COURSE OF THE SEARCH, OR OTHER POST-SEARCH MATERIAL OR INFORM ATION AVAILABLE WITH THE AO WHICH CAN BE RELATED TO THE EVIDENCE FO UND, IT DOES NOT MEAN THAT THE ASSESSMENT 'CAN BE ARBITRARY OR MADE WITHOUT ANY RELEVANCE OR NEXUS WITH THE SEIZED MATERIAL. OBVIOU SLY AN ASSESSMENT HAS TO BE MADE UNDER THIS SECTION ONLY ON THE BASIS OF SEIZED MATERIAL.' V. IN ABSENCE OF ANY INCRIMINATING MATER IAL, THE COMPLETED ASSESSMENT CAN BE REITERATED AND THE ABATED ASSESSM ENT OR REASSESSMENT CAN BE MADE. THE WORD 'ASSESS' IN SECT ION 153 A IS RELATABLE TO ABATED PROCEEDINGS (I.E. THOSE PENDING ON THE DATE OF SEARCH) AND THE WORD 'REASSESS' TO COMPLETED ASSESS MENT PROCEEDINGS. VI. INSOFAR AS PENDING ASSESSMENTS ARE CONCERNED, T HE JURISDICTION TO MAKE THE ORIGINAL ASSESSMENT AND THE ASSESSMENT UND ER 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 A O. 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 ITA.117/BANG/2017 PAGE - 13 REQUISITION OF DOCUMENTS OR UNDISCLOSED INCOME OR P ROPERTY DISCOVERED IN THE COURSE OF SEARCH WHICH WERE NOT P RODUCED OR NOT ALREADY DISCLOSED OR MADE KNOWN IN THE COURSE OF OR IGINAL ASSESSMENT. CONCLUSION 38. THE PRESENT APPEALS CONCERN AYS, 2002-03, 2005- 06 AND 2006- 07.ON THE DATE OF THE SEARCH THE SAID ASSESSMENTS A LREADY STOOD COMPLETED. SINCE NO INCRIMINATING MATERIAL WAS UNEA RTHED DURING THE SEARCH, NO ADDITIONS COULD HAVE BEEN MADE TO THE IN COME ALREADY ASSESSED. THUS IT IS SETTLED PROPOSITION OF LAW TH AT THE ASSESSING OFFICER WILL EXERCISE NORMAL ASSESSMENT POWERS IN R ESPECT OF SIX YEARS PRECEEDING TO THE RELEVANT ASSESSMENT YEAR IN WHICH THE SEARCH TAKES PLACE AND THEREFORE, THERE WILL BE ONLY ONE ASSESSM ENT ORDER IN RESPECT OF EACH SIX ASSESSMENT YEARS IN WHICH BOTH DISCLOS ED AND UNDISCLOSED INCOME WOULD BE BROUGHT TO TAX. IN THE ABSENCE OF A NY INCRIMINATING MATERIAL COMPLETED THE ASSESSMENT CAN BE REITERATED AND THE ABATED ASSESSMENT OR REASSESSMENT CAN BE MADE. IN CASE OF COMPLETED ASSESSMENTS ON THE DATE OF SEARCH, THE ASSESSMENT U NDER SECTION 153A CAN BE MADE ONLY ON THE BASIS OF SOME INCRIMINATING MATERIAL UNEARTHED DURING THE COURSE OF SEARCH OR REQUISITIO N OF DOCUMENT OR UNDISCLOSED INCOME OR PROPERTY DISCOVERED IN THE CO URSE OF SEARCH WHICH WERE NOT PRODUCED OR NOT ALREADY DISCLOSED OR MADE OPEN IN THE COURSE OF ORIGINAL ASSESSMENT. THEREFORE THE ADDITI ON MADE BY THE ASSESSING OFFICER FOR THE ASSESSMENT YEARS 2009-10 TO 2011-12 TOWARDS DEEMED DIVIDEND UNDER SECTION 2(22)(E) OF T HE ACT WITHOUT ANY INCRIMINATING MATERIAL FOUND DURING THE SEARCH IS NOT SUSTAINABLE UNDER LAW. HENCE THE SAME IS LIABLE TO BE DELETED. 08. THE LD. DR SUPPORTED THE ORDER OF THE ASSESSEE OFFICER. 09. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT THE COORDINATE BENCH IN TH E ABOVE NOTED MATTER HELD THAT IN THE ABSENCE OF INCRIMINATING MA TERIAL NO ADDITION CAN BE MADE . AS IN THE PRESENT CASE ALSO NO INCRIM INATING MATERIAL WAS FOUND DURING THE COURSE OF SEARCH, UNDISCLOSED PROPERTY OR INCOME WAS RECOVERED DURING THE COURSE OF SEARCH, T HE AO COULD NOT MAKE ANY ADDITION IN RESPECT OF DEPRECIATION ETC., IN THE LIGHT OF THE ITA.117/BANG/2017 PAGE - 14 ABOVE WE DO NOT FIND ANY JUSTIFICATION FOR MAKING T HE ADDITION. HENCE THE SAME IS DELETED. 10. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 21ST DAY OF N OVEMBER, 2017. SD/- SD/- (INTURI RAMA RAO) (LALIT KUMAR) ACCOUNTANT MEMBER JUDICIAL M EMBER MCN* COPY TO: 1. THE ASSESSEE 2. THE ASSESSING OFFICER 3. THE COMMISSIONER OF INCOME-TAX 4. COMMISSIONER OF INCOME-TAX(A) 5. DR 6. GF, ITAT, BANGALORE BY ORDER SENIOR PRIVATE SECRETARY