By AJAY R. SINGH
Advocate
5. The Pr. CIT-4 vs. Jignesh P. Shah [Income tax
Appeal no 555 of 2016, Dated: 26th September, 2018 (Bombay High
Court)].
[Jignesh P. Shah vs. DCIT;
dated 13/02/2015 ; ITA. No 1553 & 3173/Mum/2010, Mum. ITAT ]
Section 153A: Assessment – Search or requisition-No addition can
be made in respect of an unabated assessment which has become final if no
incriminating material is found during the search. [Section 132, 143(3)]
The assessee is an individual being
the member of Financial Technologies India Ltd., was covered under search and
seizure action. In pursuance of search action u/s. 132(1), notices u/s. 153A
was issued to the assessee on 25.10.2007 for the six assessment years
immediately preceding the assessment year of the year of the search, which
included the aforesaid assessment years. In response to the said notices the
assessee filed his return of income on 26.11.2007 on the same income which was
declared in the original return of income filed u/s. 139. In the assessment
order passed u/s. 153A, r.w.s 143(3), the addition on account of deemed
dividend of Rs.1,69,68,750/- for the A.Y. 2002-03 and Rs.4,65,76,000/- for the
A.Y. 2004-05 was made, vide separate order dated 31.03.2009.
The Ld. AO noted the facts about
receiving the payments by the assessee from Lotus investment, which was a
division of La-fin Financial Services Pvt. Ltd. in which the assessee held 50%
of share, from the balance sheets and records already filed along with the
return of income. However, an Assessment Order was made and this time, an
addition, on account of deemed dividend of Rs.1,69,68,750/for AY: 2002-03 and
Rs.4,65,76,000/- for AY: 2004-05, was
made. This came to be confirmed by the CIT (A).
The assessee submitted that during
the course of search and seizure action, no incriminating document, material or
unaccounted assets were found from the assessee. The A.O, without there being
any incriminating material found in the course of search relating to the deemed
dividend has made the addition on the basis of information already available in
the return of income. This is also evident from the copy of panchnama and
statement on oath of the assessee recorded at the time of search. The Ld. AO
has noted the facts about receiving of the payments by the assessee from Lotus
investment, which was a division of La-fin Financial Services Pvt. Ltd. in
which the assessee held 50% of share, from the balance sheets and records
already filed along with the return of income. Since the assessment for the
A.Ys. 2002-03 & 2004-05 had attained finality before the date of search and
does not get abated in view of second proviso to section 153A, therefore,
without there being any incriminating material found at the time of search, no
addition over and above the income which already stood assessed can be made.
This proposition he said, is squarely covered by the decision of All Cargo
Global Logistics Ltd. vs. DCIT reported in (2012) 137 ITD 287 (SB) (Mum).
Even the Hon’ble jurisdictional
(Bombay) High Court in the case of CIT vs. Murli Agro Products Ltd. ITA No.
36 of 2009 order dated 29.10.2010, has clearly held that, once the
assessment has attained finality before the date of search and no material is found
in the course of proceedings u/s. 132(1), then no addition can be made in the
proceedings u/s. 153A. This proposition has been reiterated by Hon’ble
Rajasthan High Court in the case of Jai Steel (India) vs. ACIT reported in
(2013) 259 CTR (Raj) 281. Thus, the addition of deemed dividend made by the
assessing officer is beyond the scope of assessment u/s 153A for the impugned
assessment years.
The Tribunal held that the
principle which was enunciated by the judgment of this Court rendered in the
case of Commissioner of Income Tax vs. M/S Murli Agro Products Ltd. (Income
Tax Appeal No.36 of 2009 decided on 29th October 2010) was
applied. That judgment held that, once the assessment has attained finality
before the date of search and no material is found in the course of proceedings
u/s. 132(1), then, no addition can be made in the proceedings u/s. 153A. After
setting out this principle in great details, the Tribunal rendered their
opinion that factually there was no incriminating material found during the
course of search relating to the addition made on account of deemed dividend.
The very fact that section 132 was resorted requiring the Assessing Officer to
record the necessary satisfaction, was lacking in this case. The assessment,
which had gained finality, in the absence of any material termed as
incriminating having thus been subjected to assessment/reassessment, the Tribunal
held in favour of the assessee.
Being aggrieved with the order of
the ITAT, the Revenue filed the Appeal before High Court. The Court upheld the order of the Tribunal. Accordingly,
dismissed the departments appeal .
