M/s Parsvnath Developers Ltd., Delhi V. DCIT, New Delhi

ITA 5188/DEL/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81949 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 27-08-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 13-09-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M B REDDY
• Assessee Lawyers: ADESH KUMAR JAIN
• Keywords: Search and seizure; Document seized; Opportunity of being heard; Earning of tax free income; Documents seized; Reassessment proceedings
• Section: 143(3); 142(1); 153A; 14A; 132; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: F NEW DELHI BEFORE SHRI B. C. MEENA, ACCOUNTANT MEMBER AND SHRI C. M. GARG, JUDICIAL MEMBER I.T.A .NO. - 5 188 /DEL/2013 (ASSESSMENT YEAR - 200 6 - 0 7 ) PARSVNATH DEVELOPERS LTD. , VS. DC IT PARSVNATH METRO TOWER, NEAR CENTRAL CIRCLE - 1 9 SHAHDARA METRO STATION, NEW DELHI. SHAHDARA, DELHI - 110032 PAN:AA ACP0743J (APPELLANT) (RESPONDENT) ASSESSEE BY: - SH . A DESH KUMAR JAIN , & SH. AKSHAT JAIN, AR. REVENUE BY: - SH. M . B. REDDY , CIT . DR ORDER PER C. M. GARG, JM. THIS APPEAL OF THE ASSESSEE HAS BEEN PREFERRED AGAINST THE ORDER OF CIT (APPEALS) - X XX III, NEW DELHI, VIDE DATED 1 0 . 06.2013 IN APPEAL NO. 244 / 13 - 14/1395 FOR THE ASSESSMENT YEAR 200 6 - 0 7 . 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS IN TH IS APPEAL: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANT S CASE, THE LEARNED CIT(APPEALS) ERRED BOTH IN FACT AND IN LAW IN CONFIRMING THE ORDER OF AO MAKING AN AD HOC ESTIMATED DISALLOWANCE OF EXPENSES OF RS.2,10,311/ - BY HOLDING THAT THE SCOPE OF ASSES SMENT UNDER SECTION 153A OF THE INCOME TAX IS TO 2 ASSESS TOTAL INCOME AND NOT RESTRICTED TO SEIZED DOCUMENTS, EVEN WHEN THE CASE OF THE RELEVANT ASSESSMENT YEAR HAD ALREADY BEEN ASSESSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 AND NO MATERIAL / EVI DENCE WAS FOUND DURING THE COURSE OF SEARCH AND SEIZURE OPERATION FOR THE RELEVANT ASSESSMENT YEAR. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANT S CASE, THE LEARNED CIT(APPEALS) ERRED BOTH IN FACT AND IN LAW IN CONFIRMING THE ORDER OF AO MAKING AN AD HOC ESTIMATED DISALLOWANCE OF EXPENSES OF RS.2,10,311/ - BY HOLDING THAT FAILURE ON THE PART OF THE AO TO AFFORD THE APPELLANT AN OPPORTUNITY OF BEING HEARD BEFORE MAKING ADDITION DOES NOT VITIATE THE ASSESSMENT PROCEEDINGS. 3. THAT ON THE FAC TS AND IN THE CIRCUMSTANCES OF THE APPELLANT S CASE, THE LEARNED CIT(APPEALS) ERRED BOTH IN FACT AND IN LAW IN CONFIRMING THE ORDER OF LEARNED A SSESSING O FFICER MAKING AN AD HOC ESTIMATED DISALLOWANCE OF EXPENSES OF RS.2,10,311/ - BY HOLDING THAT DISALLOWAN CE OUT OF ADMINISTRATIVE EXPENSES @ % OF AVERAGE INVESTMENT CANNOT BE SAID TO BE AD HOC. 3. BRIEFLY STATED THE FACT; GIVING RISE TO THIS APPEAL ARE THAT A SEARCH AND SEIZURE OPERATION U/S 132OF THE ACT 1961, (FOR SHORT THE ACT ) WAS CARRIED OUT IN THE ASSESSEE S GROUP OF CASES INCLUDING THE ASSESSEE COMPANY ON 13.05.2010 AND SUBSEQUENTLY ALL CASES WERE DULY CENTRALISED WITH CENTRAL CIRCLE - 19, NEW 3 DELHI, VIDE ORDER U/S 127 OF THE ACT , DATED 10.10.2012. ORIGINALLY THE RETURN OF INCOME WAS FILED U/S 139 O N 30.11.2006 DECLARING TOTAL INCOME OF RS.1,18,93,32,413/ - WHICH WAS ASSESSED EARLIER U/S 143(3) OF THE ACT AT RS.1,21,21,89,430/ - . DUE TO SEARCH TAKEN PLACE, STATUTORY NOTICE U/S 153A OF THE ACT WAS ISSUED ON 15.02.2012 REQUIRING THE ASSESSEE TO FILE THE RETURN OF INCOME FOR A.Y. 2006 - 07 BEING ONE OF THE SIX PRECEDING THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH SEARCH WAS CONDUCTED. IN RESPONSE TO THE NOTICE U/S 153A OF THE ACT, THE ASSESSEE FILED THE RETURN OF ITS INCOME ON 03.05.2012, DECL ARING A TOTAL INCOME OF RS.1,18,93,32,413/ - FOR AY 2006 - 07. 