The Principal Commissioner Of ... vs Backbone Projects Ltd
2023 Latest Caselaw 5151 Guj

      C/TAXAP/88/2023                                    ORDER DATED: 04/07/2023




             IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

                         R/TAX APPEAL NO. 88 of 2023
                                     With
                         R/TAX APPEAL NO. 205 of 2023
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            THE PRINCIPAL COMMISSIONER OF INCOME TAX 1
                              Versus
                      BACKBONE PROJECTS LTD.
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Appearance:
MR KARAN SANGHANI FOR MRS KALPANAK RAVAL(1046) for the
Appellant(s) No. 1
 for the Opponent(s) No. 1
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     CORAM:HONOURABLE MR. JUSTICE VIPUL M. PANCHOLI
           and
           HONOURABLE MR. JUSTICE DEVAN M. DESAI

                              Date : 04/07/2023

                              COMMON ORAL ORDER

(PER : HONOURABLE MR. JUSTICE VIPUL M. PANCHOLI)

1. Heard learned Standing Counsel Mr. Karan Sanghani for the appellant.

2. Both these appeals are filed under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as the 'Act') against the order passed by the Income Tax Appellate Tribunal (hereinafter referred to as the 'Tribunal') in similar type of matters. Tax Appeal No.88 of 2023 is filed against the order dated 26.08.2022 passed by the Tribunal in ITA No. 288/RJT/ 2015 for Assessment Year 2006-2007, whereas, Tax Appeal No.205 of 2023 is filed against the order dated 26.08.2022 passed by the Tribunal in ITA

C/TAXAP/88/2023 ORDER DATED: 04/07/2023

No.340/RJT/2015 for the Assessment Year 2005-2006.

3. As the issue involved in both the appeals is similar, learned Standing Counsel appearing for the appellant Revenue requested that both the appeals be heard together.

4. For the sake of convenience, the facts as narrated in Tax Appeal No.88 of 2023 are taken into consideration.

4.1. The original Assessment Order in the case of respondent assessee was passed on 26.12.2008, wherein, the additions were made to the return of income of the assessee. Thereafter, search under Section 132 of the Act was carried out at the premises of the assessee on 24.06.2010 and proceedings under Section 153A of the Act were initiated. During the course of assessment, the Assessing Officer sought to make certain disallowances under Section 80IA of the Act, which was challenged by the assessee on the ground that since the original assessment was already concluded and no incriminating material was found during the course of search, such additions are not sustainable under Section 153A of the Act. However, the Assessing Officer rejected the said contention and made addition of Rs.6,40,86,418/- by disallowing the claim of deduction under Section 80IA(4) of the Act.

C/TAXAP/88/2023 ORDER DATED: 04/07/2023

4.2. The assessee challenged the said order passed by the Assessing Officer by filing an appeal before the CIT (A). However, the CIT(A) dismissed the appeal filed by the assessee.

4.3. Against the order passed by the CIT (A), the assessee preferred an appeal before the Tribunal. However, the Tribunal vide impugned order dated 26.08.2022, allowed the appeal filed by the assessee and therefore the appellant Revenue has preferred present appeal under Section 260A of the Act.

5. In both the appeals, the appellant Revenue has proposed the following substantial questions of law:

(i) Whether the Hon'ble Tribunal has erred in upholding that any addition during the assessment u/s. 153A has to be confined to the incriminating material found during the course of search u/s. 132(1) of the Act?

(ii) Whether the Hon'ble Tribunal has erred in not appreciating that Sec. 153A requires a notice to be issued requiring the assessee to furnish his return of income in respect of each assessment year falling within six assessment years and to assess or re-assess the total income of those six assessment years?

C/TAXAP/88/2023 ORDER DATED: 04/07/2023

(iii) Whether the Hon'ble Tribunal has erred in not appreciating that while computation of undisclosed income of the block period u/s. 158BB was not be made on the basis of evidence found as a result of search or requisition of books of accounts, there is no such stipulation in Sec. 153A and Sec. 153B1 specifically states that the provisions of Chapter-XIV-B, under which Sec. 158BB falls, would not be applied where a search was initiated u/s. 132 after 31/05/2003?

(iv) Whether the Hon'ble Tribunal has erred in not appreciating that assessment in relation to certain issues not related to the search and seizure may arise in any of the said six assessment years after the search u/s. 132 is conducted in the case of the assessee?

(v) Whether the Hon'ble Tribunal was justified in deleting the addition merely on the basis that no addition can be made other than which is on the basis of seized incriminating document when in a recent judgment in case of M/s. Amar Jewellers Ltd. v. ACIT [2022] 137 taxmann.com 249 (Gujarat) Hon'ble Gujarat High Court has clarified that the u/s. 153A of the Act the assessment needs to be made for both disclosed and undisclosed income?

C/TAXAP/88/2023 ORDER DATED: 04/07/2023

6. Learned Standing Counsel appearing for the appellant referred the observations made by the Tribunal while passing the impugned order and submitted that the Tribunal has placed reliance upon the decision rendered by this Court in the case of Principal Commissioner of Income Tax-4 vs. Saumya Construction, reported in (2016) 387 ITR 529 (Gujarat). It is submitted that at the relevant point of time, the SLP filed by the Revenue before the Hon'ble Supreme Court against the said order was pending. However, learned Standing Counsel appearing for the appellant Revenue has fairly submitted that now the SLP preferred by the Revenue against the order passed in Saumya Construction (supra) is dismissed and the Hon'ble Supreme Court has passed an order in group of appeals filed by the Revenue in the case of Principal Commissioner of Income Tax, Central-3 vs. Abhisar Buildwell P. Ltd.

