Assessments which have already attained finality and do not get ‎abated have to be assessed on the basis of the incriminating ‎material found during the course of search.

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Assessments which have already attained finality and do not get abated have to be assessed on the basis of the incriminating material found during the course of search.

 

 

In the case of Dy. CIT v. United Stock Exchange of India Ltd, Mumbai ITAT has held that assessments which have already attained finality and does not get ‎abated, then they have to be assessed on the basis of the incriminating ‎material found during the course of search.

The reason being that the ‎assessments which are pending and get abated, the entire income has to be ‎determined which includes material already on record and also the ‎material found as a result of search.‎

Here is the copy of the complete order:

 

IN THE ITAT, MUMBAI BENCH
SAKTIJIT DEY, J.M. & MANOJ KUMAR AGGARWAL, A.M.

Dy. CIT v. United Stock Exchange of India Ltd.

ITA No. 541/Mum/2017

Cross Objection No. 103/Mum/2018

12 September, 2018

 

Revenue by: Vidisha Kalra, learned Commissioner Departmental Representative
Assessee by: Vijay Mehta, learned Authorised Representative
ORDER
Manoj Kumar Aggarwal, A.M.‎
Aforesaid appeal by revenue for assessment year (AY) 2009-10 contest the order ‎of the learned Commissioner (Appeals)-48 (Commissioner (Appeals)), ‎Mumbai, Appeal No. Commissioner (Appeals)-48/I.T-187/DCCC-2(2)/2015-16 ‎dated 22-11-2016. The assessment for impugned assessment year was framed by ‎learned Deputy CIT, Central Circle-2(1), Mumbai (AO) under section 143(3) read ‎with section 153A of the Income Tax Act, 1961 on 27-3-2015 wherein the ‎expenses of Rs. 135.08 Lacs as claimed by the assessee has been disallowed in ‎terms of section 3 of the Income Tax Act, 1961. During impugned assessment ‎year, the assessee being resident corporate assessee was engaged in providing ‎exchange platform for trading in currency derivatives. The effective sole ground ‎raised by revenue reads as under :–‎

On the facts and circumstances of the case and in law the learned ‎Commissioner (Appeals) erred in deleting the addition of Rs. 1,35,08,000 ‎made in order under section 153A read with section 143(3) stating that in the ‎absence of any incriminating material on issue, addition so made was beyond ‎the scope and ambit of an assessment envisaged under section 153A of the ‎Income Tax Act, 1961.‎