4. THE ASSESSING OFFICER ISSUED NOTICE U/S 142(1) OF THE ACT ALONG WITH QUESTIONNAIRE ON 14.12.2012. THE LD. AR SUBMITTED SOME DETAILS AND DOCUMENTS, BEFORE THE AO. THE AO NOTED THAT THE ASSESSEE COMPANY HAS SHOWN INVESTMENT IN QUOTED AND UNQUOTED SHARES OF D IFFERENT COMPANIES THE INCOME OF WHICH IS EXEMPT U/S 10 OF THE ACT. FURTHER OBSERVE THAT THE ASSESSEE COMPANY HAS SHOWN COMMON ADMINISTRATIVE EXPENSES UNDER VARIOUS HEADS WHICH ARE CLAIMED IN THE P & L A/C FOR THE RELEVANT PERIOD WHICH ARE NOT ALLOWABLE PR OPORTIONATELY AGAINST CORRESPONDING EARNING OF EXEMPT INCOME. THUS, THE AO MADE DISALLOWANCE OF EXPENSES @ 0.5% OF THE AVERAGE INVESTMENT OF THE ASSESSEE COMPANY AMOUNTING TO RS. 2,10,311/ - . BEING AGGRIEVED BY ABOVE ASSESSMENT ORDER U/S 153A R.W.S. 143(3) O F THE ACT , THE ASSESSEE FILED FIRST APPEAL, BEFORE LD. CIT(A) WHICH WAS ALSO DISMISSED BY PASSING THE IMPUGN ED 4 ORDER. NOW THE EMPTY HAND ED ASSESSEE IS BEFORE THIS TRIBUNAL WITH THE GROUNDS AS REPRODUCED HEREINABOVE. 5. WE HAVE HEARD ARGUMENT OF BOTH THE SI DES AND CAREFULLY PERUSED THE RELEVANT MATERIAL PLACED ON RECORD , INTER ALIA , CITATIONS AND DECISIONS RELIED BY BOTH THE PARTIES ON THE ISSUE. 6. THE LD. ASSESSEE S REPRESENTATIVE (AR) SUBMITTED THAT THE LD. CIT(A) HAS ERRED BOTH IN FACT AND IN LAW IN CONF IRMING THE ORDER OF THE AO MAKING AN ADHOC ADDITION BY HOLDING THAT THE SCOPE OF THE ASSESSM ENT U/S 153A OF THE ACT IS TO ASSESS TOTAL INCOME AND THE SAME IS NOT RESTRICTED TO THE SEIZED DOCUMENTS AND MATERIAL ONLY, EVEN WHEN THE CASE OF THE RELEVANT ASSES SMENT YEAR HAD ALREADY BEEN ASSESSED U/S 143(3) OF THE ACT AND NO INCRIMINATING MATERIAL/EVIDENCE FOUND DURING THE COURSE OF SEARCH AND SEIZURE OPERATION FOR THE RELEVANT ASSESSMENT YEAR. 7. THE LD. AR FURTHER CONTENDED THAT THE LD. CIT(A) ALSO ERRED BOTH IN FACT AND IN LAW IN CONFIRMING THE ORDER OF THE AO BY HOLDING THAT FAILURE ON THE PART OF THE AO TO AFFORD OPPORTUNITY OF BEING HEARD BEFORE MAKING ADDITION DOES NOT VITIATE THE RE - ASSESSMENT PROCEEDINGS. 8. THE LD. AR VEHEMENTLY CONTENDED THAT THE LD. CIT(A) ALSO ERRED IN CONFIRMING THE ORDER OF THE AO MAKING AN ADHOC ESTIMATED DISALLOWANCE OF ADMINISTRATIVE EXPENSES BY HOLDING THAT THE DISALLOWANCE OUT OF ADMINISTRATIVE 5 EXPENSES @ 0.5% OF AVERAGE INVESTMENT CANNOT BE SAID TO BE ADHOC. THE LD. AR HAS PLACED HIS RELIANCE ON VARIOUS DECISIONS AND CITATIONS INCLUDING RECENT JUDGMENT OF ITAT, DELHI BENCH, G IN THE CASE OF SANJAY A G GA R WAL, VS. DCIT (2014) 4 7 TAXMAN N .COM 210 (DEL - TRIBUNAL ) & ANOTHER DECISION OF I TAT, DELHI BENCH, SMC IN THE CASE OF PARIVAR PROPERTIES PVT. LTD. VS. DCIT (2014) 41 TAXMANN.COM 485 (DELHI - TRIBUNAL). 9. REPLY TO THE ABOVE THE LD. DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT IN VIEW OF RECENT JUDGMENT OF HON BL E JURISDICTIONAL HIGH COURT OF DELHI, IN THE CASE OF FILATEX INDIA LTD. VS. CIT 2014 - TIOL - 1325 - HC - DEL SUBMITTED THAT WHEN NOTICE U/S 153A OF THE ACT WAS ISSUED THEN ALL ASSESSMENT OF THE BLOCK OF S IX ASSESSMENT YEARS PRECEDING THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH THE SEARCH WAS CONDUCTED FALLS WITHIN THE AMBIT OF ASSESSMENT OR RE - ASSESSMENT U/S 153A OF THE ACT. 10. THE LD. DR FURTHER CONTENDED THAT THE ADDITIONS NEED NOT TO BE RESTRICTED OR LIMITED TO THE INCRIMINATING MATERIAL WHICH WAS FOUND DURING THE COURSE OF SEARCH AND AFTER ISSUANCE OF NOTICE U/S 153A OF THE ACT. THE AO IS EMPOWERED TO COMPUTE THE TOTAL INCOME OF SIX ASSESSMENT YEARS IMMEDIAT ELY PROCEEDING THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH SEARCH WAS CONDUCTED AND THE TOTAL INCOME OF ASSESSEE IS ASSESSED AND ARE ASSESSED AND RE - ASSESSED U/S 153A OF THE ACT. 6 11. ON CAREFUL CONSIDERATION OF ABOVE SUBMISSIONS AND CONTENT IONS, AT THE OUTSET WE NOTE THAT UNDISPUTEDLY THE ORIGINAL ASSESSMENT FOR ASSESSMENT YEAR 2006 - 07 WAS COMPLETED ON 31.12.2008 U/S 143(3) OF THE ACT, PRIOR