M/s Reliance Granite Private Limited, Hyderabad V. ACIT,Central Circle-7, Hyderabad

ITA 1278/HYD/2014

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9023 (ITAT-HYDERABAD)
• Duration Of Justice: 6 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-01-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2003-2004
• Appeal Filed On: 03-07-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITRA
• Assessee Lawyers: P MURALI MOHAN RAO
• Keywords: Gift; Depreciation; Business expenditure; Search and seizure; Documents seized; Unabsorbed depreciation
• Section: 143(3); 133A; 153A; 32; 132; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER S.NO. ITA NO. AY APPELLANT RESPONDENT 1 1071/H/14 2003-04 DY. COMMISSI-ONER OF INCOME-TAX, CENTRAL CIRCLE 7, HYD. M/S RELIANCE GRANITE PVT. LTD., HYDERABAD. PAN AABCR1369P 2 1072/H/14 2004-05 -DO- -DO- 3 1073/H/14 2005-06 -DO- -DO- 4 1074/H/14 2007-08 -DO- -DO- 5 1278/H/14 2003-04 M/S RELIANCE GRANITE PVT. LTD., HYDERABAD. PANAABCR1369P ASST. COMMISSI- ONER OF INCOME- TAX, CENTRAL CIRCLE 7, HYD. 6 1279/H/14 2004-05 -DO- ASST. COMMISSI- ONER OF INCOME- TAX, CENTRAL CIRCLE 7, HYD. 7 1280/H/14 2005-06 -DO- -DO- 8 1281/H/14 2006-07 -DO- -DO- 9 1282/H/14 2007-08 -DO- -DO- 10 1283/H/14 2008-09 -DO- -DO- 11 1284/H/14 2009-10 -DO- -DO- REVENUE BY SHRI RAJAT MITRA ASSESSEE BY SHRI P. MURALI MOHAN RAO DATE OF HEARING 06-01-2015 DATE OF PRONOUNCEMENT 14-01-2015 O R D E R PER BENCH: THESE ARE BUNCH OF 11 APPEALS RELATING TO SAME ASS ESSEE. WHILE THERE ARE CROSS APPEALS BY REVENUE AND ASSESS EE FOR AYS 2003-04, 2004-05, 2005-06 AND 2007-08, APPEALS FOR THE AYS 2006- 07, 2008-09 & 2009-10 ARE BY ASSESSEE ALONE. THOUGH LD. CIT(A) FOR LATER THREE ASSESSMENT YEARS ALSO HAS HELD THAT THE ADDITIONS MADE IN 2 ITA NOS.1071/HYD/2014 AND OTHERS M/S RELIANCE GRANITE PVT. LTD. ABSENCE OF INCRIMINATING MATERIALS CANNOT BE UPHELD , BUT, THE DEPARTMENT HAS NOT PREFERRED APPEAL AGAINST SUCH OR DERS OF LD. CIT(A). 2. WE WILL FIRST DEAL WITH THE APPEALS PREFERRED BY THE DEPARTMENT NUMBERED AS ITA NOS. 1071, 1072, 1073 & 1074/HYD/20 14. COMMON GROUNDS RAISED BY THE DEPARTMENT IN ALL THESE APPEA LS, ARE AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE CIT(A) ERRED IN DELETING THE ADDITIONS BY FOLLOWING THE RATIO LAID DOWN IN THE CASE OF ALL CARGO GLOBAL LOG ISTICS 137 ITD 287 WITHOUT GOING INTO THE MERITS OF THE ISSUES. 2. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE AO BE RESTORED. 3. AS FACTS ARE MORE OR LESS IDENTICAL IN ALL THESE APPEALS, FOR THE SAKE OF BREVITY, WE WILL DEAL WITH THE FACTS AS INV OLVED IN ITA NO. 1071/HYD/14 FOR AY 2003-04. 4. BRIEFLY THE FACTS ARE, ASSESSEE A COMPANY IS ENG AGED IN THE BUSINESS OF MANUFACTURING AND TRADING OF GRANITE SL ABS, PROCESSED BLOCKS AND MARBLE SLABS/TILES, ETC. FOR THE AY UNDE R CONSIDERATION, ASSESSEE FILED ITS RETURN OF INCOME ORIGINALLY ON 2 9/10/2012 DECLARING LOSS OF RS. 67,54,270. ASSESSMENT IN CASE OF ASSESS EE WAS ALSO COMPLETED U/S 143(3) VIDE ASSESSMENT ORDER DATED 24 /03/2005 DETERMINING THE TOTAL INCOME AT RS. 1,07,09,372. IT IS ALSO MENTIONED BY AO IN THE ASSESSMENT ORDER THAT ASSESSEE PREFERR ED APPEAL AGAINST THE SAID ASSESSMENT ORDER BEFORE