The assessee, in cross objections, has supported the stand taken by learned ‎Commissioner (Appeals) in the following manner :–‎
On the facts and circumstances of the case and in law, the Hon’ble ‎Commissioner (Appeals) has correctly deleted the addition of Rs. ‎‎1,35,08,000 on account of absence of any incriminating material on issue.‎
‎2. The assessee was assessed under section 153A pursuant to search action under ‎section 132(1) upon assessee on 30-3-2012 by the investigation wing of the ‎department. In response to notice under section 153A, the assessee offered ‎original return of income filed by the assessee on 7-5-2010 declaring loss of Rs. ‎‎3.50 Lacs. It was noted that the assessee started business operations from 20-9-‎‎2010 and therefore, there was no business carried out by the exchange in the ‎impugned assessment year. In view of the same, the assessee, in the opinion of ‎learned assessing officer, was not at all entitled to claim any expenditure before ‎setting up of the business in terms of section 3 of the Income Tax Act, 1961. ‎Consequently, the expenditure of Rs. 135.08 Lacs as claimed by the assessee was ‎treated as capital expenditure and disallowed in the hands of the assessee.‎
‎3. Aggrieved, the assessee contested the same with success before learned ‎Commissioner (Appeals) vide impugned Order, dt. 22-11-2016 wherein after due ‎consideration, the matter was concluded in the following manner :–‎
‎7. I have given a careful consideration to the appellant’s contention. Section ‎‎153A of the Act postulates the assessment in cases of search or requisition ‎under section 132 or 132A of the Act respectively. The said section envisages ‎that the assessing officer shall assess or reassess the total income for six ‎assessment years immediately preceding the assessment year relevant to the ‎previous year in which search was conducted. The second proviso to section ‎‎153A(1) of the Act also prescribes that assessment or reassessment, if any, ‎relating to any assessment year falling within the period of six years referred to ‎in this sub-section pending on the date of initiation of search under section 132 ‎or making of requisition under section 132A of the Act as the case may be ‎shall abate.‎
‎7.1 The chronologies of events relating to status of assessment of the ‎impugned assessment year are that a search action under section 132(1) of the ‎Act was conducted on the appellant on 30-3-2012. Prior to that, the appellant ‎had filed the return of income under section 139 of the Act, on 7-5-2010. It is ‎the case of the assessee that assessment/reassessment was not pending prior to ‎the date of initiation of search. Subsequent to search action, the assessing ‎officer issued notice under section 153A(1)(A) for assessment year 2009-10 on ‎‎26-9-2013, in response thereof the assessee vide Letter, dt. 8-10-‎‎2013 requested the assessing officer to consider its original return of income ‎filed on 7-5-2010 and total loss of Rs. (-)3,50,107, being the same as declared ‎earlier in the original return of income. The assessment under section 143(3) ‎read with section 153A was completed on the total income of Rs. 1,35,08,000 ‎on 27-3-2015. whereby he made the following addition :–‎
Sr.No.‎ Nature of additions Amount Rs.‎
‎1‎ Disallowance of ‎expenditure ‎1,35,08,00‎‎0‎
‎7.2 From the above, it is evident that the assessment for assessment year 2009-‎‎10 had attained finality as the assessment/reassessment was not pending and ‎further the assessing officer had lost his jurisdiction to issue a notice under ‎section 143(2) of the Act on the date of initiation of search on 30-3-2012. ‎Accordingly, the assessment for the assessment year 2009-10 does not get ‎abated in view of the second proviso to section 153A. The relevant provisions ‎of section 153A reads as under:–‎
‎”Not withstanding anything contained in section 139, section 147, section ‎‎148, section 149, section 151 and section 153, in the case of a person where ‎a search is initiated under section 132 or books of account, other documents ‎or any assets are requisitioned under section 132A after the 31-5-2003, the ‎assessing officer shall–‎
‎(a) Issue notice to such person requiring him to furnish within such ‎period, as may be specified in the notice, the return of income in respect ‎of each assessment year failing within six assessment years referred to ‎in clause (b), in the prescribed form and verified in the prescribed ‎manner and setting forth such oilier particulars as may be prescribed and ‎the provisions of this Act shall, so far as may be, apply accordingly as if ‎such return were a return required to be furnished under section 139;‎
