Mahavir Singh (Judicial Member) And N. K. Pradhan (Accountant Member)

For the Appellant : Jignesh R. Shah and Haresh Kenia
For the Respondent : H. N. Singh, Commissioner of Income-Tax-Departmental Representative

ORDER

The order of the Bench was delivered by

1. These eighteen appeals by the assessees are arising out of the different orders of the Commissioner of Income-tax (Appeals)-39, Mumbai, in appeal No. CIT(A)-39/IT-189, 193, 197, 198, 201, 202, 203, 204, 205, 215, 222/2008-09 of even date March 23, 2011. The assessments were framed by the Deputy Commissioner of Income-tax CC 17 and 28, Mumbai for the assessment year 2003-04 vide orders of even date December 30, 2008 under section 143(3) read with section 153 of the Income-tax Act, 1961 (hereinafter "the Act") in all these cases. The penalties in I. T. A. Nos. 7382, 7383, 7384, 7385, 7387, 7389 and 7390/Mum/2013 for the assessment year 2003-04 were levied by the Assistant Commissioner of Income-tax CC 17 and 18 under section 271(1)(c) of the Act vide his orders of even date March 21, 2012.

2. The only common issue in all these eleven quantum appeals of the assessees is as regards to the order of the Commissioner of Income-tax (Appeals) confirming the action of the Assessing Officer in treating the gift received as unexplained and assessed as income from other sources despite the fact that no incriminating material/evidence were found during the course of search under section 132 of the Act on the premises of the assessees and the original assessment was not abated. The following are the details of these eleven appeals :

3. For this all the eleven assessees have raised identical worded grounds and hence, we will take up the ground raised in I. T. A. No. 3577/Mum/2011 for the assessment year 2003-04, which is lead case, reads as under :

"1. Re : Addition under section 68 with regard to the gift received.

1.1 On the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) (hereinafter referred to as the learned CIT (Appeals)) erred in affirming the action of the Assessing Officer by treating the gifts received as 'Income from other sources' in spite of the fact that no incriminating evidence being found during the course of search proceedings.

1.2 On the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals erred in discarding the various documentary evidence and explanations given during the course of assessment proceedings and the appeal proceedings to prove the genuineness of the gift received."

4. Brief facts are that in these eleven cases, the assessees filed returns of income on even date August 11, 2003 for the assessment year 2003-04. The assessees received a gift of Rs. 10 lakhs in each of the case from one Mr.Gayanchand Jain. This gift was declared in the original returns filed by the respective assessees' on August 11, 2003 in the form of capital accounts filed, wherein each of the assessee has declared this gift. The assessment/processing of return of income for the year under consideration was concluded much before the searchand could not therefore abate as the returns were filed by the respective assessees on August 11, 2003 and therefore, the last date for issuing notices under section 143(2) of the Act was on August 31, 2004, whereas, the search on the premises of these assessees took place on August 3, 2006. The Assessing Officer during the course of the assessment proceedings in consequence to the search under section 153A read with section 143(2) of the Act noticed the factum of gift was already disclosed in the capital accounts filed along with the returns of income by the respective assessees and this is not the income discovered or unearthed during the course of search by the Department under section132 of the Act. But the Assessing Officer assessed the gifts as income from undisclosed sources of the assessees and the Commissioner of Income-tax (Appeals) also confirmed the same. Aggrieved, all the assessees came in second appeal before the Tribunal.

5. In view of the above given facts, the learned counsel for the assessees argued that the issue of assumption of jurisdiction by the Assessing Officer and making addition while framing the assessment under section 153A read with section 143(3) of the Act, the assessment is without jurisdiction in respect of assessment of gifts already disclosed. Now, before us the learned Commissioner of Income-tax-Departmental representative could not support the orders of the Commissioner of Income-tax (Appeals) or on a query from the Bench could not produce any seized material pertaining to this assessment year relatable to the assessee in regard to the additions made by the Assessing Officer. Once this is the position, the issue is squarely covered in favour of the assessee by the decision of the hon'ble Bombay High Court in the case of CIT v. Continental Warehousing Corporation (Nhava Sheva) Ltd. [2015] 374 ITR 645 (Bom)