TO THE DATE OF SEARCH AND SEIZURE OPERATION THAT WAS CARRIED OUT ON 13.0 5.2010. IT IS NOT DISPUTED TH AT NO INCRIMINATING MATERIAL WAS FOUND DURING THE COURSE OF SEARCH PERTAINING TO THE ASSESSMENT YEAR UNDER CONSIDERATION I.E. 2006 - 07. FROM THE ASSESSMENT ORDER U/S 153A READ WITH SECTION 143(3) OF THE ACT, DATED 28.03.2013 WE OBSERVE THAT THE AO MADE IMPU GNED ADDITION WITH FOLLOWING OBSERVATION AND CONCLUSION: 2. THE ASSESSEE COMPANY HAS SHOWN INVESTMENT IN QUOTED AND UNQUOTED SHARES OF DIFFERENT COMPANIES THE INCOME OF WHICH IS EXEMPT U/S 10. IT IS OBSERVED THAT THE ASSESSEE HAS SHOWN COMMON ADMINISTRATIVE EXPENSES UNDER VARIOUS HEADS WHICH ARE CLAIMED IN THE P & L A/C IN THE RELEVANT PERIOD, WHICH ARE NOT ALLOWABLE PROPORTIONATELY AGAINST CORRESPONDING EARNING OF EXEMPT INCOME NO ACCEPTABLE REPLY ALSO COULD BE FILED BY THE ASSESSEE, IN THIS R EGARD. IN VIEW OF THE ABOVE, DISALLOWANCE OF EXPENSE IS HEREBY MADE @ 0.5% OF THE AVERAGE INVESTMENT APPLICABLE FOR THE RELEVANT PERIOD, WHICH IS CALCULATED AS UNDER: 0.5% OF RS.(42,105,296 + 42,019,046)/ - /2=RS.2,10,311/ - [ADDITION: RS.2,10,311/ - ] 7 12. THE ABOVE ADDITION MADE BY THE AO WAS UPHELD BY THE LD. CIT(A) BY PASSING THE IMPUGN ED ORDER, THE RELEVANT OPERATIVE PORTION OF THE IMPUGN ED ORDER READS AS UNDER: A PERUSAL OF INVESTMENT SCHEDULE SHOWS THAT PREVIOUS YEAR NO. OF SHARES FOR M/S. ANSAL BUILD WELL LTD. WAS 26,400 AGAINST 9500 SHARES DURING THE CURRENT YEAR. TOTAL INVESTMENT HAS GONE DOWN IN THIS SCRIP FROM RS.2,17,776 TO RS.1,31526. SIMILARLY, DURING THE YEAR UNDER CONSIDERATION THE APPELLANT HAS GOT 400 EQUITY SHARES OF RS.10/ - OF M/S. VIDEOC ON INDUSTRIES LTD. AS AGAINST 2000 EQUITY SHARES HELD IN M/S. VIDEOCON INTERNATIONAL LTD. PURSUANT TO AMALGAMATION OF THESE TWO COMPANIES. THEREFORE, THE APPELLANT COMPANY HAS MADE CERTAIN CHANGES IN INVESTMENT. HENCE, THESE CHANGE IN PORTFOLIO & RECORD KEEPING NEEDS CERTAIN ADMINISTRATIVE EXPENDITURE. ACCORDINGLY, IN MY VIEW, THERE IS SOME NEXUS OF MAINTAINING THE INVESTMENT & ADMINISTRATIVE EXPENSE. IN VIEW OF THE ABOVE THE ASSESSING OFFICER DISALLOWANCE OF % OF AVERAGE INVESTMENT OUT OF TOTAL ADMINISTRATIVE EXPENSE CLAIMED FOR RS.7,55,73,544/ - APPEARS TO BE PROPER. IT MAY BE MENTIONED HERE THAT DISALLOWANCE OF ADMINISTRATIVE EXPENSE CANNOT BE SAID AS ADHOC. AS SUBSEQUENTLY W.E.F. 24.03.2008 UNDER RULE 8D, SUB RULE (III) FOR RESIDUAL EXPENSE, I .E. NOT DIRECT EXPENSE DISALLOWANCE IS TO BE COMPUTED @ % OF AVERAGE INVESTMENT. THROUGH RULE 8D HAS NOT BEEN MADE RETROSPECTIVELY, BUT THIS RULE GIVES BASIS OF DISALLOWING INDIRECT EXPENSES IN CLAUSE (III) OF SAID RULE. AS A RESULT, THE ACTION OF THE AS SESSING OFFICER IS CONFIRMED. THIS GROUND OF APPEAL IS DISMISSED. 8 13. IN THE CASE OF SANJAY AGGARWAL (SUPRA) THE COORDINATE BENCH OF THIS TRIBUNAL TOOK A VIEW THAT THE PROVISION OF SECTION 153A OF THE ACT , IN RESPECT OF THE ASSESSMENT YEAR FOR WHICH ORIG INAL ASSESSMENT HAVE ALREADY BEEN COMPLETED ON THE DATE OF SEARCH THE TOTAL INCOME SHALL BE DETERMINED BY RESTRICTING THE ADDITIONS, ONLY TO THOSE ISSUES WHICH FLOW FROM INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH THE RELEVANT OBSERVATIONS OF THIS DECISION PARAGRAPH NO. 7 - TO 14 REPRODUCED : - 7. LET US EXAMINE THE JUDGMENTS OF THE HON BLE JURISDICTIONAL HIGH COURT RELIED ON BY THE LD. DR. THE FIRST IS THAT IN THE CASE OF SSP AVIATION LTD. (SUPRA). THE LD. DR ACCENTUATED ON PARA 15 OF THIS JUDGMENT TO CANVASS THE VIEW THAT ADDITION CAN BE MADE U/S 153A DE HORSE ANY INCRIMINATING MATERIAL FOUND IN THE COURSE OF SEARCH. THIS PARA READS THAT THE SATISFACTION REQUIRED TO BE REA CHED BY THE AO HAVING JURISDICTION OVER SEARCHED PERSON IS THAT THE VALUABLE ARTICLES OR BOOKS, ETC., SEIZED DURING THE SEARCH BELONG TO A PERSON OTHER THAN THE SEARCHED PERSON. THE LATER LINE ON