M/s ATR WAREHOUSING Pvt.Ltd., Visakhapatnam V. THE DCIT, CENTRAL CIRCLE-2, Visakhapatnam

ITA 71/VIZ/2014

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 0270 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 6 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-09-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 22-07-2015
• Assessment Year: 2002-2003
• Appeal Filed On: 05-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G G; B NARASIMHA SHARMA SR
• Keywords: Reopening of assessment; Unexplained investment; Depreciation; Search and seizure; Loose papers; Source of fund; Question of law; Reasonable cause; Tangible material; Deemed dividend; Block assessment; Commercial expediency; Reason to believe; Reassessment proceedings
• Section: 143(3); 80HHC; 133A; 153A; 32; 147; 68; 148; 263; 132; 10; 139

Judgement Text

ITA NO.S313 TO 319/V/2014 A.T. RAYUDU, VSKP ITA NOS.71 TO 77/V/2014 M/S. ATR WAREHOUSING P LTD. , VSKP & ITA NOS.304 TO 310/V/2014 A. AVNASH, VSKP IN THE INCOME TAX APPELLATE TRIBUNAL, VISHAKHAPATNAM BENCH, VISHAKHAPATNAM BEFORE SHRI D.MANMOHAN, VICE PRESIDENT AND SHRI B.R.BASKARAN, ACCOUNTANT MEMBER I.T.A. NOS.313 TO 319/VIZ/2014 ASSESSMENT YEARS :2002-03 TO 2008-09 A.T.RAYUDU, D.NO.11-08-34, DASAPALLA HILLS, VISAKHAPATNAM VS. DCIT, CENTRAL CIRCLE-1, VISAKHAPATNAM PAN/GIR NO. : AALPA 2921 L (APPELLANT ) .. (RESPONDENT ) I.T.A. NOS.71 TO 77/VIZ/2014 ASSESSMENT YEARS :2002-03 TO 2008-09 M/S. ATR WAREHOUSING PVT LTD., D.NO.11-08-34, DASAPALLA HILLS, MADDILIPALEM, VISAKHAPATNAM VS. DCIT, CENTRAL CIRCLE-2, VISAKHAPATNAM PAN/GIR NO. : AADCA 2121 Q (APPELLANT ) .. (RESPONDENT ) I.T.A. NOS.304 TO 310/VIZ/2014 ASSESSMENT YEARS :2002-03 TO 2008-09 A. AVNASH, D.NO.11-08-34, DASAPALLA HILLS, VISAKHAPATNAM VS. DCIT, CENTRAL CIRCLE-1, VISAKHAPATNAM PAN/GIR NO. : AAMPA 1094 J (APPELLANT ) .. (RESPONDENT ) APPELLANTS BY : SHRI G.V.N. HARI, ADV RESPONDENT BY : SHRI B. NARASIMHA SHARMA, SR. STANDING COUNSEL & SHRI G.GURUSAMY, CIT DR DATE OF HEARING : 24/7/2015 DATE OF PRONOUNCEMENT : 15/9 /2015 ITA NO.S313 TO 319/V/2014 A.T. RAYUDU, VSKP ITA NOS.71 TO 77/V/2014 M/S. ATR WAREHOUSING P LTD. , VSKP ITA NOS.304 TO 310/V/2014 A. AVNASH 2 O R D E R PER BENCH: 1. IN ALL THESE CASES, A COMMON GROUND RELATING TO THE SCOPE OF ASSESSMENTS MADE U/S 153A OF THE ACT HAS BEEN RAISE D BY THE ASSESSEES. 2. ON BEHALF OF THE REVENUE, SHRI NARASIMHA SHA RMA, LD STANDING COUNSEL APPEARED AND ADVANCED HIS ARGUMENTS. ON BEHALF OF THE ASSESSEES, SHRI G.V.N. HARI APPEARED AND ADVANCED HIS ARGUMENTS. H ENCE, WE FIRST PROCEED TO DISPOSE OF THIS LEGAL GROUND RELATING TO THE SCO PE OF ASSESSMENTS MADE U/S 153A OF THE ACT. 3. WE SHALL TAKE UP THE APPEALS FILED BY SHRI A. T. RAYUDU AS LEAD CASE. THE FACTS RELATING TO THE CASE OF SHRI A.T. RAYUDU ARE STATED IN BRIEF. THE REVENUE CARRIED OUT SEARCH AND SEIZURE OPERATIONS UNDER SEC TION 132 OF THE ACT IN THE HANDS OF THE ASSESSEE ON 04.12.2007. CONSEQUENT TH ERETO, THE ASSESSEE FILED RETURNS OF INCOME UNDER SECTION 153A OF THE ACT FOR THE YEARS UNDER CONSIDERATION, WHICH WERE TAKEN UP FOR SCRUTINY BY ISSUING NOTICES UNDER SECTION 143(2) OF THE ACT. THE ASSESSING OFFICER C OMPLETED THE ASSESSMENTS OF ALL THE YEARS BY MAKING FOLLOWING ADDITIONS TO T HE INCOME RETURNED BY THE ASSESSEE:- (A) THE AGRICULTURAL INCOME DECLARED BY THE ASSESS EE WAS ASSESSED UNDER SECTION 68 OF THE ACT BY REJECTING THE CLAIM OF AVAILABILITY OF AGRICULTURAL INCOME. (B) ADDITION TOWARDS DEEMED DIVIDEND UNDER SECTIO N 2(22)(E) OF THE ACT IN ASSESSMENT YEAR 2002-03, 2005-06 AND 2006-07 . 4. IN THE APPEAL FILED BEFORE LEARNED CIT(A), THE ASSESSEE RAISED A LEGAL GROUND THAT THE ADDITIONS COULD BE MADE IN THE CASE OF CONCLUDED ASSESSMENTS, I.E., ASSESSMENTS WHICH WERE NOT ABATE D, ONLY ON THE BASIS OF SEIZED MATERIALS. THE PROVISIONS OF SEC. 153A OF T HE ACT READ AS UNDER:- ITA NO.S313 TO 319/V/2014 A.T. RAYUDU, VSKP ITA NOS.71 TO 77/V/2014 M/S. ATR WAREHOUSING P LTD. , VSKP ITA NOS.304 TO 310/V/2014 A. AVNASH 3 ASSESSMENT IN CASE OF SEARCH OR REQUISITION. 153A (1) NOTWITHSTANDING ANYTHING CONTAINED IN SECT ION 139, SECTION 147, SECTION 148, SECTION 149, SECTION 151 AND SECT ION 153, IN THE CASE OF A PERSON WHERE A SEARCH IS INITIATED UNDER SECTI ON 132 OR BOOKS OF ACCOUNT, OTHER DOCUMENTS OR ANY ASSETS ARE REQUISIT IONED UNDER SECTION 132A AFTER THE 31ST DAY OF MAY, 2003, THE A SSESSING OFFICER SHALL (A) ISSUE NOTICE TO SUCH PERSON REQUIRING HIM TO FU RNISH WITHIN SUCH PERIOD, AS MAY BE SPECIFIED IN THE NOTICE, THE RETU RN OF INCOME IN RESPECT OF EACH ASSESSMENT YEAR FALLING WITHIN SIX ASSESSMENT YEARS REFERRED TO IN CLAUSE (B), IN THE PRESCRIBED FORM A ND VERIFIED IN THE PRESCRIBED MANNER AND SETTING FORTH SUCH OTHER PART ICULARS 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 REQUIRE D TO BE FURNISHED UNDER SECTION 139; (B) ASSESS OR REASSESS THE TOTAL INCOME OF SIX ASSE SSMENT YEARS IMMEDIATELY PRECEDING THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH SUCH SEARCH IS CONDUCTED OR REQUISITI ON IS MADE: PROVIDED THAT THE ASSESSING OFFICER SHALL ASSESS OR REASSESS THE TOTAL INCOME IN RESPECT OF EACH ASSESSMENT YEAR FALLING W ITHIN SUCH SIX ASSESSMENT YEARS: PROVIDED FURTHER THAT ASSESSMENT OR REASSESSMENT, I F ANY, RELATING TO ANY ASSESSMENT YEAR FALLING WITHIN THE PERIOD OF SI X ASSESSMENT YEARS REFERRED TO IN THIS SUB-SECTION PENDING ON THE DATE OF INITIATION OF THE SEARCH UNDER SECTION 132 OR MAKING OF REQUISITION U NDER SECTION 132A, AS THE CASE MAY BE, SHALL ABATE : PROVIDED ALSO THAT THE CENTRAL GOVERNMENT MAY BY RU LES MADE BY IT AND PUBLISHED IN THE OFFICIAL GAZETTE (EXCEPT IN CA SES WHERE ANY ASSESSMENT OR REASSESSMENT HAS ABATED UNDER THE SEC OND PROVISO), SPECIFY THE CLASS OR CLASSES OF CASES IN WHICH THE ASSESSING OFFICER SHALL NOT BE REQUIRED TO ISSUE NOTICE FOR ASSESSING OR RE ASSESSING THE TOTAL INCOME FOR SIX ASSESSMENT YEARS IMMEDIATELY PRECEDI NG THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WH ICH SEARCH IS CONDUCTED OR REQUISITION IS MADE. (2) IF ANY PROCEEDING INITIATED OR ANY ORDER OF ASSE SSMENT OR REASSESSMENT MADE UNDER SUB-SECTION (1) HAS BEEN AN NULLED IN APPEAL OR ANY OTHER LEGAL PROCEEDING, THEN, NOTWITHSTANDIN G ANYTHING CONTAINED IN SUB-SECTION (1) OR SECTION 153, THE AS SESSMENT OR REASSESSMENT RELATING TO ANY ASSESSMENT YEAR WHICH HAS ABATED UNDER THE SECOND PROVISO TO SUB-SECTION (1), SHALL STAND REVIVED WITH EFFECT FROM THE DATE OF RECEIPT OF THE ORDER OF SUCH ANNUL MENT BY THE PRINCIPAL COMMISSIONER OR COMMISSIONER. ITA NO.S313 TO 319/V/2014 A.T. RAYUDU, VSKP ITA NOS.71 TO 77/V/2014 M/S. ATR WAREHOUSING P LTD. , VSKP ITA NOS.304 TO 310/V/2014 A. AVNASH 4 HENCE, AS PER THE PROVISIONS OF SEC. 153A OF THE AC T, THE ASSESSING OFFICER IS REQUIRED TO ASSESS OR REASSESS THE TOTAL INCOME OF SIX ASSESSMENT YEARS IMMEDIATELY PRECEDING THE YEAR IN WHICH THE SEARCH WAS INITIATED. AS PER THE SECOND PROVISO TO SEC. 153A(1) THE ASSESSMENT OR RE ASSESSMENT, IF ANY, PERTAINING TO THE SIX ASSESSMENT YEARS PENDING AS O N THE DATE OF INITIATION OF SEARCH SHALL ABATE. IN THE INSTANT CASE, THE ASSESSM ENT OR REASSESSMENT PERTAINING TO ASSESSMENT YEARS 2002-03 TO 2006-07 W ERE NOT PENDING ON THE DATE OF INITIATION OF SEARCH AND HENCE THE ASSESSME NT OR REASSESSMENT ALREADY CONCLUDED FOR THESE YEARS SHALL NOT ABATE. HENCE THE ASSESSMENT PERTAINING TO AY 2002-03 TO 2006-07 CAN BE CLASSIFI ED AS CONCLUDED ASSESSMENTS. THE LEARNED CIT(A) HAS DISCUSSED ABO UT THE SAME IN PARAGRAPH 3.2 TO 3.6 OF HIS ORDER. THE ASSESSEES CONTENTIONS ARE THAT THE ADDITIONS COULD BE MADE IN THE CASE OF CONCLUDED AS SESSMENTS ONLY ON THE BASIS OF ANY INCRIMINATING MATERIAL FOUND DURING TH E COURSE OF SEARCH. THE ASSESSEE PLACED RELIANCE ON THE FOLLOWING CASE LAW IN SUPPORT OF HIS CONTENTIONS:- A. MEGHMANI ORGANICS LIMITED VS. DY.COMMISSIONER OF INC OME TAX (2010) 6 ITR (TRIB) 360 B. SINHGAD TECHNICAL EDUCATION SOCIETY VS. ACIT (2011) 5 DTR (PUNE)(TRIB) 241 C. KGR EXPORTS, VISAKHAPATNAM VS. JCIT, CENTRAL CIRCLE , VISAKHAPATNAM IN ITA NO.494/V/2007 D. ALL CARGO GLOBAL LOGISTICS LIMITED VS. DY.COMMISSIO NER OF INCOME TAX 137 ITD 287 (MUM) (SB) ACCORDINGLY, IT WAS CONTENDED THAT THE ADDITIONS MA DE BY THE ASSESSMENT RELATING TO AGRICULTURAL INCOME AND DEEMED DIVIDEND WERE NOT BASED UPON ANY SEIZED MATERIAL AND HENCE THEY ARE LIABLE TO BE DELETED. 5. THE LEARNED CIT(A) NOTICED THAT THE RETURNS O F INCOME FILED BY THE ASSESSEE FOR ASSESSMENT YEARS 2002-03 TO 2006-07 HA VE BEEN PROCESSED UNDER SECTION 143(1) OF THE ACT AND ACCORDINGLY TOO K THE VIEW THAT THE PROCESSING OF RETURNS ARE NOT TREATED AS ASSESSMEN TS UNDER THE ACT. ACCORDINGLY, THE LEARNED CIT(A) HELD THAT THE ASSES SMENTS COULD NOT BE SAID TO HAVE BEEN COMPLETED FOR ASSESSMENT YEARS 2002-03 TO 2006-07 AND ACCORDINGLY HELD THAT THE VARIOUS CASE LAWS RELIED UPON BY THE ASSESSEE ARE ITA NO.S313 TO 319/V/2014 A.T. RAYUDU, VSKP ITA NOS.71 TO 77/V/2014 M/S. ATR WAREHOUSING P LTD. , VSKP ITA NOS.304 TO 310/V/2014 A. AVNASH 5 NOT APPLICABLE. IN VIEW OF THE ABOVE, THE LEARNED CIT(A) REJECTED THE CONTENTIONS OF THE ASSESSEE URGED ON THE ABOVE SAID LEGAL ISSUE. 6. LEARNED STANDING COUNSEL SHRI B. NARASIMHA S HARMA, THE LEARNED STANDING COUNSEL APPEARING ON BEHALF OF THE REVENUE , COMMENCED HIS ARGUMENTS EXPLAINING THE METHODOLOGIES PRESCRIBED U NDER THE INCOME TAX ACT FOR ASSESSING THE INCOME OF AN ASSESSEE. HE SUBMITT ED THAT UNDER THE INCOME-TAX ACT, VARIOUS METHODOLOGIES HAVE BEEN PROV IDED FOR ASSESSING THE TOTAL INCOME OF AN ASSESSEE. FIRST OF ALL, THE ASS ESSEE IS REQUIRED TO FILE HIS RETURN OF INCOME DISCLOSING ALL SOURCES OF INCOME I N TERMS OF PROVISIONS OF SEC. 139 OF THE ACT, WHICH SHALL BE ACCEPTED EITHER UNDER SECTION 143(1) OR ASSESSED UNDER SECTION 143(3). IF THE ASSESSING OF FICER HAS REASON TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED THE A SSESSMENT IN RESPECT OF ANY ASSESSEE, THEN HE IS ENTITLED TO REOPEN THE SAI D ASSESSMENT BY ISSUING NOTICE UNDER SECTION 148 OF THE ACT. THERE MAY BE CASES WHERE THE ASSESSING OFFICER MAY NOT HAVE REASON TO BELIEVE AB OUT ESCAPEMENT OF INCOME AND STILL THE REVENUE MAY POSSESS INFORMATIO N ABOUT SUPPRESSION OF INCOME BY ANY PERSON. HENCE THE ACT PROVIDES FOR SE ARCH AND SEIZURE PROCEEDINGS IN SEC. 132 OF THE ACT IN ORDER TO UNEA RTH SUCH KIND OF UNDISCLOSED INCOME OF AN ASSESSEE. HE SUBMITTED TH AT THE INCOME-TAX ACT EARLIER PROVIDED A SPECIAL PROCEDURE FOR ASSESSMENT OF SEARCH CASES UNDER CHAPTER XIV-B OF THE ACT (CALLED BLOCK ASSESSMENT ). ACCORDING TO THE SAID CHAPTER, THE UNDISCLOSED INCOME FOUND DURING THE COURSE OF SEARCH WAS ASSESSED SEPARATELY. HENCE THE DISCLOSED INCOME SH ALL BE ASSESSED UNDER REGULAR PROVISIONS OF THE ACT. HENCE, THE BLOCK ASS ESSMENT WAS MADE SEPARATELY, IN ADDITION TO THE REGULAR ASSESSMENT M ADE UNDER THE PROVISIONS OF SECTION 139 TO 143(3) OF THE ACT. FURTHER CHAPT ER XIV-B PROVIDED THAT THERE WILL BE A SINGLE ASSESSMENT ORDER FOR THE ENT IRE PERIOD COVERED BY THE SEARCH PROCEEDINGS AND THE SAME WAS CALLED AS BLOC K PERIOD. THE ASSESSMENT FOR BLOCK PERIOD WAS STRICTLY CONFINED T O THE UNDISCLOSED INCOME FOUND OUT OF THE SEIZED MATERIALS. HOWEVER, THE SA ID SCHEME OF BLOCK ASSESSMENT HAS BEEN HELD TO BE NOT APPLICABLE FOR T HE SEARCH INITIATED UNDER SECTION 132 OF THE ACT AFTER 31 ST MAY 2003 AS PER THE PROVISIONS OF SECTION 158BI OF THE ACT. ITA NO.S313 TO 319/V/2014 A.T. RAYUDU, VSKP ITA NOS.71 TO 77/V/2014 M/S. ATR WAREHOUSING P LTD. , VSKP ITA NOS.304 TO 310/V/2014 A. AVNASH 6 7. THE LEARNED COUNSEL SUBMITTED THAT THE SEARCH IN THE HANDS OF THE ASSESSEE TOOK PLACE ON 4.12.2007 AND HENCE THE SPEC IAL PROCEDURE PRESCRIBED UNDER CHAPTER XIV-B IS NOT APPLICABLE. THE INCOME-T AX ACT PROVIDED SEPARATE ASSESSMENT PROCEDURE IN CASES OF SEARCH IN ITIATED AFTER 31 ST OF MAY, 2003 AND ASSESSMENT SCHEME IS PRESCRIBED IN SECTION 153A TO 153D OF THE ACT. AS PER PROVISIONS OF 153A OF THE ACT, WHERE T HE SEARCH IS INITIATED AFTER 31 ST MAY, 2003, THE ASSESSING OFFICER SHALL ISSUE NOTIC E TO THE SEARCHED PERSON TO FURNISH RETURNS OF INCOME IN RESPECT OF EACH ASS ESSMENT YEAR FALLING WITHIN SIX ASSESSMENT YEARS IMMEDIATELY PRECEDING THE ASSE SSMENT YEAR RELATING TO THE PREVIOUS YEAR IN WHICH SEARCH WAS INITIATED. I T IS FURTHER PROVIDED IN THE FIRST PROVISO TO SECTION 153A THAT THE ASSESSING OF FICER SHALL ASSESS OR REASSESS THE TOTAL INCOME IN RESPECT OF EACH OF THE ASSESSME NT YEAR FALLING WITHIN SUCH SIX ASSESSMENT YEARS. THE LEARNED STANDING COUNSEL SUBMITTED THE SAID PROCEDURE IS IN CONTRAST WITH THE PROCEDURE THAT HA D BEEN PRESCRIBED FOR ASSESSMENT MADE UNDER ERSTWHILE CHAPTER XIV-B, WHER E THE ASSESSING OFFICER WAS REQUIRED TO PASS A SINGLE ASSESSMENT ORDER FOR THE BLOCK PERIOD. UNDER SEC. 153A OF THE ACT, THE ASSESSING OFFICER IS REQU IRED TO ASSESS OR REASSESS TOTAL INCOME OF EACH OF THE ASSESSMENT YEAR BY PA SSING SEPARATE ASSESSMENT ORDER FOR EACH OF THE SIX YEARS. THE LE ARNED STANDING COUNSEL SUBMITTED THAT THE EXPRESSION TOTAL INCOME IS DEF INED, UNDER SUB-SECTION 45 OF SECTION 2 OF THE ACT, AS UNDER:- 2(45) TOTAL INCOME MEANS THE TOTAL AMOUNT OF INC OME REFERRED TO IN SECTION 5, COMPUTED IN THE MANNER LAID DOWN IN THIS ACT. THE LEARNED STANDING COUNSEL SUBMITTED THAT TOTAL INCOME, FOR THE PURPOSES OF SEC. 153A, SHALL CONSIST OF BOTH DISCLO SED INCOME AS WELL AS UNDISCLOSED INCOME, WHEREAS UNDER THE SPECIAL PROCE DURE PRESCRIBED IN THE ERSTWHILE CHAPTER XIV-B OF THE ACT, THE ASSESSING O FFICER WAS REQUIRED TO COMPUTE UNDISCLOSED INCOME ON THE BASIS OF SEIZED MATERIAL ONLY AND FURTHER HE WAS REQUIRED TO PASS A SINGLE ASSESSMENT ORDER FOR THE BLOCK PERIOD ASSESSING UNDISCLOSED INCOME ONLY. WHERE AS IN THE SCHEME PRESCRIBED UNDER SEC. 153A OF THE ACT, THE ASSESSIN G OFFICER IS REQUIRED TO PASS SEPARATE ASSESSMENT ORDER FOR EACH OF THE ASSE SSMENT YEARS AND FURTHER HE HAS TO ASSESS THE TOTAL INCOME FOR EACH OF THE YEARS, MEANING THEREBY ITA NO.S313 TO 319/V/2014 A.T. RAYUDU, VSKP ITA NOS.71 TO 77/V/2014 M/S. ATR WAREHOUSING P LTD. , VSKP ITA NOS.304 TO 310/V/2014 A. AVNASH 7 THE ASSESSMENT MADE UNDER SECTION 153A OF THE ACT I S NOT RESTRICTED TO SEIZED MATERIALS ALONE. ACCORDINGLY HE SUBMITTED THAT THE VARIOUS CASE LAWS RENDERED IN THE CONTEXT OF CHAPTER XIV-B ASSESSMENT S CANNOT BE TAKEN SUPPORT OF FOR THE ASSESSMENTS COMPLETED UNDER SECT ION 153A OF THE ACT. 8. HE FURTHER SUBMITTED THAT THE CONDITIONS PRE SCRIBED FOR RE-OPENING OF ASSESSMENTS, VIZ., REASON TO BELIEVE ABOUT ESCAPE MENT OF INCOME, AVAILABILITY OF MATERIALS ETC. ARE NOT APPLICABLE F OR THE ASSESSMENTS INITIATED UNDER SECTION 153A OF THE ACT, SINCE THE PROVISIONS OF SEC. 153A OVERRIDES THE PROVISIONS OF SEC. 147 & 148 OF THE ACT. FURTHER T HE ACT DOES NOT PRESCRIBE ANY CONDITION IN SEC. 153A THAT THE ASSESSMENT SHOU LD BE BASED ON THE MATERIALS SEIZED DURING THE COURSE OF SEARCH ONLY. ACCORDINGLY HE SUBMITTED THAT THE ASSESSMENT PROCEEDINGS UNDER SECTION 153A OF THE ACT SHALL BE AUTOMATICALLY TRIGGERED ONCE THE