6. We find that this issue now stands covered in favour of the assessee and against the Revenue by the decision of the hon'ble Bombay High Court in the case of Continental Warehousing Corporation (Nhava Sheva) Ltd. (supra), wherein considering the judgment of the Special Bench of the Mumbai Tribunal in the case of All Cargo Global Logistics v. Deputy CIT [2012] 18 ITR (Trib) 106 (Mumbai) [SB] ; [2012] 137 ITD 287 (SB) (Mum) considered this issue that, whether there is scope of assessment under section 153A of the Act in respect of completed assessment which is limited only to undisclosed income and undisclosed assets found during the course of search or not ? The hon'ble High Court held that on a plain reading of section 153 of the Act it becomes clear that on initiation of the proceedings under section 153A of the Act, it is only the assessment/reassessment proceedings that are pending on the date of conducting search under section. 132 of the Act stand abated and not the assessments/reassessments already final for those assessment years covered under section 153A of the Act. The hon'ble High Court also discussed the Central Board of Direct Taxes Circular No. 8 of 2003 dated September 18, 2003 reported in 263 ITR (St.) 61 at page 107 wherein the Central Board of Direct Taxes has clarified that on initiation of proceedings under section 153A of the Act the proceedings pending in appeal, revision or rectification proceedings against final assessment shall not abate. It is only because the final assessments do not abate the appeal, revision or rectification pending against the final assessments would not abate. Therefore, the hon'ble High Court rejected the arguments of the Revenue that on initiation of proceedings under section 153A of the Act, the reassessment final for the assessment years covered under section 153A of the Act stands abated. Only the pending assessments get revived under section 153A of the Act. The hon'ble High Court further held that once the assessment has attained finality, then the Assessing Officer while passing independent assessment order under section 153A/143(3) of the Act could not disturb the assessment order which has attained finality unless the material gathered in the course of searchunder section 132/153A of the Act established that the finality attained in the assessment were contrary to the facts unearthed during the course of search. The relevant portion of the judgment reads as under (page 661 of 374 ITR) :

"We, therefore, hold that the Special Bench's understanding of the legal provision is not perverse nor does it suffer from any error of law apparent on the face of the record. The Special Bench in that regard held as under (pages 144 to 148 of 18 ITR (Trib) :

'The provision under section 153A is applicable where a search or requisition is initiated after May 31, 2003. In such a case the Assessing Officer is obliged to issue notice under section 153A in respect of 6 preceding years, preceding the year in which search etc. has been initiated. Thereafter he has to assess or reassess the total income of these six years. It is obligatory on the part of the Assessing Officer to assess or reassess total income of the six years as provided in section 153A(1)(b) and reiterated in the first proviso to this section. The second proviso states that the assessment or reassessment pending on the date of initiation of the search or requisition shall abate. We find that there is no divergence of views in so far as the provision contained in section 153A till the first proviso. The divergence starts from the second proviso which states that pending assessment or reassessment on the date of initiation of search shall abate. This means that an assessment or reassessment pending on the date of initiation of search shall cease to exist and no further action shall be taken thereon. The assessment shall now be made under section 153A. The case of the learned counsel for the assessee is that necessary corollary to this provision is that completed assessment shall not abate. These assessments become final except in so far and to the extent as undisclosed income is found in the course of search. On the other hand, it has been argued by the learned standing counsel that abatement of pending assessment is only for the purpose of avoiding two assessments for the same year, one being regular assessment and the other being assessment under section 153A. In other words these two assessments coalesce into one assessment. The second proviso does not contain any word or words to the effect that no reassessment shall be made in respect of a completed assessment. The language is clear in this behalf and therefore the literal interpretation should be followed. Such interpretation does not produce manifestly absurd or unjust results as section 153A(1)(b) and the first proviso clearly provide for assessment or reassessment of all six years. It may cause hardship to some assessees where one or more of such assessments has or have been completed before the date of initiation of search. This is hardly of any relevance in view of clear and unambiguous words used by the Legislature. This interpretation does not cause any absurd results etc.. There is no casus omissus and supplying any would be against the legislative intent and against the very rule in this behalf that it should be supplied for the purpose of achieving legislative intent. The submissions of the learned counsels are manifold, the foremost being that the provision under section 153A should be read in conjunction with the provision contained in section 132(1), the reason being that the latter deals with search and seizure and the former deals with assessment in case of search etc., thus, the two are inextricably linked with each other.

Before proceeding further, we may now examine the provision contained in sub-section (2) of section 153, which has been dealt with by the learned counsel. It provides that if any assessment made under sub-section (1) is annulled in appeal etc., then the abated assessment revives. However, if such annulment is further nullified, the assessment again abates. The case of the learned counsel is that this provision further shows that completed assessments stand on a different footing from the pending assessments because appeals, etc. proceedings continue to remain in force in case of completed assessments and their fate depends upon subsequent orders in appeal. On consideration of the provision and the submissions, we find that this provision also makes it clear that the abatement of pending proceedings is not of such permanent nature that they cease to exist for all times to come. The interpretation of the learned counsel, though not specifically stated, would be that on annulment of the assessment made under section 153(1), the Assessing Officer gets the jurisdiction to assess the total income which was vested in him earlier independent of the search and which came to an end due to initiation of the search.

The provision contained in section 132(1) empowers the officer to issue a warrant of search of the premises of a person where any one or more of conditions mentioned therein is or are satisfied, i.e. (a) summons or notice has been issued to produce books of account or other documents but such books of account or documents have not been produced, (b) summons or notice has been or might be issued, he will not produce the books of account or other documents mentioned therein, or (c) he is in possession of any money or bullion, etc., which represents wholly or partly the income or property which has not been and which would not be disclosed for the purpose of assessment, called as undisclosed income or property. We find that the provision in section 132 (1) does not use the word 'incriminating document'. Clauses (a) and (b) of section 132(1) employ the words 'books of account or other documents'. For harmonious interpretation of this provision with the provision contained in section 153A, all the three conditions on satisfaction of which a warrant of search can be issued will have to be taken into account.

Having held so, an assessment or reassessment under section 153A arises only when a search has been initiated and conducted. Therefore, such an assessment has a vital link with the initiation and conduct of the search. We have mentioned that a search can be authorised on satisfaction of one of the three conditions enumerated earlier. Therefore, while interpreting the provision contained in section 153A, all these conditions will have to be taken into account. With this, we proceed to literally interpret to the provision in section153A as it exists and read it alongside the provision contained in section 132(1).

The provision comes into operation if a search or requisition is initiated after May 31, 2003. On satisfaction of this condition, the Assessing Officer is under obligation to issue notice to the person requiring him to furnish the return of income of six years immediately preceding the year of search. The word used is "shall" and, thus, there is no option but to issue such a notice. Thereafter he has to assess or reassess total income of these six years. In this respect also, the word used is "shall" and, therefore, the Assessing Officer has no option but to assess or reassess the total income of these six years. The pending proceedings shall abate. This means that out of six years, if any assessment or reassessment is pending on the date of initiation of the search, it shall abate. In other words pending proceedings will not be proceeded with thereafter. The assessment has now to be made under section 153A(1)(b) and the first proviso. It also means that only one assessment will be made under the aforesaid provisions as the two proceedings i.e. assessment or reassessment proceedings and proceedings under this provision merge into one. If assessment made under sub-section (1) is annulled in appeal or other legal proceedings, then the abated assessment or reassessment shall revive. This means that the assessment or reassessment, which had abated, shall be made, for which extension of time has been provided under section 153B.

The question now is-what is the scope of assessment or reassessment of total income under section 153A(1)(b) and the first proviso ? We are of the view that for answering this question, guidance will have to be sought from section 132(1). If any books of account or other documents relevant to the assessment had not been produced in the course of original assessment and found in the course of search in our humble opinion such books of account or other documents have to be taken into account while making assessment or reassessment of total income under the aforesaid provision. Similar position will obtain in a case where undisclosed income or undisclosed property has been found as a consequence of search. In other words, harmonious interpretation will produce the following results :

(a) In so far as pending assessments are concerned, the juris diction to make original assessment and assessment under section 153A merge into one and only one assessment for each assessment year shall be made separately on the basis of the findings of the search and any other material existing or brought on the record of the Assessing Officer,

(b) in respect of non-abated assessments, the assessment will be made on the basis of books of account or other documents not produced in the course of original assessment but found in the course of search, and undisclosed income or undisclosed property discovered in the course of search.' "

7. We have examined the details and noticed that the notice under section143(2) of the Act became time barred on August 31, 2004 at the time when the search took place much later on August 3, 2006. Therefore, it follows that as on the date of search, there was an assessment completed or processing of return of income of the assessee under section 143(1) of the Act. Subsequently, the Assessing Officer initiated proceedings under section 153A and in the assessment completed under section 143(3) read with section 153A, the Assessing Officer has brought to tax a sum of Rs. 10,00,000 being the amount of gift received from Shri Gayanchand Jain without any incriminating material found during the course of search. Once this is the position the issue is clearly covered in favour of the assessee and against the Revenue by the decision of the hon'ble Bombay High Court in the case of Continental Warehousing Corporation (Nhava Sheva) Ltd. (supra). Respectfully, following the same and in the given said of facts, we are of the view that this gift received from Shri Gayandhand Jain for an amount of Rs. 10,00,000 disclosed in the return of income as evidence by the capital account and which has not been abated, the amount of gift cannot be added. Accordingly, we reverse the orders of the Commissioner of Income-tax (Appeals) as well as that of the Assessing Officer and delete the addition in all these eleven appeals of the assessee.

8. Further, in regard to the above quantum appeals, the Assessing Officer levied the penalty, in the following seven assessees, under section 271(1)(c) of the Act on the addition of gift of Rs. 10 lakhs in each of the case received by respective assessees' from Shri Gayanchand Jain :

9. At the outset, the learned counsel for the assessee argued that the penalty in one of the group cases in the case of Gunvantiben N Shah v. Asst. CIT (I. T. A. No. 7386/Mum/2013 for the assessment year 2003-04) was deleted by the co-ordinate Bench of this Tribunal vide order dated November 16, 2015 on the merits. But now, we have already deleted the quantum addition in all these seven cases, the penalties levied by Assessing Officer will not survive. Hence, the penalties levied by the Assessing Officer and confirmed by the Commissioner of Income-tax (Appeals) are hereby deleted.

10. In the result, all the eighteen appeals of the assessees' are allowed.

The order pronounced in the open court on May 24, 2017.