WHICH THE LD. DR FORCEFULLY EMPHASIZED IS THAT: THERE IS NO REQUIREMENT IN SECTION 153A (1) THAT THE AO SHOULD ALSO BE SATISFIED THAT SUCH VALUABLE ARTICLES OR BOOKS OF ACCOUNT OR DOCUMENTS BELONGING TO THE OTHER PERSON MUST BE SHOWN TO CONCLUSIVELY REFLECT OR DISCLOSE ANY UNDISCLOSED INCOME. IT IS RELEVANT TO NO TE THE FACTUAL MATRIX OF THAT CASE, IN WHICH A SEARCH WAS CARRIED OUT IN THE P GROUP OF COMPANIES. IN THE COURSE OF SEARCH, CERTAIN DOCUMENTS WERE FOUND SHOWING THAT THE ASSESSEE ACQUIRED CERTAIN DEVELOPMENT RIGHTS FROM P GROUP OF COMPANIES. A SATISFACTION WAS RECORDED BY THE AO IN THE CASE OF THE ASSESSEE U/S 153C. THEREAFTER, THE PROCEEDINGS WERE INITIATED 9 AGAINST THE ASSESSEE U/S 153A AND THE ASSESSEE WAS DIRECTED TO FILE RETURNS FOR THE SIX ASSESSMENT YEARS. ASSESSMENTS WERE COMPLETED U/S 143(3) READ WI TH SECTION 153C. AS THE APPEALS WERE PENDING BEFORE THE CIT(A), THE ASSESSEE FILED WRIT PETITION CONTENDING THAT THE AO HAD ILLEGALLY ASSUMED JURISDICTION U/S 153C READ WITH SECTION 153A AND THAT THERE WAS NO UNDISCLOSED INCOME TO BE ASSESSED IN THE ASSESS EE S HANDS. DISMISSING THE PETITION, THE HON BLE HIGH COURT HELD THAT THE SATISFACTION THAT IS REQUIRED TO BE REACHED BY THE AO HAVING JURISDICTION OF THE ASSESSED PERSON IS THAT THE VALUABLE ARTICLES OR BOOKS OF ACCOUNT, ETC., SEIZED DURING THE SEARCH BEL ONG TO A PERSON OTHER THAN THE ASSESSED PERSON AND THERE WAS NO REQUIREMENT IN SECTION 153C(1) THAT THE AO SHOULD ALSO BE SATISFIED THAT SUCH VALUABLE ARTICLES OR BOOKS OF ACCOUNT, ETC., BELONGING TO THE OTHER PERSON MUST CONCLUSIVELY REFLECT OR DISCLOSE A NY UNDISCLOSED INCOME. THUS, IT IS APPARENT THAT THE ISSUE RAISED IN THE CASE OF SSP AVIATION LTD. (SUPRA) WAS ALTOGETHER DIFFERENT FROM THE ONE WHICH IS UNDER OUR FOCUS IN THE EXTANT APPEAL. PRESENTLY, WE ARE NOT REQUIRED TO DETERMINE AS TO WHETHER ANY SA TISFACTION WAS PROPERLY RECORDED IN THE CASE OF PERSON OTHER THAN THE PERSON SEARCHED. ON THE CONTRARY, WE ARE DEALING WITH ASSESSMENT U/S 153A, BEING THE ASSESSMENT IN THE CASE OF PERSON SEARCHED. IN THAT VIEW OF THE MATTER, WE FIND THAT THE RELIANCE OF T HE LD. DR ON THIS JUDGMENT IS MISPLACED. 8. NOW WE TURN TO THE OTHER JUDGMENT RELIED BY THE LD. DR IN THE CASE OF CHETAN DAS LACHMAN DAS (SUPRA). REFERRING TO PARA 11 OF THIS JUDGMENT, THE LD. DR CONTENDED THAT THE CONDITION PRECEDENT FOR COMPUTING UNDISC LOSED INCOME ON THE BASIS OF INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH WAS IN THE CONTEXT OF CHAPTER XIV - B OF THE ACT WHICH ENVELOPES A SPECIAL PROCEDURE FOR ASSESSMENT OF SEARCH CASES. THE LD. DR CONTENDED THAT SECTION 153A WHICH PROVIDES F OR AN 10 ASSESSMENT IN THE CASE OF SEARCH, DOES NOWHERE STIPULATE THAT A SEARCH ASSESSMENT HAS TO BE MADE ON THE BASIS OF EVIDENCE FOUND AS A RESULT OF SEARCH, ETC. HE EMPHATICALLY RELIED ON SEVERAL JUDGMENTS INCLUDING STATE OF KERALA VS. MATHAI VERGHESE (198 6) 4 SCC 746, 749 AND CIT VS. KESHAVLAL AIR 1965 SC 866 TO PUT FORTH THAT THERE IS NO ROOM FOR ANY INTENDMENT AND THERE IS NO EQUITY ABOUT TAX. IT WAS EMPHASIZED THAT THE COURTS CANNOT REFRAME THE LEGISLATION. HE SUMMED UP HIS CONTENTION THAT SINCE THE LEG ISLATURE IN ITS WISDOM HAS CONSIDERED IT INAPPROPRIATE TO BASE ADDITION ONLY ON THE INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH, THE SAME CANNOT BE READ BY THE TRIBUNAL IN THE PROVISION. 