SEARCH IS INITIATE D UNDER SECTION 132 OF THE ACT AFTER 31 ST DAY OF MAY 2003 AND FURTHER THE AVAILABILITY OF SE IZED MATERIALS OR INCRIMINATING MATERIALS IS NOT A CONDITION FOR I NITIATING PROCEEDINGS UNDER SECTION 153A OF THE ACT. HE FURTHER SUBMITTED THAT THE PROVISIONS OF SEC. 147 AUTHORIZES THE ASSESSING OFFICER TO ASSESS SUCH OTH ER INCOME THAT COMES TO HIS NOTICE DURING THE COURSE OF ASSESSMENT PROCEEDI NGS IN ADDITION TO THE INCOME WHICH ESCAPED THE ASSESSMENT AND FOR WHICH T HE ASSESSMENT WAS RE- OPENED. THE ACT HAS PROVIDED SO IN SEC. 147 OF THE ACT, FOR THE REASON THAT THE ASSESSING OFFICER IS REQUIRED TO ASSESS THE TO TAL INCOME OF THE ASSESSEE IN THE RE-OPENED ASSESSMENT ALSO. HE FURTHER SUBMI TTED THAT THE SAME ANALOGY SHOULD BE EXTENDED TO THE ASSESSMENT MADE U NDER SECTION 153A OF THE ACT ALSO, SINCE THE VERY OBJECT OF SEARCH IS TO UNEARTH THE UNDISCLOSED INCOME OR INCOME WHICH HAD EARLIER ESCAPED THE ASSE SSMENT. ACCORDINGLY HE SUBMITTED THAT THE ASSESSING OFFICER IS VERY MUCH E NTITLED TO ASSESS ANY OTHER INCOME THAT COMES TO HIS NOTICE DURING THE COURSE O F ASSESSMENT PROCEEDINGS, EVEN IF THE MATERIAL RELATING TO THE S AME WAS NOT FOUND DURING THE COURSE OF SEARCH, SINCE THE ASSESSING OFFICER I S REQUIRED TO ASSESS OR REASSESS TOTAL INCOME FOR EACH OF THE SIX ASSESSM ENT YEARS. ACCORDINGLY THE LD STANDING COUNSEL SUBMITTED THAT THE CONTENTIONS OF THE ASSESSEE THAT THE ASSESSING OFFICER SHOULD CONFINE HIMSELF WITH THE S EIZED MATERIALS AND THE ADDITIONS COULD BE MADE ON THE BASIS OF SEIZED MATE RIALS ONLY ARE AGAINST THE ITA NO.S313 TO 319/V/2014 A.T. RAYUDU, VSKP ITA NOS.71 TO 77/V/2014 M/S. ATR WAREHOUSING P LTD. , VSKP ITA NOS.304 TO 310/V/2014 A. AVNASH 8 SCHEME OF THE PROVISIONS OF SEC. 153A OF THE ACT. THE LEARNED STANDING COUNSEL REITERATED THAT THE TOTAL INCOME SHALL CONS IST OF BOTH INCOME DISCLOSED BY THE ASSESSEE AND THE INCOME UNDISCLOSED AND/OR E SCAPED THE ASSESSMENT. ACCORDINGLY HE SUBMITTED THAT THE EXISTENCE OF INCR IMINATING MATERIAL SHOULD NOT BE CONSIDERED AS A PRE-CONDITION FOR ASSESSING ANY ESCAPED INCOME WHILE DETERMINING TOTAL INCOME UNDER SECTION 153A OF TH E ACT. ACCORDINGLY, THE LEARNED A.R SUBMITTED THAT THE POWER OF THE ASSESSI NG OFFICER IS NOT RESTRICTED BY ANY CRITERIA UNDER SECTION 153A OF TH E ACT WHILE DETERMINING THE TOTAL INCOME UNDER THAT SECTION. 9. AT THAT STAGE, A SPECIFIC QUERY WAS POSED BY THE BENCH TO THE LEARNED STANDING COUNSEL AS TO WHETHER THE ASSESSING OFFICE R IS ENTITLED TO REVISIT THE CONCLUDED MATTERS IN THE ASSESSMENTS CARRIED OUT UN DER SECTION 153A OF THE ACT. THE BENCH ALSO GAVE AN ILLUSTRATION, VIZ., IF THE ASSESSEE HAD CLAIMED DEPRECIATION ON PRINTERS @ 60% (TREATING IT AS PART OF COMPUTERS) AND IT WAS ALSO ALLOWED IN THE ORIGINAL ASSESSMENT AND IN THAT CASE, CAN THE ASSESSING OFFICER RESTRICT THE DEPRECIATION TO 15% (RATE APPLICABLE TO MACHINERIES) IN THE 153A PROCEEDING. THE LEARNED A .R SUBMITTED THAT SINCE IT WAS A MISTAKE THAT CAME TO THE NOTICE OF THE ASS ESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND SINCE IT HAS R ESULTED IN ESCAPEMENT OF INCOME, IT CAN VERY WELL BE CORRECTED, EVEN IF NO M ATERIAL RELATING TO THE ABOVE SAID MISTAKE WAS STUMBLED UPON DURING THE COU RSE OF SEARCH. IN THIS REGARD, THE LEARNED A.R DREW SUPPORT FROM THE PROVI SIONS OF SEC. 147 OF THE ACT, WHICH EMPOWERS THE ASSESSING OFFICER TO RE-COM PUTE THE LOSS OR THE DEPRECIATION ALLOWANCE. 10. ACCORDINGLY THE LD STANDING COUNSEL SUBMITTED THE VARIOUS CASE LAWS RELIED UPON BY THE ASSESSEE, WHEREIN IT HAS BEEN HE LD THAT THE ADDITIONS COULD BE MADE UNDER SECTION 153A OF THE ACT IN RESPECT OF CONCLUDED ASSESSMENTS ONLY ON THE BASIS ON SEIZED MATERIALS, SHOULD NOT B E TAKEN SUPPORT OF, SINCE THEY HAVE BEEN RENDERED WITHOUT CONSIDERING THE FIR ST PRINCIPLES OF TAXATION SUBMITTED BY HIM. ITA NO.S313 TO 319/V/2014 A.T. RAYUDU, VSKP ITA NOS.71 TO 77/V/2014 M/S. ATR WAREHOUSING P LTD. , VSKP ITA NOS.304 TO 310/V/2014 A. AVNASH 9 11. THE LEARNED STANDING COUNSEL INVITED OUR ATTENTION TO THE DECISION RENDERED BY HON'BLE JURISDICTIONAL ANDHRA PRADESH H IGH COURT IN THE CASE OF GOPAL LAL BHADRUKA VS. DY. COMMISSIONER OF INCOME T AX (2012) 346 ITR 0106 WHEREIN THE JURISDICTIONAL HIGH COURT HAS HELD THAT THE CONDITIONS PRESCRIBED UNDER CHAPTER XIV-B OF THE ACT IS NOT AP PLICABLE TO THE PROCEEDINGS PRESCRIBED IN SECTION 153A/153C OF THE ACT. THE L EARNED COUNSEL RELIED UPON THE FOLLOWING OBSERVATIONS MADE BY THE HON'BLE HIGH COURT IN PARA-17 OF THE ORDER. BY VIRTUE OF SECTION 158BI OF THE ACT, THE VARIOUS P ROVISIONS OF CHAPTER XIV-B OF THE ACT ARE MADE INAPPLICABLE TO P ROCEEDINGS UNDER SECTION 153A/153C OF THE ACT. THE EFFECT OF THIS IS THAT WHILE THE PROVISIONS OF CHAPTER XIV-B OF THE ACT LI MIT THE INQUIRY BY THE ASSESSING OFFICER TO THOSE MATERIALS FOUND D URING THE SEARCH AND SEIZURE OPERATION, NO SUCH LIMITATION IS FOUND IN SO FAR AS SECTION 153A/153C OF THE ACT ARE CONCERNED. THEREFORE, IT FOLLOWS THAT FOR THE PURPOSES OF SECTION 153A/15 3C OF THE ACT THE ASSESSING OFFICER CAN TAKE INTO CONSIDERATION M ATERIAL OTHER THAN WHAT WAS AVAILABLE DURING THE SEARCH AND SEIZU RE OPERATION FOR MAKING AN ASSESSMENT OF THE UNDISCLOSED INCOME OF THE ASSESSEE. THE LEARNED STANDING COUNSEL SUBMITTED THAT THE DEC ISION RENDERED BY JURISDICTIONAL HIGH COURT IS BINDING ON THIS BENCH. THE LEARNED COUNSEL ALSO RELIED UPON THE DECISION OF HON'BLE DELHI HIGH COUR T RENDERED IN THE CASE OF CIT VS. ANIL KUMAR BHATIA (2013) 352 ITR 493 WHEREI N THE HIGH COURT HAS MADE THE FOLLOWING OBSERVATIONS, AFTER CONSIDERING THE PROVISIONS OF CHAPTER XIV-B AND SECTION 153 OF THE ACT. THE POSITION THUS EMERGING IS THAT WHERE ASSESSMEN T OR REASSESSMENT PROCEEDINGS ARE PENDING COMPLETION WHE N THE SEARCH IS INITIATED OR REQUISITION IS MADE, THEY WI LL ABATE MAKING WAY FOR THE ASSESSING OFFICER TO DETERMINE THE TOTA L INCOME OF THE ASSESSEE IN WHICH THE UNDISCLOSED INCOME WOULD ALSO BE INCLUDED, BUT IN CASES WHERE THE ASSESSMENT OR REAS SESSMENT PROCEEDINGS HAVE ALREADY BEEN COMPLETED AND ASSESSM ENT ORDERS HAVE BEEN PASSED DETERMINING THE ASSESSEES TOTAL INCOME AND SUCH ORDERS ARE SUBSISTING AT THE TIME W HEN THE SEARCH OR THE REQUISITION IS MADE, THERE IS NO QUES TION OF ANY ABATEMENT SINCE NO PROCEEDINGS ARE PENDING. IN THIS LATTER SITUATION, THE ASSESSING OFFICER WILL REOPEN THE AS SESSMENTS OR REASSESSMENTS ALREADY MADE (WITHOUT HAVING THE NEED TO FOLLOW THE STRICT PROVISIONS OR COMPLYING WITH THE STRICT CONDITIONS OF SECTIONS 147, 148 AND 151) AND DETERMINE THE TOTAL INCOME OF THE ASSESSEE. SUCH DETERMINATION IN THE ORDERS PAS SED UNDER ITA NO.S313 TO 319/V/2014 A.T. RAYUDU, VSKP ITA NOS.71 TO 77/V/2014 M/S. ATR WAREHOUSING P LTD. , VSKP ITA NOS.304 TO 310/V/2014 A. AVNASH 10 SECTION 153A WOULD BE SIMILAR TO THE ORDERS PASSED IN ANY REASSESSMENT, WHERE THE TOTAL INCOME DETERMINED IN THE ORIGINAL ASSESSMENT ORDER AND THE INCOME THAT ESCAPED ASSESS MENT ARE CLUBBED TOGETHER AND ASSESSED AS THE TOTAL INCOME. IN SUCH A CASE, TO REITERATE, THERE IS NO QUESTION OF ANY ABA TEMENT OF THE EARLIER PROCEEDINGS FOR THE SIMPLE REASON THAT NO P ROCEEDINGS FOR ASSESSMENT OR REASSESSMENT WERE PENDING SINCE T HEY HAD ALREADY CULMINATED IN ASSESSMENT OR REASSESSMENT OR DERS WHEN THE SEARCH WAS INITIATED OR THE REQUISITION WAS MAD E. IN THE LIGHT OF OUR DISCUSSION, WE FIND IT DIFFICULT TO UPHOLD THE VIEW OF THE TRIBUNAL EXPRESSED IN PARA 9.6 OF ITS O RDER THAT SINCE THE RETURNS OF INCOME FILED BY THE ASSESSEE FOR ALL THE SIX YEARS UNDER CONSIDERATION BEFORE THE SEARCH TOOK PLACE WE RE PROCESSED UNDER SECTION 143(1)(A) OF THE ACT, THE P ROVISIONS OF SECTION 153A CANNOT BE INVOKED. THE ASSESSING OFFI CER HAS THE POWER UNDER SECTION 153A TO MAKE ASSESSMENT FOR ALL THE SIX YEARS AND COMPUTE THE TOTAL INCOME OF THE ASSESSEE, INCLUDING THE UNDISCLOSED INCOME, NOTWITHSTANDING THAT THE AS SESSEE FILED RETURNS BEFORE THE DATE OF SEARCH WHICH STOOD PROCE SSED UNDER SECTION 143(1)(A). THE LEARNED STANDING COUNSEL FURTHER PLACED RELIANC E ON THE DECISION RENDERED BY HON'BLE ALLAHABAD HIGH COURT IN THE CAS E OF CIT VS. RAJ KUMAR ARORA (2014) 367 ITR 517 WHEREIN THE HIGH COURT HAS MADE FOLLOWING OBSERVATIONS: CONSEQUENTLY, WE ARE OF THE OPINION THAT IN CASES W HERE THE ASSESSMENT OR REASSESSMENT PROCEEDINGS HAVE ALREADY BEEN COMPLETED AND ASSESSMENT ORDERS HAVE BEEN PASSED, W HICH WERE SUBSISTING WHEN THE SEARCH WAS MADE, THE ASSES SING OFFICER WOULD BE COMPETENT TO REOPEN THE ASSESSMENT PROCEEDING ALREADY MADE AND DETERMINE THE TOTAL INC OME OF THE ASSESSEE. THE ASSESSING OFFICER, WHILE EXERCISING THE POWER UNDER SECTION 153A OF THE ACT, WOULD MAKE ASSESSMEN T AND COMPUTE THE TOTAL INCOME OF THE ASSESSEE INCLUDING THE UNDISCLOSED INCOME, NOTWITHSTANDING THE ASSESSEE HA D FILED THE RETURN BEFORE THE DATE OF SEARCH WHICH STOOD PROCES SED UNDER SECTION 143(1)(A) OF THE ACT. LEARNED STANDING COUNSEL, NEXT, RELIED UPON THE DEC ISION RENDERED BY HON'BLE HIGH COURT OF KARNATAKA IN THE CASE OF M/S. CANARA HOUSING DEVELOPMENT COMPANY VS. DY. COMMISSIONER OF INCOME TAX (ITA NO. 38/2014 DATED 25.7.2014) WHEREIN FOLLOWING OBSERVATIONS HAVE BEEN MADE BY HON'BLE HIGH COURT: THEREFORE, IT IS CLEAR EVEN IF AN ASSESSMENT ORDER IS PASSED UNDER SECTION 143(1) OR 143(3) OF THE ACT, THE ASSE SSING OFFICER ITA NO.S313 TO 319/V/2014 A.T. RAYUDU, VSKP ITA NOS.71 TO 77/V/2014 M/S. ATR WAREHOUSING P LTD. , VSKP ITA NOS.304 TO 310/V/2014 A. AVNASH 11 IS EMPOWERED TO REOPEN THOSE PROCEEDINGS AND REASSE SS THE TOTAL INCOME TAKING NOTE OF THE UNDISCLOSED INCOME, IF ANY, UNEARTHED DURING THE SEARCH. AFTER SUCH REOPENING OF THE ASSESSMENT, THE ASSESSING OFFICER IS EMPOWERED TO A SSESS OR REASSESS THE TOTAL INCOME OF THE AFORESAID YEARS. THE CONDITION PRECEDENT FOR APPLICATION OF SECTION 153A IS THERE SHOULD BE A SEARCH UNDER SECTION 132. INITIATION OF PROCEEDINGS UNDER SECTION 153A IS NOT DEPENDENT ON ANY UNDISCLOSED IN COME BEING UNEARTHED DURING SUCH SEARCH. THE PROVISO TO THE A FORESAID SECTION MAKES IT CLEAR THE ASSESSING OFFICER SHALL ASSESS OR REASSESS THE TOTAL INCOME IN RESPECT OF EACH ASSESS MENT YEAR FALLING WITHIN SUCH SIX ASSESSMENT YEARS. IF ANY AS SESSMENT PROCEEDINGS ARE PENDING WITHIN THE PERIOD OF SIX AS SESSMENT YEARS REFERRED TO IN THE AFORESAID SUB-SECTION ON T HE DATE OF INITIATION OF THE SEARCH UNDER SECTION 132, THE SAI D PROCEEDING SHALL ABATE. IF SUCH PROCEEDINGS ARE ALREADY CONCLU DED BY THE ASSESSING OFFICER BY INITIATION OF PROCEEDINGS UNDE R SECTION 153A, THE LEGAL EFFECT IS THE ASSESSMENT GETS REOPE NED. THE BLOCK ASSESSMENT ROPED IN ONLY THE UNDISCLOSED INCO ME AND THE REGULAR ASSESSMENT PROCEEDINGS WERE PRESERVED, RESU LTING IN MULTIPLE ASSESSMENTS. UNDER SECTION 153A, HOWEVER, THE ASSESSING OFFICER HAS BEEN GIVEN THE POWER TO ASSES S OR REASSESS THE TOTAL INCOME OF THE SIX ASSESSMENT Y EARS IN QUESTION IN SEPARATE ASSESSMENT ORDERS. THE ASSESS ING OFFICER IS EMPOWERED TO REOPEN THOSE PROCEEDINGS AND REASSE SS THE TOTAL INCOME, TAKING NOTE OF THE UNDISCLOSED INCOME , IF ANY, UNEARTHED DURING THE SEARCH. HE HAS BEEN ENTRUSTED WITH THE DUTY OF BRINGING TO TAX THE TOTAL INCOME OF AN ASSE SSEE WHOSE CASE IS COVERED BY SECTION 153A, BY EVEN MAKING REASSESSMENTS WITHOUT ANY FETTERS. THIS MEANS THAT THERE CAN BE ONLY ONE ASSESSMENT ORDER IN RESPECT OF EACH OF THE SIX ASSESSMENT YEARS, IN WHICH BOTH THE DISCLOSED AND T HE UNDISCLOSED INCOME WOULD BE BROUGHT TO TAX. WHEN O NCE THE PROCEEDINGS ARE INITIATED UNDER SECTION 153A OF THE ACT, THE LEGAL EFFECT IS EVEN IN CASE WHERE THE ASSESSMENT O RDER IS PASSED IT STANDS REOPENED. IN THE EYE OF LAW THERE IS NO ORDER OF ASSESSMENT. RE-OPENED MEANS TO DEAL WITH OR BEG IN WITH AGAIN. IT MEANS THE ASSESSING OFFICER SHALL ASSESS OR REASSESS THE TOTAL INCOME OF SIX ASSESSMENT YEARS. ONCE THE ASSESSMENT IS REOPENED, THE ASSESSING AUTHORITY CAN TAKE NOTE OF THE INCOME DISCLOSED IN THE EARLIER RE TURN, ANY UNDISCLOSED INCOME FOUND DURING SEARCH OR AND A LSO ANY OTHER INCOME WHICH IS NOT DISCLOSED IN THE EARL IER RETURN OR WHICH IS NOT UNEARTHED DURING THE SEARCH, IN ORDER TO FIND OUT WHAT IS THE TOTAL INCOME OF EAC H YEAR AND THEN PASS THE ASSESSMENT ORDER. THE LD STANDING COUNSEL SUBMITTED THAT THE DECISION RENDERED BY HONBLE KARNATAKA HIGH COURT HAS BEEN FOLLOWED BY THE BANGA LORE BENCH OF ITA NO.S313 TO 319/V/2014 A.T. RAYUDU, VSKP ITA NOS.71 TO 77/V/2014 M/S. ATR WAREHOUSING P LTD. , VSKP ITA NOS.304 TO 310/V/2014 A. AVNASH 12 TRIBUNAL IN THE CASE OF NANDINI DELUXE VS. ACIT (20 15)(167 TTJ 0746). THE LEARNED STANDING COUNSEL SUBMITTED THAT THE DEC ISION RENDERED BY THE SPECIAL BENCH IN THE CASE OF ALL CARGO GLOBAL L OGISTICS LTD (SUPRA) IS NOT CORRECT LAW. HE INVITED OUR ATTENTION TO PARAG RAPH 58 OF THE ORDER PASSED BY THE SPECIAL BENCH, WHEREIN IT HAD ANSWERE D THE QUESTION NO.1 FORMULATED BY IT. FOR THE SAKE OF CONVENIENCE, WE EXTRACT BELOW THE RELEVANT QUESTION FORMULATED BY THE SPECIAL BENCH A ND THE DECISION TAKEN THEREON:- QUESTION NO.1:- WHETHER, ON THE FACTS AND IN LAW, THE SCOPE OF ASSESSMENT U/S 153A ENCOMPASSES ADDITIONS, NOT B ASED ON ANY INCRIMINATING MATERIAL FOUND, DURING THE COURSE OF SEARCH? 58. THUS, QUESTION NO.1 BEFORE US IS ANSWERED AS U NDER: A) IN ASSESSMENTS THAT ARE ABATED, THE AO RETAINS THE ORIGINAL JURISDICTION AS WELL AS JURISDICTION CONFE RRED ON HIM U/S 153A FOR WHICH ASSESSMENTS SHALL BE MADE FOR EACH O F THE SIX ASSESSMENT YEARS SEPARATELY; B) IN OTHER CASES, IN ADDITION TO THE INCOME THA T HAS ALREADY BEEN ASSESSED, THE ASSESSMENT U/S 153A WILL BE MADE ON THE BASIS OF INCRIMINATING MATERIAL, WHICH IN THE CONTE XT OF RELEVANT PROVISIONS MEANS (I) BOOKS OF ACCOUNT, O THER DOCUMENTS, FOUND IN THE COURSE OF SEARCH BUT NOT PR ODUCED IN THE COURSE OF ORIGINAL ASSESSMENT, AND (II) UNDISCL OSED INCOME OR PROPERTY DISCOVERED IN THE COURSE OF SEARCH. THE LEARNED STANDING COUNSEL SUBMITTED THAT THE DEC ISION RENDERED BY THE SPECIAL BENCH OF TRIBUNAL TO THE EFFECT THAT AS SESSMENT CAN BE MADE IN THE PROCEEDINGS INITIATED UNDER SECTION 153A OF THE ACT ONLY ON THE BASIS OF SEIZED MATERIAL IS NOT CORRECT PROPOSITION OF LAW, IN VIEW OF THE DECISION RENDERED BY HONBLE KARNATAKA HIGH COURT, REFERRED ABOVE AND ALSO IN VIEW OF THE BINDING DECISION OF HON'BLE JUR ISDICTIONAL HIGH COURT IN THE CASE OF GOPAL LAL BHADRUKA (SUPRA). ACCORDINGLY HE CONTENDED THAT THE ASSESSEE CANNOT PLACE RELIANCE ON THE DECISION OF THE SPECIAL BENCH, REFERRED ABOVE. ACCORDINGLY, HE SUBMITTED THAT THE ASSESSING OFFICER IS EMPOWERED TO ASSESS OR REASSESS THE TOTAL INCOME OF THE ASSESSEE ON THE BASIS OF MATERIAL OR INFORMATION AVAILABLE WITH HIM EVEN IF NO SEIZED MATERIAL RELATING TO THE SAME ARE FOUND DURING THE COURSE OF SEARCH. THE LD STANDING COUNSEL ALSO PLACED HIS RELIANCE ON THE DECISION RENDERED BY ITA NO.S313 TO 319/V/2014 A.T. RAYUDU, VSKP ITA NOS.71 TO 77/V/2014 M/S. ATR WAREHOUSING P LTD. , VSKP ITA NOS.304 TO 310/V/2014 A. AVNASH 13 THE JURISDICTIONAL HIGH COURT IN THE CASE OF RAJNIK & CO. (251 ITR 561) AND SUBMITTED THAT THE EXTRAPOLATION OF INCOME ON T HE BASIS OF MATERIALS PERTAINING TO A PART PERIOD IS APPROVED BY THE HON BLE JURISDICTIONAL HIGH COURT. ACCORDINGLY HE SUBMITTED THAT THERE IS NO RE QUIREMENT OF RESTRICTING THE ADDITIONS OR MAKING ASSESSMENT ONLY ON THE BASI S OF SEIZED MATERIALS. 