‎(b) Assess or reassess the total income of six assessment years ‎immediately preceding the assessment year relevant to the previous year ‎in which such search is conducted or requisition is made:–‎
Provided that the assessing officer shall assess or reassess the total ‎income in respect of each assessment year falling within such six ‎assessment years:‎
Provided further that assessment or reassessment, if any, relating to any ‎assessment year falling within the period of six assessment years ‎referred to in
This sub-section pending on the date of initiation of the search under ‎section 132 or making of requisition under section 132A, as the case ‎maybe, shall abate: ……….”‎
‎7.3 From the perusal of the aforesaid provision, it is evident that, where search ‎has been initiated under section 132 or requisition has been made under section ‎‎132A, it is incumbent upon the assessing officer to issue notices requiring the ‎person searched to file return of income in respect of each assessment year ‎falling within six assessment years immediately preceding the assessment year ‎in which search is conducted. The assessing officer has to assess or reassess ‎the total income in respect of each assessment year falling within six ‎assessment years. Thus, it is a statutory mandate upon the assessing officer to ‎assesses or reassess the total income on which a person can be said to be ‎assessable under the provisions of the Act. The first proviso covers the income ‎which is to be assessed i.e. emanating not only, from the declared sources but ‎also from any material found during the course of search. However, if the ‎assessment has already been made or finalized before the date of search, then ‎the assessing officer can reassess the total income on the basis of material ‎found or gathered during the course of search over and above the income ‎which already stood assessed. However, the second proviso carves out ‎exception/limitation that, pending assessment or reassessment relating to any ‎assessment year following within the period of six years on the date of search, ‎gets abated. In other words, the assessments which have not attained finality ‎and are pending on the date of search, then the same gets abated. The ‎assessments which have abated, fresh determination of total income would be ‎required which can be made on the basis of material already on record as well ‎as material gathered during the course of search. However, the assessments ‎which have already attained finality and does not get abated, then they ‎have to be assessed on the basis of the incriminating material found ‎during the course of search. The reason being that the assessments which ‎are pending and get abated, the entire income has to be determined which ‎includes material already on record and also the material found as a result ‎of search. However, statute has carved out the exception to those assessments ‎which have attained finality, because those assessments do not get abated. In ‎such a situation, the income which has already been assessed, the same cannot ‎be disturbed unless some incriminating information or material is found ‎suggesting that the income which already stood assessed requires to be ‎reassessed on the basis of new material found. This proposition has been ‎upheld and clarified by the Hon’ble jurisdictional High Court in the case ‎of M/s. Murli Agro Products Limited.‎
‎7.4 Thus on a plain reading of section 153A of the Income Tax Act, it ‎becomes clear that on initiation of the proceedings under section 153A, it is ‎only the assessment/reassessment proceedings that are pending on the date of ‎conducting search under section 132 or making requisition under section 132A ‎of the Act stand abated and not the assessments/reassessments already finalized ‎for those assessment years covered under section 153A of the Act. By ‎a Circular No. 8 of 2003, dt. 18-9-2003 (See 263 ITR (St) 61 at 107) the ‎CBDT has clarified that on initiation of proceedings under section 153A, the ‎proceedings pending in appeal, revision or rectification proceedings against ‎finalized assessment I reassessment shall not abate. It is only because, the ‎finalized assessments/reassessments do not abate, the appeal revision or ‎rectification pending against finalized assessment/reassessments would not ‎abate. Therefore, the argument of the assessing officer, that on initiation of ‎proceedings under section 153A, the assessments/reassessments finalized for ‎the assessment years covered under section 153A of the Income Tax Act stand ‎abated cannot be accepted. Similarly on annulment of assessment made under ‎section 153A(1) what stands revived is the pending assessment/reassessment ‎proceedings which stood abated as per section 153A(1).‎