9. WE ARE FULLY CONVINCED WITH THE ARGUMENT ADVANCED BY THE LD. DR IN SO FAR AS THE NON - APPLICABILITY OF SECTION 158BB TO SECTION 153A OF THE ACT IS CONCERNED. OBVIOUSLY, CHAPTER XIV - B OF THE ACT DEALS WITH COMPUTATION OF UNDISCLOSED INCOME, WHEREAS SECTION 153A, ETC., PROVIDES FOR THE COMPUTATION OF TOTAL IN COME. HOWEVER, WE FIND THAT THE LANGUAGE OF SECTION 153A HAS BEEN STRUCTURED IN SUCH A WAY SO AS NOT TO PERMIT THE MAKING OF ADDITION FOR THE ASSESSMENT YEAR OF WHICH THE ASSESSMENT IS NOT PENDING AS ON THE DATE OF SEARCH, WITHOUT THERE BEING ANY INCRIMIN ATING MATERIAL FOUND DURING THE COURSE OF SEARCH. AT THIS STAGE, IT WOULD BE APPROPRIATE TO CONSIDER THE RELEVANT PARTS OF SECTION 153A OF THE ACT, AS UNDER: - 153A. (1) NOTWITHSTANDING ANYTHING CONTAINED IN SECTION 139, SECTION 147, SECTION 148, SECTION 149, SECTION 151 AND SECTION 153, IN THE CASE OF A PERSON WHERE A SEARCH IS INITIATED UNDER SECTION 132 OR BOOKS OF ACCOUNT, OTHER DOCUMENTS OR ANY ASSETS ARE REQUISITIONED UNDER SECTION 132A AFTER THE 31ST DAY OF MAY, 2003, THE ASSESSING OFFICER SHALL 11 (A ) ISSUE NOTICE TO SUCH PERSON REQUIRING HIM TO FURNISH WITHIN SUCH PERIOD, AS MAY BE SPECIFIED IN THE NOTICE, THE RETURN OF INCOME IN RESPECT OF EACH ASSESSMENT YEAR FALLING WITHIN SIX ASSESSMENT YEARS REFERRED TO IN CLAUSE (B), IN THE PRESCRIBED FORM AND VERIFIED IN THE PRESCRIBED MANNER AND SETTING FORTH SUCH OTHER PARTICULARS AS MAY BE PRESCRIBED AND THE PROVISIONS OF THIS ACT SHALL, SO FAR AS MAY BE, APPLY ACCORDINGLY AS IF SUCH RETURN WERE A RETURN REQUIRED TO BE FURNISHED UNDER SECTION 139; (B) ASSES S OR REASSESS THE TOTAL INCOME OF SIX ASSESSMENT YEARS IMMEDIATELY PRECEDING THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH SUCH SEARCH IS CONDUCTED OR REQUISITION IS MADE : PROVIDED THAT THE ASSESSING OFFICER SHALL ASSESS OR REASSESS THE TOTA L INCOME IN RESPECT OF EACH ASSESSMENT YEAR FALLING WITHIN SUCH SIX ASSESSMENT YEARS: PROVIDED FURTHER THAT ASSESSMENT OR REASSESSMENT, IF ANY, RELATING TO ANY ASSESSMENT YEAR FALLING WITHIN THE PERIOD OF SIX ASSESSMENT YEARS REFERRED TO IN THIS SUB - SECTI ON 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 : ..............' 10. A CAREFUL PERUSAL OF THE ABOVE PROVISION BRINGS TO LIGHT THAT WHERE A SEARCH IS INITIAT ED U/S 132 OF THE ACT ETC., THE A.O SHALL ISSUE A NOTICE REQUIRING THE PERSON SEARCHED ETC. TO FURNISH HIS RETURN OF INCOME IN RESPECT OF EACH ASSESSMENT YEAR FALLING WITHIN SIX ASSESSMENT YEARS IMMEDIATELY PRECEDING THE ASSESSMENT YEAR RELEVANT TO THE PRE VIOUS YEAR IN WHICH SUCH SEARCH IS CONDUCTED OR REQUISITION IS MADE. ONCE SUCH RETURNS ARE FILED, THE ASSESSING OFFICER HAS TO ASSESS OR REASSESS THE TOTAL INCOME OF SUCH ASSESSMENT YEARS. THE DECISIVE WORDS USED IN THE PROVISIONS ARE TO 'ASSESSEE OR REASS ESS THE TOTAL INCOME'. THUS, IT IS 12 MANIFEST THAT A DUTY HAS BEEN CAST ON THE ASSESSING OFFICER TO DETERMINE THE 'TOTAL INCOME' OF THE ASSESSEE FOR SUCH SIX ASSESSMENT YEARS. OBVIOUSLY 'TOTAL INCOME' REFERS TO THE SUM TOTAL OF INCOME IN RESPECT OF WHICH A P ERSON IS ASSESSABLE. IT COVERS NOT ONLY THE INCOME EMANATING FROM DECLARED SOURCES OR ANY MATERIAL PLACED BEFORE THE ASSESSING OFFICER BUT FROM ALL SOURCES INCLUDING THE UNDECLARED ONES, OR UNPLACED MATERIAL BEFORE THE AO. THE POSITION WHICH EMERGES ON A R EADING OF CLAUSES (A) OR (B) OF SEC. 153A(1) ALONG WITH THE FIRST PROVISO IS THAT THE ASSESSING OFFICER IS SUPPOSED TO DETERMINE THE TOTAL INCOME' OF THE ASSESSEE IN RESPECT OF THE RELEVANT SIX ASSESSMENT YEARS. SECOND PROVISO TO SEC. 153A(1) ECLIPSES THE AFORE DISCUSSED DETERMINATION OF 'TOTAL INCOME'. SUCH PROVISO MANDATES THAT ANY PENDING ASSESSMENT OR REASSESSMENT RELATING TO ANY ASSESSMENT YEAR FALLING WITHIN THE PERIOD OF SIX YEARS REFERRED TO IN SUB - SEC. (1) ON THE DATE OF INITIATION OF THE SEARCH U NDER SECTION 132 OR MAKING OF REQUISITION UNDER SECTION 132A, AS THE CASE MAY BE, SHALL ABATE. THE EFFECT OF THE SECOND PROVISO IS THAT ANY PENDING ASSESSMENT OR REASSESSMENT ON THE DATE OF SEARCH FOR ANY ASSESSMENT YEAR FALLING WITHIN THE PERIOD OF RELEVA NT SIX ASSESSMENT YEARS SHALL ABATE AND A FRESH DETERMINATION OF 'TOTAL INCOME WOULD BE REQUIRED. NOW A QUESTION ARISES THAT WHAT IS THE EFFECT OF SECOND PROVISO ON THE ASSESSMENTS FOR