12. THE LD A.R, ON THE CONTRARY, SUBMITTED THAT THE DECISION RENDERED BY THE SPECIAL BENCH IN THE CASE OF ALL CARGO GLOBAL L OGISTICS LTD (SUPRA) HAS SINCE BEEN APPROVED BY THE HONBLE BOMBAY HIGH COUR T BY ITS ORDER DATED 21-04-2015 PASSED IN ITA NO.1969 OF 2013 ALONG WITH THE APPEAL OF ANOTHER ASSESSEE NAMED CONTINENTAL WAREHOUSING CORPORATION (ITA NO. 523 OF 2013) AND ALSO REPORTED IN THE NAME OF LATER. THE LD A.R SUBMITTED THAT THE HONBLE BOMBAY HIGH COURT HAS ALSO CONSIDERED THE D ECISION RENDERED BY THE HONBLE DELHI HIGH COURT IN THE CASE OF ANIL KUMAR BHATIA (SUPRA) AND THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CANARA HOUSING DEVELOPMENT CORPORATION (SUPRA) AND HAS OBSERVED IN CLEAR TERMS THAT THE FINDINGS GIVEN IN THE ABOVE SAID DECISIONS DO NOT WARRANT RECONSIDERA TION OF THE DECISION RENDERED BY HONBLE BOMBAY HIGH COURT IN THE CASE O F MURLI AGRO PRODUCTS. HE SUBMITTED THAT THE HONBLE BOMBAY HIGH COURT HAD RENDERED ITS DECISION IN THE CASE OF MURLI AGRO PRODUCTS IDENTICAL TO THE DECISION RENDERED BY THE SPECIAL BENCH IN THE CASE OF ALL CARGO GLOBAL LOGIS TICS LTD. FURTHER, IN THE ABOVE SAID DECISION, THE HONBLE BOMBAY HIGH COURT HAS CONSIDERED EXTENSIVELY THE OBSERVATIONS MADE BY HONBLE DELHI AND KARNATAKA HIGH COURTS AND ALSO THE SPECIAL BENCH AND FINALLY CONCL UDED THAT THE UNDERSTANDING OF THE SPECIAL BENCH ON THE LEGAL PRO VISION IS NOT PERVERSE NOR DOES IT SUFFER FROM ANY ERROR OF LAW APPARENT ON TH E FACE OF RECORD (PARA 31). 13. THE LD A.R FURTHER SUBMITTED THAT THE ASSES SMENT IS MADE U/S 153A OF THE ACT IN PURSUANCE OF SEARCH AND HENCE THE SCOPE OF PROVISIONS O SECTION 153A AND ALSO THE SCOPE OF ASSESSMENT MADE THERE UN DER SHOULD BE UNDERSTOOD IN THE CONTEXT OF SEARCH PROCEEDINGS & P ROVISIONS OF SEC. 132 ONLY. HE SUBMITTED THAT THE FOLLOWING OBSERVATIONS MADE BY THE HONBLE BOMBAY HIGH COURT IN THE CASE REFERRED SUPRA, AT PA RA 30, EXPLAINS THIS PRINCIPLE IN CLEAR TERMS:- ITA NO.S313 TO 319/V/2014 A.T. RAYUDU, VSKP ITA NOS.71 TO 77/V/2014 M/S. ATR WAREHOUSING P LTD. , VSKP ITA NOS.304 TO 310/V/2014 A. AVNASH 14 30.. NOT ONLY THE FINALIZED ASSESSMENT CANNOT BE TOUCHED BY RESORTING TO THOSE PROVISIONS, BUT EVEN WHILE EXERC ISING THE POWER CAN BE EXERCISED WHERE A SEARCH IS INITIATED UNDER SECTION 132 OR BOOKS OF ACCOUNT, OTHER DOCUMENTS OR ANY ASSETS ARE REQUISITIONED UNDER SECTION 132A AFTER 3 1 ST MARCH, 2003. THERE IS A MANDATE TO ISSUE NOTICES UNDER SE CTION 153(1)(A) AND ASSESSEE OR REASSESS THE TOTAL INCOME OF SIX ASSESSMENT YEARS IMMEDIATELY PRECEDING THE ASSESSME NT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH SUCH SEARCH IS CONDUCTED OR REQUISITION IS MADE. THUS, THE CRUCIAL WORDS S EARCH AND REQUISITION APPEAR IN THE SUBSTANTIVE PROVISION A ND THE PROVISOS. THAT WOULD THROW LIGHT ON THE ISSUE OF A PPLICABILITY OF THE PROVISION. IT BEING ENACTED TO A SEARCH OR REQU ISITION THAT ITS CONSTRUCTION WOULD HAVE TO BE ACCORDINGLY. THA T IS THE CONCLUSION REACHED BY THE DIVISION BENCH IN MURLI A GRO (SUPRA) WITH WHICH WE RESPECTFULLY AGREE. THESE ARE THE CON CLUSIONS WHICH CAN BE REACHED AND UPON READING OF THE LEGAL PROVISIONS IN QUESTION. IN THE CASE OF MURLI AGRO PRODUCTS CASE, THE HONBLE BOMBAY HIGH COURT HAD ANALYSED THE PROVISIONS OF SEC. 153A AND HELD THAT ONLY THE ASSESSMENTS / REASSESSMENTS THAT ARE PENDING ON THE DATE OF CONDU CTING SEARCH U/S 132 OR MAKING REQUISITION U/S 132A OF THE ACT SHALL STAND ABATED AND NOT THE ASSESSMENTS / REASSESSMENTS, WHICH HAS ALREADY BEEN CONCLUDED. THE HONBLE BOMBAY HIGH COURT ALSO REFERRED TO THE CIRC ULAR NO.8 OF 2003 DATED 18-9-2003 (263 ITR (ST.) 61 AT 107) ISSUED BY THE C BDT, WHEREIN THE CBDT HAS CLARIFIED THAT ON INITIATION OF PROCEEDINGS UND ER SECTION 153A, THE PROCEEDINGS PENDING IN APPEAL, REVISION OR RECTIFIC ATION PROCEEDINGS AGAINST FINALIZED ASSESSMENT / REASSESSMENT SHALL NOT ABATE . IN MURLI AGRO PRODUCTS, THE ASSESSING OFFICER REVISITED THE DEDUCTION ALLOW ED U/S 80HHC OF THE ACT IN THE ORIGINAL ASSESSMENT WITHOUT THERE BEING ANY MAT ERIAL TO SHOW THAT THE RELIEF U/S 80HHC WAS ERRONEOUS. AFTER CONSIDERING THE SCOPE OF THE PROVISIONS OF SEC. 153A, THE HONBLE BOMBAY HIGH CO URT CONCLUDED AS UNDER:- ONCE IT IS HELD THAT THE ASSESSMENT FINALIZED ON 29.12.2000 HAS ATTAINED FINALITY, THEN THE DEDUCTION ALLOWED U NDER SECTION 80HHC OF THE INCOME TAX ACT AS WELL AS THE LOSS COMP UTED UNDER THE ASSESSMENT DATED 29.12.2000 WOULD ATTAIN FINALITY. IN SUCH A CASE, THE A.O. WHILE PASSING THE INDEPENDE NT ASSESSMENT ORDER UNDER SECTION 153A READ WITH SECTI ON 143(3) OF THE I.T ACT COULD NOT HAVE DISTURBED THE ASSESSMENT/REASSESSMENT ORDER WHICH HAS ATTAINED FI NALITY, UNLESS THE MATERIALS GATHERED IN THE COURSE OF PROC EEDINGS UNDER SECTION 153A OF THE INCOME TAX ACT ESTABLISH THAT THE ITA NO.S313 TO 319/V/2014 A.T. RAYUDU, VSKP ITA NOS.71 TO 77/V/2014 M/S. ATR WAREHOUSING P LTD. , VSKP ITA NOS.304 TO 310/V/2014 A. AVNASH 15 RELIEFS GRANTED UNDER THE FINALIZED ASSESSMENT/REAS SESSMENT WERE CONTRARY TO THE FACTS UNEARTHED DURING THE COU RSE OF 153A PROCEEDINGS. 14. THE LD A.R SUBMITTED THAT THE HONBLE DELHI HIGH COURT IN THE CASE OF ANIL KUMAR BHATIA (SUPRA) HAS ONLY EXPLAINED THE SC OPE OF THE PROVISIONS OF SEC. 153A OF THE ACT. IT DID NOT CONSIDER ABOUT THE EFFECT OF AVAILABILITY OR OTHERWISE OF ANY INCRIMINATING MATERIALS. IN THIS R EGARD, HE INVITED OUR ATTENTION TO PARAGRAPH 23 OF THE ORDER PASSED IN TH E CASE OF ANIL KUMAR BHATIA (SUPRA):- 23. WE ARE NOT CONCERNED WITH A CASE WHERE NO INC RIMINATING MATERIAL WAS FOUND DURING THE SEARCH CONDUCTED UNDE R SECTION 132 OF THE ACT. WE, THEREFORE, EXPRESS NO OPINION AS TO WHETHER SECTION 153A CAN BE INVOKED IN SUCH A SITUA TION. THAT QUESTION IS THEREFORE LEFT OPEN. THE LD A.R FURTHER SUBMITTED THAT THE DECISION OF H ONBLE ANDHRA PRADESH HIGH COURT IN THE CASE OF GOPAL LAL BHADRUKA (SUPRA ) WAS RENDERED IN THE CONTEXT OF FACTS PREVAILING IN THAT CASE. THE ASS ESSEE THEREIN WAS POWER OF ATTORNEY HOLDER OF THE FIRM NAMED AHURA HOLDINGS AN D THE SAID FIRM WAS ENGAGED IN REAL ESTATE BUSINESS. THE SEARCH REVEAL ED RECEIPT OF ON-MONEY ON SALE OF EIGHT PLOTS. THE FIRM HAD DEVELOPED AND SO LD 32 PLOTS. IN THE STATEMENT, THE ASSESSEE CONFIRMED RECEIPT OF ON-MON EY, BUT CLAIMED THAT IT WAS RECEIVED BY HIM ONLY. THE AO CAME TO THE CONCL USION THAT M/S AHURA HOLDINGS HAD RECEIVED ON-MONEY IN RESPECT OF THE TR ANSACTIONS AND ACCORDINGLY ESTIMATED THE UNDISCLOSED INCOME TO THE BEST OF HIS JUDGMENT. THE ORDER OF AO WAS CONFIRMED BY THE LD CIT(A) AND THE TRIBUNAL. UNDER THESE SET OF FACTS, THE HONBLE HIGH COURT CAME TO THE CONCLUSION THAT THE MATERIALS FOUND DURING THE COURSE OF SEARCH IN THE FORM OF EIGHT SALE DEEDS AND IN THE FORM OF REPLIES GIVEN BY GOPAL TO THE QU ESTIONS POSED TO HIM WITH REGARD TO RECEIPT OF ON-MONEY WERE ADEQUATE TO ENAB LE THE AO TO COME TO AN INFORMED CONCLUSION IN THIS REGARD. ACCORDINGLY, T HE HIGH COURT HELD THAT THE APPRECIATION OF MATERIAL IS WITHIN THE DOMAIN OF TH E AO AND THIS DOES NOT LEAD TO ANY SUBSTANTIAL QUESTION OF LAW, UNLESS THE CONC LUSIONS ARRIVED AT ARE PERVERSE. ACCORDINGLY, THE LEARNED A.R CONTENDED T HAT THE HON'BLE JURISDICTIONAL HIGH COURT HAS NOT RENDERED ANY OPIN ION CONTRADICTORY TO THE ONE EXPRESSED BY THE HON'BLE BOMBAY HIGH COURT. ITA NO.S313 TO 319/V/2014 A.T. RAYUDU, VSKP ITA NOS.71 TO 77/V/2014 M/S. ATR WAREHOUSING P LTD. , VSKP ITA NOS.304 TO 310/V/2014 A. AVNASH 16 15. THE LD A.R FURTHER SUBMITTED THAT THE HONB LE JURISDICTIONAL A.P HIGH COURT HAS ALSO CONSIDERED THE SCOPE OF PROVISIONS O F SEC. 153A IN THE FOLLOWING CASES AND THE HIGH COURT HAS UPHELD THE V IEW TAKEN BY THE TRIBUNAL, BY FOLLOWING THE DECISION RENDERED BY THE SPECIAL BENCH IN THE CASE OF ALL CARGO GLOBAL LOGISTICS LTD. (A) SREE LALITHA CONSTRUCTIONS (ITTA NO.368 OF 2014) (B) M/S HYDERABAD HOUSE PVT LTD (ITTA NO.266 OF 2013) (C) M/S AMR INDIA LTD (ITTA NO.357 /V/2014) HE SUBMITTED THAT THE TRIBUNAL, IN ALL THE THREE CA SES, HAD TAKEN THE VIEW THAT THE ADDITIONS CAN BE MADE IN THE CASE OF CONCLUDED PROCEEDINGS, ONLY ON THE BASIS OF MATERIALS FOUND DURING THE COURSE OF SEARC H AS PRONOUNCED IN THE CASE OF ALL CARGO GLOBAL LOGISTICS LTD BY THE SPECI AL BENCH. 16. WE HAVE HEARD THE RIVAL CONTENTIONS ON THE LEGA L ISSUE AND PERUSED THE RECORD. WITH REGARD TO THE SCOPE OF ASSESSMENT S MADE UNDER THE PROVISIONS OF SEC. 153A OF THE ACT, THE FIRST CONTE NTION OF THE LD STANDING COUNSEL WAS THAT THE EXISTENCE OF UNDISCLOSED INCO ME OR THE AVAILABILITY OF SEIZED MATERIALS WAS NOT A MANDATORY REQUIREMENT FO R ISSUING NOTICES U/S 153A OF THE ACT. THE LD STANDING COUNSEL SUBMITTED THAT THE PROVISIONS OF SEC. 153A SHALL BE TRIGGERED AS SOON AS THE SEARCH IS INITIATED AFTER 31 ST DAY OF MAY, 2003. THE FOLLOWING PROPOSITION LAID DOWN BY HONBLE KARNATAKA HIGH COURT IN THE CASE OF M/S CANARA HOUSING DEVELOPMENT CORPORATION SUPPORTS THE CONTENTIONS OF LD STANDING COUNSEL:- ..THE CONDITION PRECEDENT FOR APPLICATION OF SECT ION 153A IS THERE SHOULD BE A SEARCH UNDER SECTION 132. INITIAT ION OF PROCEEDINGS UNDER SECTION 153A IS NOT DEPENDENT ON ANY UNDISCLOSED INCOME BEING UNEARTHED DURING SUCH SEAR CH. THE LD STANDING COUNSEL FURTHER SUBMITTED THAT THE OBJECT OF THE PROVISIONS OF SEC. 153A IS AKIN TO THE OBJECT BEHIND THE RE-OP ENING OF ASSESSMENT U/S 147 OF THE ACT, I.E., THE ASSESSMENT OF INCOME ESCA PING ASSESSMENT. HE FURTHER SUBMITTED THAT THE ASSESSING OFFICER SHALL BE ENTITLED TO ASSESS THE UNDISCLOSED INCOME, IF ANY, COMING TO HIS NOTICE DU RING THE COURSE OF ITA NO.S313 TO 319/V/2014 A.T. RAYUDU, VSKP ITA NOS.71 TO 77/V/2014 M/S. ATR WAREHOUSING P LTD. , VSKP ITA NOS.304 TO 310/V/2014 A. AVNASH 17 ASSESSMENT PROCEEDINGS, AS IN THE CASE OF PROVISION S OF SEC. 147 OF THE ACT. ACCORDINGLY, THE LD. STANDING COUNSEL SUBMITTED THA T THE ASSESSMENTS MADE U/S 153A OF THE ACT NEED NOT NECESSARILY BE RESTRIC TED TO THE MATERIALS FOUND DURING THE COURSE OF SEARCH AND THE ASSESSING OFFIC ER IS EMPOWERED TO ASSESS OR REASSESS ALL THE INCOME THAT COMES TO HIS NOTICE , SINCE THE AO IS REQUIRED TO DETERMINE THE TOTAL INCOME OF THE ASSESSEE IN RE SPECT OF EACH OF SIX ASSESSMENT YEARS. ON THIS PROPOSITION OF LAW, THE LD STANDING COUNSEL VEHEMENTLY PLACED RELIANCE ON THE FOLLOWING CASE LA W:- (A) CIT VS. ANIL KUMAR BHATIA (2013)(352 ITR 493)(DELH I) (B) CIT VS. RAJ KUMAR ARORA (2014)(367 ITR 517)(ALL) (C) M/S CANARA HOUSING DEVELOPMENT COMPANY VS. DCIT (IT A 38/2014 DATED 25 TH JULY, 2014). A CAREFUL PERUSAL OF THE ORDERS PASSED BY THE HONB LE HIGH COURTS IN THE ABOVE CITED CASES, WE NOTICE THAT ALL THE THREE HIG H COURTS CONCUR WITH THE FOLLOWING PROPOSITIONS ENUNCIATED BY HONBLE DELHI HIGH COURT IN THE CASE OF ANIL KUMAR BHATIA (SUPRA). (A) SECTION 153A STARTS WITH NON-OBSTANTE CLAUSE RELAT ING TO NORMAL ASSESSMENT PROCEDURE WHICH IS COVERED BY SECTIONS 1 39, 147, 148, 149, 151 AND 153. (B) AFTER INTRODUCTION OF SECTIONS 153A TO 153C, THE S INGLE BLOCK ASSESSMENT ORDER HAS BEEN GIVEN A GO-BY. UNDER SEC TION 153A, THE AO IS OBLIGED TO ISSUE NOTICES CALLING UPON THE SEA RCHED PERSON TO FURNISH RETURNS FOR THE SIX ASSESSMENT YEARS IMMEDI ATELY PRECEDING THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR I N WHICH THE SEARCH WAS CONDUCTED OR REQUISITION WAS MADE. (C) THE ASSESSING OFFICER IS EMPOWERED TO ASSESS OR REA SSESS THE TOTAL INCOME OF THE AFORESAID YEARS IN SEPARATE ASSESSME NT ORDERS, MEANING THEREBY, THERE CAN BE ONLY ONE ASSESSMENT O RDER IN RESPECT OF EACH OF THE SIX ASSESSMENT YEARS, IN WHI CH BOTH THE DISCLOSED AND THE UNDISCLOSED INCOME WOULD BE BROUGHT TO TAX. (D) WHERE AN ASSESSMENT ORDER HAD ALREADY BEEN PASSED IN RESPECT OF ALL OR ANY OF THOSE SIX ASSESSMENT YEARS, EITHER UN DER SECTION ITA NO.S313 TO 319/V/2014 A.T. RAYUDU, VSKP ITA NOS.71 TO 77/V/2014 M/S. ATR WAREHOUSING P LTD. , VSKP ITA NOS.304 TO 310/V/2014 A. AVNASH 18 143(1)(A) OR SECTION 143(3) OF THE ACT, THE AO IS EMPOWERED TO REOPEN THOSE PROCEEDINGS AND REASSESS THE TOTAL INC OME, TAKING NOTE OF THE UNDISCLOSED INCOME, IF ANY, UNEA RTHED DURING THE SEARCH . FOR REOPENING OF ASSESSMENTS, THE STRICT PROCEDURE PRESCRIBED IN SEC. 147 & 148 HAVE BEEN RE MOVED BY THE NON OBSTANTE CLAUSE PRESCRIBED IN SEC. 153A(1). TH E TOTAL INCOME DETERMINED IN THE ORIGINAL ASSESSMENT ORDER AND THE INCOME THAT ESCAPED ASSESSMENT ARE CLUBBED TOGETHER AND ASSESSE D AS THE TOTAL INCOME. THERE IS NO QUESTION OF ABATEMENT OF THOSE PROCEEDINGS, SINCE THE PROCEEDING FOR ASSESSMENT OR REASSESSMENT OF THOSE YEARS WAS PENDING AT THE TIME SEARCH WAS INITIATED. (E) IF ANY ASSESSMENT OR REASSESSMENT PROCEEDINGS ARE P ENDING AT THE TIME WHEN THE SEARCH IS INITIATED OR REQUISITION IS MADE, THEN SUCH PROCEEDINGS SHALL ABATE. THE REASON IS OBVIOUS, I .E., THE PROVISIONS OF SEC. 153A DO NOT ENVISAGE MULTIPLE AS SESSMENT ORDERS IN RESPECT OF SIX ASSESSMENT YEARS UNDER CONSIDERAT ION. IT IS PERTINENT TO NOTE THAT THE HONBLE DELHI HIGH COURT IN THE CASE OF ANIL KUMAR BHATIA (SUPRA) HAS LEFT OPEN THE QUESTION AS TO WHETHER SEC. 153A CAN BE INVOKED IN A CASE WHERE NO INCRIMINATING MATERIA L WAS FOUND DURING THE SEARCH CONDUCTED U/S 132 OF THE ACT. HOWEVER, THE HONBLE KARNATAKA HIGH COURT HAS EXPRESSED THE VIEW THAT THE CONDITION PRE CEDENT FOR APPLICATION OF SECTION 153A IS THERE SHOULD BE A SEARCH UNDER SECT ION 132. IT WAS FURTHER HELD THAT INITIATION OF PROCEEDINGS UNDER SECTION 1 53A IS NOT DEPENDENT ON ANY UNDISCLOSED INCOME BEING UNEARTHED DURING SUCH SEARCH. IT WAS FURTHER HELD BY THE HONBLE KARNATAKA HIGH COURT AS UNDER:- WHEN ONCE THE PROCEEDINGS ARE INITIATED UNDER SECTI ON 153A OF THE ACT, THE LEGAL EFFECT IS EVEN IN CASE WHERE THE ASSESSMENT ORDER IS PASSED, IT STANDS REOPENED. IN THE EYES OF LAW THERE IS NO ORDER OF ASSESSMENT. RE-OPENED MEANS TO DEAL WI TH OR BEGIN WITH AGAIN. IT MEANS THE ASSESSING OFFICER SH ALL ASSESS OR REASSESS THE TOTAL INCOME OF SIX ASSESSMENT YEARS. ONCE THE ASSESSMENT IS REOPENED, THE ASSESSING AUTHORITY CAN TAKE NOTE OF THE INCOME DISCLOSED IN THE EARLIER RETURN, ANY UNDISCLOSED INCOME FOUND DURING SEARCH OR AND ALSO ANY OTHER IN COME WHICH IS NOT DISCLOSED IN THE EARLIER RETURN OR WHICH IS NOT UNEARTHED DURING THE SEARCH, IN ORDER TO FIND OUT WHAT IS THE TOTAL INCOME OF EACH YEAR AND THEN PASS ASSESSMENT ORDER. ITA NO.S313 TO 319/V/2014 A.T. RAYUDU, VSKP ITA NOS.71 TO 77/V/2014 M/S. ATR WAREHOUSING P LTD. , VSKP ITA NOS.304 TO 310/V/2014 A. AVNASH 19 IT CAN BE NOTICED THAT THE SPECIAL BENCH IN THE CASE OF ALL CARGO GLOBAL LOGISTICS LTD (SUPRA) HAS CLASSIFIED THE ASSESSMENT YEARS COVERED BY SEC. 153A OF THE ACT INTO TWO CATEGORIES AND TAKEN THE VIEW T HAT THE ASSESSMENTS WHICH ARE NOT PENDING AS ON THE DATE OF INITIATION OF SEA RCH NEED NOT BE RE-OPENED. IN PARAGRAPH 55(D) OF ITS ORDER, THE SPECIAL BENCH H AS OBSERVED AS UNDER:- ..READING SECTION 153A IN ISOLATION AND AS INTERP RETED BY THE LD STANDING COUNSEL WOULD HAVE THE EFFECT THAT IN C ASE OF ASSESSMENT, WHICH IS NOT PENDING AND WHERE NOTHING IS FOUND, THE SAME MAY BE REOPENED. SUCH INTERPRETATION WILL PRODUCE A RESULT THAT AN ASSESSMENT WHICH HAS COME TO AN END AND FOR WHICH THERE IS NO CAUSE OF REOPENING SHALL REVIVE S IMPLY BECAUSE A SEARCH HAS BEEN CONDUCTED. ACCORDING TO US, THIS WILL NOT BE HARMONIOUS INTERPRETATION OF VARIOUS PROVISI ONS OF SECTIONS 132(1) AND 153A. THE ABOVE SAID INTERPRETATION GIVEN BY THE SPECIAL BENCH IS IN CONTRADICTION TO THE INTERPRETATION MADE BY HONBLE DELHI HIGH COURT AND HONBLE KARNATAKA HIGH COURT. IT IS WELL SETTLED PROPOSITION THAT THE DECISION RENDERED BY A HIGH COURT CAN BE PREFERRED OVER THE DECISION RENDERED B Y THE SPECIAL BENCH. IN VIEW OF THE DECISION RENDERED BY HONBLE DELHI AND KARNATAKA HIGH COURTS, WE ARE INCLINED TO AGREE WITH THE CONTENTIONS OF TH E LD STANDING COUNSEL THAT THE PROVISIONS OF SEC. 153A SHALL BE TRIGGERED UPON INITIATION OF SEARCH PROCEEDINGS U/S 132 OF THE ACT, IN WHICH CASE THE C ONCLUDED ASSESSMENTS WILL BE REOPENED AS PER THE PROVISIONS OF SEC. 153A OF T HE ACT AND SUCH KIND REOPENING IS NOT DEPENDENT UPON EXISTENCE OR OTHERW ISE OF ANY UNDISCLOSED INCOME. 