‎7.5 In the present case. I find that there is nothing on record to suggest that any ‎material was found in the course of search which would show any connection ‎on disallowance of expenses amounting to Rs. 1,35,08000 made by assessing ‎officer with the seized material which is the subject matter of dispute in ‎assessment order. Nothing is found contrary to the stated position of the ‎assessee. In the instant case the assessing officer disallowed expenses incurred ‎by the assessee prior to the commencement of business, even though the same ‎had not been claimed since the appellant itself made disallowance thereof in its ‎computation of income except the expenses claimed at Rs. 3,50,107. On these ‎aspects, I find that there is no material referred to by the assessing officer to ‎say that any incriminating material was unearthed during the search. Therefore, ‎in the factual background, I do not find any justification for the assessing ‎officer to make the impugned additions/disallowance in an assessment ‎finalized under section 153A of the Act in the absence of any incriminating ‎material having been found during the course of search, qua the impugned ‎disallowances/additions made in assessment order. I may categorically mention ‎that on the date of initiation of search, qua the assessment year 2009-10 under ‎consideration, assessment was not pending on the date of initiation of search ‎under section 132(1) of the Act, and accordingly, the assessment for this year ‎did not abate in terms of the second proviso to section 153A(1) of the Act. ‎Therefore, the ratio of the judgment of the Hon’ble Bombay High Court in the ‎case of Continental Warehousing Corporation (Nhava Seva) (2015) 120 DTR ‎‎89 (Bom-HC) : 2015 TaxPub(DT) 2182 (Bom-HC) is clearly attracted and the ‎impugned additions should not have been made in respect of an unabated ‎assessment which had become final in the absence of any incriminating ‎material having been found in the course of search, qua the impugned addition ‎relating to disallowance of expenses. Thus, I direct the assessing officer to ‎delete the addition of Rs. 1,35,08,0000 made on account of disallowance of ‎expenditure as the same are beyond the scope and ambit of an assessment ‎envisaged under section 153A of the Act. Accordingly, ground no.1 is ‎allowed.‎
Aggrieved, the revenue is in further appeal before us.‎
‎4. The Auhtorised Representative for Assessee (AR), Shri Vijay Mehta, submitted ‎that the issued stood squarely covered in assessee’s favor by the cited judgment of ‎Hon’ble Bombay High Court. The same has been controverted by learned ‎Commissioner–Departmental Representative, Ms. Vidisha Kalra, who submitted ‎that the matter has not yet attained finality since Special Leave Petition against the ‎aforesaid judgment is under consideration by Hon’ble Apex Court. The learned ‎Commissioner–Departmental Representative, by way of written submissions, ‎agitated the stand of learned Commissioner (Appeals), which as a matter of record ‎are extracted here-in-below :–‎
Note on section 153A: Legal issues
Three Issues need to be addressed:–‎
(1) Conceptual difference between 143(1)(a) intimation and 143(3) ‎assessment.‎
‎(2) Harmonious Construction of the section 153A as a ‘whole’ and its ‎overall congruency with other sections should be there, so as to ensure that ‎interpretation of any one ‘word’ or ‘sub-section’ or ‘clause’ or ‘provision’ does ‎not result in illogical conclusion or Dis-harmony.‎
‎(3) Interpretation of statute should not lead to absurdity and illogical ‎conclusion.‎
Issue Number-1‎
‎1. Conceptual Difference between 143(1) and 143(3): ACIT v. Rajesh ‎Jhaveri (2007) 161 Taxman 316 : 2007 TaxPub(DT) 1257 (SC) Hon’ble ‎Supreme Court in the landmark judgment in the case of ACIT v. Rajesh ‎Jhaveri Stock Brokers (F) Ltd. (2007) 161 Taxman 316 : 2007 TaxPub(DT) ‎‎1257 (SC) has given detailed expositions regarding nature of 143(1)(a) ‎processing and has categorically and emphatically upheld that 143(1)(a) ‎intimation is not assessment at all. To quote from the order as below:–‎
‎”With effect from 1-4-1989, the provisions underwent substantial and ‎material changes. A new scheme was introduced and in the new ‎substituted section 143(1) prior to the subsequent substitution with effect ‎from 1-6-1999, in clause(a), a provision was made that where a return ‎was filed under section 139 or in response to a notice under section ‎‎142(1), and any tax or refund was found due on the basis of such return ‎after adjustment of tax deducted at source, any advance tax or any ‎amount paid otherwise by way of tax or interest, an intimation was to be ‎sent without prejudice to the provisions of section 143(2) to the assessee ‎specifying the sum so payable and such intimation was deemed to be a ‎notice of demand issued under section 156.‎
What were permissible under the first proviso to section 143(1) (a) to be ‎adjusted were that, (i) only apparent arithmetical errors in the return, ‎accounts or documents accompanying the return, (ii) loss carried ‎forward, deduction allowance or relief, which was prima facie ‎admissible on the basis of information available in the return but not ‎claimed in the return and similarly (iii) those claims which were on the ‎basis of the information available in the return, prima facie inadmissible, ‎were to be rectified/allowed/disallowed. What was permissible was ‎correction of errors apparent on the face of the documents ‎accompanying the return. The assessing officer had no authority to make ‎adjustments or adjudicate upon any debatable issues. In other words, the ‎assessing officer had no power to go behind the return, accounts or ‎documents, either in allowing or in disallowing deductions, allowance or ‎relief.‎
The intimation under section 143(1)(a) is given without prejudice to the ‎provisions of section 143(2). Though technically the intimation issued ‎was deemed to be a demand notice issued under section 156, that did ‎not per se preclude the right of the assessing officer to proceed under ‎section 143(2). That right is preserved and is not taken away. Between ‎the period from 1-4-1989 to 31-3-1998, the section proviso to section ‎‎143(1)(a) required that where adjustments were made under the first ‎proviso to section 143(1)(a), an intimation had to be sent to the assessee, ‎notwithstanding that no tax or refund was due from or to him after ‎making such adjustments. With effect from 1-4-1998, the second ‎proviso to section 143(1)(a) was substituted by the Finance Act, 1997, ‎which was operative till 1-6-1999. The requirement was that an ‎intimation was to be sent to the assessee whether or not any adjustment ‎had been made under the first proviso to section 143(1) and ‎notwithstanding that no tax or interest was found due from the assessee ‎concerned. Between 1-4-1998 and 31-5-1999, sending of an intimation ‎under section 143(1)(a) was mandatory. Thus, the legislative intent is ‎very clear from the use of the word ‘intimation’ as substituted for ‎‎’assessment’ that two different concepts emerged. While making an ‎assessment, the assessing officer is free to make any addition after grant ‎of opportunity to the assessee. By making adjustments under the first ‎proviso to section 143(1)(a), no addition which is impermissible by the ‎information given in the return could be made by the assessing officer. ‎The reason is that under section 143(1)(a) no opportunity is granted to ‎the assessee and the assessing officer proceeds on his opinion on the ‎basis of the return filed by the assessee. The very fact that no ‎opportunity of being heard is given under section 143(1)(a) indicates ‎that the assessing officer has to proceed after accepting the return and ‎making the permissible adjustments only. As a result of insertion of the ‎Explanation to section 143 by the Finance (No. 2) Act of 1991 with ‎effect from 1-10-1991 and, subsequently, with effect from 1-6-1994, by ‎the Finance Act, 1994, and ultimately omitted with effect from 1-6-‎‎1999, an intimation sent to the assessee under section 143(1) was ‎deemed to be an order for the purposes of section 246 between 1-6-1994 ‎and 31-5-1999, and under section 264 between 1-10-1991 and 31-5-‎‎1999. The expression ‘intimation’ and ‘assessment order’ have been used ‎at different places. The contextual difference between the two ‎expressions has to be understood in the context the expressions are used. ‎The assessment is used as meaning sometimes ‘the computation of ‎income’, sometimes ‘the determination of the amount of tax payable’ and ‎sometimes ‘the whole procedure laid down in the Act for imposing ‎liability upon the tax payer’. In the scheme of things, as noted above, the ‎intimation under section 143(1)(a) cannot be treated to be an order of ‎assessment….‎