ANY ASSESSMENT YEARS FALLING WITHIN THE PERIOD OF SIX ASSESSMENT YEARS, WHICH ARE NOT PENDING ON THE DATE OF SEARCH. WE ARE UNABLE TO ACCEPT THE CONTENTION URGED ON BEHALF OF THE REVENUE FOR THE REASON THAT IF BOTH THE PENDING AND COMPLETED ASSESSMENT WERE TO BE TAKEN ON SAME PEDESTAL, THEN THERE WAS NO NEED TO ENSHRINE SECON D PROVISO TO SEC. 153A(1) PROVIDING THAT THE PENDING ASSESSMENTS WITHIN THE PERIOD OF SIX ASSESSMENT YEARS SHALL ABATE. THE EFFECT OF THE SECOND PROVISO IN THE ENTIRE SETTING OF SECTION IS THAT THE ASSESSMENT FOR ANY 13 ASSESSMENT YEAR WHICH IS NOT PENDING AS ON THE DATE OF SEARCH CANNOT INCLUDE AN ITEM OF INCOME FOR WHICH NO INCRIMINATING MATERIAL WAS FOUND. OUR VIEW FINDS SUPPORT FROM PARA NO. 11 OF THE JUDGMENT IN CHETAN DAS LACHMAN DAS (SUPRA),IN WHICH IT HAS BEEN HELD THAT : OBVIOUSLY AN ASSESSMENT HAS T O BE MADE UNDER THIS SECTION ONLY ON THE BASIS OF SEIZED MATERIAL. 11. THIS BRINGS US TO THE NEXT CONTENTION PUT FORTH ON BEHALF OF THE REVENUE THAT SINCE THERE IS NO SPECIFIC MENTION OF CORRELATING ADDITION WITH THE INCRIMINATING MATERIAL FOUND DURING T HE COURSE OF SEARCH, THE TRIBUNAL SHOULD NOT VENTURE TO MAKE SUCH A PROVISION IN THE ACT. WE FIND THIS CONTENTION AS BEREFT OF MERITS. THE MAJOR REASON FOR OUR THIS DECISION IS THAT WE ARE NOT TRYING TO LEGISLATE BY INSERTING SUCH A PROVISION IN THE LANGUAGE OF SECTION 153A. IN FACT, THE SPECIAL BENCH OF THE TRIBUNAL IN HOLDING SO HAS INTERPRETED THE PROVISION IN ITS EXISTING FORM IN THIS WAY SO AS TO PROHIBIT THE MAKING OF ANY ADDITION IN THE ASSESSMENT FOR THOSE YEARS THE ASSESSMENT OF WHICH WAS NOT PENDING ON THE DATE OF SEARCH. THIS VIEW HAS BEEN FOLLOWED IN SEVERAL CASES INCLUDING KABUL CHAWLA VS. ASSTT. CIT [ IT A PPEAL NO. 779 ( D ELHI) OF 2013 , DATED 23 - 05 - 2014], TO WHICH ONE OF US, NAMELY, THE AM IS PARTY, THUS, WE DO NOT FIND ANY MERIT IN THE CONT ENTION RAISED ON BEHALF OF THE REVENUE THAT THE TRIBUNAL SHOULD NOT LEGISLATE. AS IT IS A CASE OF INTERPRETATION OF THE PROVISION AND NOT THAT OF LEGISLATING, WE FIND NO FORCE IN THE CONTENTION ADVANCED ON BEHALF OF THE REVENUE. THE SAME IS JETTISONED. 12 . THE NEXT JUDGMENT RELIED ON BY THE LD. AR IS ANIL KUMAR BHATIA (SUPRA). IN THAT CASE, THE HON BLE HIGH COURT HELD THAT EVEN IF ASSESSMENT ORDER HAD ALREADY BEEN PASSED IN RESPECT OF ONE OR ANY OF THE SIX RELEVANT ASSESSMENT YEARS EITHER U/S 143(1)(A) OR 143(3) PRIOR TO THE 14 INITIATION OF SEARCH, STILL THE AO IS EMPOWERED TO REOPEN THOSE PROCEEDINGS U/S 153A WITHOUT ANY FETTERS AND REASSESS TOTAL INCOME TAKING NOTE OF UNDISCLOSED INCOME, IF ANY, UNEARTHED DURING THE SEARCH. IT IS CLEAR THAT THE HON'BLE HIGH COURT DEALT WITH A SITUATION IN WHICH SOME INCRIMINATING MATERIAL WAS FOUND IN RESPECT OF A NON - PENDING ASSESSMENT. IT WAS IN THAT BACKGROUND THAT THE HON'BLE HIGH COURT HELD THAT SEC. 153A APPLIES IF INCRIMINATING MATERIAL IS FOUND EVEN IF ASSESSMENTS AR E COMPLETED. THE QUESTION AS TO WHETHER ANY ADDITION CAN BE MADE IN RESPECT OF COMPLETED ASSESSMENTS WHEN NO INCRIMINATING MATERIAL WAS FOUND, WAS APPARENTLY LEFT OPEN. HOWEVER, WE FIND THAT THERE ARE SUFFICIENT INDIRECT HINTS GIVEN BY THE HON'BLE DELHI HI GH COURT IN THE CASE OF ANIL KUMAR BHATIA (SUPRA) ABOUT NOT MAKING OF ANY ADDITION IN RESPECT OF AN ASSESSMENT YEAR FOR WHICH THE ASSESSMENT IS ALREADY COMPLETED UNLESS SOME INCRIMINATING MATERIAL IS FOUND DURING THE COURSE OF SEARCH. THIS CAN BE SEEN FROM THE FOLLOWING OBSERVATIONS OF THE HON'BLE HIGH COURT : - '20. A QUESTION MAY ARISE AS TO HOW THIS IS SOUGHT TO BE ACHIEVED WHERE AN ASSESSMENT ORDER HAD ALREADY BEEN PASSED IN RESPECT OF ALL OR ANY OF THOSE SIX ASSESSMENT YEARS, EITHER UNDER SECTION 143(1)(A) OR SECTION 143(3) OF THE ACT. IF SUCH AN ORDER IS ALREADY IN EXISTENCE, HAVING OBVIOUSLY BEEN PASSED PRIOR TO THE INITIATION OF THE SEARCH/REQUISITION, THE ASSESS ING OFFICER IS EMPOWERED TO REOPEN THOSE PROCEEDINGS AND REASSESS THE TOTAL INCOME, TAKING NOTE OF THE UNDISCLOSED INCOME, IF ANY, UNEARTHED DURING THE SEARCH. ...' 