17. THE NEXT CONTENTION OF THE LD STANDING COUNSEL WAS THAT THE TOTAL INCOME OF THE SIX ASSESSMENT YEARS CAN BE DETERMINE D BY THE ASSESSING OFFICER BY INCLUDING ALL TYPES OF INCOME THAT COMES TO HIS NOTICE WHILE COMPLETING THE ASSESSMENTS U/S 153A OF THE ACT, IRR ESPECTIVE OF THE FACT THAT THE SEARCH OPERATION HAS REVEALED ANY UNDISCLOSED I NCOME OR NOT. WE NOTICE THAT THE LD STANDING COUNSEL SEEKS TO CANVASS THIS PROPOSITION OF LAW IN RESPECT OF ALL THE SIX ASSESSMENT YEARS. ACCORDING TO LD A.R, THE DECISION RENDERED BY HONBLE KARNATAKA HIGH COURT SUPPORTS T HE SAID PROPOSITION. HOWEVER, IN OUR VIEW, THE PROPOSITIONS LAID DOWN BY THE VARIOUS HIGH COURTS, ON WHICH THE LD STANDING COUNSEL PLACED HEAVY RELIA NCE, ALSO DO NOT SUPPORT ITA NO.S313 TO 319/V/2014 A.T. RAYUDU, VSKP ITA NOS.71 TO 77/V/2014 M/S. ATR WAREHOUSING P LTD. , VSKP ITA NOS.304 TO 310/V/2014 A. AVNASH 20 THAT PROPOSITION OF LAW. THIS IS FOR THE REASON THA T THE PROVISIONS OF SEC. 153A ITSELF SEGREGATES ALL THE SIX ASSESSMENT YEARS INTO TWO CATEGORIES VIZ., (A) THE PROCEEDINGS RELATING TO ASSESSMENT OR REASS ESSMENT, WHICH ARE PENDING ON THE DATE OF INITIATION OF THE SEARCH U/S 132 OF THE ACT OR MAKING OF REQUISITION U/S 132A OF THE ACT. AND (B) THE PROCEEDINGS RELATING TO ASSESSMENT OR REAS SESSMENT, WHICH ARE NOT PENDING ON THAT DATE. IN THE CASE OF FIRST CATEGORY, IT IS EXPRESSLY PROVI DED IN THE SECOND PROVISO TO SEC. 153(1) THAT THE ASSESSMENT OR REASSESSMENT PEN DING SHALL ABATE. THE COURTS HAVE HELD THAT THE ASSESSMENTS, WHICH STOOD CONCLUDED ON THE DATE OF INITIATION OF SEARCH, SHALL NOT ABATE. IN VIEW OF T HE DICHOTOMY PRESCRIBED BY THE ACT, THE SPECIAL BENCH OF TRIBUNAL HAS INTERPRE TED THE SCOPE OF PROVISIONS OF SEC. 153A AS UNDER IN RESPECT OF THE ASSESSMENT YEARS WHICH ABATE AND WHICH DO NOT ABATE:- A) 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 OF THE SIX ASSES SMENT YEARS SEPARATELY; B) IN OTHER CASES, IN ADDITION TO THE INCOME THAT HAS 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) UNDISCLOSED INCOME OR PROPERTY DISCOVERED IN THE CO URSE OF SEARCH. THE ABOVE SAID CONCLUSIONS REACHED BY THE SPECIAL B ENCH HAS SINCE BEEN APPROVED BY HONBLE BOMBAY HIGH COURT, VIDE ITS ORD ER DATED 21-04-2015 PASSED IN THE CASES OF CONTINENTAL WAREHOUSING CORP ORATION (ITA NO.523 OF 2013) AND ALL CARGO GLOBAL LOGISTICS LTD (ITA NO.19 69 OF 2013). THE HONBLE BOMBAY HIGH COURT, IN PARAGRAPH 30 OF ITS ORDER, HA S CLEARLY HELD THAT THE FINALIZED ASSESSMENT CANNOT BE TOUCHED WHILE EXERCI SING THE POWER UNDER SECTION 153A OF THE ACT WHEN A SEARCH WAS INITIATED U/S 132 OR BOOKS OF ITA NO.S313 TO 319/V/2014 A.T. RAYUDU, VSKP ITA NOS.71 TO 77/V/2014 M/S. ATR WAREHOUSING P LTD. , VSKP ITA NOS.304 TO 310/V/2014 A. AVNASH 21 ACCOUNT, OTHER DOCUMENTS OR ANY ASSETS ARE REQUISIT IONED UNDER SECTION 132A AFTER 31 ST MARCH, 2003. 18. ACCORDINGLY IN THE CASE OF ASSESSMENTS, WHICH A RE PENDING ON THE DATE OF INITIATION OF SEARCH, THE ASSESSING OFFICER SHAL L RETAIN THE ORIGINAL JURISDICTION AS WELL AS JURISDICTION CONFERRED ON HIM U/S 153A. IN THAT CASE, HE IS EMPOWERED TO LOOK INTO ANY MATERIAL AND HIS SCOPE O F INVESTIGATION IS NOT RESTRICTED TO SEARCH MATERIALS ALONE, SINCE HIS ORI GINAL JURISDICTION GETS MERGED WITH 153A PROCEEDINGS. 19. HOWEVER, SINCE THE ASSESSMENTS WHICH ARE NOT PE NDING ON THE DATE OF INITIATION OF SEARCH WOULD NOT ABATE, THOSE ASSESSM ENTS WILL REMAIN INTACT AND THEY SHALL GET RE-OPENED BY VIRTUE OF THE PROVISION S OF SEC. 153A OF THE ACT. AT THIS STAGE, A QUESTION THAT ARISES IS AS TO WHEN AND HOW AN ASSESSMENT SHOULD BE CONSIDERED AS PENDING AS ON THE DATE OF I NITIATION OF SEARCH. IN THIS REGARD, THE LD A.R SUBMITTED THAT THE ASSESSME NTS SHALL NOT BE CONSIDERED TO BE PENDING, IF THE PERIOD FOR ISSUING NOTICE U/S 143(2) OF THE ACT HAD EXPIRED BY THE TIME THE SEARCH WAS INITIATE D AND NO NOTICE WAS ISSUED, I.E., THE CASE OF THE LD A.R IS THAT THE AV AILABILITY OF AN ASSESSMENT ORDER U/S 143(3) IS NOT AN ESSENTIAL REQUIREMENT TO COME TO THE CONCLUSION THAT THE PROCEEDINGS ARE NOT PENDING. IN THIS REGA RD, HE PLACED RELIANCE ON THE DECISION RENDERED BY THE MUMBAI BENCH OF TRIBUN AL IN THE CASE OF GURINDER SINGH BAWA VS. DCIT (2014)(150 ITD 40), WH EREIN THE TRIBUNAL HAS OBSERVED THAT AFTER THE EXPIRY OF TIME LIMIT PRESCR IBED FOR ISSUING NOTICE U/S 143(2) OF THE ACT, THE ASSESSMENT CANNOT BE CONSIDE RED TO BE PENDING IF NO NOTICE UNDER THAT SECTION WAS ISSUED. WE ARE INCLI NED TO AGREE WITH THE SAID CONTENTIONS. UNDER THE SCHEME OF THE ACT, AFTER FI LING OF RETURN OF INCOME, THE ASSESSING OFFICER CAN ASSUME JURISDICTION TO AS SESS THE INCOME BY ISSUING NOTICE U/S 143(2) OF THE ACT. THE RETURN OF INCOME IS ACCEPTED AS IT IS, IF THE AO DID NOT INTEND TO SCRUTINIZE THE SAID RETURN OF INCOME. IN THAT CASE, NO NOTICE IS ISSUED U/S 143(2) OF THE ACT. IT IS PERTI NENT TO NOTE THAT THE ACT PRESCRIBES A TIME LIMIT FOR ISSUING NOTICE U/S 143( 2) OF THE ACT AND IT IS WELL SETTLED PROPOSITION THAT THE AO CANNOT ISSUE SUCH N OTICE AFTER THE EXPIRY OF PRESCRIBED TIME LIMIT. HENCE, CONSISTENT WITH THE VIEW TAKEN BY THE CO- ORDINATE BENCH IN THE CASE OF GURINDER SINGH BAWA ( SUPRA), WE ALSO HOLD THAT ITA NO.S313 TO 319/V/2014 A.T. RAYUDU, VSKP ITA NOS.71 TO 77/V/2014 M/S. ATR WAREHOUSING P LTD. , VSKP ITA NOS.304 TO 310/V/2014 A. AVNASH 22 THE ASSESSMENT OF A PARTICULAR YEAR WOULD NOT BE CO NSIDERED TO BE PENDING AS ON THE DATE OF INITIATION OF SEARCH, IF THE PERIOD FOR ISSUING NOTICE U/S 143(2) OF THE ACT HAD EXPIRED BY THE TIME THE SEARCH IS IN ITIATED U/S 132 OF THE ACT AND NO NOTICE WAS ISSUED. IN SUCH KIND OF CASES, THE ASSESSMENT SHALL BE CONSIDERED TO HAVE BECOME FINAL BY OPERATION OF LAW AFTER THE EXPIRY OF TIME LIMIT PRESCRIBED U/S 143(2) OF THE ACT, IF THE AO D ID NOT ISSUE NOTICE U/S 143(2) OF THE ACT. IN THE CASES WHERE THE ASSESSMEN TS WERE NOT CONSIDERED TO BE PENDING, THE QUESTION OF ABATEMENT OF THE SAM E DOES NOT ARISE AT ALL, MEANING THEREBY THE SAME WOULD FALL IN THE CATEGORY OF CONCLUDED ASSESSMENTS. 20. NEXT QUESTION THAT ARISES IS RELATES TO THE SCO PE OF ASSESSMENT OF ASSESSMENT YEARS, WHICH ARE NOT ABATED (I.E., THE P ROCEEDINGS WHICH ARE NOT PENDING ON THE DATE OF INITIATION OF SEARCH). ALL THE COURTS REFERRED ABOVE HAVE EXPRESSED THE VIEW THAT SUCH CONCLUDED ASSESSM ENTS STAND RE-OPENED AND IN THE RE-OPENED ASSESSMENT, THE AO SHALL ASSES S THE INCOME ALREADY ASSESSED AND THE UNDISCLOSED INCOME UNEARTHED DURIN G THE COURSE OF SEARCH. WITH REGARD TO THE SCOPE OF ASSESSING THE TOTAL INC OME IN RESPECT OF CONCLUDED ASSESSMENT, THE HONBLE KARNATAKA HIGH CO URT HAS EXPRESSED THE VIEW THAT IN THE RE-OPENED ASSESSMENT, THE ASSESSIN G AUTHORITY CAN TAKE NOTE OF INCOME DISCLOSED IN THE EARLIER RETURN, ANY UNDI SCLOSED INCOME FOUND DURING SEARCH OR AND ALSO ANY OTHER INCOME WHICH IS NOT DISCLOSED IN THE EARLIER RETURN OR WHICH IS NOT UNEARTHED DURING THE SEARCH, IN ORDER TO FIND OUT WHAT IS THE TOTAL INCOME OF EACH YEAR AND THEN PA SS ASSESSMENT ORDER. HOWEVER, THE SAID VIEW IS IN CONTRADICTION WITH THE VIEW EXPRESSED BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CONTINENTA L WAREHOUSING CORPORATION & ALL CARGO GLOBAL LOGISTICS LTD (SUPRA ), WHEREIN THE HONBLE BOMBAY HIGH COURT HAS EXPRESSED THE FOLLOWING VIEW: - 30.. NOT ONLY THE FINALIZED ASSESSMENT CANNOT BE TOUCHED BY RESORTING TO THOSE PROVISIONS, BUT EVEN WHILE EXERC ISING THE POWER CAN BE EXERCISED WHERE A SEARCH IS INITIATED UNDER SECTION 132 OR BOOKS OF ACCOUNT, OTHER DOCUMENTS OR ANY ASSETS ARE REQUISITIONED UNDER SECTION 132A AFTER 31 ST MARCH, 2003. THERE IS A MANDATE TO ISSUE NOTICES UNDER SECTION 1 53(1)(A) AND ASSESSEE OR REASSESS THE TOTAL INCOME OF SIX ASSESS MENT YEARS IMMEDIATELY PRECEDING THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH SUCH SEARCH IS CONDUCTED OR REQUISITION IS ITA NO.S313 TO 319/V/2014 A.T. RAYUDU, VSKP ITA NOS.71 TO 77/V/2014 M/S. ATR WAREHOUSING P LTD. , VSKP ITA NOS.304 TO 310/V/2014 A. AVNASH 23 MADE. THUS, THE CRUCIAL WORDS SEARCH AND REQUIS ITION APPEAR IN THE SUBSTANTIVE PROVISION AND THE PROVISO S. THAT WOULD THROW LIGHT ON THE ISSUE OF APPLICABILITY OF THE PROVISION. IT BEING ENACTED TO A SEARCH OR REQUISITION THAT ITS CONSTRUCTION WOULD HAVE TO BE ACCORDINGLY. THAT IS THE CONCLUSI ON REACHED BY THE DIVISION BENCH IN MURLI AGRO (SUPRA) WITH WH ICH WE RESPECTFULLY AGREE. THESE ARE THE CONCLUSIONS WHICH CAN BE REACHED AND UPON READING OF THE LEGAL PROVISIONS IN QUESTION. THUS, IT CAN BE SEEN THAT THE HONBLE BOMBAY HIGH C OURT HAS EXPRESSED THE VIEW THAT THE CRUCIAL WORDS SEARCH AND REQUISITI ON APPEARING IN THE SUBSTANTIVE PROVISION AND THE PROVISO WOULD THROW L IGHT ON THE ISSUE OF APPLICABILITY OF PROVISIONS OF SEC. 153A. FURTHER, THE HONBLE BOMBAY HIGH COURT ALSO CONSIDERED DECISION RENDERED BY THE HON BLE KARNATAKA HIGH COURT, REFERRED ABOVE, IN PARAGRAPH 36 OF THE ORDER AND IT HAS ALSO EXTRACTED THE RELEVANT OBSERVATIONS MADE BY THE HONBLE KARNATAKA HIGH COURT. IT WAS FURTHER NOTICED THAT THE HONBLE KARNATAKA HIGH COU RT WAS CONSIDERING THE ISSUE RELATING TO VALIDITY OF INITIATION OF REVISIO N PROCEEDINGS ON AN ASSESSMENT ORDER, AGAINST WHICH PROCEEDINGS U/S 153A HAD ALREA DY BEEN INITIATED CONSEQUENT TO SEARCH OPERATIONS. HENCE THE HONBLE BOMBAY HIGH COURT HAS EXPRESSED THE VIEW THAT THE HONBLE KARNATAKA HIGH COURT HAS ONLY ANALYSED THE PROVISIONS OF SEC. 153A OF THE ACT IN THE CONTE XT OF THE ISSUE RELATING TO VALIDITY OF REVISION PROCEEDINGS AND IT DOES NOT LA Y DOWN ANY PROPOSITION. FOLLOWING OBSERVATIONS MADE BY THE HONBLE BOMBAY H IGH COURT ARE RELEVANT HERE:- 37. WE DO NOT SEE AS TO HOW WHILE ALLOWING THE A PPEAL OF THE ASSESSEE AND SETTING ASIDE THE ORDER OF THE COMMISS IONER UNDER SECTION 263 COULD THE JUDGMENT BE SAID TO BE LAYING DOWN A PROPOSITION AND AS CANVASSED BY MR. PINTO. TRUE IT IS THAT THE ASSESSMENT WHICH HAS TO BE MADE IN PURSUANCE OF THE NOTICE IS IN RELATION TO THE SIX YEARS. AN ORDER WILL HAVE T O BE MADE IN THAT REGARD. WHILE MAKING THE ORDER THE INCOME OR RETURN OF INCOME FILED FOR ALL THESE ASSESSMENT YEARS IS TO B E TAKEN INTO ACCOUNT. HOWEVER, THE SCOPE OF ENQUIRY, THOUGH NOT CONFINED AS HELD BY THE HIGH COURT OF KARNATAKA, IT ESSENTIA LLY REVOLVES AROUND THE SEARCH OR REQUISITION UNDER SECTION 132A AS THE CASE MAY BE. WE DO NOT FIND ANYTHING IN THESE OBSERVATI ONS AND REPRODUCED ABOVE WHICH WOULD ENABLE US TO CONCLUDE THAT THE DIVISION BENCH JUDGMENT OF THIS COURT IN THE CASE O F MURLI AGRO REQUIRES RECONSIDERATION OR DOES NOT LAY DOWN A COR RECT PRINCIPLE OF LAW. ITA NO.S313 TO 319/V/2014 A.T. RAYUDU, VSKP ITA NOS.71 TO 77/V/2014 M/S. ATR WAREHOUSING P LTD. , VSKP ITA NOS.304 TO 310/V/2014 A. AVNASH 24 WE HAVE NOTICED THAT THE HONBLE BOMBAY HIGH COURT HAS UPHELD THE VIEW EXPRESSED BY THE SPECIAL BENCH IN THE CASE OF ALL C ARGO GLOBAL LOGISTICS LTD (SUPRA) THAT IN RESPECT OF NON-ABATED ASSESSMENTS, THE ASSESSMENT WILL BE MADE ON THE BASIS OF BOOKS OF ACCOUNT OR OTHER DOCU MENTS NOT PRODUCED IN THE COURSE OF ORIGINAL ASSESSMENT BUT FOUND IN THE COURSE OF SEARCH, AND UNDISCLOSED INCOME OR UNDISCLOSED PROPERTY DISCOVER ED IN THE COURSE OF SEARCH. THUS, IN A NUTSHELL, IN THE CASE OF UNABAT ED ASSESSMENTS THE ASSESSING OFFICER CAN DETERMINE THE TOTAL INCOME BY CLUBBING THE INCOME ALREADY ASSESSED AND THE UNDISCLOSED INCOME FOUND D URING THE COURSE OF SEARCH AND THE BASIS FOR ASCERTAINING THE SAID UNDI SCLOSED INCOME IS THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS NOT PRODUCED IN THE COURSE OF ORIGINAL ASSESSMENT BUT FOUND IN THE COURSE OF SEARCH AND AL SO THE UNDISCLOSED INCOME OR UNDISCLOSED PROPERTY DISCOVERED IN THE CO URSE OF SEARCH. IT IS PERTINENT TO NOTE THAT THE HONBLE BOMBAY HIGH COUR T HAS RENDERED THE DECISION AFTER CONSIDERING THE DECISION RENDERED BY THE HONBLE KARNATAKA HIGH COURT ALSO. 21. WE FURTHER NOTICE THAT THE HON'BLE RAJASTHA N HIGH COURT HAS ALSO EXPRESSED IDENTICAL VIEW IN THE CASE OF JAI STEEL ( INDIA) VS. ACIT (2013)(259 CTR 0281) IN THE FOLLOWING LINES:- TO CONSIDER THE RIVAL SUBMISSIONS MADE AT THE BAR IN THE CONTEXT OF THE PRESENT CASE AND THE SUBSTANTIAL QUE STION OF LAW FRAMED, THE SCOPE OF ASSESSMENT OR REASSESSMENT OF TOTAL INCOME UNDER SECTION 153A(1)(B) AND THE FIRST AND SECOND PROVISO HAVE TO BE CONSIDERED. FURTHER, FOR ANSWER ING THE ABOVE ISSUES, GUIDANCE WILL HAVE TO BE SOUGHT FROM SECTION 132(1) OF THE ACT, AS SECTION 153A OF THE ACT CANNO T BE READ IN ISOLATION, IN AS MUCH AS, THE SAME IS TRIGGERED ONL Y ON ACCOUNT OF ANY SEARCH/REQUISITION UNDER SECTIONS 132 OR 132 A OF THE ACT. IF ANY BOOKS OF ACCOUNTS OR OTHER DOCUMENTS RELEVANT TO THE ASSESSMENT HAD NOT BEEN PRODUCED IN THE COURSE OF O RIGINAL ASSESSMENT AND, FOUND IN THE COURSE OF SEARCH, SUCH BOOKS OF ACCOUNTS OR OTHER DOCUMENTS HAVE TO BE TAKEN INTO CONSIDERATION WHILE ASSESSING OR REASSESSING THE TO TAL INCOME UNDER THE PROVISIONS OF SECTION 153A OF THE ACT. E VEN IN A CASE WHERE UNDISCLOSED INCOME OR UNDISCLOSED PROPERTY HA S BEEN FOUND AS A CONSEQUENCE OF THE SEARCH, THE SAME WOUL D ALSO BE TAKEN INTO CONSIDERATION. THE REQUIREMENT OF ASSES SMENT OR REASSESSMENT UNDER THE SAID SECTION HAS TO BE READ IN THE ITA NO.S313 TO 319/V/2014 A.T. RAYUDU, VSKP ITA NOS.71 TO 77/V/2014 M/S. ATR WAREHOUSING P LTD. , VSKP ITA NOS.304 TO 310/V/2014 A. AVNASH 25 CONTEXT OF SECTIONS 132 OR 132A OF THE ACT, IN AS M UCH AS, IN CASE NOTHING INCRIMINATING IS FOUND ON ACCOUNT OF S UCH SEARCH OR REQUISITION, THEN THE QUESTION OF REASSESSMENT OF T HE CONCLUDED ASSESSMENTS DOES NOT ARISE, WHICH WOULD REQUIRE MOR E REITERATION AND IT IS ONLY IN THE CONTEXT OF THE AB ATED ASSESSMENT UNDER SECOND PROVISO WHICH IS REQUIRED T O BE ASSESSED. 22. IN THIS REGARD, IT IS ALSO PERTINENT TO REFER TO THE FOLLOWING OBSERVATIONS MADE BY THE SPECIAL BENCH IN THE CASE OF ALL CARGO GLOBAL LOGISTICS LTD (SUPRA):- 57 (F) IN THE CASE OF PARASHURAM POTTERY WORKS C O. LTD VS. ITO (106 ITR 57)(SC), IT HAS BEEN MENTIONED IN THE LAST PARAGRAPH OF THE JUDGMENT THAT THE COURT HAS TO BEA R IN MIND THAT THE POLICY OF LAW IS THAT THERE MUST BE A POIN T OF FINALITY IN ALL LEGAL PROCEEDINGS, THAT STALE ISSUES SHOULD NOT BE REACTIVATED BEYOND A PARTICULAR STAGE AND THAT LAPSE OF TIME MU ST INDUCE REPOSE IN AND SET AT REST JUDICIAL AND QUASI JUDICI AL CONTROVERSIES AS IT MUST IN OTHER SPHERES OF HUMAN ACTIVITY. OUR DECISION IS IN CONSONANCE WITH THIS OBSERVATION. THE DECISION RENDERED BY THE SPECIAL BENCH THAT THE ASSESSING OFFICER CAN MAKE ADDITIONS IN THE CASE OF CONCLUDED ASSESSMENTS ON THE BASIS OF INCRIMINATING MATERIALS IS ALSO BASED UPON THE DECI SION RENDERED BY HONBLE SUPREME COURT IN THE CASE OF PARASHURAM POTTERY WOR KS CO. LTD (SUPRA). 23. WE HAVE EARLIER NOTICED THAT THE HONBLE J URISDICTIONAL ANDHRA PRADESH HIGH COURT HAS ALSO UPHELD BY THE ORDERS PASSED BY THE TRIBUNAL BY FOLLOWING THE DECISION RENDERED BY THE SPECIAL BENCH IN THE C ASE OF ALL CARGO GLOBAL LOGISTICS LTD (SUPRA) IN THE FOLLOWING CASES:- (A) SREE LALITHA CONSTRUCTIONS (ITTA NO.368 OF 2014) (B) M/S HYDERABAD HOUSE PVT LTD (ITTA NO.266 OF 2013) (C) M/S AMR INDIA LTD (ITTA NO.357 /V/2014) FURTHER WE AGREE WITH THE CONTENTIONS OF THE ASSESS EE THAT THE DECISION RENDERED BY THE JURISDICTIONAL HIGH COURT IN THE CA SE OF GOPAL DAS BHADRUKA (SUPRA) HAVE BEEN RENDERED ON THE FACTS PREVAILING IN THOSE CASES, SINCE THE ISSUE RELATING TO CONCLUDED ASSESSMENTS AND PENDING ASSESSMENTS WAS NOT BEFORE THE HONBLE ANDHRA PRADESH HIGH COURT. ON THE CONTRARY, THE ABOVE SAID THREE DECISIONS OF THE JURISDICTIONAL HIGH COU RT COMES TO THE SUPPORT OF THE ASSESSEES CONTENTIONS WITH REGARD TO THE LEGAL PROPOSITION AGITATED ITA NO.S313 TO 319/V/2014 A.T. RAYUDU, VSKP ITA NOS.71 TO 77/V/2014 M/S. ATR WAREHOUSING P LTD. , VSKP ITA NOS.304 TO 310/V/2014 A. AVNASH 26 BEFORE US, BESIDES THE DECISIONS RENDERED BY VARIOU S OTHER HIGH COURTS. ACCORDINGLY, WE ARE OF THE VIEW THAT THE SCOPE OF E NQUIRY IN THE CASE OF UNABATED ASSESSMENTS, I.E., THE ASSESSMENT YEARS IN WHICH PROCEEDINGS ARE NOT PENDING, IS THAT THE UNDISCLOSED INCOME SHOULD BE ASCERTAINED ONLY ON THE BASIS OF MATERIALS FOUND DURING THE COURSE OF SEARC H. IF NO INCRIMINATING MATERIAL SHOWING ANY UNDISCLOSED INCOME WAS FOUND I N THE CASE OF CONCLUDED PROCEEDINGS, THEN THE QUESTION OF MAKING ANY ADDITI ON DOES NOT ARISE. IN THAT CASE, THE ASSESSING OFFICER SHOULD COMPLETE TH E ASSESSMENT OF THOSE YEARS BY DETERMINING THE VERY SAME TOTAL INCOME THA T WAS ASSESSED IN THE EARLIER PROCEEDING. 24. IN VIEW OF THE ABOVE, WE ARE UNABLE TO AGREE WIT H THE CONTENTIONS OF LD STANDING COUNSEL THAT THE ASSESSING OFFICER WOUL D GET UNFETTERED POWERS IN THE CASE OF UNABATED ASSESSMENTS, ONCE THEY WERE REOPENED US 153A OF THE ACT. IN OUR VIEW, IN THE CASE OF UNABATED ASSE SSMENTS, THE TOTAL INCOME SHOULD BE DETERMINED BY THE ASSESSING OFFICER BY CO MBINING THE INCOME ALREADY ASSESSED/DISCLOSED IN THE RETURN OF INCOME AND THE UNDISCLOSED INCOME, IF ANY, FOUND DURING THE COURSE OF SEARCH P ROCEEDING. EVEN OTHERWISE, IT IS SETTLED PROPOSITION OF LAW THAT TH E ASSESSEE IS ENTITLED TO TAKE SUPPORT OF THE DECISION IN HIS FAVOUR, WHEN TWO CON TRADICTORY VIEWS HAVE BEEN EXPRESSED BY THE HIGH COURTS. IN THE INSTANT CASE THE HONBLE JURISDICTIONAL HIGH COURT COMES TO THE SUPPORT OF THE ASSESSEE IN RESPECT OF THE LEGAL PROPOSITION IN ADDITION TO THE THE DECISI ON RENDERED BY THE HONBLE BOMBAY HIGH COURT. ACCORDINGLY, WE FIND MERIT IN T HE CONTENTIONS OF THE ASSESSEE ON THE LEGAL ISSUE. 25. BASED ON THIS LEGAL PROPOSITION AS DISCUSSED AB OVE, WE SHALL EXAMINE OTHER ISSUES. WE SHALL FIRST TAKE UP THE APPEAL FI LED BY SHRI A.T. RAYUDU. (A) A.T. RAYUDU:- 26. THE ASSESSEE SHRI A.T. RAYUDU HAS FILED THESE A PPEALS CHALLENGING THE COMMON ORDER DATED 25.3.2014 PASSED BY LEARNED CIT( A), VISAKHAPATNAM AND THEY RELATE TO THE ASSESSMENT YEARS 2002-03 TO 2008-09. THE GROUNDS OF ITA NO.S313 TO 319/V/2014 A.T. RAYUDU, VSKP ITA NOS.71 TO 77/V/2014 M/S. ATR WAREHOUSING P LTD. , VSKP ITA NOS.304 TO 310/V/2014 A. AVNASH 27 APPEAL URGED BY THE ASSESSEE GIVE RISE TO THE FOLLO WING ISSUES IN ADDITION TO THE LEGAL ISSUE ADJUDICATED IN THE PRECEDING PARAGR APHS:- (A) ADDITION OF AGRICULTURAL INCOME UNDER SECTIO N 68 OF THE ACT IN ALL THE YEARS UNDER CONSIDERATION (B) ADDITION OF DEEMED DIVIDEND IN ASSESSMENT YEAR S 2002-03, 2004- 05 AND 2006-07. 27. LD A.R. SUBMITTED THAT THE PROCEEDINGS RE LATING TO ASSESSMENT YEARS 2002-03 TO 2006-07 ARE NOT PENDING ON THE DATE OF I NITIATION OF SEARCH AND HENCE, THEY FALL UNDER THE CATEGORY OF CONCLUDED PR OCEEDINGS. HE SUBMITTED THAT THE AO IS ENTITLED TO MAKE ADDITION IN RESPECT OF THESE YEARS ON THE BASIS OF INCRIMINATING MATERIALS FOUND DURING THE COURSE OF SEARCH. IN THIS REGARD, LD A.R. FURNISHED A CHART SHOWING FOLLOWING DETAILS : PARTICULARS A.Y.2002-03 AY 2003-04 AY 2004-05 AY 20 05-06 AY 2006-07 DATE OF FILING OF ORIGINAL RETURN 3.7.2002 30.9.2003 5.11.2004 30.7.2005 30.7.2006 INCOME RETURNED 70000 70000 70000 70034 100000 LAST DATE FOR ISSUE OF NOTICE U/S.143(2) 30.7.2003 30.9.2004 30.11.2005 31.8.2006 31.7.2007 DATE OF SEARCH 4.12.2007 4.12.2007 4.12.2007 4.12.2007 4.12.2007 WE HAVE EARLIER NOTICED THAT THE PROCEEDINGS SHALL STAND CONCLUDED BY OPERATION OF LAW, IF THE TIME LIMIT PRESCRIBED UNDE R THE ACT FOR ISSUING NOTICE U/S 143(2) OF THE ACT FOR SCRUTINIZING THE RETURN O F INCOME FILED BY THE ASSESSEE HAS EXPIRED BY THE DATE OF INITIATION OF S EARCH, PROVIDED THE NOTICE HAS NOT BEEN ISSUED BY THAT DATE. A PERUSAL OF ABO VE CHART WOULD SHOW THAT THE PROCEEDINGS OF THE ASSESSMENT YEARS 2003-04 TO 2006-07 WERE NOT PENDING ON THE DATE OF INITIATION OF SEARCH, SINCE THE TIME LIMIT FOR ISSUING NOTICE U/S.143(2) OF THE ACT HAS EXPIRED ON THE DAT E OF INITIATION OF SEARCH AND NOTICES UNDER THAT SECTION HAVE NOT BEEN ISSUED . ACCORDINGLY, WE FIND MERIT IN THE CONTENTIONS OF LD A.R. THAT ADDITION C AN BE MADE IN RESPECT OF THESE FIVE YEARS ONLY ON THE BASIS OF INCRIMINATING MATERIALS FOUND DURING THE COURSE OF SEARCH, SINCE THE SAID CONTENTIONS ARE SU PPORTED BY VARIOUS DECISIONS DISCUSSED IN THE PRECEDING PARAGRAPHS. ITA NO.S313 TO 319/V/2014 A.T. RAYUDU, VSKP ITA NOS.71 TO 77/V/2014 M/S. ATR WAREHOUSING P LTD. , VSKP ITA NOS.304 TO 310/V/2014 A. AVNASH 28 28. THE DETAILS OF ADDITIONS MADE IN THESE FIVE YEA RS ARE TABULATED BELOW: PARTICULARS A.Y.2002-03 AY 2003-04 AY 2004-05 AY 20 05-06 AY 2006-07 AGRICULTURAL INCOME 118000 118000 118000 129000 150000 DEEMED DIVIDEND 1586000 - - 20312000 12487000 A PERUSAL OF ASSESSMENT ORDERS OF THESE FIVE YEARS WOULD SHOW THAT THE ASSESSING OFFICER DID NOT REFER TO ANY OF THE MATER IALS FOUND DURING THE COURSE OF SEARCH FOR MAKING BOTH TYPE OF ADDITIONS CITED A BOVE. THE BASIS FOR MAKING BOTH THESE TYPES OF ADDITION IS THE INFORMATION ALR EADY AVAILABLE IN THE RETURNS OF INCOME FILED PRIOR TO THE DATE OF SEARCH. WE HA VE ALREADY DISCUSSED ABOUT THE SCOPE OF 153A ASSESSMENTS IN RESPECT OF CONCLUD ED PROCEEDINGS. SINCE THE ADDITIONS SHOWN IN THE CHART HAVE BEEN MADE WIT HOUT REFERENCE TO ANY INCRIMINATING MATERIALS, WE ARE OF THE VIEW THAT TH ESE ADDITIONS ARE BEYOND THE SCOPE OF PROVISIONS OF 153A AND HENCE WE FIND M ERIT IN THE CONTENTIONS OF LD A.R. ACCORDINGLY, WE ARE OF VIEW THAT THE AO CO ULD NOT HAVE MADE THESE ADDITIONS AS THEY ARE BEYOND THE SCOPE OF PROVISION S OF SECTION 153A OF THE ACT. 29. ACCORDINGLY, WE SET ASIDE THE ORDERS OF THE LD CIT(A) PASSED IN RESPECT OF ABOVE SAID ADDITIONS MADE IN THE FIVE ASSESSMENT YEARS REFERRED ABOVE AND DIRECT THE AO TO DELETE THEM. 30. THERE IS NO DISPUTE BETWEEN THE PARTIES THAT TH E PROCEEDINGS RELATING TO ASSESSMENT YEARS 2007-08 AND 2008-09 WERE PENDIN G ON THE DATE OF INITIATION OF SEARCH AND HENCE, THE SAID PROCEEDING S SHALL ABATE BY VIRTUE OF PROVISIONS OF SECTION 153A OF THE ACT. FOR THESE T WO YEARS ALSO, THE AO HAS REJECTED THE CLAIM OF AGRICULTURAL INCOME AND, ACCO RDINGLY, ASSESSED THE SAME U/S.68 OF THE ACT. THE ASSESSEE HAD DECLARED AGRIC ULTURAL INCOME OF RS.1,60,000/- EACH IN BOTH THE YEARS. IN THE APPEL LATE PROCEEDINGS, THE LD CIT(A) RESTRICTED THE ADDITION TO 50% OF AGRICULTUR AL INCOME AND THUS ACCEPTED THE REMAINING AMOUNTS AS AGRICULTURAL INCO ME IN BOTH THE YEARS. ITA NO.S313 TO 319/V/2014 A.T. RAYUDU, VSKP ITA NOS.71 TO 77/V/2014 M/S. ATR WAREHOUSING P LTD. , VSKP ITA NOS.304 TO 310/V/2014 A. AVNASH 29 31. LD AR SUBMITTED THAT THE ASSESSEE IS POSSESSING ABOUT 7.68 ACRES OF AGRICULTURAL LAND SITUATED AT TWO DIFFERENT PLACES. HE FURTHER SUBMITTED THAT THE CO-ORDINATE BENCH OF THIS TRIBUNAL HAS EXAMINED THE ISSUE RELATING TO AGRICULTURAL INCOME IN THE HANDS WIFE OF THE ASSESS EE HEREIN NAMED SMT. A. AMMAJI VS ACIT (ITA NO.337 TO 343/VIZ/2014) AND THE TRIBUNAL, VIDE ITS ORDER DATED 21.7.2014 SUSTAINED THE ADDITION TO THE EXTEN T OF 25% OF THE AGRICULTURAL INCOME. ACCORDINGLY, HE PRAYED THAT T HE SAID ORDER OF THE TRIBUNAL MAY BE FOLLOWED IN THE PRESENT CASE ALSO. LD D.R., ON THE CONTRARY, STRONGLY SUPPORTED THE ORDERS PASSED BY THE LD CIT( A). HE SUBMITTED THAT, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE EN QUIRY MADE BY THE AO REVEALED THAT SOME OF THE AGRICULTURAL LANDS ARE BA RREN IN NATURE. FURTHER, THERE WAS CONTRADICTION WITH REGARD TO THE METHOD O F CARRYING ON AGRICULTURAL ACTIVITIES. ACCORDINGLY, HE SUBMITTED THAT LD CIT( A) WAS JUSTIFIED IN SUSTAINING THE ADDITION TO THE EXTENT OF 50% OF THE AGRICULTUR AL INCOME DECLARED BY THE ASSESSEE. 32. WE HAVE GONE THROUGH THE ORDER PASSED BY THE CO -ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF A. AMMAJI (SUPRA). WE NOTICE THAT THE CO- ORDINATE BENCH OF THE TRIBUNAL HAS CONSIDERED AN ID ENTICAL ISSUE IN THE CASE OF A AMMAJI (SUPRA) AND ALSO IN THE CASE OF M/S. AVINA SH ESTATES & RESTORS LTD IN ITA NO.299 TO 302/VIZ/2014 DATED 4.7.2014. IN A LL THESE CASES, THE CO- ORDINATE BENCH HAS TAKEN THE VIEW THAT THE AGRICULT URAL INCOME TO THE EXTENT OF 25% CAN BE DISALLOWED, WHICH SHALL BE ASSESSED A S INCOME FROM OTHER SOURCES. SINCE A UNIFORM VIEW HAS BEEN TAKEN IN OT HER CASES FALLING IN THE GROUP, WE ARE INCLINED TO FOLLOW THE SAME IN THE PR ESENT CASE ALSO. ACCORDINGLY, WE MODIFY THE ORDERS PASSED BY THE LD CIT(A) ON THIS ISSUE IN AY 2007-08 AND 2008-09 AND DIRECT THE AO TO DISALLOW 2 5% OF THE AGRICULTURAL INCOME DECLARED BY THE ASSESSEE IN THESE TWO YEARS AND ASSESSEE THE AMOUNT SO DISALLOWED AS INCOME OF THE ASSESSEE UNDER THE H EAD INCOME FROM OTHER SOURCES. ITA NO.S313 TO 319/V/2014 A.T. RAYUDU, VSKP ITA NOS.71 TO 77/V/2014 M/S. ATR WAREHOUSING P LTD. , VSKP ITA NOS.304 TO 310/V/2014 A. AVNASH 30 (B) A.T.R. WAREHOUSING P LTD:- 33. WE SHALL NOW TAKE UP THE APPEALS FILED BY M/S A TR WAREHOUSING P LTD FOR ASSESSMENT YEARS 2002-03 TO 2008-09. ALL THE APPEALS ARE BARRED BY LIMITATION BY 2 DAYS. THE ASSESSEE HAS FILED PETIT IONS IN ALL THESE YEARS REQUESTING THE BENCH TO CONDONE THE DELAY. IN THE P ETITION, IT IS STATED THAT THE ACCOUNTANT TO WHOM THE JOB OF FILING THE APPEAL S WAS ENTRUSTED DID NOT PAY FILING FEES AND ALSO DID NOT PREFER THE APPEALS IN TIME. WHEN IT CAME TO THE NOTICE OF THE ASSESSEE, IT IMMEDIATELY TOOK STE PS TO FILE THE APPEALS WHICH RESULTED IN A DELAY OF 2 DAYS. 34. WE HAVE HEARD THE PARTIES ON PRELIMINARY ISSUE. HAVING REGARD TO THE SUBMISSIONS MADE IN THE PETITION, WE ARE OF THE VIE W THAT THERE WAS A REASONABLE CAUSE FOR THE ASSESSEE IN FILING THESE A PPEALS BELATEDLY. ACCORDINGLY, WE CONDONE THE DELAY AND ADMIT THE APP EALS. 35. IN ALL THESE APPEALS, THE ASSESSEE IS CHALLENGIN G THE ORDER OF THE LD CIT(A) IN PARTIALLY CONFIRMING THE INTEREST ON LOAN S DISALLOWED BY THE AO HOLDING THAT THERE WAS DIVERSION OF INTEREST BEARIN G FUNDS AS INTEREST FREE ADVANCES TO SISTER CONCERNS. BESIDES ABOVE, THE AS SESSEE ALSO HAS RAISED A LEGAL GROUND RELATING TO SCOPE OF ASSESSMENT UNDER SECTION 153A OF THE ACT IN THE ABSENCE OF INCRIMINATING MATERIALS. 36. THE FACTS RELATING TO THE CASE ARE THAT THE ASS ESSEE COMPANY IS ENGAGED IN THE BUSINESS OF CONSTRUCTION AND LETTING OUT OF INDUSTRIAL GODOWNS. A SEARCH AND SEIZURE OPERATION WAS CONDUCTED IN THE HANDS OF THE ASSESSEE ON 4.12.2007. DURING THE COURSE OF SEARCH PROCEEDI NGS, THE DEPARTMENT SEIZED FOLLOWING TWO DOCUMENTS: A) A LETTER DATED 1.11.2007 WRITTEN BY STATE BANK O F INDIA TO THE ASSESSEE IN CONNECTION WITH THE PROPOSAL FOR AVAILI NG TERM LOAN OF RS.21 CRORES UNDER RENT PLUS SCHEME, WHICH IS EX TRACTED AS UNDER: ITA NO.S313 TO 319/V/2014 A.T. RAYUDU, VSKP ITA NOS.71 TO 77/V/2014 M/S. ATR WAREHOUSING P LTD. , VSKP ITA NOS.304 TO 310/V/2014 A. AVNASH 31 SEIZED DOCUMENT ATR/B/P02/5 DT.7.1.2008 IMP ATR WH LOAN-INTEREST STATE BANK OF INDIA, OFFICE: 2737560,2550 190,2731841 DEVELOPMENT BANKING DIVISION FAX:[phone] MAIN BRANCH, VISAKHAPATNAM E-MAIL: [e-mail] IP PHONE: 90241,902412 SWIFT: SBININBB326 TO: THE MANAGING DIRECTOR, ATR WAREHOUSING PVT LTD., 11-8-34, DASAPALLA HILLS, VISAKHAPATNAM. LR NO.DBD/ DT.1.11.2007 DEAR SIRS, PROPOSAL FOR TERM LOAN OF RS. 21.00 CRORES UNDER RENT PLUS SCHEME WITH REFERENCE TO THE CAPTIONED PROPOSAL, WE HAVE T O ADVISE THAT FOR URGENT INFORMATION OF THE APPROPRIATE AUTH ORITY, WE REQUEST YOU TO ARRANGE TO ADVISE US ON THE FOLLOWIN G POINTS. A. SUBMIT THE AUDITED BALANCE SHEET FOR THE FINAN CIAL YEAR 2006-2007. B. ON PERUSAL OF PROVISIONAL BALANCE SHEET FOR THE END ING MARCH 2007, IT IS OBSERVED THAT THE TANGIBLE NET WORTH ( TNW) AS ON 31.03.2007 IS RS.7.64 CRORES AND THE TOTAL OUTSIDE LIABILITIES (TOL) IS NEARLY RS.45.96 CRORES. THE TOL/TNW IS WOR KED OUT AT 6.01, WHICH IS NOT A HEALTHY INDICATOR. PLEASE SUBS TANTIATE. C. THE COMPANY HAS PAID INTEREST ON TERRA LOANS T O THE TUNE OF RS.3.11 CRORES AGAINST A TOTAL INCOME OF RS.3.73 CRORES, D. THE COMPANY IS SHOWING PROFIT AFTER TAX (PAT) OF RS.0.07 CRORES AND HAVING TERM LOAN LIABILITIES OF RS.26.82 CRORES AS ON 31.03.2007. PLEASE ADVISE HOW SUCH HUGE DEBT WIL L BE REPAID WITH A MEAGER PAT OF RS.0.07 CRORES. E. THE COMPANY HAS INVESTED SUBSTANTIAL AMOUNT O F RS. 13.50 CRORES IN M/S USHA & TUBES & PIPES PVT LT D AND ALSO CROSS INVESTMENTS WERE OBSERVED IN ITS ASSOCIATES. PLEASE ADVISE WHETHER ANY IMPACT OF THESE INVESTMENTS ON ATR WAREHOUSING PVT. LTD. YOURS FAITHFULLY, SD/- ASST. GENERAL MANAGER ITA NO.S313 TO 319/V/2014 A.T. RAYUDU, VSKP ITA NOS.71 TO 77/V/2014 M/S. ATR WAREHOUSING P LTD. , VSKP ITA NOS.304 TO 310/V/2014 A. AVNASH 32 B) A DOCUMENT CONTAINING AUDIT QUERIES, WHEREIN TH E AUDITOR HAD EXPRESSED THE VIEW THAT INTEREST OF 96 LAKHS AR E TO BE DISALLOWED, WHICH IS EXTRACTED BELOW SEIZED DOCUMENT-ATR/B/2 2/15 DT.4.12.2007 BOOKS OF ACCOUNTS OF ATR WAREHOSUING:31.3.2007 AUDIT QUERIES II AND FINAL 1) LAND AT VIZAG- PARK GUEST HOUSE WAS CAPITALIZED DURING THE PREVIOUS FINANCIAL YEAR AND DISCLOSED UNDER THE HEADING FIXED ASSETS. AS IT IS SEEN FROM SOME OF THE SALE D EEDS, IT IS SEEN THAT COMPANY HAS ALREADY EXECUTED SALE DEEDS DURING LAST WEEK OF MARCH 2O06 THOUGH ACTUAL CASH INFLOW WAS DURING THE FINANCIAL YEAR O6-07. COMPANIES' ACCOUNTS ARE TO BE PREPARED ON ACCRUAL BASIS AND NOT ON CASH BASIS. THIS REQUIR ES REVISION OF PREVIOUS YEAR ACCOUNTS I.E. ACCOUNTS OF 31.5.06. CA RE WILL BE TAKEN HOT TO REPEAT THE MISTAKE IT IS NOT ADVISABLE TO SHOW TRANSACTIONS OF PARK GU SSET REAL ESTATE AS A STOCK IN TRADE FOR THE REASONS THAT ME MORANDUM DOES NOT SPECIFICALLY PERMIT THE SAME EITHER IN A O R B OBJECTS. ALSO, IN THE EARLIER YEAR IT IS SHOWN AS A FIXED AS SETS. ANY CHANGE IN TREATMENT NOW WOULD ATTRACT CLOSER LOOK B Y INCOME TAX, SUGGESTED METHOD IS TO SHOW THE SAME AS SHORT TERM CAPITAL GAIN WITHOUT DISTURBING EARLIER YEAR ACCOUN TS. YOU MAY PL DO WHAT EVER YOU FEEL RIGHT 2) THERE WAS AN INVESTMENT OF ABOUT RS. 12 CRORES I N THE SHARES OF USHA TUBES. WE NEED COPIES OF SHARES CE RTIFICATES AND DEBENTURES' STANDING IN THE NAME OF THE COMPANY . IF THE ENTIRE CAPITAL IS HELD BY ATR , WE MAY HAVE TO EXAM INE THE ISSUE FROM THE POINT OF HOLDING AND SUBSIDIARY CONC EPT ALSO. THERE ARE RESTRICTIONS IN INVESTMENT IN SUCH CASES. WE NEED TO EXAMINE THE ISSUE FROM THE ANGLE OF SECTION 372. T HIS EXERCISE WE WOULD DO ONLY AFTER RECEIPT OF CERTIFICATE COPIE S OF SHARES. IS THERE ANY MOU BETWEEN TWO COMPANIES BEFORE INVES TMENT?. IF SO SEND US A COPY. BALANCE SHEET OF USHA TUBE S AS ON 31.3.06 AND ALSO 31.3.20O7 ARE REQUIRED. WHETHER CONSTITUTION OF BOARD OF DIRECTORS OF USHA TUBES IS SAME AS ATR OR OTHER DIRECTORS ARE ALSO INVOLVED ? KINDLY CLARIFY. I AM MAILING YOU THE SCANNED COPIES FOR YOUR REFERENCE. THE DIRECTORS OF BOTH THE COMPANIES ARE SAME 3) THE SOURCE OF INVESTMENT FOR THE ABOVE IS OUT OF BANK LOAN, SINCE THE MAIN BUSINESS OF THE ATR IS NOT T HAT OF INVESTMENT ACTIVITIES, ENTIRE INTEREST PAID ON SUCH BORROWING ARE TO BE DISALLOWED ( SEC.36 ). THE INTEREST PAID IS ABOUT RS.93 LACS. THIS WOULD BE DISALLOWED. THE BUSINESS OF U TPL IS ALSO OF ITA NO.S313 TO 319/V/2014 A.T. RAYUDU, VSKP ITA NOS.71 TO 77/V/2014 M/S. ATR WAREHOUSING P LTD. , VSKP ITA NOS.304 TO 310/V/2014 A. AVNASH 33 WAREHOUSING AND WE INTEND TO MERGE IT INTO ATRWPL. YOU MAY PT EXAMINE THOUGH THE MONEY WAS BORROWED AT THE SAME T IME, THERE ARE RESERVES AND EARNINGS IN THE COMPANY TO I NVEST IN ADDITIONAL ASSETS. THE COMPANY WOULD HAVE BOUGHT ON LY THE ASSETS OF UTPL BUT IN VIEW OF THE HUGE COST OF REGI STRATION WE PREFERRED TAKE OVER OF EQUITY.. 4) IOB VIZAG, ACCOUNT NO.2655 - ON 3.10.06 BANK HAS DEBITED SUM OF RS.14,31,200 AS MARGIN MONEY ON LG. WHAT IS THE TRANSACTION?. DID THE COMPANY ISSUED ANY LETTE R OF GUARANTEE? IF SO WHAT IS THE NATURE AND PURPOSE? IF NOT PLEASE CLARIFY/WE HAVE OBTAINED A IG TO BE ISSUED TO UNDER TAKE WORKS OF M/S. SLUMBERGER WHICH WAS LATER CANCELED. 5) FORM NO. 8 AND 13 2B.12..Q5 CHARGE CREATION FORM S - PAGE NO 6 II PARA CONTAIN A MENTION ABOUT MODIFICAT ION OF CHARGE REGISTERED IN WEST BENGAL ROC. WHAT IS THE T RANSACTION? WHY CHARGE CREATED THERE WHEN THE REGISTERED OFFICE IS STILL IN KARNATAKA. ONLY KARNATAKA ROC HAS POWER TO CREATE A NY CHARGE. BY MISTAKE STATE BANK OF INDIA FILED PAPE RS OF UTPL WHICH IS REGISTERED IN WEST BENGAL IN THE ACCOUNT O F ATRWPL 6) THE COMPANY HAS BORROWED LOANS FROM MRS. ANITA AGARWAL AND ASSOCIATES TO THE EXTENT OF RS.123 LACS . COMPANY BEING A NON SSI PRY. COMPANY CANNOT BORROW FROM PER SONS OTHER THAN MEMBERS. THIS WOULD CREATE PROBLEMS AS PER SECTION 58 A OF COMPANIES ACT. SHE IS AN INDIVIDUAL 7) COMPANY HAS ADVANCED SUM OF ABOUT RS.6.85 CRORES TO VARIOUS PARTIES INCLUDING SISTER CONCERN. THIS WOU LD CREATE PROBLEMS AS PER SECTION 2(22)(E) OF THE ACT AND SHA LL BE DEEMED TO BE AN INCOME IN THE NATURE OF DEEMED DIV IDEND IN THE HANDS OF THE SHAREHOLDER AND COMPANY WOULD BE H AULED UP FOR NON DEDUCTION OF TAX AT SOURCE ON SUCH DEEMED D IVIDEND AS PER SECTION M OF THE ACT. THESE MONEYS WERE INVESTE D TO BUY THE STAKE IN THOSE COMPANIES WHICH HAVE NOT YET DON E THE ALLOTMENT OF SHARES, 37. IT MAY BE NOTICED THAT THE STATE BANK OF INDIA HAD RAISED CERTAIN QUERIES TO ASCERTAIN THE FINANCIAL STRENGTH OF THE ASSESSEE IN CONNECTION WITH THE TERM LOAN SOUGHT BY THE ASSESSEE FROM THE BANK. IN THE AUDIT QUERY, THE AUDITOR, INTER ALIA, HAS EXPRESSED HIS OPINION THAT THE INTEREST ON LOANS MAY BE DISALLOWED. THE ASSESSING OFFICER TREATED BOTH T HE DOCUMENTS AS INCRIMINATING MATERIALS, SINCE THE AUDITOR HIMSELF HAS EXPRESSED THE VIEW THAT THE INTEREST PAID ON LOANS IS LIABLE FOR DISALLOWAN CE U/S.36 OF THE ACT. ITA NO.S313 TO 319/V/2014 A.T. RAYUDU, VSKP ITA NOS.71 TO 77/V/2014 M/S. ATR WAREHOUSING P LTD. , VSKP ITA NOS.304 TO 310/V/2014 A. AVNASH 34 ACCORDINGLY, THE AO EXAMINED THE DETAILS OF ADVANCE S GIVEN TO SISTER CONCERNS AND DISALLOWED THE INTEREST RELATING TO THOSE ADVAN CES IN ALL THE YEARS. 38. IN THE APPELLATE PROCEEDINGS, THE LD CIT(A) GAV E PARTIAL RELIEF. THE RELEVANT DETAILS ARE TABULATED BELOW: PARTICULARS A.Y.2002 - 03 AY 2003 - 04 AY 2004 - 05 AY 2005 - 06 AY 2006 - 07 AY.2007 - 08 AY 2008 - 09 ADDITION MADE U/S.36 80,000 1710000 1824000 923000 768000 9281000 17936000 RELIEF GIVEN BY LD CIT(A) NIL 17562 131757 16551 44683 3379601 7061563 BALANCE IN DISPUTE 80000 1692438 1692243 906449 721 317 5901399 10874437 39. IN THIS CASE ALSO, THE ASSESSEE HAS CONTENDED ABOUT THE SCOPE OF ASSESSMENTS MADE U/S 153A OF THE ACT. THE LD A.R S UBMITTED THAT THE PROCEEDINGS RELATING TO ASSESSMENT YEARS 2002-03 TO 2006-07 ARE NOT PENDING ON THE DATE OF INITIATION OF SEARCH AND HEN CE, THEY FALL UNDER THE CATEGORY OF CONCLUDING PROCEEDINGS. HE SUBMITTED T HAT THE AO IS ENTITLED TO MAKE ADDITION IN RESPECT OF THESE YEARS ON THE BASI S OF INCRIMINATING MATERIALS FOUND DURING THE COURSE OF SEARCH. IN TH IS REGARD, LD A.R. FURNISHED A CHART SHOWING FOLLOWING DETAILS: PARTICULARS A.Y.2002 - 03 AY 2003 - 04 AY 2004 - 05 AY 2005 - 06 AY 2006 - 07 AY.2007 - 08 AY 2008 - 09 DATE OF FILING OF ORIGINAL RETURN 31.10.2002 24.11.200 3 1.11.2004 31.10.2005 29.11.200 6 15.11.2007 13.10.20 08 INCOME RETURNED 103323 146186 834910 3651670 6555737 2428010 9777540 LAST DATE FOR ISSUE OF NOTICE U/S.143(2) 31.10.03 30.11.04 30.11.05 31.10.06 30.11.07 30.9.0 8 30.9.09 DATE OF SEARCH 4.12.07 4.12.07 4.12.07 4.12.07 4.12.07 4.12.07 4.12.07 40. WE HAVE EARLIER NOTICED THAT THE PROCEEDING S SHALL STAND CONCLUDED BY OPERATION OF LAW, IF THE TIME LIMIT PRESCRIBED UNDE R THE ACT FOR ISSUING NOTICE U/S 143(2) OF THE ACT FOR SCRUTINIZING THE RETURN O F INCOME FILED BY THE ASSESSEE HAS EXPIRED BY THE DATE OF INITIATION OF S EARCH, PROVIDED NO NOTICE WAS ISSUED BY THAT DATE. A PERUSAL OF ABOVE CHART WOULD SHOW THAT THE PROCEEDINGS OF THE ASSESSMENT YEARS 2003-04 TO 2006 -07 WERE NOT PENDING ON THE DATE OF INITIATION OF SEARCH, SINCE THE TIME LIMIT FOR ISSUING NOTICE U/S.143(2) OF THE ACT HAS EXPIRED ON THE DATE OF IN ITIATION OF SEARCH AND NO NOTICE HAS BEEN ISSUED. ACCORDINGLY, WE FIND MERI T IN THE CONTENTIONS OF LD ITA NO.S313 TO 319/V/2014 A.T. RAYUDU, VSKP ITA NOS.71 TO 77/V/2014 M/S. ATR WAREHOUSING P LTD. , VSKP ITA NOS.304 TO 310/V/2014 A. AVNASH 35 A.R. THAT ADDITION CAN BE MADE IN RESPECT OF THESE FIVE YEARS ONLY ON THE BASIS OF INCRIMINATING MATERIALS FOUND DURING THE C OURSE OF SEARCH. 41. LD A.R. SUBMITTED THAT THE ONLY DOCUMENTS FOUND DURING THE COURSE OF SEARCH PROCEEDINGS WERE A LETTER WRITTEN BY A BANK AND THE QUERY RAISED BY THE AUDITORS. HE SUBMITTED THAT BOTH THESE DOCUMEN TS CANNOT BE CONSIDERED AS INCRIMINATING MATERIALS, AS THEY DO NOT BRING OU T ANYTHING ABOUT SUPPRESSION OF INCOME. FURTHER, BOTH THESE DOCUMEN TS CONTAIN ONLY PERSONAL VIEWS EXPRESSED BY THE BANK AND AUDITORS AND THE SA ID VIEWS CANNOT BE CONSIDERED TO BE BINDING UPON THE ASSESSEE AS WELL THE ASSESSING OFFICER. IN THIS REGARD, HE PLACED RELIANCE ON THE DECISION REN DERED BY HONBLE BOMBAY HIGH COURT IN THE CASE OF ARONI COMMERCIALS LTD VS DICT(2014) 101 DTR (BOM) 244, WHEREIN THE HONBLE BOMBAY HIGH COURT HA S HELD THAT TANGIBLE MATERIAL WOULD MEAN FACTUAL MATERIAL AND NOT INFERE NCE/OPINION ON MATERIAL ALREADY IN EXISTENCE. HE FURTHER SUBMITTED THAT BO TH BANK AND THE AUDITOR HAVE DRAWN CERTAIN INFERENCES OR EXPRESSED THEIR OP INION ON THE MATERIALS ALREADY AVAILABLE ON RECORD AND HENCE THE VIEW EXPR ESSED BY THE AUDITORS OR THE QUERY RAISED BY THE BANK CANNOT CONSIDERED TO B E INCRIMINATING MATERIALS FALLING WITHIN THE SCOPE OF SECTION 153A OF THE ACT. ACCORDINGLY, HE SUBMITTED THAT THE AO WAS NOT JUSTIFIED IN TREATING THESE MATERIALS AS INCRIMINATING MATERIALS GIVING RIGHT TO THE AO TO D ISTURB THE CONCLUDED PROCEEDINGS. 42. LD AR FURTHER SUBMITTED THAT ON MERITS ALSO , THE IMPUGNED DISALLOWANCE OF INTEREST CANNOT BE MADE, SINCE THER E IS COMMERCIAL EXPEDIENCY IN GIVING THESE LOANS. FURTHER THE ASSE SSEE HAS ALSO UTILIZED OWN FUNDS FOR GIVING LOANS TO SISTER CONCERNS. WITH RE GARD TO THE CLAIM OF COMMERCIAL EXPEDIENCY, THE LD A.R SUBMITTED THAT TH E SISTER CONCERNS ARE ALSO ENGAGED IN SIMILAR LINE OF BUSINESS AND FURTHE R THEY HAVE OFFERED THEIR RESPECTIVE IMMOVABLE PROPERTIES AS COLLATERAL SECUR ITIES TO THE LOANS AVAILED BY THE ASSESSEE FROM BANKS. IN THIS REGARD, HE IN VITED OUR ATTENTION TO A CHART FURNISHED BY HIM GIVING THE RELEVANT DETAILS. ACCORDINGLY, HE SUBMITTED THAT THE DISALLOWANCE OF INTEREST MADE BY THE AO IN ALL ASSESSMENT YEARS, MORE PARTICULARLY IN THE ASSESSMENT YEARS 2007-08 A ND 2008-09, IS LIABLE TO ITA NO.S313 TO 319/V/2014 A.T. RAYUDU, VSKP ITA NOS.71 TO 77/V/2014 M/S. ATR WAREHOUSING P LTD. , VSKP ITA NOS.304 TO 310/V/2014 A. AVNASH 36 BE DELETED. IN THIS REGARD, THE LD AR HAS FILED A WRITTEN SUBMISSION AND FOR THE SAKE OF CONVENIENCE, WE EXTRACT THE SAME AS BEL OW: I) THE APPELLANT SUBMITS THAT THE METHOD ADOPTED BY THE LEARNED CIT{A) IN EXAMINING THE AVAILABILITY OF INT EREST FREE FUNDS IS NOT A PROPER METHOD. THE ASSESSING OFFICER WENT BY 'BALANCE SHEET' METHOD BY CONSIDERING THE ENTIRE AMOUNT OF ADVANCES OUTSTANDING AT THE END OF THE YEAR AS GIVEN FROM BORROWED FUNDS. T HE ASSESSING OFFICER HAS NOT GONE BY 'DIRECT NEXUS' METHOD IN WH ICH CASE HE WOULD HAVE CONSIDERED FOR DISALLOWANCE ONLY THOSE ADVANCE S FOR WHICH THE IMMEDIATE SOURCE IS A BORROWED FUND. WHEN SUCH IS T HE CASE, THE AVAILABILITY OF INTEREST FREE FUNDS IS ALSO TO BE E XAMINED FROM THE BALANCE SHEET OF THE APPELLANT. AS AGAINST THIS, TH E LEARNED CIT(A) SOUGHT TO EXAMINE THIS ASPECT BY APPLYING THE DIREC T NEXUS METHOD IN A SUPERFICIAL MANNER. WHILE HE IGNORED THE OPENING BALANCE OF INTEREST FREE FUNDS, HE DID NOT IGNORE THE OPENING BALANCE O F BORROWED FUNDS. FURTHER, WHEN THERE ARE MIXED FUNDS AND ONE TO ONE NEXUS IS NOT POSSIBLE, THE LEGAL PRESUMPTION IS THAT THE INTERES T FREE FUNDS ARE ATTRIBUTED TO INTEREST FREE ADVANCES. THEREFORE, TH E APPELLANT PRAYS THAT THE ASSESSING OFFICER MAY BE DIRECTED TO EXCLU DE THE AMOUNT OF ADVANCES COVERED BY INTEREST FREE FUNDS AVAILABLE A S PER THE BALANCE SHEET OF THE RESPECTIVE YEARS FOR PURPOSES OF COMPU TING THE INTEREST DISALLOWANCE. (DETAILS OF THE INTEREST FREE FUNDS A RE AT PAGE NOS.268 AND 269 OF THE PAPER BOOK. II) SECONDLY, THE LEARNED CIT(A) IS NOT JUS TIFIED IN JUSTIFIED IN CONSIDERING THE FOLLOWING ADVANCES AS ADVANCES FOR NON-BUSINESS PURPOSES: A) AMOUNT GIVEN TO USHA TUBES & PIPES PRIVATE LIM ITED RS.14,50,00,000 B) AMOUNT GIVEN TO PRAGATHI FERTILISERS LIMITED R S. 3,10,00,000 THE ABOVE TWO COMPANIES ARE SUBSIDIARY COMPANIES OF THE APPELLANT COMPANY AS EVIDENT FROM THE FINANCIAL STATEMENTS, ( PAGE NO.132 OF THE PAPER BOOK). AMOUNT INVESTED IN SUBSIDIARY COMPANIE S IS PART OF BUSINESS PLAN OF THE APPELLANT COMPANY AND THEREFOR E DISALLOWANCE OF INTEREST IS NOT WARRANTED. THE APPELLANT PLACES REL IANCE IN THIS REGARD IN THE CASE OF SA BUILDERS LIMITED VS. CIT(A) & ANR 288 ITR 1 (SC). THE DECISION IN THE CASE OF CIT VS. SWAPNA ROY 331 ITR 367 (ALL) IS COMPLETELY OUT OF CONTEXT AND FACTS IN THAT CASES A RE TOTALLY DIFFERENT FROM THE FACTS IN THE CASE OF THE APPELLANT COMPANY . III) THIRDLY, THE APPELLANT EXPLAINED THE PU RPOSE FOR WHICH THE ADVANCES WERE GIVEN TO THE SISTER CONCERNS. THE LEA RNED C1T(A) DID NOT GIVE DUE CONSIDERATION TO THE FOLLOWING FACTS: A) THAT FOR THE LOANS AVAILED BY THE APPELLANT CO MPANY, PROPERTIES OF THESE SISTER CONCERNS WERE OFFERED AS COLLATERAL SE CURITY. ITA NO.S313 TO 319/V/2014 A.T. RAYUDU, VSKP ITA NOS.71 TO 77/V/2014 M/S. ATR WAREHOUSING P LTD. , VSKP ITA NOS.304 TO 310/V/2014 A. AVNASH 37 B) THE AMOUNTS WERE ADVANCED TO THE SISTER CONCER NS IN ORDER TO PROMOTE THE OVERALL GROWTH OF THE GROUP AS A WHOLE WHICH IN TURN BENEFITS THE APPELLANT COMPANY AS WELL. IN THIS REGARD, THE APPELLANT PLACES RELIANCE ON TH E FOLLOWING DECISIONS: I) ORDER DT.28.6.2013 OF HONBLE A.P. HIGH COURT IN THE CASE OF CIT VS. BALAJI INDUSTRIAL CORPORATION LTD IN ITA NO.143 OF 2013. II) ORDER DT.4.7.2014 IN ITA NO.624/VIZ/2013 IN THE CASE OF DR. CH.SRI PADMAVATHI. 43. LD D.R., ON THE CONTRARY, SUBMITTED THAT THE LD CIT(A) HAS ANALYSED EACH AND EVERY LOANS ADVANCED TO THE SISTER CONCERN S IN EACH OF THE ASSESSMENT YEARS AND HAVE GIVEN A CATEGORICAL REPLY THAT THERE IS NO COMMERCIAL EXPEDIENCY IN GIVING LOANS. THE LD CIT( A) HAS FURTHER EXAMINED THE CLAIM OF AVAILABILITY OF INTEREST FREE FUNDS IN EACH OF THE ASSESSMENT YEARS AND AFTER RECORDING DETAILS OF INTEREST FREE FUNDS, SET ASIDE THE MATTER TO THE FILE OF THE AO TO EXAMINE THE CLAIM AND TAKE APPROP RIATE DECISION IN ACCORDANCE WITH LAW. ACCORDINGLY, LD D.R. SUBMITTE D THAT THERE IS NO INFIRMITY IN THE ORDERS PASSED BY THE LD CIT(A). 44. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. ADMITTEDLY, IN THE ASSESSMENT YEARS UNDER CONSIDERA TION, THE AO HAS DISALLOWED ONLY INTEREST EXPENDITURE CLAIMED BY THE ASSESSEE. THE MATERIALS AVAILABLE WITH THE AO ARE A LETTER WRITTEN BY STATE BANK OF INDIA AND A QUERY LETTER WRITTEN BY THE AUDITORS. ACCORDING TO LD A. R., ALL THESE DOCUMENTS CANNOT BE CONSIDERED AS INCRIMINATING MATERIALS SIN CE THEY ARE MERELY INFERENCE/OPINION EXPRESSED BY TWO DIFFERENT PERSON S ON THE MATERIALS ALREADY AVAILABLE WITH THE ASSESSEE. TO SUPPORT HIS CONTEN TION, LD A.R. ALSO PLACED RELIANCE ON THE DECISION RENDERED BY HONBLE BOMBAY HIGH COURT IN THE CASE OF ARONI COMMERCIALS LTD(SUPRA). THE SAID DECISION HAS BEEN RENDERED IN THE CONTEXT OF PROVISIONS OF SECTION 147 OF THE ACT. F OR REOPENING OF ASSESSMENT U/S.147 OF THE ACT, THE EXISTENCE OF TANGIBLE MATER IAL IS ONE OF THE PRIMARY CONDITIONS. SO IN THAT CONTEXT, HONBLE BOMBAY HIGH COURT HAS EXAMINED THE MATERIAL THAT WAS AVAILABLE WITH THE AO TO INITIATE REASSESSMENT PROCEEDINGS. THE MATERIAL THAT WAS AVAILABLE WITH THE AO WAS INT ERNAL AUDITORS REPORT. HENCE, HONBLE BOMBAY HIGH COURT OPINED THAT THE TA NGIBLE MATERIAL WOULD ITA NO.S313 TO 319/V/2014 A.T. RAYUDU, VSKP ITA NOS.71 TO 77/V/2014 M/S. ATR WAREHOUSING P LTD. , VSKP ITA NOS.304 TO 310/V/2014 A. AVNASH 38 MEAN FACTUAL MATERIAL AND NOT INFERENCE/OPINION OF MATERIALS ALREADY IN EXISTENCE I.E. INTERNAL AUDITORS REPORT VIZ ONLY A N OPINION EXPRESSED BY THE AUDITORS ON THE MATERIALS AVAILABLE WITH THE ASSESS EE. SINCE THE PROCEEDINGS OF THE ASSESSMENT YEARS 2002-03 TO 2006-07 WERE NOT PENDING ON THE DATE OF INITIATION OF SEARCH, THEY FALL UNDER THE CATEGORY OF CONCLUDED PROCEEDINGS AND HENCE, THEY HAVE BEEN REOPENED BY VIRTUE OF PROVISI ONS OF SECTION 153A OF THE ACT. WHILE EXAMINING THE SCOPE OF ASSESSMENT U /S.153A OF THE ACT, IN EARLIER PARAGRAPHS, WE HAVE EXPRESSED THE VIEW THAT CONCLUDED ASSESSMENTS WHICH HAVE BEEN REOPENED CAN BE DISTURBED OR ADDITI ON COULD BE MADE ONLY ON THE BASIS OF INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH PROCEEDINGS. HENCE, IN THE CASE OF 153A PROCEEDING S ALSO, THE EXISTENCE OF MATERIAL IS A PRIMARY CONDITION. HENCE, IN OUR VIE W THE RATIO LAID DOWN BY HONBLE BOMBAY HIGH COURT IN THE CASE OF ARONI COMM ERCIALS LTD (SUPRA) SHALL ALSO SQUARELY APPLY IN 153A PROCEEDINGS ALSO. ACCO RDINGLY, WE HOLD THAT LETTER WRITTEN BY SBI AND QUERY RAISED BY THE AUDITORS CAN NOT BE CONSIDERED AS TANGIBLE OR INCRIMINATING MATERIALS, SINCE THE CONC ERNED OFFICIALS HAVE ONLY EXPRESSED THEIR OPINION IN THOSE LETTERS. ACCORDIN GLY, IN OUR VIEW THEY CANNOT FALL UNDER THE CATEGORY OF INCRIMINATING MATERIALS, WHICH WOULD WARRANT DISTURBANCE OF THE ASSESSMENT ALREADY COMPLETED FOR ASSESSMENT YEARS 2002- 03 TO 2006-07. 45. EVEN OTHERWISE, THOSE LETTERS CANNOT BE CONSIDE RED AS DIRECT MATERIAL WARRANTING ADDITION U/S.36(1)(VI) OF THE ACT, SINCE THE QUESTION OF DISALLOWANCE TO BE MADE UNDER THAT SECTION IS TO BE EXAMINED BY CONSIDERING VARIOUS CRITERIA. IN FACT, THE LD CIT(A) HAS ALSO SET ASIDE THE MATTER TO THE FILE OF THE AO FOR ASSESSMENT YEARS 2006-07 TO 2008-09 AND THE LD CIT(A) HAS GRANTED PARTIAL RELIEF IN RESPECT OF THIS DISALLOWA NCE IN ASSESSMENT YEARS 2003-04 AND 2004-05. THESE FACTS SHOW THAT THE OPI NION EXPRESSED BY THE AUDITORS IS A DEBATABLE ONE AND FURTHER REQUIRES EX AMINATION. HENCE, AS ALREADY EXPRESSED BY US IN EARLIER PARAGRAPHS, THES E TWO DOCUMENTS CANNOT FORM INCRIMINATING MATERIAL AND HENCE, THE ADDITION MADE IN ASSESSMENT YEARS 2002-03 TO 2006-07 SHOULD BE HELD TO HAVE BEE N MADE WITHOUT REFERENCE TO ANY INCRIMINATING MATERIAL. ACCORDING LY, WE SET ASIDE THE ORDER ITA NO.S313 TO 319/V/2014 A.T. RAYUDU, VSKP ITA NOS.71 TO 77/V/2014 M/S. ATR WAREHOUSING P LTD. , VSKP ITA NOS.304 TO 310/V/2014 A. AVNASH 39 OF THE LD CIT(A) PASSED FOR ASSESSMENT YEARS 2002-0 3 TO 2006-07 AND DIRECT THE AO TO DELETE THE INTEREST DISALLOWANCE IN THOSE YEARS. 46. IN RESPECT OF ASSESSMENT YEARS 2007-08 AND 2008-09, THE CONTENTION OF THE ASSESSEE IS THAT THE INVESTMENT MADE IN THE FOLLOWING SUBSIDIARY COMPANIES HAVE BEEN MADE OUT OF COMMERCIAL EXPEDIEN CY AND HENCE THE SAME CANNOT BE CONSIDERED AS DIVERSION OF INTEREST BEARING FUNDS:- A) AMOUNT GIVEN TO USHA TUBES & PIPES PRIVATE LIM ITED RS.14,50,00,000/- B) AMOUNT GIVEN TO PRAGATHI FERTILISERS LIMITED R S.3,10,00,000/- THE ASSESSEE HAS PLACED RELIANCE ON THE DECISION RE NDERED BY HONBLE SUPREME COURT IN THE CASE OF S.A. BUILDERS LTD (SUP RA) AND ALSO THE DECISION RENDERED BY HONBLE ALLAHABAD HIGH COURT IN THE CAS E OF SWAPNA ROY (SUPRA). THE ASSESSEE HAS ALSO PLACED RELIANCE ON THE DECISI ON RENDERED BY THE HONBLE JURISDICTIONAL ANDHRA PRADESH HIGH COURT IN THE CASE OF BALAJI INDUSTRIAL CORPORATION (ITTA NO.143 OF 2013 DATED 2 8.6.2013), WHEREIN THE DECISION OF HONBLE SUPREME COURT RENDERED IN THE C ASE OF S.A. BUILDERS (SUPRA) WAS FOLLOWED. IN ALL THESE CASES IT HAS BE EN HELD THAT THE INVESTMENT MADE IN SUBSIDIARY COMPANIES DOES NOT CALL FOR INTE REST DISALLOWANCE, SINCE THERE IS COMMERCIAL EXPEDIENCY IN MAKING THE INVEST MENTS. WE FURTHER NOTICE THAT THE HONBLE JURISDICTIONAL HIGH COURT HAS EXPR ESSED IDENTICAL VIEW IN ANOTHER CASE ALSO, VIZ., CIT VS. AMBIENCE PROPERTIE S (P) LTD (ITTA NO.441 OF 2014 DATED 16-07-2014), WHEREIN ALSO THE HONBLE AN DHRA PRADESH HIGH COURT NOTICED THAT THE ABOVE SAID ASSESSEE HAD INVE STED BORROWED FUNDS IN THE SISTER CONCERN IN THE FORM OF SUBSCRIBED SHARE CAPITAL. THE HONBLE ANDHRA PRADESH HIGH COURT HELD THAT THE TRIBUNAL IS JUSTIFIED IN CONCLUDING THAT THE MONEY HAS NOT BEEN DIVERTED TO THIRD PARTY AS THE ASSESSEE HAS INVESTED THE AMOUNT IN A SISTER CONCERN. 47. IN VIEW OF THE BINDING DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASES REFERRED ABOVE, NO DISALLOWANCE OUT OF IN TEREST EXPENDITURE IS CALLED FOR IN RESPECT OF INVESTMENT MADE IN SUBSIDIARY COM PANIES. HENCE WE DIRECT THE ASSESSING OFFICER TO EXCLUDE THE INVESTMENT MAD E BY THE ASSESSEE IN THE ITA NO.S313 TO 319/V/2014 A.T. RAYUDU, VSKP ITA NOS.71 TO 77/V/2014 M/S. ATR WAREHOUSING P LTD. , VSKP ITA NOS.304 TO 310/V/2014 A. AVNASH 40 TWO COMPANIES REFERRED ABOVE FOR THE PURPOSE OF WOR KING OUT DISALLOWANCE OF INTEREST. 48. IN RESPECT OF INVESTMENT MADE IN OTHER SIS TER CONCERNS, THE CONTENTION OF THE ASSESSEE IS THAT THE OWN FUNDS HAVE BEEN USE D FOR THE SAID PURPOSES. EVEN THOUGH THE LD A.R CONTENDED THAT THERE IS COMM ERCIAL EXPEDIENCY INVOLVED IN THE INVESTMENTS MADE IN OTHER SISTER CO NCERNS ALSO IN AS MUCH AS, THE PROPERTY BELONGING TO THEM HAVE BEEN USED BY TH E ASSESSEE TO GIVE COLLATERAL SECURITY TO BANKS IN RESPECT OF LOAN AVA ILED BY IT. IN THE ALTERNATIVE, IT WAS CONTENDED THAT THE AO DID NOT EXAMINE THE NE XUS BETWEEN THE BORROWED FUNDS AND THE INVESTMENT. WE NOTICE ALL T HESE CONTENTIONS OF THE ASSESSEE REQUIRE EXAMINATION OF FACTS RELATING TO T HE SAME. ACCORDINGLY, WE SET ASIDE THE MATTER RELATING TO DISALLOWANCE OF IN TEREST IN RESPECT OF ADVANCES MADE TO OTHER SISTER CONCERNS TO THE FILE OF THE ASSESSING OFFICER FOR FRESH CONSIDERATION. THE ORDER OF LD CIT(A) IN RES PECT OF THIS ISSUE IN AY 2007-08 AND 2008-09 STANDS MODIFIED ACCORDINGLY. (C) A.AVNASH:- 49. WE SHALL NOW TAKE UP THE APPEALS FILED BY S HRI A. AVNASH FOR ASSESSMENT YEARS 2002-03 TO 2008-09. IN THIS CASE THE ASSESSMENTS HAVE BEEN COMPLETED U/S 153C OF THE ACT. THE ASSESSEE H AS URGED AN ADDITIONAL GROUND IN AY 2008-09 RAISING SOME LEGAL ISSUE. AT THE TIME OF HEARING, THE LD A.R DID NOT PRESS THE ADDITIONAL GROUND AND HENCE T HE SAME IS DISMISSED AS NOT PRESSED. 50 THE ASSESSEE, INTER ALIA, IS QUESTIONING TH E VALIDITY OF PROCEEDINGS INITIATED U/S 153C OF THE ACT. THE LD A.R SUBMITTE D THAT THE SEARCH OPERATIONS WERE CONDUCTED IN THE HANDS OF ASSESSEE S FATHER SHRI A.T. RAYUDU. AT THE TIME OF SEARCH OPERATIONS, SHRI A.T .RAYUDU WAS NOT AVAILABLE AND HENCE THE SEARCH OFFICIALS RECORDED STATEMENT U /S 132(4) OF THE ACT FROM THE ASSESSEE HEREIN, I.E., SHRI A. AVNASH AT THE TI ME OF SEARCH ON 04-12-2007. DURING THE COURSE OF SEARCH PROCEEDINGS, THE SEARCH OFFICIALS FOUND KEYS OF TWO BANK LOCKERS HELD BY ASSESSEES PARENTS. ACCOR DINGLY, WITH THE PERMISSION OF ASSESSEES MOTHER, THE LOCKERS WERE O PENED AND THE JEWELLERIES ITA NO.S313 TO 319/V/2014 A.T. RAYUDU, VSKP ITA NOS.71 TO 77/V/2014 M/S. ATR WAREHOUSING P LTD. , VSKP ITA NOS.304 TO 310/V/2014 A. AVNASH 41 FOUND THEREIN WERE INVENTORISED. IN THE SWORN STAT EMENT, THE ASSESSEE SUBMITTED THAT THE JEWELLERIES BELONG TO HIS PARENT S, SISTER, WIFE AND HIS DAUGHTER. HOWEVER, THE ASSESSEE ADMITTED LATER THA T THERE EXISTS EXCESS JEWELLERY AND ACCORDINGLY AGREED TO OFFER A SUM OF RS.30.00 LAKHS AS HIS INCOME. SUBSEQUENTLY SHRI AVNASH RETRACTED FROM THE STATEMENT BY FILING AN AFFIDAVIT DATED 13.3.2008 BEFORE THE DDI. THE ASSE SSEES FATHER SHRI A.T. RAYUDU ALSO WROTE A LETTER DATED 28.12.2007 TO THE DDI, WHEREIN HE REQUESTED FOR RELEASE OF JEWELLERIES OF ENTIRE FAMI LY, SINCE HIS DAUGHTER IS LEAVING TO SINGAPORE. 51. BASED ON THESE FACTS, THE LD A.R SUBMITTED THAT THE PROCEEDINGS U/S 153C OF THE ACT WERE INITIATED IN THE HANDS OF THE ASSESSEE ON THE BASIS OF STATEMENT GIVEN BY HIM, WHICH HAS SUBSEQUENTLY BEEN RETRACTED. HE SUBMITTED THAT THE RETRACTED STATEMENT CANNOT BE CO NSIDERED AS INCRIMINATING MATERIALS. HE FURTHER SUBMITTED THAT THE UNDISCLO SED INVESTMENT IN JEWELLERY ADMITTED BY THE ASSESSEE IN THE STATEMENT TAKEN U/S 132(4) OF THE ACT PERTAINS TO AY 2008-09 ONLY AND NO MATERIAL RELATIN G TO OTHER YEARS WAS FOUND. HE FURTHER SUBMITTED THAT THE SEARCH OFFIC IALS CAN RECORD A STATEMENT U/S 132(4) OF THE ACT FROM A PERSON ONLY IN THE CAS ES, WHERE ANY UNACCOUNTED MONEY, UNACCOUNTED DOCUMENT OR ANY INCR IMINATING MATERIAL IS FOUND DURING THE COURSE OF SEARCH. IF NO SUCH ITEMS ARE FOUND, THEN STATEMENT CANNOT BE TAKEN U/S 132(4) OF THE ACT. F OR THIS PROPOSITION, THE LD A.R PLACED RELIANCE ON THE DECISION RENDERED BY HON BLE JURISDICTIONAL ANDHRA PRADESH HIGH COURT IN THE CASE OF CIT VS. NARESH KU MAR AGARWAL (2014)(369 ITR 0171). THE LD A.R SUBMITTED THAT THE REVENUE D ID NOT UNEARTH ANY INCRIMINATING MATERIAL PERTAINING TO AY 2002-03 TO AY 2007-08 AND HENCE, INITIATION OF PROCEEDINGS U/S 153C OF THE ACT IN RE SPECT OF THOSE YEARS IS BAD IN LAW. IN THIS REGARD, HE PLACED RELIANCE ON THE FOLLOWING CASE LAW:- (A) SRI RAMA EDUCATIONAL TRUST (ITA NOS. 31 TO 35/ VIZ/2012 DT. 13-12- 2013) (B) GADIRAJU VENKATA SUBBA RAJU (ITA NO.360 & 361/ VIZ/13 DT. 05-03- 2014) (C) A.AMMAJI (ITA NO.337 TO 343/VIZ/2014 DATED 21 .07.2014) ITA NO.S313 TO 319/V/2014 A.T. RAYUDU, VSKP ITA NOS.71 TO 77/V/2014 M/S. ATR WAREHOUSING P LTD. , VSKP ITA NOS.304 TO 310/V/2014 A. AVNASH 42 52. THE LD A.R FURTHER SUBMITTED THAT THE PROCE EDINGS U/S 153C OF THE ACT WERE INITIATED ON 15.12.2008 AND ON THAT DATE THE P ROCEEDINGS RELATING TO AY 2002-03 TO 2007-08 WERE NOT PENDING. FURTHER, THE REVENUE DID NOT UNEARTH ANY INCRIMINATING MATERIAL RELATING TO THE ADDITION S MADE BY THE ASSESSING OFFICER. ACCORDINGLY, BY PLACING RELIANCE ON THE D ECISION OF SPECIAL BENCH RENDERED IN THE CASE OF ALL CARGO GLOBAL LOGISTICS LTD (SUPRA), WHICH HAS SINCE BEEN CONFIRMED BY THE HONBLE BOMBAY HIGH COURT, TH E LD A.R CONTENDED THAT ALL THE ADDITIONS MADE IN AY 2002-03 TO 2007-0 8 ARE LIABLE TO BE QUASHED. 53. THE LD A.R SUBMITTED THAT THE ASSESSING OFF ICER HAS ENHANCED THE RENTAL INCOME DECLARED BY THE ASSESSEE IN AY 2005-0 6 TO 2007-08 ON THE BASIS OF SOME LOOSE MATERIALS FOUND AT THE SURVEY O PERATIONS CONDUCTED IN THE HANDS OF THE LESSEE. THE LD A.R SUBMITTED THAT THE LESSEE HIMSELF HAS DENIED PAYMENT OF ANY EXCESS RENT AND HENCE THE AO WAS NOT JUSTIFIED IN RELYING ON THOSE LOOSE SHEETS. THE LD A.R FURTHER SUBMITTED THAT THE MATERIALS FOUND DURING THE COURSE OF SURVEY OPERATI ONS COULD NOT USED TO MAKE ADDITIONS IN SEARCH ASSESSMENT PROCEEDINGS. I N THIS REGARD, HE PLACED RELIANCE ON THE DECISION RENDERED BY THE VISAKHAPAT NAM BENCH OF TRIBUNAL IN THE CASE OF DASARI SRI SAILENDRA KUMAR VS. DCIT (20 07)(111 TTJ 0101). HE SUBMITTED THAT THE ASSESSING OFFICER COULD MAKE ADD ITIONS IN THE CASE OF CONCLUDED ASSESSMENTS ONLY ON THE BASIS OF MATERIAL S FOUND DURING THE COURSE OF SEARCH. 54. ON THE CONTRARY, THE LD D.R SUBMITTED THAT THE SEARCH OFFICIALS HAVE FOUND JEWELLERY DURING THE COURSE OF SEARCH AND THE ASSESSEE HIMSELF HAS VOLUNTARILY ADMITTED UNDISCLOSED INCOME RELATING TO EXCESS JEWELLERY. HE FURTHER SUBMITTED THAT THERE IS NO RESTRICTION IN S EC. 153A OF THE ACT FOR USING THE MATERIAL FOUND AT THE TIME OF SURVEY OPERATIONS . HE SUBMITTED THAT THE SAME CONSTITUTES INCRIMINATING MATERIAL AND HENCE T HE PROCEEDINGS INITIATED U/S 153C OF THE ACT IS VALID. 55. WE NOTICE THAT THE ASSESSMENTS RELATING TO AY 2002-03 TO 2007-08 HAS BEEN COMPLETED U/S 143(3) R.W.S. 153C OF THE AC T. IN ALL THESE YEARS, THE ITA NO.S313 TO 319/V/2014 A.T. RAYUDU, VSKP ITA NOS.71 TO 77/V/2014 M/S. ATR WAREHOUSING P LTD. , VSKP ITA NOS.304 TO 310/V/2014 A. AVNASH 43 ASSESSING OFFICER DID NOT REFER TO ANY OF THE MATER IALS FOUND DURING THE COURSE OF SEARCH. THE PROVISIONS OF SEC. 153C OF THE ACT IS INVOKED IN RESPECT OF A PERSON WHO IS NOT SUBJECTED TO SEARCH ON THE BASIS OF INCRIMINATING MATERIAL PERTAINING TO HIM FOUND FROM THE POSSESSION OF THE SEARCHED PERSON. IN THE INSTANT CASE, THE SEARCH WAS CONDUCTED IN THE HANDS OF ASSESSEES FATHER NAMED SHRI A.T.RAYUDU. DURING THE COURSE OF SEARCH , AS STATED EARLIER, A STATEMENT WAS TAKEN FROM SHRI A.AVNASH, THE ASSESSE E HEREIN, U/S 132(4) OF THE ACT. IN THE SWORN STATEMENT, HE ADMITTED UNDIS CLOSED INCOME OF RS.30.00 LAKHS RELATING TO EXCESS JEWELLERY. ON TH E BASIS OF THE SAID DECLARATION, THE ASSESSING OFFICER HAS INITIATED PR OCEEDINGS U/S 153C OF THE ACT. AT THE TIME OF COMPLETING THE ASSESSMENT, THE AO HAS ALSO PLACED RELIANCE ON CERTAIN LOOSE SHEETS FOUND DURING THE C OURSE OF SURVEY OPERATIONS CONDUCTED IN THE HANDS OF A LESSEE, FROM WHICH IT W AS INFERRED BY THE AO THAT THE ASSESSEE WAS RECEIVING HIGHER RENT. IT HAS BEE N SUBMITTED THAT THE LESSEE HIMSELF HAS DENIED THE SAME AND ACCORDINGLY IT WAS CONTENDED THAT THE SAME DOES NOT FORM INCRIMINATING MATERIAL FOUND DUR ING THE COURSE OF SEARCH. IT WAS SUBMITTED THAT THE JEWELLERY WAS OFFERED AS INCOME IN AY 2008-09 ONLY AND ACCORDINGLY IT WAS SUBMITTED THAT THE ASSESSING OFFICER DID NOT REFER TO ANY OF THE INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH FOR MAKING THE ADDITIONS IN AY 2002-03 TO 2007-08. ACC ORDINGLY, IT WAS CONTENDED THAT THE VERY INITIATION OF PROCEEDINGS U /S 153C OF THE ACT WAS NOT VALID AND EVEN, IF IT IS HELD TO BE VALID FOR A MOM ENT, THE ADDITIONS MADE BY THE ASSESSING OFFICER BY PLACING RELIANCE ON THE IN FORMATION ALREADY AVAILABLE ON RECORD WITHOUT REFERRING TO ANY OF THE SEIZED MA TERIALS IS BAD IN LAW. 56. THE CO-ORDINATE BENCH OF VISAKHAPATNAM TRIB UNAL HAS CONSIDERED AN IDENTICAL ISSUE IN THE CASE OF SRI RAMA EDUCATION S OCIETY (SUPRA) G.BANGARAMMA (SUPRA) AND SMT. A.AMMAJI (SUPRA) AND IN ALL THE THREE CASES, THE TRIBUNAL HAS QUASHED THE PROCEEDINGS INITIATED U/S 153C OF THE ACT IN THE ABSENCE OF ANY INCRIMINATING MATERIALS RELATING TO THE ABOVE SAID ASSESSEES FOUND DURING THE COURSE OF SEARCH. IN THE INSTANT CASES ALSO, THE AO DID NOT REFER TO ANY OF THE INCRIMINATING MATERIALS FOR ASS ESSING THE INCOME RELATING TO AY 2002-03 TO 2007-08. THE ONLY REASON FOR INITIAT ING THE PROCEEDINGS U/S 153C OF THE ACT IS THE ADMISSION MADE IN THE SWORN STATEMENT, WHICH HAS ITA NO.S313 TO 319/V/2014 A.T. RAYUDU, VSKP ITA NOS.71 TO 77/V/2014 M/S. ATR WAREHOUSING P LTD. , VSKP ITA NOS.304 TO 310/V/2014 A. AVNASH 44 BEEN LATER RETRACTED BY THE ASSESSEE. THE MATERIAL S FOUND DURING THE COURSE OF SURVEY OPERATIONS CONDUCTED IN THE HANDS OF LESS EE, IN OUR VIEW, COULD NOT ALSO BE PLACED RELIANCE, SINCE THE LESSEE HIMSELF H AS DENIED THE ENTRIES MADE IN THE LOOSE SHEETS FOUND DURING THE COURSE OF SURV EY AND HENCE THE LOOSE SHEETS ITSELF REMAIN UNCORROBORATED. THE ADMISSION MADE IN THE SWORN STATEMENT MAY BE SUFFICIENT TO INITIATE PROCEEDINGS U/S 153C OF THE ACT. HOWEVER THE ADDITIONS MADE WITHOUT REFERENCE TO ANY OF THE SEIZED MATERIALS ARE LIABLE TO BE DELETED, SINCE THESE ASSESSMENT YE ARS FALL UNDER THE CATEGORY OF COMPLETED PROCEEDINGS AND NO INCRIMINATING MATER IAL SUPPORTING THE ADDITIONS MADE IN THESE YEARS WERE FOUND DURING THE COURSE OF SEARCH PROCEEDINGS. 57. IN VIEW OF THE FOREGOING DISCUSSIONS, WE SE T ASIDE THE ORDER OF THE LD CIT(A) PASSED FOR AY 2002-03 TO 2007-08 AND QUASH THE ASSESSMENT ORDERS PASSED FOR THESE YEARS. 58. WE SHALL NOW TAKE UP THE APPEAL FILED BY TH IS ASSESSEE FOR AY 2008-09. THE ASSESSMENT FOR AY 2008-09 HAS BEEN COMPLETED U/ S 143(3) OF THE ACT BY MAKING FOLLOWING ADDITIONS:- (A) `AGRICULTURAL INCOME - 2,25,000 (B) UNDISCLOSED JEWELLERY - 30,00,000 (C) DEEMED DIVIDEND - 35,41,000 (D) RENTAL INCOME - 13,71,000 59. THE FIRST ISSUE RELATES TO THE ADDITIONS RE LATING TO AGRICULTURAL INCOME. THE LD CIT(A), HOWEVER, GRANTED PARTIAL RELIEF. I N THE CASE OF A.T. RAYUDU, THE FATHER OF THE ASSESSEE, WE HAVE DIRECTED THE AO TO DISALLOW 25% OF THE AGRICULTURAL INCOME AND WE HAD FOLLOWED THE DECISIO N RENDERED BY THE CO- ORDINATE BENCH IN THE CASE OF A.AMMAJI AND M/S AVNA SH ESTATES & RESORTS LTD. CONSISTENT WITH THE VIEW TAKEN IN THE ABOVE S AID CASES, WE DIRECT THE AO TO DISALLOW 25% OF THE AGRICULTURAL INCOME AND ASSE SS THE SAME AS INCOME OF THE ASSESSEE UNDER THE HEAD INCOME FROM OTHER SOURC ES. ITA NO.S313 TO 319/V/2014 A.T. RAYUDU, VSKP ITA NOS.71 TO 77/V/2014 M/S. ATR WAREHOUSING P LTD. , VSKP ITA NOS.304 TO 310/V/2014 A. AVNASH 45 60. THE NEXT ISSUE RELATES TO THE ASSESSMENT OF UNDISCLOSED JEWELLERY OF RS.30,00,000/-. DURING THE COURSE OF SEARCH PROCEE DINGS, THE JEWELLERY FOUND IN THE LOCKERS AND BEDROOMS WAS INVENTORISED. THE GROSS WEIGHT OF JEWELLERY WAS 8.8 KGS AND NET WEIGHT OF JEWELLERY WAS 7.8 KGS . WE HAVE NOTICED THAT THE SWORN STATEMENT U/S 132(4) OF THE ACT WAS TAKEN FROM SHRI A.AVNASH. HE SUBMITTED THAT THE JEWELLERY BELONGS TO HIS MOTHER SMT. AMMAJI, SISTER SMT. MAITRI AND WIFE SMT. HARSHITA AND HIS DAUGHTER BABY AHARYA. HE ALSO SUBMITTED THAT THE JEWELLERY WERE REFLECTED IN THEI R RETURNS OF INCOME. HOWEVER, HE ADMITTED THAT THERE IS EXCESS JEWELLERY OF 3 KGS. (APPROX.) AMOUNTING TO RS.30,00,000/-. HE ADMITTED THAT THE SAME WAS HIS UNEXPLAINED INVESTMENT AND AGREED TO OFFER THE SAME FOR ASSESSMENT YEAR 2008-09. HOWEVER, HE FILED AN AFFIDAVIT WITHIN THR EE MONTHS BEFORE THE DDI AND RETRACTED FROM THE ADMISSION. ACCORDINGLY HE D ID NOT OFFER THE SAME IN HIS RETURN OF INCOME. SINCE THE ASSESSEE HAD MADE THE ADMISSION IN THE SWORN STATEMENT, THE ASSESSING OFFICER ASSESSED THE SAME AS HIS INCOME, SINCE THE ASSESSEE COULD NOT PROVE THAT THE JEWELLE RIES BELONGED TO HIS SISTER AND HIS WIFE. THE LD CIT(A) ALSO CONFIRMED THE SAM E. 61. WE HEARD THE PARTIES ON THIS ISSUE. THE QUE STION NO.17 ASKED TO THE ASSESSEE IN THE SWORN STATEMENT TAKEN U/S 132(4) OF THE ACT STATES THE TWO LOCKERS STOOD IN THE NAME OF ASSESSEES PARENTS AND THEY WERE OPENED IN THE PRESENT OF WITNESSES AND THE CONTENTS WERE BROUGHT AS IT IS. IN THE REPLY THE SHRI A. AVNASH STATES THAT THE AVAILABLE CASH & JEW ELLERY WERE INVENTORISED IN THE PRESENCE. SINCE THE JEWELLERIES WERE FOUND IN THE LOCKERS BELONGING TO THE PARENTS OF SHRI A AVNASH, THE NORMAL PRESUMPTIO N IS THAT THE JEWELLERIES FOUND IN THE LOCKER BELONG TO THE PARENTS OF SHRI A AVNASH. 62. THEREAFTER, SHRI A AVNASH IS ASKED TO EXPLAIN AS TO WHOM THE JEWELLERIES FOUND IN THE BEDROOM AND LOCKERS BELONG TO. IN REP LY, SHRI AVNAS STATED THAT THE JEWELLERY BELONG TO HIS MOTHER SMT. AMMAJI, SIS TER SMT. MAITRI AND WIFE SMT. HARSHITA AND HIS DAUGHTER BABY AHARYA. THE N ET WEIGHT OF JEWELLERY WAS FOUND TO BE 7.8 KGS, APPROXIMATELY. SHRI AVNAS H WAS ASKED TO EXPLAIN THE SOURCES. HE REPLIED THAT THE JEWELLERY WERE RE FLECTED IN THEIR RETURNS OF INCOME. AFTER STATING SO, HE STATED THAT THE JEWEL LERY 7.8 KGS IS HIGHER THAN ITA NO.S313 TO 319/V/2014 A.T. RAYUDU, VSKP ITA NOS.71 TO 77/V/2014 M/S. ATR WAREHOUSING P LTD. , VSKP ITA NOS.304 TO 310/V/2014 A. AVNASH 46 WHAT IS REFLECTED IN THE RETURNS OF INCOME. AFTER CONSULTING HIS MOTHER AND WIFE, HE ADMITTED THAT THERE IS EXCESS JEWELLERY OF THREE KGS VALUED AT RS.30.00 LAKHS. HE THEN ADMITTED THAT THE SAME IS HIS UNEXPLAINED INVESTMENT FOR THE F.Y 2007-08 RELEVANT FOR ASSESSM ENT YEAR 2008-09. 63. A CAREFUL PERUSAL OF THE ANSWER GIVEN BY SHR I AVNAS WOULD SHOW THAT THERE IS CONTRADICTION IN THE STATEMENTS GIVEN BY H IM. AS STATED EARLIER, THE JEWELLERY HAS BEEN RECOVERED FROM THE LOCKERS BELON GING TO THE PARENTS OF SHRI AVNAS AND ALSO FROM THE BED ROOMS. THE QUANTI TY OF JEWELLERIES RECOVERED FROM THE LOCKERS, THE BED ROOM OF THE PAR ENTS AND THE BED ROOM OF SHRI AVNASH IS NOT AVAILABLE. NORMAL PRESUMPTION I S THAT THE JEWELLERY BELONGS TO THE PERSON WHO IS HAVING CONTROL OVER TH EM. NEXT, THERE IS NO CLARITY AS TO HOW THE EXCESS JEWELLERY OF THREE KGS . WAS ARRIVED AT. FURTHER, THE SEARCH WARRANT WAS IN THE NAME OF SHRI A.T.RAYU DU AND SINCE HE WAS NOT AVAILABLE THE SWORN STATEMENT WAS TAKEN FROM SHRI A VNASH. HE HAS STATED THAT THE EXCESS JEWELLERY WAS ARRIVED AT AFTER CONS ULTING HIS MOTHER AND WIFE. THEN HE OWNS UP THE UNDISCLOSED INVESTMENT MADE IN THE JEWELLERY. ALL THESE SEQUENCE OF EVENTS WOULD SHOW THAT THERE IS NO CLAR ITY AND LINK BETWEEN THE INITIAL DECLARATION AND SUBSEQUENT ADMISSION MADE. SUBSEQUENTLY SHRI A.T.RAYUDU HAS WRITTEN A LETTER TO THE DDI FOR RELE ASE OF JEWELLERIES. FURTHER THE ASSESSEES SISTER AND ASSESSEES WIFE HAVE ALSO PUT THEIR CLAIM OVER THE JEWELLERY. ALL THESE FACTS WOULD SHOW THAT ADMISS ION OF RS.30.00 LAKHS MADE BY SHRI AVNASH WAS NOT CORRECT AND AGAINST THE FACT S SURROUNDING THE ISSUE. HENCE, WE ARE OF THE VIEW THAT SHRI AVNASH WAS JUST IFIED IN RETRACTING FROM THE ADMISSION MADE BY HIM THROUGH THE AFFIDAVIT FIL ED BEFORE THE DDI. 64. SUBSEQUENTLY, THE ASSESSEE HAS FURNISHED THE OWNERSHIP DETAILS OF THE JEWELLERY, BUT THE SAID DETAILS WERE REJECTED BY TH E ASSESSING OFFICER BY POINTING OUT CERTAIN DEFECTS. IN RESPECT OF THE JE WELLERIES CLAIMED TO BELONG TO THE SISTER OF SHRI AVNASH, THE SAME WAS REJECTED ON THE REASONING THAT THE CUSTOMS DOCUMENTS WERE NOT AVAILABLE. SIMILARLY TH E CLAIM MADE BY HIS WIFE WAS REJECTED ON THE REASONING THAT THE PARENTS AND GRANT PARENTS OF AVNASS WIFE DID NOT FURNISH WEALTH TAX RETURNS. HOWEVER, IN OUR VIEW, WHAT IS ITA NO.S313 TO 319/V/2014 A.T. RAYUDU, VSKP ITA NOS.71 TO 77/V/2014 M/S. ATR WAREHOUSING P LTD. , VSKP ITA NOS.304 TO 310/V/2014 A. AVNASH 47 REQUIRED TO BE SEEN IS WHETHER THE ASSESSEE COULD BE CONSIDERED TO HAVE MADE INVESTMENT IN JEWELLERY OUT OF HIS UNDISCLOSED INCOME. THE FAMILY STATUS, THE LOCKER DETAILS, THE RECOVERY MADE FROM BED ROOM, CLAIM MADE BY HIS SISTER, THE SUBMISSIONS MADE BY THE PARENTS OF AVNASS WIFE, IF CONSIDERED FROM THE ANGLE OF HUMAN PROBABILITIES, IN OUR VIEW, WOULD GIVE NEGATIVE ANSWER. ACCORDINGLY, WE ARE OF THE VIEW THAT THE A DDITION OF RS.30.00 LAKHS MADE PURELY ON THE BASIS OF SWORN STATEMENT, THAT T OO WITHOUT ANY CORROBORATIVE MATERIALS, WAS NOT JUSTIFIED. ACCORD INGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND DIRECT THE AO TO DEL ETE THE SAID ADDITION. 65. THE NEXT ISSUE RELATES TO THE ASSESSMENT O F DEEMED DIVIDEND INCOME. IN THE APPELLATE PROCEEDINGS BEFORE LD CIT(A), THE ASSESSEE CONTENDED THAT THE AMOUNT OF ACCUMULATED PROFIT AND THE AMOUNT O F ADVANCES HAS BEEN WRONGLY TAKEN BY THE AO. ACCORDINGLY, THE LD CIT(A ) DIRECTED THE AO TO REWORK THE DEEMED DIVIDEND IN ALL THE YEARS. 66. BEFORE US, THE LD A.R SUBMITTED THAT THE AS SESSEE HAD EARLIER ADVANCED LOANS TO THE CLOSELY HELD COMPANIES AND TH E AMOUNTS RECEIVED BY THE ASSESSEE ARE ONLY REPAYMENT OF LOANS GRANTED EA RLIER. ALTERNATIVELY IT WAS CONTENDED THAT THE ASSESSEE HAD GRANTED PERSONAL GU ARANTEE IN RESPECT OF THE LOAN TAKEN BY M/S ATR WAREHOUSING FROM BANKS. HE SUBMITTED THAT THE ABOVE SAID CONCERN COULD AVAIL THE LOAN FROM THE BA NK ONLY BECAUSE OF THE PERSONAL GUARANTEE GIVEN BY THE ASSESSEE. ACCORDIN GLY, IT WAS CONTENDED THAT THE ADVANCE RECEIVED BY THE ASSESSEE SHOULD BE CONSIDERED AS HAVING RECEIVED IN THE NORMAL COURSE OF BUSINESS AND HENCE THE PROVISIONS OF SEC. 2(22)(E) OF THE ACT SHALL NOT APPLY. 67. THE LD D.R, ON THE CONTRARY, SUBMITTED THAT THE FACT OF GIVING PERSONAL GUARANTEE BY THE ASSESSEE AND THE RECEIPT OF ADVANC E ARE TWO DIFFERENT TRANSACTIONS. HE SUBMITTED THAT THE LD CIT(A) HAS ONLY SET ASIDE THE MATTER TO THE FILE OF THE AO FOR CONSIDERING THE VARIOUS S UBMISSIONS MADE BY THE ASSESSEE. ITA NO.S313 TO 319/V/2014 A.T. RAYUDU, VSKP ITA NOS.71 TO 77/V/2014 M/S. ATR WAREHOUSING P LTD. , VSKP ITA NOS.304 TO 310/V/2014 A. AVNASH 48 68. WE HEARD THE PARTIES ON THIS ISSUE. WE NOT ICE FROM THE DETAILS OF LOANS AVAILED BY THE SISTER CONCERNS THAT THE PERSONAL GU ARANTEE HAS BEEN GIVEN BY THE ASSESSEE AND ALSO BY THE PARENTS OF THE ASSESSE E. IN SOME CASES, THE SISTER CONCERNS HAVE ALSO PROVIDED GUARANTEE. HENC E, IT IS NOT REALLY A CASE, WHERE THE ASSESSEE ALONE HAS GIVEN THE PERSONAL GUA RANTEE. FURTHER WE NOTICE THAT THE ASSESSEE HAS NOT GIVEN ANY OF HIS S ECURITIES AS COLLATERAL SECURITY IN CONNECTION WITH THE LOAN AVAILED BY THE SISTER CONCERNS. HENCE, WE ARE UNABLE TO ACCEPT THE CONTENTIONS OF THE ASSE SSEE THAT THE ADVANCES RECEIVED BY THE ASSESSEE SHOULD BE CONSIDERED AS NO RMAL BUSINESS TRANSACTIONS. 69. HOWEVER, WE NOTICE THAT THE LD CIT(A) HAS SE T ASIDE THE MATTER TO THE FILE OF THE AO IN ORDER TO ASCERTAIN THE CORRECT AM OUNT OF ACCUMULATED PROFITS AND ALSO TO WORK OUT THE CORRECT AMOUNT OF ADVANCES RECEIVED BY THE ASSESSEE. HENCE, IN OUR VIEW, THE ORDER PASSED BY THE LD CIT(A) ON THIS ISSUE DOES NOT CALL FOR ANY INTERFERENCE. 70. THE NEXT ISSUE RELATES TO THE ENHANCEMENT O F RENTAL INCOME. THE ASSESSEE HAD GIVEN A PROPERTY LOCATED IN R.K. BEACH , VISAKHAPATNAM FOR MONTHLY RENT OF RS.8000/- TO A CONCERN NAMED M/S SU PRAJAS SANDY LANE BAR & RESTAURANT FROM JANUARY, 2005. THE REVENUE CONDU CTED SURVEY OPERATIONS U/S 133A OF THE ACT IN THE CASE OF M/S SUPRAJAS SA NDY LAND BAR & RESTAURANT ON 07-12-2007. FROM THE IMPOUNDED MATERIALS, IT WA S NOTICED THAT THE ABOVE SAID CONCERN IS PAYING A RENT OF RS.82,000/- PER MO NTH. FURTHER, IT WAS NOTICED THAT THE ASSESSEE HAD RECEIVED ADVANCE OF R S.4,83,000/-. ACCORDINGLY, THE AO ASSESSED THE DIFFERENCE RENT OF RS.8,88,000/- (RS.74,000/- X 12 MONTHS) AND ALSO THE RENT ADVANCE OF RS.4,83,000/- , BOTH AGGREGATING TO RS.13,71,000/- AS RENTAL INCOME OF T HE ASSESSEE. 71. IN THE APPELLATE PROCEEDINGS, THE LD CIT(A) AGREED WITH THE CONTENTIONS OF THE ASSESSEE THAT THE RENT ADVANCE C ANNOT BE ASSESSED AS RENTAL INCOME. WITH REGARD TO THE DIFFERENCE IN RE NTAL INCOME, THE LD CIT(A) CONFIRMED THE ADDITION WITH THE REASONING THAT THE ASSESSEE DID NOT REBUT THE ITA NO.S313 TO 319/V/2014 A.T. RAYUDU, VSKP ITA NOS.71 TO 77/V/2014 M/S. ATR WAREHOUSING P LTD. , VSKP ITA NOS.304 TO 310/V/2014 A. AVNASH 49 IMPOUNDED MATERIAL. HOWEVER, HE DIRECTED THE AO TO ALLOW THE STATUTORY DEDUCTION ALLOWABLE @ 30%. 72. THE LD A.R SUBMITTED THAT THE LESSEE HIMSEL F HAS NOT ACCEPTED THE CONTENTS OF THE LOOSE SHEET AND HENCE THE AO WAS NO T JUSTIFIED IN PLACING RELIANCE ON THOSE UNCORROBORATED MATERIALS FOR MAKI NG THE ADDITIONS IN THE HANDS OF THE ASSESSEE. THE LD A.R SUBMITTED THAT T HE BUILDING LET OUT BY THE ASSESSEE IS 80 YEARS OLD AND IT WAS IN DILAPIDATED CONDITIONS. THE LESSEE AGREED TO BEAR THE REPAIR EXPENSES AND HENCE THE AS SESSEE HAS COLLECTED MONTHLY RENT OF RS.8000/-. THE LD A.R SUBMITTED TH AT THE ASSESSING OFFICER DID NOT REFER TO THE MUNICIPAL VALUATION OF THE PRO PERTY OR THE FACTS SURROUNDING THE ISSUE. ACCORDINGLY, THE LD A.R SUB MITTED THAT THE LD CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ADOPTION OF MON THLY RENT AT RS.80,000/- P.M. THE LD D.R, ON THE CONTRARY, SUBMITTED THAT T HE AO HAS MADE THE ADDITION ON THE BASIS OF MATERIAL IMPOUNDED DURING THE COURSE OF SURVEY OPERATIONS IN THE HANDS OF LESSEE. 73. WE HAVE HEARD THE PARTIES ON THIS ISSUE. WE NOTICE THAT THE BASIS FOR MAKING THE ADDITION TO RENTAL INCOME IS SOME LOOSE PAPERS FOUND DURING THE COURSE OF SURVEY OPERATIONS CONDUCTED IN THE HANDS OF THE LESSEE. IT IS THE CONTENTION OF THE ASSESSEE THAT THE LESSEE HIMSELF HAS NOT ACCEPTED THE CONTENTS OF THE LOOSE PAPERS. THUS, WE NOTICE THAT THE ASSESSING OFFICER HAS SIMPLY DRAWN ADVERSE CONCLUSIONS FROM THE LOOSE PAP ERS IMPOUNDED FROM LESSEE, WITHOUT ASCERTAINING AS TO WHETHER THE CONT ENTS OF THE LOOSE PAPERS WERE PROVED TO BE TRUE IN THE ASSESSMENT OF THE LES SEE. WE FURTHER NOTICE THAT THE ASSESSEE HAS SUBMITTED THAT THE BUILDING W AS IN DILAPIDATED CONDITION AT THE TIME WHEN THE BUILDING WAS GIVEN ON RENT AND THE LESSEE HAS AGREED TO CARRY OUT REPAIR WORKS, IN WHICH CASE THE RENT SHAL L BE FIXED LOWER THAN THE MARKET RATES. WE NOTICE THAT THESE SUBMISSIONS HAV E BEEN IGNORED BY THE AO AND HE HAS FULLY PLACED RELIANCE ON THE UNCORROB ORATED LOOSE SHEETS FOUND IN THE CONTROL OF THE LESSEE. WE NOTICE THAT THE L D CIT(A) HAS CONFIRMED THE ADDITION WITH THE REASONING THAT THE ASSESSEE DID N OT REBUT THE IMPOUNDED MATERIAL. WE HAVE NOTICED THAT THE LOOSE SHEETS HA VE BEEN IMPOUNDED FROM LESSEE AND ACCORDING TO LD A.R, THE LESSEE HIMSELF HAS NOT ACCEPTED THE ITA NO.S313 TO 319/V/2014 A.T. RAYUDU, VSKP ITA NOS.71 TO 77/V/2014 M/S. ATR WAREHOUSING P LTD. , VSKP ITA NOS.304 TO 310/V/2014 A. AVNASH 50 CONTENTS OF THE LOOSE PAPER. IN OUR VIEW, IT IS TH E LESSEE WHO HAS TO FIRST REBUT THE CONTENTS OF THE IMPOUNDED MATERIALS. ONL Y IF IT IS CONCLUSIVELY ESTABLISHED THAT THE LESSEE HAS PAID THE RENT AS ST ATED IN THE LOOSE SHEETS, THEN THE ASSESSEE SHOULD BE QUESTION AND A DECISION HAS TO BE TAKEN. IN THE INSTANT CASE, THE ASSESSING OFFICER HAS NOT BROUGHT ANY MATERIAL TO SHOW THAT THE CONTENTS OF LOOSE PAPERS HAVE BEEN ACCEPTED BY THE LESSEE FROM WHOM THEY WERE IMPOUNDED OR THE CONTENTS OF THE LOOSE PA PERS HAVE BEEN ESTABLISHED. UNDER THESE SET OF FACTS, WE ARE OF T HE VIEW THAT THE ASSESSING OFFICER HAS MADE THE ADDITION ON INFERENCES WITHOUT PROVING THE CONTENTS OF THE LOOSE PAPERS AND THE SAME CANNOT BE SUSTAINED. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND DIRE CT THE AO TO DELETE THE ADDITION MADE TOWARDS RENTAL INCOME. 74. IN THE RESULT, (A) THE APPEALS FILED BY SHRI A.T. RAYUDU FOR AS SESSMENT YEARS 2002-03 TO 2006-07 ARE ALLOWED AND THE APPEALS FIL ED FOR AY 2007-08 AND 2008-09 ARE PARTLY ALLOWED. (B) THE APPEALS FILED BY M/S ATR WAREHOUSING (P) LTD FOR ASSESSMENT YEARS 2002-03 TO 2006-07 ARE ALLOWED AND THE APPEALS FILED FOR AY 2007-08 AND 2008-09 ARE TREATED AS ALLOWED. (C) THE APPEALS FILED BY SHRI A.AVNASH FOR ASSES SMENT YEARS 2002-03 TO 2007-08 ARE ALLOWED AND THE APPEAL FILED FOR AY 2008-09 IS PARTLY ALLOWED. ORDER PRONOUNCED ON 15/9/2015. SD/- SD/- (D.MANMOHAN) (B.R.BASKARAN) VICE PRESIDENT ACCOUNTANT MEMBER DATED 15/ 9 /2015 B.K.PARIDA , SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT: 2. THE RESPONDENT. 3. THE CIT(A)-VISHAKHAPATNAM 4. CIT , VISHAKHAPATNAM 5. DR, ITAT, VISHAKHAPATNAM 6. GUARD FILE. BY ORDER //TRUE COPY//