LD. CIT(A) AND BEING UNSUCCESSFUL THERE HAS GONE IN FURTHER APPEAL BEFOR E THE ITAT, WHICH IS STILL PENDING. BE THAT AS IT MAY, A SEARCH AND S EIZURE OPERATION U/S 132 OF THE ACT WAS CONDUCTED IN CASE OF M/S MIDWEST GRANITE (P) LTD. AND OTHERS IN THE GROUP ON 24/07/2008. AS A CONSEQU ENCE OF SUCH SEARCH OPERATION, AS NOTED BY AO IN THE ASSESSMENT ORDER, NOTICES U/S 15A WERE ISSUED TO ASSESSEE ON 17/07/2009 CALLI NG FOR RETURNS OF INCOME FOR THE AYS 2003-04 TO 2008-09. IN RESPONSE TO THE SAID 3 ITA NOS.1071/HYD/2014 AND OTHERS M/S RELIANCE GRANITE PVT. LTD. NOTICE, ASSESSEE FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2003-04 ON 13/10/2009 DECLARING TOTAL INCOME OF RS. 1,41,38,954. SIMILARLY, RETURNS WERE ALSO FILED FOR AYS 2004-05 TO 2008-09. AO, ULTIMATELY, COMPLETED THE ASSESSMENT U/S 143(3) REA D WITH SECTION 153A OF THE ACT VIDE ASSESSMENT ORDER DATED 19/08/2 011 BY MAKING A NUMBER OF ADDITIONS, AS A RESULT OF WHICH INCOME BEFORE SET OFF OF BROUGHT FORWARD LOSSES AND UNABSORBED DEPRECIATION WAS DETERMINED AT RS. 1,58,72,796, WHICH WAS COMPUTED TO NIL FIG URE AFTER ALLOWING BROUGHT FORWARD LOSSES AND UNABSORBED DEPRECIATION. AO, HOWEVER, COMPUTED BOOK PROFIT AT RS. 107,09,372 WITHOUT ALLO WING ANY DEDUCTION U/S 80HHC. BEING AGGRIEVED OF THE ASSESSM ENT ORDER, SO PASSED, ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A) . 5. IN COURSE OF HEARING OF APPEAL BEFORE LD. CIT(A) , ASSESSEE RAISED ADDITIONAL GROUNDS CHALLENGING THE ASSESSMEN T ORDER PASSED AND ADDITIONS MADE IN ABSENCE OF INCRIMINATING/SEIZ ED MATERIALS. 6. LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF ASSESSEE AND FOLLOWING THE RATIO LAID DOWN IN A NUMBER OF DECISI ONS INCLUDING THE DECISION OF ITAT, MUMBAI SPECIAL BENCH IN CASE OF A LL CARGO GLOBAL LOGISTICS PVT. LTD. VS. DCIT, 137 ITD 287 DECIDED T HE ISSUE IN FAVOUR OF ASSESSEE BY HOLDING AS UNDER: 4.5 PERUSED THE SUBMISSIONS OF THE APPELLANT, WITH SPECIFIC REFERENCE T THE ISSUES RAISED THROUGH ADDITIONAL GROUNDS, WHICH WAS MAINLY RELIED UPON THE JUDICIAL DECISIONS, MORE PARTICULARLY IN THE CASE OF ALL CARGO (,OBAL LOGIS TICS PVT. LTD., BY SPECIAL BENCH OF MUMBAI ITAT REPORTED IN 137 ITD 287. BEFORE GETTING INTO THE JUDICIAL DECISION, IT IS PERTINENT TO LOOK INTO THE RELEVANT LAW ON THIS ISSUE, WHICH IS SECTION 153C AS APPLICABLE TO THE FACTS OF THE CASE WHERE S EARCH WAS CONDUCTED IN THE CASE OF M/ . MIDWEST GRANITES PVT. LTD AND BASED ON CERTAIN FINDINGS, PROCEEDLNQ: U/S. 153C IN ITIATED IN THIS CASE. 153C. ASSESSI ENT OF INCOME OF ANY OTHER PERSON. [1] NOTWITHSTA .DING ANYTHING CONTAINED IN SECTION 139, SECTION 4 ITA NOS.1071/HYD/2014 AND OTHERS M/S RELIANCE GRANITE PVT. LTD. 147, SECTION 148, SECTION 149, SECTION 151 AN SECTI ON 153, WHERE THE ASSESSING OFFICER IS SATISFIED THAT ANY M ONEY, BULLION, JEWELLERY OR ( HER VALUABLE ARTICLE OR THING OR BOO KS OF ACCOUNT OR DOCUMENTS SEIZED OR REQUISITIONED 1 .LONGS OR BELON G 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 A GAINST EACH SUCH OTHER PERSON AND ISSUE SUCH OTHER PERSON NOTICE AND ASSESS OR REASSESS INC OME OF SUCH OTHER PERSON IN ACCORDANCE WITH THE PROVISIONS OF SECTION 153 A.] [PROVIDED THAT N CASE OF SUCH OTHER PERSON, THE REFERENCE TO THE DATE OF INITIATION OF THE SEARCH UNDER SECTION 32 O R MAKING OF REQUISITION UNDER SECTION 132A IN THE SECOND PROVIS O TO [SUB- SECTION (1) OF S ECTION 153A] SHALL BE CONSTRUED AS REFERENCE TO THE DATE OF RECEIVING THE BOOKS OF ACCOUNT OR DOCUM ENTS OR ASSETS SEIZED OR REQUISITIONED BY THE ASSESSING OFF ICER HAVING JURISDICTION OVER SUCH OTHER PERSON.] [PROVIDED FURTHER THAT THE CENTRAL GOVERNMENT MAY BY RULES MADE BY IT AND PUBLISHED IN THE OFFICIAL GAZET TE, SPECIFY THE CLASS OR CLASSES OF CASES IN RESPECT OF SUCH OTHER PERSON, I N WHICH THE ASSESSING OFFICER SHALL NOT BE REQUIRED TO ISSUE NO TICE FOR ASSESSING OR REASSESSING THE TOTAL INCOME FOR SIX A SSESSMENT YEARS IMMEDIATELY PRECEDING THE ASSESSMENT YEAR REL EVANT TO THE PREVIOUS YEAR IN WHICH SEARCH IS CONDUCTED OR R EQUISITION IS MADE EXCEPT IN CASES WHERE ANY ASSESSMENT OR REASSE SSMENT HAS ABATED.] [(2) WHERE B OOK S OF ACCOUNT OR DOCUMENTS OR ASSETS SEIZED OR REQUISITIONED AS REFERRED TO IN SUB-SECTION (1 ) HAS OR HAVE BEEN RECEIVED BY THE ASSESSING OFFICER HAVING JURISDICTI ON OVER SUCH OTHER PC: .ON AFTER THE DUE DATE FOR FURNISHING THE RETURN OF INCOME FOR THE ASSESSMENT YEAR RELEVANT 0 THE PREVIOUS YEAR IN WHICH SEARCH IS CONDUCTED UNDER SECTION 132 OR REQU ISITION IS MADE UNDER SECTION 132A AND IN RESPECT OF SUCH ASSE SSMENT YEAR -- A) NO RETURN OF INCOME HAS BEEN FURNISHED BY SUCH O THER PERSON AND NO NOTICE UNDER SUB-SECTION (1) OF SECTI ON 142 HAS BEEN ISSUED TO HIM, OR (B) A .TURN OF INCOME HAS BEEN FURNISHED BY SUCH OT HER PERSON BUT NO NOTICE UNDER SUB-SECTION (2) OF SECTI ON 143 HAS BEEN SERVED AND LIMITATION OF SERVING THE NOTIC E UNDER SUB-SECTION (2) OF SECTION 143 HAS EXPIRED, OR 5 ITA NOS.1071/HYD/2014 AND OTHERS M/S RELIANCE GRANITE PVT. LTD. (C) ASSESSMENT OR REASSESSMENT, IF ANY, HAS BEEN MADE, BEFORE THE DATE OF RECEIVING THE BOOKS OF ACCOUNT O R DOCUMENTS OR ASSETS SEIZED OR REQUISITIONED BY THE ASSESSING OFFICER HAVING JURISDICTION OVER SUCH OTH ER PERSON, SUCH ASSESSING OFFICER SHALL ISSUE THE NOTI CE AND ASSESS OR REASSESS TOTAL INCOME OF SUCH OTHER PERSO N OF SUE ASSESSMENT YEAR IN THE MANNER PROVIDED IN SECTI ON 153A.] 4.6 AS COULD BE SEEN FROM THE LANGUAGE USED, THE BA SIS FOR INITIATION OF PROCEEDINGS U/S. 153C IS THE INFORMATION /VALUA BLES/DOCUMENTS SEIZED BELONGING TO PERSONS OTHER THAN COVERED U/S 153A. AS COULD BE SEEN FROM THE ASSESSMENT ORDER UNDER REFERENCE, HERE IS NO INDICATION AS TO THE INFORMATION ON THE VALUABLES / DOCUMENTS SEI ZED DURING FROM THE SEARCH PROCEEDINGS CONDUCTED IN THE CASE OF MJ '. MIDWEST GRANITES (P) LTD(MGPL), AND IT'S DIRECTORS, AND NO SUCH VALUABLES OR DOCUMENTS RELATABLE/BELONG TO THE ASSESSEE. AS COUL D BE SEEN FN M THE ASSESSMENT ORDER, NO ADDITION WAS MADE BASED ON THE INCRIMINATING MATERIAL FOUND DURING THE COURSE OF S EARCH PROCEEDINGS CONDUCTED IN CASE OF MGPL , WHICH IS AN ASSOCIATE CONCERN OF THE ASSESSEE COMPANY. THERE ARE CATENA OF JUDICIAL DECI SIONS WHEREIN IT HAS BEEN HELD THAT ADDITIONS MADE IN COURSE OF ASSE SSMENT PROCEEDINGS U/S. 153A SHOULD BE DERIVED FROM THE IN CRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH. TH E ASSESSMENT PROCEEDINGS U/S. 153C ARE ALSO CONSIDERED AS PROCEE DING U/S. 153A, SINCE 153C IS READ WITH SEC. 153A. 4.7 (I) IN THE CASE OF LMJ INTERNATIONAL LTD., HON' BLE ITAT KOLKATA, OBSERVED T AT THE ITEMS OF REGULAR ADDITIONS CANNOT BE TAKEN UP IN THE ASSESSRNENT U/S. 153A/153C. THE HEAD NOTE IN THE CA SE READ AS UNDER: 'SECTION L53C, READ WITH SECTION 153A, OF THE INCOM E-TAX ACT,1 961, SEARCH AND SEIZURE - ASSESSMENT OF INCOM E OF ANY OTHER PERSON ASSESSMENT YEAR 1990-00 WHETHE R ITEMS OF REGULAR A SSESS MENT CAN BE ADDED BACK IN PROCEEDINGS UNDER SECTION 153C - HELD, NO - WHETHER ONLY UNDISCLOSED INCOME DETECTED IN COURSE OF SEARCH OF SEARCHED PERSON OR ANY OTHER PERSON CAN BE ADDED AN D CHARGED TO TAX UNDER SECTION 153C - HELD, YES.' WHILE DECIDING THE ISSUE THE HON'BLE TRIBUNAL REFE RRED TO THE DECISION OF HON'BLE HIGH COURT OF JHARKHAND IN THE CASE OF ABHAY KUMAR SHROFF VS. CIT (290 ITR 114) II) IN THE CASE OF KG EXPORTS VS. JCIT (ITA NO. 494 /V/2007), HON'BLE ITA , WAS OF THE VIEW THAT ONLY UNDISCLOSED INCOME CAN BE ASSESSED U/ . 153A OF THE INCOME-TAX ACT. THE RELEV ANT PORTION OF THE ORDER RUN AS NDER: 6 ITA NOS.1071/HYD/2014 AND OTHERS M/S RELIANCE GRANITE PVT. LTD. IN VIEW OF THE FOREGOING, WE ARE OF THE OPINION TH AT WHEN NO INCRIMINATING MATERIAL IS FOUND DURING THE COURSE O F SEARCH, THE ASSESS I G OFFICER CANNOT MAKE ANY ADDITION ON ISSUES WHICH HAVE ALREADY BEEN CONCLUDED EVEN WHEN THE ASSESSMENTS WERE REOPENED BY VIRTU E OF PROVISIONS OF SEC. 153A. IN SUCH CASES, THE ASSESSING OFFICER HAS TO COMPLET E SUCH ASSESSMENTS WITHOUT MAKING ANY FURTHER ADDITIO N. HENCE, THE SECOND ISSUE URGED BEFORE US IS ANSWER D IN FAVOUR OF THE ASSESSEE. ' (III) A IMILAR VIEW WAS TAKEN BY THE HON'BLE ITAT, HYDERABAD, IN THE CASE OF PLATINA PROPERTIES PROJECTS LTD IN ITA NO. 1622, 1623, 573 TO 576/HYD/2001. THE RELEVANT PORTION OF THE OR DER RUNS AS UNDER: ....THE PRESENT ASSESSMENT IS MADE U/S. 143(3) R.W.S. 153A RW.S. 153C OF THE ACT. THE SECOND PROVISO OF SUB SE CTION 1 TO SECTION PROVIDES THAT IF ASSESSMENT FOR ANY OF T HE ASSESSMENT YEAR FALLING WITHIN A PERIOD OF 6 YEARS MENTIONED IN CLAUSE (B) OF SECTION 153A(1), IS PENDING ON THE DATE OF SEARCH, IT SHALL ABATE. THE PRESENT ASSESSMENT YEAR IS 1999- 2000 WHICH IS FALLING WITHIN THE PERIOD OF 6 YEARS BUT ITS ASSESSMENT IS COMPLETE AND HENCE THE PROCEE DINGS DO NOT ABATE. IN OTHER WORDS THE ORIGINAL ASSESSMENT WAS M ADE U/S. 143(3) HAS BECOME FINAL AND IS NOT AFFECTED BY THE SECOND PROVISO TO SECTION 153A. OF COURSE, THE PRESENT ASSESSMENT IS A CASE FALLING U/S. 153C, BUT THEN, AS PER SUB SECTION (2) OF SECTION 153C, THIS ASSESSMENT WAS ALSO TO BE DONE IN THE MANNER PROVI DED IN SECTION 153A. THEREFORE, THE SECOND PROVISO TO SECTION 153A I PP LIES EQUALLY TO THE CASES FALLING U/S. 153C. WHAT FOLLOWS IS THAT THE ASSESSMENT NOW TO BE DONE IS TO BE CONFINED TO THE MATERIAL FOUND IN THE COURSE OF SEARCH ONLY. THE ADDITIONS/DISALLOWANCES MADE IN THE REGULAR ASSESSM ENT CANNOT BE REPEAL D IN THE ASSESSMENT TO BE MADE U/S. 153C OF THE ACT UNLESS FRESH, MATERIAL HAS BEEN UNEARTHE D IN COURSE OF SEARCH IN RESPECT OF THOSE ADDITIONS/DISALLOWANCES..... ' (IV) HI N'BLE SPECIAL BENCH OF ITAT, MUMBAI, IN THE CASE OF ALL CARGO GLOBAL LO91 TICS (137 ITD 287), WHILE DEALING ON THE ISSUE MORE ELABORATELY, HAS CATEGORICALLY HELD THAT ADDIT IONS TO THE INCOME THAT HAS ALREADY BEEN ASSESSED, THE ASSESSME NT U/S. 153A WILL BE MADE ON THE BASIS OF INCRIMINATING MAT ERIAL. THE ESSENTIAL OBSERVATIONS OF THE ORDER RUN AS UNDER : 'IN ASSESSMENTS THAT ARE ABATED, THE AO RETAINS THE ORIGINAL JURISDICTION AS WELL AS JURISDICTION CONFERRED ON H IM U/S. 153A FOR WHICH ASSESSMENTS SHALL BE MADE FOR EACH O F THE 7 ITA NOS.1071/HYD/2014 AND OTHERS M/S RELIANCE GRANITE PVT. LTD. SIX ASSESSMENT YEARS SEPARATELY; (B) IN OTHER CASES, IN ADDITION TO THE INCOME THAT HAS ALREADY BEEN ASSESS I D, THE ASSESSMENT U/S. 153A WILL BE MADE ON THE BASIS OF INCRIMINATING MATERIAL, WHICH IN THE CONTEXT OF RELEVANT PROVISIONS MEANS (I) BOOKS OF ACCOUNT, OTHER DOCUMENTS, FOUND IN THE COURSE OF SEARCH BUT NOT PRODUCED IN THE COURSE OF ORIGINA L ASSESSMENT, AND (II) UND ISCLOSED INCOME OR PROPERTY DISCOVERED IN THE COURSE OF SEARCH. 4.8 FURTHER, ON THE SAID ISSUE SIMILAR VIEWS WERE ECHOE D FROM THE FOLLOWING DECISIONS OF VARIOUS TRIBUNALS AND HIGH COURTS. (I) JAI STEELS (P) LTD. VS. CIT (88 ITR 1 (RAJ.) (2013) (II) ACIT VS. PRATHIBHA INDUSTRIES ( 28 TAXMN.COM 2 46 ITAT, BOM) IN THE CASE OF ACIT VS. PRATHIBHA INDUSTRIES LTD. ( SUPRA), THE DECISION OF SPECIAL BENCH, BOMBAY, IN THE CASE OF A LL CARGO GLOBAL LOGISTICS LTD WAS FOLLOWED, AND IT HAS BEEN HELD THAT IN CASES WHERE ASSESSMENTS ARE COMPLETED OR TIME LIMIT FOR ISSUE OF NOTICES U/S. 143(3) HAVE EXPIRED AND NO INCRIMINATI NG MATERIAL HAS BEEN FOUND, THE ASSESSMENTS HAVE TO BE COMPLETED AT NIL INCOME. THIS VIEW WAS ALSO ENTERTAINED IN THE CASE OF MR. V IKRAM KHANDELWAL VS. DCIT (ITA NO. 1976, 1977 AND 3896/MU M 2009 ORDER DTD. 18.3.2013.) IN THE CASE OF JAI STEELS (P) LTD VS. CIT (SUPRA), IT HAS BEEN HELD THAT, IT IS NOT OPEN F .R ASSESSEE TO SEEK DEDUCTION OR CLAIM EXPENDITURE WHICH HAS NOT BEEN CLAI MED IN ORIGINAL ASSESSMENT, WHICH ALREADY STANDS COMPLETED ONLY BECAUSE AN ASSESSMENT UNDER SECTION 153A/153C OF THE ACT, IN PURSUANCE OF SEARCH OR REQUISITION, IS REQUIRED TO BE MADE. VIDE THE AT EVE DISCUSSION AND DECIDED CASE LAWS, IT HAS BEEN DECIDED THAT JURISDICTION IN SEARCH CASES IS TWO WA Y; I) ONE IN CASE OF CONCLUDED ASSESSMENT WHETHER UNDER SECTION 143(3) OR 143(1), WHERE DATE OF ISSUE OF NOTICE U S. 143(2) HAS EXPIR ED AND II) THE OTHER IN RESPECT OF PENDING ASSESSMENT WHICH ABATES CONSEQUENT TO SEARCH. IN CASE OF THE FORMER, THE JURISDICTION TO ASSESS IS LIMITED TO INCRIMINATING MATERIAL AND IN OTHER CASE S THE ASSESSING OFFICER HAS UNFETTERED JURISDICTION TO MAKE ASSESSM ENT BOTH BY EXERCISING HIS NORMAL JURISDICTION TO MAKE ASSESSMENT BOTH BY EXERCISING HIS NORMAL JURISDICTI ON AND ALSO BY UTILISING THE INCRIMINATING MATERIAL/EVIDENCE. 8 ITA NOS.1071/HYD/2014 AND OTHERS M/S RELIANCE GRANITE PVT. LTD. 4.9 COMING TO THE FACTS OF THE CASE, THE ASSESSMENT S FOR THE ASSESSMENT YEARS 2003-04, 2004-05, 2005-06, 2006-07 , 2007-08 AND 2008-09 W': I E UNABATED AND TREATED TO HAVE BEEN CONCLUDED. IT I S ALSO EVIDENT FROM 1 THE ASSESSMENT ORDERS THAT ASSESSING OFFICER HAS NOT SPECIFICALLY P OINTED TO ANY AVAILABILITY OF SEIZED/INCRIMINATING MATERIAL RELATED TO THE ASSESSEE FOUND DURING THE SEARCH PROCEEDINGS CONDUCTED IN CASE OF MGPL OR THE DIRECTORS OF THE G ROUP COMPANIES. THERE IS NO SPECIFIC REFERENCE TO ANY MATERIAL OR V ALUABLES THAT ARE RELATABLE TO THE ASSESSEE AND HAVE BECOME THE BASIS FOR MAKING THE ADDITIONS OR DISALLOWANCE AND PROMPT THE ASSESSING OFFICER TO REAGITATE THE ISSUES WHICH WERE OTHERWISE SETTLED IN THE UNAB ATED ASSESSMENTS. THUS, CONSIDERING THE LEGAL ADDITIONAL GROUND RAISED BY THE APPELLANT, IT IS REASONABLE TO HOLD T HAT THE VARIOUS ADDITIONS MADE BY THE ASSESSING OFFICER IN THE ASSE SSMENT ORDERS FOR THE ASST. YEARS 2003-04 IS NOT JUSTIFIED AND ARE DIRECTED TO BE DELETED. SINCE, THE ADDITIONAL G ROUND RAISED ON LEGAL ISSUE HAS BEEN DECIDED IN FAVOUR OF THE APPELLANT, IT IS REASONABLE TO HOLD THAT IT IS NOT NECESSARY TO ADJU DICATE ON THE VARIOUS ADDITIONS MADE IN ASSESSMENT ORDER, ON MERI T. 7. SIMILAR ORDERS WERE PASSED BY LD. CIT(A) FOR AYS . 2004-05 TO 2008-09 ALSO. 8. BEING AGGRIEVED OF THE AFORESAID DECISION OF LD. CIT(A), REVENUE IS BEFORE US. 9. WE HAVE HEARD THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS OTHER MATERIALS ON R ECORD. IT IS CLEARLY EVIDENT FROM THE ASSESSMENT ORDER PASSED FOR THE AS SESSMENT YEAR 2003-04 AS WELL AS OTHER ASSESSMENT YEARS UNDER APP EAL ALSO, AO HAS INITIATED PROCEEDING U/S 153A OF THE ACT IN ALL CASES. HOWEVER, AS CAN BE SEEN FROM THE IMPUGNED ORDERS OF LD. CIT(A), THOUGH, IN THE CAUSE TITLE AS WELL AS WHILE DISCUSSING THE FACTS, LD. CIT(A) HAS MENTIONED THAT THE ASSESSMENT ORDERS WERE PASSED U/ S 143(3) READ WITH SECTION 153A, BUT, WHILE RECORDING HIS FINDING , LD. CIT(A) HAS PROCEEDED AS IF THE ASSESSMENT PROCEEDINGS WERE INI TIATED U/S 153C OF THE ACT. THEREFORE, TO REMOVE THE CONFUSION, LD. DR WAS ASKED TO CLARIFY ON THE ISSUE. ON THE QUERY MADE BY BENCH, L D. DR SUBMITTED BEFORE US THAT ACTUALLY NO SEARCH OPERATION U/S 132 OF THE ACT WAS 9 ITA NOS.1071/HYD/2014 AND OTHERS M/S RELIANCE GRANITE PVT. LTD. CONDUCTED, BUT, ONLY A SURVEY U/S 133A WAS CONDUCTE D IN ASSESSEES CASE. IN THIS REGARD, LD. AR PLACED BEFORE THE BENC H A LETTER DATED 16/12/2014 RECEIVED FROM DCIT, CENTRAL CIRCLE 2(5 ), HYDERABAD AND COPY OF THE AUTHORIZATION U/S 133A. THUS, FROM THE AFORESAID FACTS, IT BECOMES CLEAR THAT NO SEARCH AND SEIZURE OPERATION U/S 132 OF THE ACT HAS BEEN CONDUCTED IN CASE OF THE PRESENT ASSES SEE. A PLAIN READING OF SECTION 153A OF THE ACT, MAKES IT CLEAR THAT AO CAN INITIATE PROCEEDING U/S 153A ONLY AGAINST A PERSON IN WHOSE CASE SEARCH AND SEIZURE U/S 132 OF THE ACT HAS BEEN CONDUCTED. THER EFORE, ADMITTEDLY, WHEN THERE IS NO SEARCH ACTION U/S 132 AGAINST ASSE SSEE, THE VERY ASSUMPTION OF JURISDICTION U/S 153A BY AO IS INVALI D. FOR THIS REASON ALONE, INITIATION OF PROCEEDING U/S 153A AND THE AS SESSMENT ORDER PASSED IN CONSEQUENCE THERETO HAVE TO BE HELD AS AB -INITIO-VOID. EVEN OTHERWISE ALSO, THERE IS NO DISPUTE TO THE FAC T, FOR THE AFORESAID ASSESSMENT YEARS, ASSESSEE HAD VOLUNTARILY FILED HI S RETURN OF INCOME IN TERMS WITH SECTION 139 OF THE ACT. IN FACT FOR A Y 2003-04 AND 2004- 05, ASSESSMENTS WERE COMPLETED U/S 143(3) OF THE A CT, MUCH PRIOR TO THE DATE OF SEARCH IN OTHER GROUP CASES AND IN AYS 2005-06 AND 2006-07, RETURNS FILED BY ASSESSEE WERE PROCESSED U /S 143(1) PRIOR TO THE DATE OF SEARCH. THEREFORE, AS ON THE DATE OF SE ARCH, THERE WAS NO ASSESSMENT PROCEEDING PENDING IN CASE OF ASSESSEE. IN THE AFORESAID FACTS AND CIRCUMSTANCES, AO COULD HAVE ASSESSED THE UNDISCLOSED INCOME UNEARTHED AS A RESULT OF INCRIMINATING MATER IAL FOUND DURING THE SEARCH AND SEIZURE OPERATION. HOWEVER, NONE OF THE ADDITIONS MADE BY AO ARE WITH REFERENCE TO ANY INCRIMINATING MATERIAL FOUND IN SEARCH. THE DEPARTMENT HAS FAILED TO BRING ANY MAT ERIAL ON RECORD TO SHOW THAT ADDITIONS MADE WERE ON THE BASIS OF ANY I NCRIMINATING MATERIAL. ON THE CONTRARY, IT IS EVIDENT ON RECORD, IN THE SEARCH ASSESSMENT, AO HAS REVISITED THE ISSUES WHICH WERE SUBJECT MATTER OF ORIGINAL ASSESSMENTS. EVEN, ASSUMING THAT AO HAS PR OCEEDED U/S 153C, WE NEED TO OBSERVE, NEITHER THE ASSESSMENT OR DER NOR ANY OTHER MATERIAL PLACED BEFORE US COULD INDICATE THAT ANY VALUABLE ARTICLE, THING, DOCUMENT ETC., BELONGING TO ASSESSE E WAS FOUND AS A 10 ITA NOS.1071/HYD/2014 AND OTHERS M/S RELIANCE GRANITE PVT. LTD. RESULT OF SEARCH TO ENABLE THE AO TO INITIATE PROCE EDING EVEN U/S 153C OF THE ACT. THUS, THE CONDITIONS OF NEITHER SECTION 153A NOR SECTION 153C ARE SATISFIED. THAT BEING THE CASE, PROCEEDING COULD NOT HAVE BEEN INITIATED AGAINST THE ASSESSEE EITHER U/S 153A OR U/S 153C OF THE ACT. IN THE AFORESAID VIEW OF THE MATTER, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF LD. CIT(A) IN HOLDING T HAT AO COULD NOT HAVE MADE THE ADDITIONS. ACCORDINGLY, WE UPHOLD THE ORDE R OF LD. CIT(A) BY DISMISSING GROUNDS RAISED. AS FACTS AND ISSUES ARE IDENTICAL IN THE OTHER APPEALS, THEY ARE ALSO DISMISSED. 10. IN THE RESULT, ALL THE APPEALS OF THE DEPARTMEN T ARE DISMISSED. 11. NOW WE WILL ADJUDICATE ASSESSEES APPEAL IN IT A NOS. 1278 TO 1283/HYD/2014. 12. THOUGH IT IS A FACT THAT LD. CIT(A) HAS HELD AS SESSMENTS TO BE INVALID IN ABSENCE OF INCRIMINATING MATERIAL IN ALL THE AFORESAID ASSESSMENT YEARS, BUT, ASSESSEE HAS STILL PREFERRED APPEALS ON THE GROUND THAT LD. CIT(A) SHOULD HAVE DECIDED ADDITION S ON MERITS ALSO. HOWEVER, CONSIDERING THE FACT THAT WE HAVE UPHELD T HE ORDER OF LD. CIT(A) BY DISMISSING THE APPEALS OF REVENUE FOR AYS 2003-04 TO 2005-06 AND 2007-08 HEREINBEFORE AND CONSIDERING TH E FACT THAT THE DEPARTMENT HAS NOT PREFERRED APPEAL AGAINST THE ORD ERS OF LD. CIT(A) FOR AYS 2006-07 AND 2008-09, ISSUES RAISED BY ASSES SEE IN ITS APPEALS ARE REDUCED TO MERE ACADEMIC INTEREST, HENC E, THERE IS NO NEED TO ADJUDICATE THEM. IN THE AFORESAID VIEW OF T HE MATTER, GROUNDS RAISED BY ASSESSEE HAVE BECOME INFRUCTUOUS. 13. IN THE RESULT, APPEALS IN ITA NO. 1278 TO 1283/ HYD/14 ARE DISMISSED. 11 ITA NOS.1071/HYD/2014 AND OTHERS M/S RELIANCE GRANITE PVT. LTD. ITA NO. 1284/HYD/14 BY ASSESSEE FOR AY 2009-10. 14. THE ONLY ISSUE IN THE AFORESAID APPEAL OF ASSES SEE IS RELATING TO DISALLOWANCE OF GENERAL EXPENSES OF RS. 34,000 AND THE DIRECTION ISSUED BY LD. CIT(A) WHILE DECIDING THAT ISSUE. 15. BRIEFLY THE FACTS ARE, IN COURSE OF ASSESSMENT PROCEEDING, WHILE EXAMINING THE DETAILS OF THE GENERAL EXPENSES CLAIM ED BY ASSESSEE, AO NOTICED THAT AN AMOUNT OF RS. 34,000 WAS CLAIMED TOWARDS GIFTS BY TREATING THE SAID EXPENDITURE AS NOT ALLOWABLE, AO MADE ADDITION OF THE AMOUNT OF RS. 34,000. BEING AGGRIEVED OF SUC H ADDITION, ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A). LD. CI T(A) AFTER CONSIDERING THE SUBMISSIONS OF ASSESSEE, HELD AS UN DER: 5.3 PERUSED THE OBSERVATIONS OF THE A.O AND THE SU BMISSIONS OF THE APPELLANT. AS COULD BE SEEN FROM THE FACTS, THE APPELLANT INCURRED CERTAIN EXPENSES UNDER THE HEAD 'GENERAL E XPENSES', WHICH INCLUDE THE AMOUNT INCURRED ON PURCHASE OF 'G IFTS' BY THE ASSESSEE COMPANY DURING THE YEAR. NO DETAILS WERE B ROUGHT ON RECORD BY THE A.O TO TREAT SUCH EXPENSES ARE DISALL OWABLE. SIMILARLY, NO DETAILED EXPLANATION WAS OFFERED BY T HE AP PELLANT, EXPLAINING THE NATURE AND RELEVANCE OF SUCH EXPENSE S TO THE BUSINESS. PRIMA FACIE, THE EXPENDITURE UNDER THE HEAD 'GIFTS', IS BUSINESS EXPENSE, AS IT IS CUSTOMARY FOR ANY BUS INESS TO OFFER THE GIFTS TO IT'S CUSTOMERS OR EMPLOYEES ON C ERTAIN SPECIAL OCCASIONS. THERE IS NO BLANKET BAR ON ALLOWANCE OF EXPENSES ON GIFTS, AS LONG AS THEY RELATE TO BUSINESS THERE IS NO DENIAL ON THIS ISSUE. BUT THE FACT REMAINS THAT, THE DETAILS A D NATURE OF EXPENSE REQUIRE SCRUTINY ALONG WITH ALLOWABLE LIMIT S ON COST OF GIFTS ETC. THIS REQUIRES EXAMINATION BY THE A.O AND IF THERE IS NO BAR ON THE LIMITS OF VALUE OF GIFTS GIVEN TO EMPLOY EES OR CUSTOMERS, THE A.O IS DIRECTED TO ALLOW THE EXPENSE S, ON VERIFICATION OF THE BILLS RELATED TO IT. ON THIS ISSUE, THE GROUND IS TREATED AS ALLOWED, SUBJECT TO VERIFICATION. 16. WE HAVE HEARD THE PARTIES AND PERUSED THE ORDER S OF REVENUE AUTHORITIES AS WELL AS OTHER MATERIAL ON RECORD. TH E MAIN CONTENTION OF LD. AR IS THAT LD. CIT(A) HAS NO POWER TO SET AS IDE THE ISSUE TO AO. HE SUBMITTED THAT ONCE, LD. CIT(A) WAS CONVINCED TH AT EXPENDITURE 12 ITA NOS.1071/HYD/2014 AND OTHERS M/S RELIANCE GRANITE PVT. LTD. UNDER THE HEAD GIFT IS A BUSINESS EXPENDITURE HE SH OULD NOT HAVE DIRECTED THE AO TO VERIFY AGAIN IN STEAD OF DELETIN G THE ADDITION. AFTER CONSIDERING THE SUBMISSIONS OF ASSESSEE, WE ARE OF THE VIEW, LD. CIT(A) IN PRINCIPLE, HAVING HELD THAT EXPENDITURE I NCURRED TOWARDS GIFT ITEMS IS ALLOWABLE AS BUSINESS EXPENDITURE SHOULD H AVE DELETED THE ADDITION. IN THE AFORESAID FACTS AND CIRCUMSTANCES, WE CONSIDER IT APPROPRIATE TO DELETE THE ADDITION OF RS. 34,000. 17. IN THE RESULT, THIS APPEAL OF ASSESSEE IS ALLOW ED. PRONOUNCED IN THE OPEN COURT ON 14/01/2015. SD/- SD/- (B. RAMAKOTAIAH) (SAKTIJIT DEY) ACCOUNTANT MEMBER JU DICIAL MEMBER HYDERABAD, DATED: 14 TH JANUARY, 2015 KV COPY TO:- 1) DCIT, CENTRAL CIRCLE 7, 8 TH FLOOR, AAYAKAR BHAVAN, L.B. STADIUM ROAD, BASHEERBAGH, HYDERABAD 500 004 2) M/S RELIANCE GRANITE PVT. LTD., 8-2-684/3/25 & 2 6, ROAD NO. 12, BANJARA HILLS, HYDERABAD 500 004 3) CIT(A)-VI, HYDERABAD 4) CIT(CENTRAL), HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD. DESCRIPTION DATE INTLS 1. DRAFT DICTATED ON SR.P.S. 2. DRAFT PLACED BEFORE AUTHOR SR.P.S 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER VP 5 APPROVED DRAFT COMES TO THE SR.P.S./PS SR.P.S. 6. KEPT FOR PRONOUNCEMENT ON SR.P S. 7. FILE SENT TO THE BENCH CLERK SR.P.S. 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER 13 ITA NOS.1071/HYD/2014 AND OTHERS M/S RELIANCE GRANITE PVT. LTD.