13. THE ABOVE EXTRACTED OBSERVATIONS OF THE HON'BLE HIGH COURT, WHICH ARE THOUGH OBITER DI CTA, MAKE THE POINT CLEAR THAT WHERE AN ASSESSMENT 15 ORDER HAS ALREADY BEEN PASSED FOR A YEAR(S) WITHIN THE RELEVANT SIX ASSESSMENT YEARS, THEN ALSO THE A.O IS DUTY BOUND TO REOPEN THOSE PROCEEDINGS AND REASSESS THE TOTAL INCOME BUT BY 'TAKING NOTE OF THE UN DISCLOSED INCOME IF ANY, UNEARTHED DURING THE SEARCH'. THE EXPRESSION 'UNEARTHED DURING THE SEARCH' IS QUITE SIGNIFICANT TO DENOTE THAT IN RESPECT OF COMPLETED OR NON - PENDING ASSESSMENTS, THE ASSESSING OFFICER IS ALBEIT DUTY BOUND TO ASSESS OR REASSESS THE TOTAL INCOME BUT THERE IS A CAP ON THE SCOPE OF ADDITIONS IN SUCH ASSESSMENT, BEING THE ITEMS OF INCOME 'UNEARTHED DURING THE SEARCH'. IN OTHER WORDS, THE DETERMINATION OF 'TOTAL INCOME' IN RESPECT OF THE ASSESSMENT YEARS FOR WHICH THE ASSESSMENTS ARE ALR EADY COMPLETED ON THE DATE OF SEARCH, SHALL NOT BE INFLUENCED BY THE ITEMS OF INCOME OTHER THAN THOSE BASED ON THE MATERIAL UNEARTHED DURING THE COURSE OF SEARCH. THERE IS NOT AND CANNOT BE ANY QUARREL OVER THE PROPOSITION THAT THE ASSESSING OFFICER HAS NO OPTION BUT TO DETERMINE THE TOTAL INCOME OF THE ASSESSEE IN RESPECT OF THE RELEVANT SIX ASSESSMENT YEARS. HOWEVER, THE SCOPE OF SUCH DETERMINATION OF TOTAL INCOME IS DIFFERENT IN RESPECT OF THE YEARS FOR WHICH THE ASSESSMENTS ARE PENDING VIS - A - VIS THE YEA RS FOR WHICH ASSESSMENTS ARE NON - PENDING. IN RESPECT TO THE ASSESSMENT YEARS FOR WHICH THE ORIGINAL ASSESSMENTS HAVE ALREADY BEEN COMPLETED ON THE DATE OF SEARCH, THE TOTAL INCOME SHALL BE DETERMINED BY RESTRICTING ADDITIONS ONLY TO THOSE WHICH FLOW FROM I NCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH. IF NO INCRIMINATING MATERIAL IS FOUND IN RESPECT OF SUCH COMPLETED ASSESSMENT, THEN THE TOTAL INCOME IN THE PROCEEDINGS U/S 153A SHALL BE COMPUTED BY CONSIDERING THE ORIGINALLY DETERMINED INCOME. IF SOME INCRIMINATING MATERIAL IS FOUND IN RESPECT OF SUCH ASSESSMENT YEARS FOR WHICH THE ASSESSMENT IS NOT PENDING, THEN THE 'TOTAL INCOME' WOULD BE DETERMINED BY CONSIDERING THE ORIGINALLY DETERMINED INCOME PLUS INCOME EMANATING 16 FROM THE INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH. IN THE OTHER SCENARIO OF THE ASSESSMENTS PENDING ON THE DATE OF SEARCH WHICH WOULD ABATE IN TERMS OF SECOND PROVISO TO SEC. 153A(1), THE TOTAL INCOME SHALL BE COMPUTED AFRESH UNINFLUENCED B Y THE FACT WHETHER OR NOT THERE IS ANY INCRIMINATING MATERIAL. IN FACT, THIS IS THE POSITION WHICH FOLLOWS WHEN WE READ THE JUDGMENT OF THE HON'BLE DELHI HIGH COURT IN ANIL KUMAR BHATIA (SUPRA) IN JUXTAPOSITION TO THE SPECIAL BENCH ORDER IN THE CASE OF ALL CARGO GLOBAL LOGISTICS LTD.(SUPRA). 14. SINCE THE SPECIAL BENCH HAS DECIDED THIS ISSUE IN THIS MANNER, IT IS NOT POSSIBLE FOR US TO DEVIATE FROM THE SAME. THERE HAS TO BE SOME CONSISTENCY IN THE VIEW TAKEN BY THE TRIBUNAL. ONCE A SPECIAL BENCH HAS DECIDE D A PARTICULAR ISSUE IN A PARTICULAR MANNER, THEN, THAT BECOMES BINDING ON ALL THE DIVISION BENCHES ACROSS THE COUNTRY UNLESS THERE IS A CONTRARY JUDGMENT OF THE HON BLE SUPREME COURT OR THAT OF SOME HIGH COURT. AS THE LD. DR FAILED TO POINT OUT ANY SPECIF IC AND DIRECT JUDGMENT RENDERED BY THE HON BLE HIGH COURT ON THE ISSUE WHICH IS OBTAINING IN THE PRESENT APPEAL, WE ARE DISINCLINED TO DEVIATE FROM THE SPECIAL BENCH ORDER IN THE CASE OF ALL CARGO (SUPRA). WE, THEREFORE, HOLD IN PRINCIPLE THAT NO ADDITION CAN BE MADE FOR ANY ASSESSMENT YEAR U/S 153A, THE ASSESSMENT FOR WHICH IS NOT PENDING ON THE DATE OF SEARCH, UNLESS ANY INCRIMINATING MATERIAL IS FOUND IN THE COURSE OF SEARCH. 