‎…… Under the first proviso to the newly substituted section 143(1), ‎with effect from 1-6-1999, except as provided in the provision itself, the ‎acknowledgment of the return shall be deemed to be an intimation under ‎section 143(1) where (a) either no sum is payable by the assessee, or (b) ‎no refund is due to him. It is significant that the acknowledgment is not ‎given by any assessing officer, but mostly by ministerial staff. No ‎assessment can be done by them. The intimation under section 143(1)(a) ‎was deemed to be a notice of demand under section 156, for the ‎apparent purpose of making machinery provisions relating to recovery ‎of tax applicable. By such application only recovery indicated to be ‎payable in the intimation became permissible. And nothing more can be ‎inferred from the deeming provisions. (Para 13)‎
‎…. In view of the conceptual difference between section 143(1) and ‎section 143(3). Thus, the appeal was to be allowed.‎
Therefore, a plain reading clearly establishes that in undisputed terms, ‎Hon’ble Supreme Court has held that 143(l)(a) intimation is not ‎assessment at all. Subsequently. Supreme Court in Dy. CIT v. Zuari ‎Estate Development and Investment Co. Ltd. (2015) 373 ITR 661 (SC) : ‎‎2015 TaxPub(DT) 2254 (SC) further settled the legal position that where ‎the return had been processed under section 143(1) of the Act, there was ‎no ‘assessment’.‎
‎2. Order of Supreme Court in Rajesh Jhaveri not discussed in any case: In ‎Perusal of various decisions namely Kabul Chawla, Anil Kumar Bhatia, ‎Chetandas Lachmandas, Canara Housing. Filatex India Ltd. and ‎Continental Warehousing, it is seen that conceptual difference between ‎‎143(1)(a) intimation and 143(3) assessment as brought out by Hon’ble ‎Supreme Court has not been discussed in any of these cases. In fact, issue ‎of intimation v. assessment has not been touched in any of these cases and ‎has escaped discussion at all. Hon’ble High Courts have not dwelled upon ‎this issue.‎
‎3. Indulata Rangwala v. DCII (2016) 384 ITR 337 : 2016 TaxPub(DT) ‎‎2519 (Del-HC): Admission regarding incorrect legal position in earlier ‎cases
In this case while dealing with section 147, for the assessment year 1999-‎‎2000, the decisions of Hon’ble Supreme Court in case of Rajesh ‎Jhaveri (supra) and Dy. CIT v. Zuari Estate Development &Investment ‎Co. were brought to the kind notice of Delhi High Court in an argument by ‎Revenue that intimation under section 143(1) is not an Assessment. Hon’ble ‎Delhi High Court categorically admitted that this distinction between ‎‎143(1) and 143(3) was overlooked in some decisions of High Courts ‎including Delhi High Court. To quote from paras 25 and 35.9 of the order:-‎‎-‎
‎”……25. It appears that the above distinction drawn between the object ‎of provision of section 14(1) and section 143(3) of tire Act was ‎overlooked in some of the decisions of the High Courts, including this ‎Court…..‎
‎”…..35.9 The decisions of this Court and other Courts to the extent ‎inconsistent wills the above decisions of the Supreme cannot be said to ‎reflect correct legal position.”‎
In view of above categorical admission by a subsequent Delhi High Court ‎order regarding incorrect legal position of the earlier orders in view of ‎expositions of Hon’ble Supreme Courts, the mistake in these orders of high ‎Courts is apparent.‎
Issue No. 2:–‎
Resulting noncompliance of letter and spirit of section 153A in many ‎situations: The High Court decisions have created situations which lead to ‎obvious noncompliance of letter and spirit of section 153A in following ‎ways:–‎
‎1. No ‘Assessment’ at aft in many cases–‎
If intimation 143(1)(a) and assessment under section 143(3) are ‎equated and 143(1)(a) is held as assessment, then it will lead to ‎situation which are apparently and basically against the basic law as ‎per 153A. Legislature in its wisdom has made assessment mandatory ‎for 6 assessment years irrespective of any discovery of incriminatory ‎evidences. By restricting the powers of assessing officer and ‎equating 143(1)(a) to assessment, in a large number of assessment ‎years: practically no assessment will take place if apparently ‎incriminating evidence is not found in search. Obviously, such cases ‎are not being covered under reassessment as reassessment presumes ‎assessment” on the earlier occasion. Since there has not been any ‎assessment earlier, assessment under section 153A as per sub section ‎‎(1) clause(b) is mandatory. In fact, the legislature has ‎overemphasized its intent by again mentioning in 1st proviso to ‎section 153(1) that assessing officer shall assess or reassess the total ‎income in respect of each assessment year falling within such six ‎assessment years. Therefore, it is logical and lawful to hold that in ‎cases where only intimation under section 143(1)(a) has been issued ‎prior to date of search, assessment as defined in Section 143(3) is ‎mandatory as per Section 153A. In such cases, there cannot be any ‎fetters on the power of assessing officer limiting additions on the ‎basis of seized material alone, such fetters can, at best be, only ‎where assessment under section 143(3) has been completed prior to ‎search and now assessing officer cannot revisit the settled issues. He ‎can only reassess the income on the basis of seized material. This ‎view is based on the Harmonious Interpretation of the statute which ‎is the cardinal guiding principle of any law including income tax ‎law.‎
‎2. No expression as ‘Abated Assessment’ v. ‘Non-Abated Assessments’ ‎in Income Tax Act:–‎
Technically, it would also be relevant to point out here that in ‎Section 153A expression Abated assessment and Non-Abated ‎Assessments has not been used in the statute. Such expression ‎categorises the assessments under section 153A in two distinct ‎categories. However, such categorization from the scratch is against ‎the basic law on which the entire super structure of Scope of ‎Assessment has been later built. The second proviso to section 153A ‎only mentions that in case assessment or reassessment is pending on ‎the date of initiation of search, such assessment or reassessment shall ‎abate. The purpose is to frame the assessment order after issuance of ‎notice under section 153A There is no category of Non-Abated ‎Assessment as per the Statute. Such imported expression distorts the ‎harmonious interpretation of the section and leads to illogical ‎conclusion. Assessment in any case is mandatory under section 153A ‎and assessment order will have to be passed in all circumstances. ‎Thus it is fair and logical to conclude that assessment-unfettered-will ‎have to be passed by assessing officer mandatorily if no earlier ‎assessment is done–143(1)(a) not being an assessment.‎
‎3. Repeated usage of Assessment or Reassessment in section 153A:–‎
Throughout the section 153A, expression Assess or Reassess has ‎been used by legislature in its wisdom. Either Assessment or ‎Reassessment must be done. There cannot be a situation the neither ‎assessment is done nor reassessment. Such a situation will be ‎contrary to spirit and letter of the statute. Equaling 143(1)(a) to ‎‎’assessment’ and limiting the hands of assessing officer would lead to ‎‎’assessment’ and limiting the hands of assessing officer would lead to ‎results which are contradictory to statute. Thus it is fair and lawful to ‎hold that where no 143(3) assessment has taken place earlier, ‎‎’Assessment without any fetters’ must take place in 153A ‎proceedings. In fact, it would be fair and lawful to argue that even ‎where 143(3) assessment has been done prior to search, no ‎incriminating evidence is found in search. assessing officer has full ‎powers to visit the earlier assessment and assess’ or ‘reassess’ such ‎income. This would be most harmonious interpretation of 153A.‎
‎4. Limited significance of 2nd proviso to section 153A(1):–‎
The second proviso to section 153A has apparently very limited ‎significance in so far as to restrict number of assessment orders to be ‎only one, where proceedings are ‘already on’ before search. It is in ‎this spirit that sub-section (2) of 153A speaks of ‘Revival of ‘abated ‎assessment’ to avoid multiplicity of assessment orders. In fact, there ‎cannot be any harmonious interpretation of provisions of section ‎‎153A as a ‘whole’ if hands of assessing officer are tied while ‎‎’assessing’ a ‘reassessing’ income for six years. ‘Assessment’ and ‎Reassessment’ order under section 153A is always supposed to have ‎comprehensive, all-encompassing jurisdiction–‘original as well as ‎based on search findings (which may or may not be there) without ‎such interpretation, sub section 2 and its proviso cannot be ‎understood and do not harmoniously fit into first Subsection.‎
Issue No. 3‎
Raison-d’etre of 153A/153C is defeated: Such interpretation of section ‎‎153A defeats the very raison-d’etre of the section 153A–If assessment is to ‎be limited to incriminating material found in search, then assessing officer ‎already had such power under section 148 and such interpretation will ‎render section 153A relevant and worthless. There cannot be any statute ‎which is irrelevant. The interpretation of section 153A has to be such that it ‎remains relevant and serves a specific purpose which is not embedded in ‎other sections.‎
Absurd interpretation: Such Limited interpretation of section 153A not only ‎defeats the very Raison-d’etre of section 153A and renders it irrelevant, but ‎it also leads to absurdity and contradiction of entire search and seizure ‎operations
Search and seizure operation under section 132 are intrusive and ‎investigative to extreme in the sense that personal space of assessee and his ‎family members is violated to unearth unaccounted income. The ‎investigation team enters and searches the entire residences of the ‎concerned assessee including each and every nook and corner of residence. ‎Thus, principle behind 132 operations is to explore, examine and ‎investigate 100% details of an assessee. Return of income filed for six ‎years’ under section 139 are very much part of such details. It would be ‎blatantly absurd and illogical if all other business and personal spaces ‎including residences are searched and investigated and returns of income ‎filed under section 139 for six years are not verified, merely 143(1) ‎processing does not allow such investigation and verification of return of ‎income. By interpreting law in such a way that in search and seizure cases, ‎returns of income (which is the most basic document related to taxable ‎income) is not subjected to scrutiny ever, would he biggest absurdity and ‎illogical interpretation of law.‎
Since no law can be interpreted in such a way as to lead absurdity, ‎assessment under section 143(3) is to be done mandatorily in all 153(3) ‎cases of returns filed under section 139.‎
‎5. We have carefully perused the order of lower authorities and submissions made ‎by respective representatives, in this regard. Upon perusal, we find that it is ‎undisputed fact that the assessment for impugned assessment year was non-abated ‎assessment since no proceedings were pending for the same on the date of search ‎i.e. 30-3-2012. The original return of income was filed by the assessee on 7-5-‎‎2010 and the time limit for issuance of scrutiny assessment notice under section ‎‎143(2) had already expired which was a statutory requirement to scrutinize the ‎return of income of the assessee. It is also undisputed fact that the impugned ‎additions are not based on any incriminating material found during the search ‎operations since the expenditure as claimed by the assessee has been disallowed ‎by placing reliance on section-3 since learned assessing officer opined that the ‎business was not set-up by the assessee during impugned assessment year. ‎However, it is noteworthy that the genuineness of the expenditure is also not in ‎question since learned assessing officer himself has treated the same as capital ‎expenditure. Another point to be noted is that impugned order record a finding ‎that majority of these expenditure have already been disallowed by the assessee ‎while filing the original return of income which could not be controverted by the ‎revenue.‎
‎6. The aforesaid factual matrix, as rightly noted by learned Commissioner ‎‎(Appeals), is squarely covered by the decision of Hon’ble Bombay High Court ‎rendered in CIT v. Continental Warehousing Corporation (2015) 374 ITR 645 ‎‎(Bom-HC) : 2015 TaxPub(DT) 2182 (Bom-HC). Similar view has been taken by ‎Hon’ble Delhi High Court in CIT v. Kabul Chawla (2016) 380 ITR 573 (Del-HC) : ‎‎2015 TaxPub(DT) 3486 (Del-HC). Further, upon perusal of SLP No. 18560 of ‎‎2015 dated 12-10-2015 admitted by Hon’ble Supreme Court against the decision ‎of Hon’ble Bombay High Court rendered in CIT v. Continental Warehousing ‎Corporation (supra), we find that Hon’ble Apex Court has only admitted SLP ‎against the ruling of the Hon’ble Bombay High Court’s finding that no addition ‎can be made in respect of assessments which have become final if no ‎incriminating material is found during search or during 153A proceedings. ‎However, it is seen that the Hon’ble Apex Court has not stayed or suspended the ‎operation of the decision of the Hon’ble Bombay High Court in any manner and ‎therefore, at the moment, the decision of jurisdictional High Court is binding on ‎us and we are bound to follow it. Respectfully following the binding judicial ‎precedent, we upheld the conclusions drawn by learned Commissioner (Appeals) ‎and dismiss revenue’s appeal which makes assessee’s cross-objections infructuous.‎
‎7. Resultantly, the appeal as well cross objection stand dismisse

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