7. We have considered the submissions canvassed by learned Standing Counsel appearing for the appellant Revenue. It is pertinent to note that this Court has recently passed an order on 05.05.2023 in Tax Appeal No.283 of 2023, wherein also similar type of substantial questions of law were proposed by the Revenue and this Court, after considering the decision rendered by the Hon'ble Supreme Court in the case of Abhisar Buildwell P. Ltd. (Supra) in Civil Appeal No.6580 of 2021 and allied matters as well as the decision rendered by this Court in the case of

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Saumya Construction (supra) as well as the decision rendered by Delhi High Court in the case of Commissioner of Income Tax, Central-III vs. Kabul

(Delhi), dismissed the appeal filed by the appellant Revenue. Thus, we are of the view that present appeals are covered by the aforesaid decision. In the said decision, the Coordinate Bench of this Court has observed in para 4, 4.1, 4.2, 4.3, 4.4, 4.5, 5 and 6 as under:

"4. While learned advocate for the appellant took the court through the order impugned in the appeal to make various submissions to assail the same and to submit that the aforesaid substantial questions of law arise, in course of the hearing, however, learned advocate fairly conceded that the issue represented in the substantial questions of law is answered by the supreme court in Principal Commissioner of Income Tax, Central- 3 vs. Abhisar Buildwell P. Ltd. being Civil Appeal No. 6580 of 2021 and other group of appeals decided on 24th April, 2023. They were the group of appeals filed by the Revenue as well as the assessee respectively. The issue involved in the said appeals before the supreme court was about the scope of assessment under section 153A of the Act. According to the case of the Revenue, the Assessing Officer is competent to consider all the material available on record including the material found during the search and make assessment of 'total income'. While some High Courts had agreed with the said proposition, other High Courts took the view that if no assessment proceedings are pending on the date of initiation of search, the Assessing Officer can consider only such incriminating material

C/TAXAP/88/2023 ORDER DATED: 04/07/2023

found during the search and it is not permissible for the Assessing Officer to consider any other material derived from any other source.

4.1 The supreme court in Abhisar Buildwell P. Ltd. (supra) answered the question as to whether in respect of completed assessment/un- abated assessment, the jurisdiction of the Assessing Officer to make assessment is confined to incriminating material found during the course of search under section 132 of the Act or the requisition under section 132A and whether additions made by the Assessing Officer in absence of any incriminating material found during the search, could be sustained or not.

4.2 The supreme court confirmed the view taken by this court in Principal Commissioner of Income Tax-4 vs. Saumya Construction [(2016) 387 ITR 529 (Gujarat)] well as that of Delhi High Court in Commissioner of Income Tax, Central-III vs. Kabul Chawla [(2015) 61 taxmann.com 412 (Delhi)], which were in favour of the assessee. The supreme court held that no addition can be made in respect of completed/ unabated assessment in absence of any incriminating material.

4.3 The supreme court observed in Abhisar Buildwell P. Ltd. (supra) thus, "....The lead judgment is by the Delhi High Court in the case of Kabul Chawla (supra), which has been subsequently followed and approved by the other High Courts, referred to hereinabove. One another lead judgment on the issue is the decision of the Gujarat High Court in the case of Saumya Construction (supra), which has been followed by the Gujarat High Court in the subsequent decisions, referred to hereinabove. Only the Allahabad High Court in the case of Pr. Commissioner of Income Tax v. Mehndipur Balaji, 2022 SCC Online All 444 : (2022) 447 ITR 517 has taken a contrary view." (para 7)

4.4 The Kabul Chawla (supra) was quoted for its ratio as under,

C/TAXAP/88/2023 ORDER DATED: 04/07/2023

"In the case of Kabul Chawla (supra), the Delhi High Court, while considering the very issue and on interpretation of Section 153A of the Act, 1961, has summarised the legal position as under: Summary of the legal position 38. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under:

i. Once a search takes place under Section 132 of the Act, notice under Section 153A(1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place.

ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise.

iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. In other words, there will be only one assessment order in respect of each of the six AYs "in which both the disclosed and the undisclosed income would be brought to tax".

iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment "can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material."

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v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e., those pending on the date of search) and the word 'reassess' to completed assessment proceedings.

vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO.

vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment."

4.5 The decision of Saumya Construction (supra) of Gujarat High Court was also quoted for its paragraph Nos. 15 and 6 to held that the case of completed assessment/unabated assessment in absence of any incriminating material will not permit making of addition by the Assessing Officer and that the Assessing Officer has no jurisdiction to reopen the completed assessment.

5. Finally, the supreme court confirmed the view taken by the Delhi High court in Kabul Chawla (supra and of this Court in Saumya Construction (supra laying down the law that no addition can be made in respect of completed assessment in absence of any incriminating material. The supreme court in laying down the proposition considered the object and purpose of insertion of section 153A of the Act.

6. In view of the above decision of the supreme

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court in Abhisar Buildwell P. Ltd. (supra), there is no gainsaying that the issue sought to be raised and the substantial questions of law ought to be put forth in that context, are answered."

8. In view of the aforesaid facts and circumstances of the present case, we are of the view that no case is made out in these appeals. No question of law much less any substantial question of law could be said to be arising in view of law laid down by the supreme court in the case of Abhisar Buildwell P. Ltd. (supra). Therefore, both the appeals stand dismissed.

(VIPUL M. PANCHOLI, J)

(D. M. DESAI,J) LAVKUMAR J JANI