14. IN VIEW OF ABOVE RATIO OF DECISION OF COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF SANJAY AGGARWAL (SUPRA) WE ARE INCLINED TO HOLD THAT THE PRESENT CASE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE, BY THE ABOVE DECISION AS NO ADDITION CAN BE MADE FOR ANY ASSESSMENT U/S 153A OF THE ACT, THE ASSESSMENT 17 FOR WHICH IS NOT PENDI NG ON THE DATE OF SEARCH UNLESS ANY INCRIMINATING MATERIAL FOUND IN THE COURSE OF SEARCH. 15. THUS AS WE HAVE ALREADY HELD AND IT IS ALSO EVIDENT THAT ON THE BASIS OF FACTS QUOTED ABOVE THE ACTION OF THE AO ASSUMING JURISDICTIONAL U/S 153A OF THE ACT IN T HE INSTANT CASE WAS CONTRADICTORY TO THE SECOND PROVISO TO SECTION 153A OF THE ACT INASMUCH AS THE ASSESSMENT FOR THE CONCERN ASSESSMENT YEAR WAS NOT PENDING. THUS , IT IS FURTHER CLEAR THAT WHERE NONE OF THE ASSESSMENT WAS PENDING ON THE DATE OF SEARCH T HE AO PRECLUDED FROM THE RE - AGITATING ISSUES U/S 153A OF THE ACT , WHICH HAVE ATT AINED FINALITY IN THE ORIGINAL ASSESSMENT DEHORS ANY INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH. 16. UNDER THESE CIRCUMSTANCES AND FACTUAL MATRIX OF THE PRESENT CASE WE AGREE WITH THE SUBMISSIONS AND CONTENTIONS OF THE LD. AR OF THE ASSESSEE THAT THE ONLY ACTION LEFT FOR THE AO IN THAT RESPECT AS NO ADDITION WAS CONCEIVED ON INCRIMINATING MATERIAL AS TO D ROP THE PROCEEDINGS. HENCE, WE ARE OF THE CONSIDERED OPINION THAT UNDER THE PROVISION OF THE ACT ONLY THE PROCEEDINGS WHICH ARE PENDING SHALL GOT ABATED. MEANING THEREBY ANY PROCEEDINGS THAT HAS REACHED ITS FINALITY SHALL NOT BE DISTURBED UNLESS THERE IS I NCRIMINATING MATERIAL FOUND INDICATING THE EXISTENCE OF INCOME EMBEDDED IN THE SAID INCRIMINATING MATERIAL/DOCUMENT/EVIDENCE. 18 17. TURNING TO THE FACT OF THE PRESENT CASE, WE NOTE THAT NO INCRIMINATING MATERIAL HAS BEEN PROVED TO HAVE BEEN FOUND DURING THE COURSE OF SEARCH OPERATION WHICH BELONGING TO THE ASSESSEE WARRA NTING THE REASSESSMENT U/S 153A R.W.S. 143(3) OF THE ACT FOR THE IMPUGNED ASSESSMENT YEAR. EVEN ON THE MERITS, WE OBSERVE THAT THE AO HAS INVOKED PROVISION OF SECTION 14A OF THE ACT READ WITH RULE 8D OF THE IT RULES 1962 FOR THE ASSESSMENT YEAR 2006 - 07 BUT THE PROVISION OF RULE 8D OF THE RULES HAVE PROSPECTIVE EFFECTS FROM A.Y. 2008 - 09 ONWARDS. ON THIS LEGAL COUNT ALSO THE IMPUGNED ADDITION IS NOT SUSTAINABLE. 18. IN THE RESULT, WE ARE INCLIN ED TO HOLD THAT THE AO MADE ADDITION ON WRONG AND UNJUSTIFIED REASONS AND BASIS WHICH WAS UPHELD BY LD. CIT(A) WITHOUT CONSIDERING THE FACTUAL MATRIX OF THE CASE AND WITHOUT AFFORDING DUE OPPORTUNITY OF HEARING FOR THE ASSESSEE. IN THIS SITUATION , ADHOC ES TIMATED DISALLOWANCE BY INVOKING PROVISION OF SECTION 14A READ WITH RULE 8D OF THE RULES IS NOT PERMISSIBLE IN AY 2006 - 07 BECAUSE AS PER SECOND PROVISO TO SECTION 153A OF THE ACT INASMUCH AS THE ASSESSMENT FOR THE YEAR UNDER CONSIDERATION WAS NOT PENDING ON THE DATE OF SEARCH THEN THE AO IS PRECLUDED FROM RE - AGITATING THE ISSUES DURING REASSESSMENT PROCEEDINGS U/S 153 A OF THE ACT WHICH HAVE ATT AINE D FINALITY IN THE ORIGINAL ASSESSMENT DEHORS ANY INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH. 19. THE LD. DR HAS FAIRLY ACCEPTED THAT THERE WAS NO INCRIMINATING MATERIAL WAS FOUND DURING THE COURSE OF SEARCH FOR THE YE AR UNDER CONSIDERATION I.E. A.Y. 19 2006 - 07. THEREFORE, ADDITION MADE BY THE AO HAS UPHELD BY THE LD. CIT(A) IS NOT SUSTAINABLE AND WE SET ASIDE THE SAME. ACCORDINGLY GROUND NOS. 1, 2 & 3 OF THE ASSESSEE ARE ALLOWED. 20. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED ALONG WITH DIRECTION GIVEN TO THE AO TO DELETE THE IMPUGNED ADDITION. ORDER PRONOUNCED IN THE OPEN COURT ON 31 /10/2014. SD/ - SD/ - (B. C. MEENA ) (C. M. GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 31 /10/2014 *AK VERMA* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR