DCIT., Central Circle-1(2), Hyderabad, Hyderabad V. M/s Engineers Syndicate (India) Pvt.Ltd., (Presently known as M/s Janapriya Engineers Syndicate Ltd), Secunderabad

ITA 1933/HYD/2014

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 6019 (ITAT-HYDERABAD)
• Duration Of Justice: 3 year(s) 5 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 02-05-2018
• Assessment Year: 2005-2006
• Appeal Filed On: 29-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J SIRI KUMAR
• Keywords: Depreciation; Search and seizure
• Section: 40A(3); 143(3); 153A; 80IB; 68; 69; 148; 132

Judgement Text

ITA NOS 1805 TO 1808 1855 TO 1857 1870 1933 AND 19 34 ENGINEERS SYNDICATE INDIA P LTD HYDERABAD. PAGE 1 OF 12 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO.1805 TO 1808 & 1870/HYD/2014 (ASSESSMENT YEARS: 2002-03, 2003-04, 2004-05, 2005-0 6, 2006-07) M/S. ENGINEERS SYNDICATE INDIA PVT. LTD (PRESENTLY KNOWN AS JANAPRIYA ENGINEERS SYNDICATE) HYDERABAD PAN: AAACE 4560A VS DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2 HYDERABAD (APPELLANT) (RESPONDENT) ITA NOS.1855 TO 1857, AND 1933 & 1934/HYD/2014 (ASSESSMENT YEARS: 2002-03, 2003-04, 2004-05, 2005-0 6, 2006-07) DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2, HYDERABAD VS M/S. ENGINEERS SYNDICATE INDIA PVT. LTD (PRESENTLY KNOWN AS JANAPRIYA ENGINEERS SYNDICATE) HYDERABAD PAN: AAACE 4 560A (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI A. SRINIVAS FOR REVENUE : SHRI J. SIRI KUMAR, DR O R D E R PER BENCH : THESE APPEALS OF THE ASSESSEE AS WELL AS REVENUE AR E AGAINST THE COMMON AND CONSOLIDATED ORDER OF THE CI T (A)-I, HYDERABAD, DATED 30-09-2014 FOR THE A.YS 2002-03 TO 2004-05 DATE OF HEARING: 02.05.2018 DATE OF PRONOUNCEMENT: 3 1 . 0 5 .2018 ITA NOS 1805 TO 1808 1855 TO 1857 1870 1933 AND 19 34 ENGINEERS SYNDICATE INDIA P LTD HYDERABAD. PAGE 2 OF 12 AND ORDERS DATED 31.10.2014 FOR THE A.YS 2005-06 TO 2006-07 RESPECTIVELY. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CO MPANY, ENGAGED IN THE CONSTRUCTION BUSINESS, FILED ITS RET URNS OF INCOME FOR THE RELEVANT A.YS AND THE ASSESSMENTS FOR THE A .YS 2002-03 TO 2005-06 WERE COMPLETED U/S 143(3) OF THE ACT. THE A SSESSEE HAD ALSO FILED RETURNS OF INCOME FOR THE A.Y 2006-07 ON 28.11.2006 BUT NO FURTHER PROCEEDINGS WERE TAKEN UP BY THE RES PECTIVE AO. THEREAFTER, ON 19.02.2008, THERE WAS A SEARCH AND S EIZURE OPERATION U/S 132 OF THE ACT ON THE BUSINESS PREMIS ES OF ITS ASSESSEE AND ALSO THE RESIDENTIAL PREMISES OF THE D IRECTORS AND PARTNERS. CONSEQUENT THERETO, NOTICES U/S 153A DATE D 24.10.2008 WERE ISSUED AND SERVED ON THE ASSESSEE. IN RESPONSE TO THE NOTICES, THE ASSESSEE FILED ITS RETURNS OF INCOME. THE AO ASKED THE ASSESSEE TO FURNISH THE DETAILS OF HOUSING PROJECT( S) UNDER SECTION 80IB OF THE ACT AND NON 80IB PROJECTS, DETAILS OF E XPENDITURE ETC. HOWEVER, THE ASSESSEE DID NOT FILE ANY INFORMATION CALLED FOR BY THE AO. 3. CONSEQUENT TO THE SEARCH AND SEIZURE OPERATION, THE GROUP CASES WERE CENTRALIZED WITH THE CENTRAL CIRCL E, HYDERABAD AND NOTICES WERE ISSUED FROM TIME TO TIME IN THE CA SE OF JANAPRIYA PROPERTIES (P) LTD (COMPANY), M/S. JANAPRIYA PROPER TIES (FIRM), M/S. ENGINEERS SYNDICATES PVT. LTD AND M/S. JANAPRI YA ENGINEERS SYNDICATE LTD ETC., IT WAS OBSERVED THAT THE HUGE AMOUNT OF ON-MONEY, UNACCOUNTED CASH WERE PAID TO V ARIOUS LANDLORDS FOR PURCHASE OF LAND AND IN SOME CASES TH E RECEIPTS ITA NOS 1805 TO 1808 1855 TO 1857 1870 1933 AND 19 34 ENGINEERS SYNDICATE INDIA P LTD HYDERABAD. PAGE 3 OF 12 FROM CUSTOMERS WERE NOT DULY RECORDED IN THE BOOKS OF ACCOUNT. IT WAS ALSO OBSERVED THAT THERE WERE SEVERAL EVIDENCES REGARDING THE CASH PAYMENTS EXCEEDING RS.20,000/-, IN VIOLATION O F PROVISIONS OF SECTION 40(A)(IA), IMPROPER METHOD OF ACCOUNTIN G IN RECOGNITION OF REVENUE ETC. THEREFORE, IT WAS PROPOSED TO REFER THE ENTIRE GROUP OF CASES FOR SPECIAL AUDIT U/S 142(2A) OF THE ACT. THE ASSESSEE RAISED ITS OBJECTIONS TO THE SPECIAL AUDIT, BUT, TH E ASSESSEE WAS DIRECTED TO GET THE BOOKS OF ACCOUNT AUDITED AS PER THE PROVISIONS OF SECTION 142(2A) OF THE ACT. THE ASSESSEE FURNISH ED ONLY PART OF THE BOOKS OF ACCOUNT BEFORE THE SPECIAL AUDITOR AND SUBSEQUENTLY, THE SPECIAL AUDIT WAS COMPLETED AND REPORT WAS SUBM ITTED ON 14.06.2010 STATING THAT THE REPORT WAS RESTRICTED T O THE COMPUTATION OF PAYMENT OF EXPENDITURE U/S 40A(3) OF THE ACT AND THAT NO OTHER ISSUES/ITEMS WERE CONSIDERED DUE TO P AUCITY OF TIME. THEREAFTER, THE ASSESSMENTS HAVE BEEN COMPLET ED U/S 143(3) R.W.S. 153A OF THE ACT. 4. THE AO DISALLOWED THE CLAIM OF DEDUCTION U/S 80I B(10) OF THE ACT ON THE GROUND THAT THOUGH THE ASSESSEE W AS SUPPOSED TO COMPLETE THE PROJECT ON OR BEFORE 31.03.2008, HE HAS NOT OBTAINED THE COMPLETION CERTIFICATE FROM THE LOCAL AUTHORITIES I.E. GHMC. FURTHER, HE ALSO MADE ADDITIONS U/S 68 OF THE ACT ON THE GROUND THAT THE ASSESSEE FAILED TO DISCHARGE ITS ON US OF PROVING THE GENUINENESS OF THE TRANSACTIONS AND THE CREDITW ORTHINESS OF THE CREDITORS. FURTHER, THE AO ALSO MADE OTHER DISA LLOWANCES U/S 40A(3) OF THE ACT ON THE PAYMENTS WHICH WERE MADE I N CASH IN EXCESS OF RS.20,000. AGGRIEVED, THE ASSESSEE PREFER RED AN APPEAL BEFORE THE CIT (A), WHO DELETED THE DISALLOWANCE U/ S 80IB(10) OF THE ACT BY FOLLOWING THE ITAT ORDERS IN THE ASSESSE ES OWN CASE IN ITA NOS 1805 TO 1808 1855 TO 1857 1870 1933 AND 19 34 ENGINEERS SYNDICATE INDIA P LTD HYDERABAD. PAGE 4 OF 12 THE EARLIER A.Y 2001-02, BUT HOWEVER, CONFIRMED THE ADDITIONS MADE U/S 40A(3) AND 68 OF THE ACT. AGGRIEVED, THE A SSESSEE IS IN SECOND APPEAL BEFORE US BY RAISING THE FOLLOWING GR OUNDS OF APPEAL FOR THE A.Y 2002-03 (WHICH ARE SIMILAR IN OTHER YEA RS ALSO EXCEPT FOR THE QUANTUM): 1. THE ORDER OF THE AO IS CONTRARY TO LAW, FACTS & CIRCUMSTANCES OF THE CASE. 2. THE AO. OUGHT NOT TO HAVE MADE THE ADDITIONS IN THE ASSESSMENT U/S.153A, WHEN NO FRESH MATERIAL WAS BEFORE HIM. 3. THE APPELLATE COMMISSIONER ERRED IN CONCURRING W ITH THE FINDING OF THE AO ON THE ASSESSMENT MADE. 4. THE AO. ERRED IN DISALLOWING AN AMOUNT OF RS.23,25,827/- U/S 40A(3). 5. THE APPELLATE COMMISSIONER ERRED IN CONFIRMING T HE ABOVE DISALLOWANCE MADE U/S 4OA(3). 6. THE AO. ERRED IN ADDING AN AMOUNT OF RS.1 ,93,91,192/- I U/S.68. 7. THE APPELLATE COMMISSIONER ERRED IN CONFIRMING T HE ABOVE ADDITION U/S.68. 5. IN THE GROUND OF APPEAL NO.2, THE ASSESSEE IS CHALLENGING THE VALIDITY OF THE ASSESSMENT U/S 153A OF THE ACT WHEN NO FRESH MATERIAL WAS BEFORE THE AO AFTER COMP LETING THE ASSESSMENTS U/S 143(3) OF THE ACT. THE CIT (A) HAD DEALT WITH THIS ISSUE AT PARA 4.2 OF HIS ORDER AND FOLLOWING THE DE CISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. ANI L KUMAR BHATIA IN ITA NOS.1626, 1632 ETC., OF 2010, WHEREIN IT WAS HELD THAT ONCE THERE IS A SEARCH U/S 132 OF THE ACT, IT IS MANDATO RY FOR THE AO TO ISSUE NOTICES U/S 153A OF THE ACT CALLING UPON THE ASSESSEE TO FILE RETURNS FOR THE SIX A.YS PRIOR TO THE YEAR IN WHICH THE SEARCH TOOK PLACE AND THE ASSESS OR REASSESS THE INCOME, WITHOU T HAVING THE ITA NOS 1805 TO 1808 1855 TO 1857 1870 1933 AND 19 34 ENGINEERS SYNDICATE INDIA P LTD HYDERABAD. PAGE 5 OF 12 NEED TO FOLLOW THE STRICT PROVISIONS OF COMPLYING W ITH THE STRICT CONDITIONS OF SECTION 147, 148 AND 151 AND DETERMIN E THE TOTAL INCOME OF THE ASSESSEE, HE UPHELD THE INITIATION OF PROCEEDINGS U/S 153A OF THE ACT. 6. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THERE WAS NO MATERIAL FOUND DURING THE COURSE OF SE ARCH WHICH NECESSITATED ISSUANCE OF NOTICES U/S 153A OF THE AC T. FURTHER, HE ALSO SUBMITTED THAT THE ASSESSMENTS WERE COMPLETED U/S 143(3) OF THE ACT FOR THE A.YS 2002-03 TO 2005-06 BY THE A CIT 11(2) BANGALORE. THEREFORE, THE ASSESSMENTS U/S 143(3) WE RE NOT ABATED AND THE ASSESSMENT U/S 153A COULD ONLY BE MADE ON T HE INCRIMINATING MATERIAL FOUND AND SEIZED DURING THE COURSE OF SEARCH. FURTHER, HE ARGUED THAT FOR THE A.Y 2006-07 , THE RETURN OF INCOME WAS FILED ON 28.11.2006 AND THEREAFTER, NO N OTICE U/S 143(2) WAS ISSUED WITHIN THE SPECIFIED PERIOD AND T HEREFORE, THE PRESUMPTION TO BE DRAWN IS THAT THE ASSESSMENT IS C OMPLETED U/S 143(1) OF THE ACT AND IN SUCH CIRCUMSTANCES ALSO, A SSESSMENT U/S 153A CAN BE DONE ONLY ON THE BASIS OF THE MATERIAL FOUND DURING THE COURSE OF SEARCH. THEREFORE, ACCORDING TO HIM, THE ASSESSMENT U/S 153A DONE BY THE AO BY MAKING DISALLOWANCES U/S 40(A)3 AND 68 OF THE ACT AND ALSO U/S 80IB ARE NOT SUSTAIN ABLE. 7. FURTHER, THE LEARNED COUNSEL FOR THE ASSESSEE, W ITHOUT PREJUDICE TO THE ABOVE ARGUMENT, SUBMITTED THAT THE ISSUE OF THE DEDUCTION U/S 80IB HAS ATTAINED FINALITY BY THE DEC ISION OF THE HON'BLE ITAT IN THE ASSESSEES OWN CASE FOR THE A.Y 2001-02 AND THE REVENUE HAS ACCEPTED THE SAME BY NOT FILING ANY APPEAL ITA NOS 1805 TO 1808 1855 TO 1857 1870 1933 AND 19 34 ENGINEERS SYNDICATE INDIA P LTD HYDERABAD. PAGE 6 OF 12 BEFORE THE HON'BLE HIGH COURT OF KARNATAKA. THEREFO RE, ACCORDING TO HIM, THE CIT (A) HAS RIGHTLY FOLLOWED THE DECISI ON OF THE ITAT IN ALLOWING DEDUCTION U/S 80IB OF THE ACT IN ALL THE A .YS AND THEREFORE, THE REVENUES APPEALS AGAINST THE ORDER OF THE CIT (A) ON THIS ISSUE ARE NOT SUSTAINABLE. 8. WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED COUN SEL ADMITTED THAT THE ASSESSEE HAD AGREED TO THE ADDITI ON OF RS.5.00 LAKHS U/S 69 FOR THE A.Y 2004-05 AND THOUGH THE ASS ESSEE HAS RAISED A GROUND OF APPEAL ON THIS ISSUE, IT DOES NO T SURVIVE BECAUSE OF THE AGREEMENT OF THE ASSESSEE TO THE SAI D ADDITION. 9. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO PLACED RELIANCE UPON THE FOLLOWING DECISIONS IN SUPPORT OF HIS CONTENTION THAT WHERE AN ASSESSMENT U/S 143(3) WAS COMPLETED B EFORE THE DATE OF SEARCH, THE FRESH ASSESSMENT U/S 153A CAN B E MADE ONLY ON THE BASIS OF THE MATERIAL FOUND DURING THE COURS E OF SEARCH: I) CIT VS. ANIL KUMAR BHATIA (2013) 352 ITR 493 (DE L.) II) CIT VS. KABUL CHAWLA (2016) 380 ITR 573 (DEL.) III) CIT VS.SOUMYA CON.(P) LTD (2016) 387 ITR 529 ( GUJ.) IV) CIT VS. DEVANGI ALIAS RUPA (2017) 394 ITR 184 ( GUJ.) V) CIT VS. MEETA GUTGUTIA (2017) 395 ITR 526 (DEL.) VI) CIT VS. DIPAK JASHVANT LAL (2017) 397 ITR 153(G UJ.) VII) CIT VS. SRS ISPAT & POWER LTD (2017) 398 ITR 584(BOM.) VIII) CIT VS. DEEPAK KUMAR AGARWAL (2017) 398 ITR 5 86 (BOM.) IX) CIT VS. MANOJ HORA (2018) 402 ITR 175 (DEL.) 10. THE LEARNED DR, ON THE OTHER HAND, SUPPORTED TH E ORDERS OF THE AUTHORITIES BELOW. ITA NOS 1805 TO 1808 1855 TO 1857 1870 1933 AND 19 34 ENGINEERS SYNDICATE INDIA P LTD HYDERABAD. PAGE 7 OF 12 11. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT THE ASSESSEE HAS FILED A CH ART SHOWING THE STATUS OF THE ASSESSMENTS U/S 143(3) OF THE ACT AND WE FIND THAT ALL THESE ASSESSMENTS WERE COMPLETED BEFORE THE DAT E OF SEARCH ON 9.2.2008. THE ASSESSMENTS U/S 143(3) FOR THE A.YS 2 002-03 AND 2003-04 WERE COMPLETED BY THE ACIT-11(II) BANGALORE ON 31.3.2006, WHEREAS FOR THE A.Y 2004-05, THE ACIT 11 (II) BANGALORE HAS COMPLETED THE ASSESSMENT U/S 143(3) O F THE ACT ON 13.11.2006 AND FOR THE A.Y 2005-06 ON 26.12.2007. F OR THE A.Y 2006-07, THE RETURN WAS FILED ON 28.11.2006 AND NO PROCEEDINGS WERE TAKEN OUT BY THE AO THEREAFTER. U/S 153A OF TH E ACT, IN THE CASE OF A SEARCH INITIATED U/S 132 OF THE ACT, THE AO SHALL ISSUE NOTICE TO THE PERSONS SEARCHED REQUIRING HIM TO FUR NISH WITHIN SUCH PERIOD, AS IS SPECIFIED IN THE NOTICE, THE RET URN OF INCOME IN RESPECT OF EACH A.Y FALLING WITHIN SIX A.YS PRIOR T O SEARCH AND THE SECOND PROVISO THERETO PROVIDES THAT THE ASSESSMENT OR RE- ASSESSMENT, IF ANY, RELATING TO ANY A.Y FALLING WIT HIN THE PERIOD OF SIX YEARS AND FOR THE RELEVANT A.Y OR YEARS REFERRE D TO IN THE SUB- SECTION, PENDING ON THE DATE OF INITIATION OF THE S EARCH U/S 132 OR MAKING OF THE REQUISITION U/S 132A OF THE ACT AS TH E CASE MAY BE, SHALL ABATE. IN THE CASE BEFORE US, THERE WAS NO AS SESSMENT FOR ANY OF THE SIX A.YS PRIOR TO THE DATE OF SEARCH, PE NDING AS ON THE DATE OF SEARCH, OR ON THE DATE OF OR MAKING OF REQU ISITION U/S 132A OF THE ACT. THEREFORE, THE ASSESSMENTS U/S 143 (3) FOR ALL THE SIX A.YS HAVE NOT BEEN ABATED. 12. IN SUCH A SCENARIO, THE AO CAN MAKE ASSESSMENT U/S 153A ONLY ON THE BASIS OF THE MATERIAL FOUND DURING THE COURSE OF SEARCH. ADMITTEDLY, THERE WAS NO MATERIAL FOUND DUR ING THE ITA NOS 1805 TO 1808 1855 TO 1857 1870 1933 AND 19 34 ENGINEERS SYNDICATE INDIA P LTD HYDERABAD. PAGE 8 OF 12 COURSE OF SEARCH, NECESSITATING/WARRANTING THE ASSE SSMENT U/S 153A OF THE ACT. IN FACT, THE COPIES OF THE ASSESSM ENT ORDERS PASSED U/S 143(3) OF THE ACT FOR ALL THE RELEVANT A .YS ARE FILED BEFORE US AND AS SEEN THEREFROM, THE AO THEREIN HAD ALREADY CONSIDERED THE ASSESSEES CLAIM OF DEDUCTION U/S 80 IB OF THE ACT AND THE CLAIM OF DEPRECIATION. EVEN IN THE ASSESSME NTS U/S 153A, AO HAS MADE ADDITIONS ON THE BASIS OF THE MATERIAL ALREADY ON RECORD. IN THE DECISIONS RELIED UPON BY THE LEARNED COUNSEL FOR THE ASSESSEE, THE HON'BLE COURTS HAVE RULED AS UNDER:- I) HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. SK S ISPAT & POWER LTD REPORTED IN (2017) 398 ITR 583 (B OM.) HELD AS UNDER: HELD, DISMISSING THE APPEALS, THAT THE SCOPE OF AS SESSMENT U/S 153A WAS LIMITED TO THE INCRIMINATING EVIDENCE FOUN D DURING THE SEARCH AND NO FURTHER. SECTION 153A OF THE I.T. ACT , 1961 DID NOT MAKE ANY DISTINCTION BETWEEN THE ASSESSMENT CONDUCT ED U/S 143(1) AND SECTION 143(3). THE ISSUE WAS NO LONGER RES INT EGRA II) HON'BLE GUJARAT HIGH COURT IN THE CASE OF PR.CIT VS . DIPAK JASHVANTLAL PANCHAL REPORTED IN (2017) 397 IT R 153 (GUJ.) HAS HELD AS UNDER: SECTION 153A OF THE INCOME-TAX ACT, 1961, BEARS TH E HEADING 'ASSESSMENT IN CASE OF SEARCH OR REQUISITION'. THE HEADING OF THE SECTION CAN BE REGARDED AS A KEY TO THE INTERPRETAT ION OF THE OPERATIVE PORTION OF THE SECTION AND IF THERE IS NO AMBIGUITY IN THE LANGUAGE OR IF IT IS PLAIN AND CLEAR, THEN THE HEADING USED IN THE SECTION STRENGTHENS THAT MEANING. FROM THE HEADING OF THE SECTION THE I NTENTION OF THE LEGISLATURE IS CLEAR, VIZ., TO PROVIDE FOR ASSESSME NT IN CASE OF SEARCH AND REQUISITION. WHEN THE VERY PURPOSE OF THE PROVI SION IS TO MAKE ASSESSMENT IN CASE OF SEARCH OR REQUISITION, IT GOE S WITHOUT SAYING THAT THE ASSESSMENT HAS TO HAVE RELATION TO THE SEA RCH OR REQUISITION. IN OTHER WORDS, THE ASSESSMENT SHOULD BE CONNECTED WITH SOMETHING FOUND DURING THE SEARCH OR REQUISITION, VIZ., INCRI MINATING MATERIAL WHICH REVEALS UNDISCLOSED INCOME. THUS, WHILE IN VI EW OF THE MANDATE OF SUB-SECTION (1) OF SECTION 153A OF THE A CT, IN EVERY CASE WHERE THERE IS A SEARCH OR REQUISITION, THE ASSESSI NG OFFICER IS OBLIGED ITA NOS 1805 TO 1808 1855 TO 1857 1870 1933 AND 19 34 ENGINEERS SYNDICATE INDIA P LTD HYDERABAD. PAGE 9 OF 12 TO ISSUE NOTICE TO SUCH PERSON TO FURNISH RETURNS O F INCOME FOR THE SIX YEARS PRECEDING THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH THE SEARCH IS CONDUCTED OR REQUISITION IS MAD E, ANY ADDITION OR DISALLOWANCE CAN BE MADE ONLY ON THE BASIS OF MATER IAL COLLECTED DURING THE SEARCH OR REQUISITION. III) HON'BLE DELHI HIGH COURT IN THE CASE OF PR.CIT VS. MEETA GUTGUTIA PROP. M/S.FERNS N PETALS REPORTED IN (20 17) 395 ITR 526 (DEL.) HELD AS UNDER: HELD, DISMISSING THE APPEALS, (I) THAT IT WAS ONLY IF DURING THE COURSE OF SEARCH U/S 132 INCRIMINATING MATERIAL JUSTIFYING THE REOPENING OF THE ASSESSMENTS FOR SIX PREVIOUS YEARS FOUND THAT T HE INVOCATION OF SECTION 153A QUA EACH OF THE A.Y WOULD BE JUSTIFIED . IV) HON'BLE GUJARAT HIGH COURT IN THE CASE OF PR.CIT VS . DEVANGI ALIAS RUPA REPORTED IN (2017) 394 ITR 184 ( GUJ.) HELD AS UNDER: HELD, DISMISSING THE APPEAL, THAT AT THE TIME OF S EARCH, NO INCRIMINATING MATERIAL WAS FOUND WITH RESPECT TO TH E ASSESSMENT YEAR 2001-02 TO 2003-04. ONLY UNDISCLOSED INCOME AND UND ISCLOSED ASSETS DETECTED DURING THE SEARCH COULD BE BROUGHT TO TAX. THEREFORE, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING A DDITION. WITH REGARD TO THE ASSESSMENT YEAR 2004-05, THE ASSESSME NT FOR THAT YEAR WAS FRAMED ON THE BASIS OF THE MATERIAL ALREADY ON RECORD MUCH PRIOR TO THE SEARCH CONDUCTED ON FEBRUARY 10, 2006. IT WA S A SCRUTINY ASSESSMENT AND THE ASSESSMENT WAS FRAMED FOR THE AS SESSMENT YEAR 2004-05 ON THE BASIS OF THE MATERIAL ON RECORD . IN THE ABSENCE OF ANY SPECIFIC INCRIMINATING MATERIAL DETECTED FOR TH E ASSESSMENT YEAR 2004-05, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING ANY ADDITION. V) HON'BLE GUJARAT HIGH COURT IN THE CASE OF PR.CIT VS . SAUMYA CONSTRUCTION P LTD REPORTED IN (2016) 387 IT R 529 (GUJ.) HELD AS UNDER: ' SECTION 153A OF THE INCOME-TAX ACT, 1961, BEARS T HE HEADING 'ASSESSMENT IN CASE OF SEARCH OR REQUISITION'. IT I S WELL SETTLED THAT THE HEADING OF THE SECTION CAN BE REGARDED AS A KEY TO THE INTERPRETATION OF THE OPERATIVE PORTION OF TILE SEC TION AND IF THERE IS NO AMBIGUITY IN THE LANGUAGE OR IF IT IS PLAIN AND DEA R, THEN THE HEADING USED IN THE SECTION STRENGTHENS THAT MEANING. THE T RIGGER POINT FOR EXERCISE OF POWERS UNDER SECTION 153A IS A SEARCH U NDER SECTION 132 OR A REQUISITION UNDER SECTION 132A OF THE ACT. THE ASSESSMENT SHOULD BE CONNECTED WITH SOMETHING FOUND DURING THE SEARCH OR REQUISITION, ITA NOS 1805 TO 1808 1855 TO 1857 1870 1933 AND 19 34 ENGINEERS SYNDICATE INDIA P LTD HYDERABAD. PAGE 10 OF 12 I.E INCRIMINATING MATERIAL WHICH REVEALS UNDISCLOSE D INCOME. WHERE AN ASSESSMENT HAS BEEN FRAMED EARLIER AND NO ASSESS MENT OR REASSESSMENT WAS PENDING ON THE DATE OF INITIATION OF SEARCH U/S 132 OR MAKING OF REQUISITION U/S 132A, WHILE COMPUTING THE TOTAL INCOME OF THE ASSESSEE U/S 153A OF THE ACT, ADDITIONS OR D ISALLOWANCES CAN BE MADE ONLY ON THE BASIS OF THE INCRIMINATING MATE RIAL FOUND DURING THE SEARCH OR REQUISITION. VI) HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. KAB UL CHAWLA REPORTED IN (2016) 380 ITR 573 (DEL.) HELD A S UNDER: THE LEGAL POSITION THAT EMERGES ON A PERUSAL OF SE CTION 153A AND SECTION 132 OF THE INCOME-TAX ACT, 1961, IS AS UNDE R: (I) ONCE A SEARCH TAKES PLACE UNDER SECTION 132 OF THE ACT, NOTICE UN DER SECTION 153A(L) WILL HAVE TO BE MANDATORILY ISSUED TO THE PERSON IN RESPECT OF WHOM SEARCH WAS CONDUCTED REQUIRING HIM TO FILE RETURNS FOR SIX ASSESSMENT YEARS IMMEDIATELY PRECEDING THE PREVIOUS YEAR RELEV ANT TO THE ASSESSMENT YEAR IN WHICH THE SEARCH TAKES PLACE. (I I) ASSESSMENTS AND REASSESSMENTS PENDING ON THE DATE OF THE SEARCH SHALL ABATE. THE TOTAL INCOME FOR SUCH ASSESSMENT YEARS WILL HAV E TO BE COMPUTED BY THE ASSESSING OFFICERS AS A FRESH EXERCISE. (III ) THE ASSESSING OFFICER WILL EXERCISE NORMAL ASSESSMENT POWERS IN R ESPECT OF THE SIX YEARS PREVIOUS TO THE RELEVANT ASSESSMENT YEAR IN W HICH THE SEARCH TAKES PLACE. THE ASSESSING OFFICER HAS THE POWER TO ASSESS AND REASSESS THE 'TOTAL INCOME' OF THE SIX YEARS IN SEP ARATE ASSESSMENT ORDERS FOR EACH OF THE SIX YEARS. IN OTHER WORDS, T HERE WILL BE ONLY ONE ASSESSMENT ORDER IN RESPECT OF EACH OF THE SIX ASSE SSMENT YEARS IN WHICH BOTH THE DISCLOSED AND THE UNDISCLOSED INCOME WOULD BE BROUGHT TO TAX. (IV) ALTHOUGH SECTION 153A DOES NOT 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 INF ORMATION AVAILABLE WITH THE ASSESSING OFFICER 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 THE SEIZED MATERIAL. (V) IN THE ABSENC E OF ANY INCRIMINATING MATERIAL, THE COMPLETED ASSESSMENT CA N BE REITERATED AND THE ABATED ASSESSMENT OR REASSESSMENT CAN BE MA DE. THE WORD 'ASSESS' IN SECTION 153A IS RELATABLE TO ABATED PRO CEEDINGS (I.E., THOSE PENDING ON THE DATE OF SEARCH) AND THE WORD' REASSE SS' TO COMPLETED ASSESSMENT PROCEEDINGS. (VI) IN SO FAR AS PENDING A SSESSMENTS ARE CONCERNED, THE JURISDICTION TO MAKE THE ORIGINAL AS SESSMENT AND THE ASSESSMENT UNDER SECTION 153A MERGES INTO ONE. ONLY ONE ASSESSMENT SHALL BE MADE SEPARATELY FOR EACH ASSESS MENT YEAR ON THE BASIS OF THE FINDINGS OF THE SEARCH AND ANY OTH ER MATERIAL EXISTING OR BROUGHT ON THE RECORD OF THE ASSESSING OFFICER. (VII) COMPLETED ASSESSMENTS CAN BE INTERFERED WITH BY THE ASSESSING OFFICER WHILE MAKING THE ASSESSMENT UNDER SECTION 153A ONLY ON TH E BASIS OF SOME ITA NOS 1805 TO 1808 1855 TO 1857 1870 1933 AND 19 34 ENGINEERS SYNDICATE INDIA P LTD HYDERABAD. PAGE 11 OF 12 INCRIMINATING MATERIAL UNEARTHED DURING THE COURSE OF SEARCH OR 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. HELD ACCORDINGLY, THAT THE MATTER RELATED TO THE AS SESSMENT YEARS 2002-03, 2005-06 AND 2006-07. ON THE DATE OF THE SE ARCH THE ASSESSMENTS ALREADY STOOD COMPLETED. SINCE NO INCRI MINATING MATERIAL WAS UNEARTHED DURING THE SEARCH, NO ADDITI ONS COULD HAVE BEEN MADE TO THE INCOME ALREADY ASSESSED 13. WE FIND THAT IN ALMOST ALL THE ABOVE DECISIONS, THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CAS E OF ANIL KUMAR BHATIA (CITED SUPRA) WAS CONSIDERED AND IN THE CASE OF KABUL CHAWLA, THE HON'BLE DELHI HIGH COURT OBSERVED AS UN DER:- 9. THE ASSESSEE THEN APPEALED TO THE ITAT. ONE OF THE ISSUES CONSIDERED BY THE ITAT WAS WHETHER THE COMPLETED ASSESSMENT ON THE DATE OF THE SEARCH WOULD STAND ON THE SAME FOOTING AS THE PENDI NG ASSESSMENTS WHICH IN TERMS OF THE SECOND PROVISO TO SECTION 153 A(1) OF THE ACT WOULD ABATE. IT WAS NOTICED THAT IN ANIL KUMAR BHATIA (SU PRA), THIS COURT HAD LEFT OPEN THE QUESTION WHETHER IN ORDER TO FRAME AN ASSESSMENT IN TERMS OF THE FIRST PROVISO TO SECTION 153A(1) OF THE ACT IN RESPECT OF THOSE AYS FOR WHICH THE ASSESSMENTS HAD ALREADY BEEN COMPLETE D, THERE WAS A REQUIREMENT THAT SOME INCRIMINATING MATERIAL SHOULD BE UNEARTHED DURING THE SEARCH. NEVERTHELESS THERE WERE SOME OBS ERVATIONS IN ANIL KUMAR BHATIA (SUPRA), WHICH WOULD INDICATE THAT THE AO WOULD BE ABLE TO REOPEN THE ASSESSMENTS FOR THOSE YEARS FOR WHICH THE ASSESSMENT ALREADY STOOD COMPLETED AT THE TIME OF THE SEARCH, ONLY IF SOME INCRIMINATING MATERIAL WAS UNEARTHED DURING THE SEA RCH. THE ITAT CONCLUDED 'IF NO INCRIMINATING MATERIAL IS FOUND IN RESPECT OF SUCH COMPLETED ASSESSMENTS THEN THE TOTAL INCOME IN THE PROCEEDINGS UNDER SECTION 153A(1) OF THE ACT SHALL BE COMPUTED BY CON SIDERING THE ORIGINALLY DETERMINED INCOME. IF SOME INCRIMINATING MATERIAL IS FOUND IN RESPECT OF SUCH ASSESSMENT YEARS FOR WHICH ASSESSME NT IS NOT PENDING, THEN THE TOTAL INCOME WOULD BE DETERMINED BY CONSID ERING THE ORIGINALLY DETERMINED INCOME PLUS (+) INCOME EMANATING FROM TH E INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH.' 14. THUS, THE UNDERLYING PRINCIPLE LAID DOWN IN ALL THE ABOVE CASE LAWS IS THAT WITHOUT ANY INCRIMINATING M ATERIAL FOUND DURING THE COURSE OF SEARCH, NO ADDITIONAL INCOME C AN BE BROUGHT ITA NOS 1805 TO 1808 1855 TO 1857 1870 1933 AND 19 34 ENGINEERS SYNDICATE INDIA P LTD HYDERABAD. PAGE 12 OF 12 TO TAX IN THE ASSESSMENT U/S 153A OF THE ACT EVEN W HERE EARLIER ASSESSMENTS WERE CONCLUDED U/S 143(3) OF THE ACT. T HE FACTS AND CIRCUMSTANCES OF THE CASE BEFORE US ARE SIMILAR TO THE ABOVE CASES. RESPECTFULLY, FOLLOWING THE ABOVE CASE LAWS ON THE ISSUE, WE HOLD THAT THE ASSESSMENTS U/S 153A FOR ALL THE A.YS ARE NOT SUSTAINABLE AND THEY ARE ACCORDINGLY SET ASIDE. SIN CE, THE ASSESSMENTS HAVE BEEN SET ASIDE, THE OTHER GROUNDS AGAINST THE MERITS OF THE ADDITIONS ARE NOT ADJUDICATED AT THIS STAGE AS IT WOULD ONLY RESULT IN AN ACADEMIC EXERCISE. 15. IN THE RESULT, THE ASSESSEES APPEALS FOR ALL T HE A.YS ARE PARTLY ALLOWED. CONSEQUENTLY, THE REVENUES APPEALS AGAINST THE RELIEF GRANTED BY THE CIT (A) U/S 80IB(10) FOR ALL THE A.YS ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST MAY, 2018. SD/- SD/- (S.RIFAUR RAHMAN) ACCOUNTANT MEMBER (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED 31 ST MAY 2018. VINODAN/SPS COPY TO: 1 M/S. ENGINEERS SYNDICATE INDIA PVT. LTD (PRESENTL Y KNOWN AS JANAPRIYA ENGINEERS SYNDICATE), 8-2-120/86, PLOT NO.11 & 12, KEERTHI AND PRIDE TOWERS, ROAD NO.2, BANJARA HILLS, HYDERABAD 500034 2 DY.CIT, CENTRAL CIRCLE-2 HYDERABAD 3 CIT (A)-I, HYDERABAD 4 CIT CENTRAL, HYDERABAD 5 THE DR, ITAT HYDERABAD 6 GUARD FILE BY ORDER