Mr. Yunus Zia, Bangalore v. DCIT, Bangalore

Per Bench All these five appeals are filed by the assessee and the same are directed against a combined order of learned CIT(A)-VI, Bengaluru dated 24.12.2012 for the Assessment Years 2003-04 to 2007-08. All these appeals were heard together and are being disposed of by way of this common order for the sake of convenience.

2. In these appeals, this is the first technical objection raised by the assessee that in the absence of any incriminating material having been found in course of search, section 153A cannot be invoked. On this aspect, we find no merit because we feel that the condition precedent for invocation of Section 153A is this that there should be a search ITA No. 126 to 130/Bang/2013 Page 2 of 24 under Section 132 and initiation of proceedings under Section 153A is not dependent on any undisclosed income being unearthed during such search. This objection is rejected.

3. Second technical objection raised by the assessee is this that in the absence of any addition on the basis of incriminating material having been found in course of search, no other addition can be made in the assessment order passed u/s 153A of I T Act. On this issue, he placed reliance on the tribunal order rendered in the case of ACIT Vs. Cornerstone Properties Pvt. Ltd., ITA No.1714 to 1717/Bang/2013 dated 08.09.2017, copy available on pages 259 to 285 of the Paper Book and on the decision of the Special Bench of the Tribunal rendered in the case of All Cargo Global Logistics Ltd., Vs. DCIT (2012)

18 ITR 106 (Trib.) copy available on pages 160 to 194 of the Paper Book and also on two judgments of Honble Karnataka High Court rendered in the case of CIT Vs. IBC Knowledge Park Pvt Ltd., 385 ITR

346 (Kar.) copy available on pages 369 to 392 of the Paper Book and in the case of CIT vs. Lancy Constructions, 295 CTR 454. He also placed reliance on the judgment of Honble Delhi High Court rendered in the case of CIT vs. Kabul Chawala, 380 ITR 573, of Honble Gujrat High Court rendered in the case of PCIT vs. Saumya Construction (P) Ltd.,

387 ITR 529, of Honble Delhi High Court rendered in the case of PCIT vs. Meeta Gutgutia, 395 ITR 526 against which SLP was filed by the revenue before Honble Apex court which is dismissed as per judgment reported in 257 Taxman 441 (SC) and of Honble Bombay High Court rendered in the case of CIT vs. Continental Warehousing Corporation (Nhava Sheva) Ltd., 374 ITR 645 . Reliance was also placed ITA No. 126 to 130/Bang/2013 Page 3 of 24 on the Tribunal order rendered in the case of ACIT vs. Pratibha Industries Ltd., 23 ITR (Trib) 766, copy available on pages 297 to 336 of the Paper Book and in particular our attention was drawn to para No.45 of this Tribunal order available on 318 of the Paper Book and it was pointed out that in this case, the search has taken place on 17.02.2005 and time was available to the AO for issuing notice under section 143(2) of the IT Act, 1961 for Assessment Year 2004-05 up to 31.10.2005 but such notice was not issued up to the date of search i.e., 17.02.2005 and under these facts, it was held by the Tribunal that the assessment for Assessment Year 2004-05 was completed and finalized on the date of search. He submitted that in the present case, up to Assessment Year 2006-07, the assessment was already completed before the date of search and he pointed out that the Assessment Order for Assessment Year 2003-04 is dated 20.03.2006, copy available on pages 41 to 42 of the Paper Book and similarly, the Assessment Order for Assessment Year 2004-05 is dated 14.06.2006, copy available on pages 61 and 62 of the Paper Book. He further pointed out that in Assessment Year 2005-06, the intimation was issued by the AO under section 143(1) of the IT Act, 1961 on 18.07.2000 and against this intimation, the assessee filed an application for rectification under section 154 of the IT Act, 1961 and the rectification order has been passed by the AO on 03.01.2007, copy available on pages 72 to 74 of the Paper Book. Thereafter, he submitted that for Assessment Year 2006-07, the AO has issued intimation on 18.07.2006 whereas the search has taken place in the month of June 2008 and till that time, no notice was issued by the AO under section 143(2) of the IT Act, 1961 ITA No. 126 to 130/Bang/2013 Page 4 of 24 and the time available to the AO for issuing such notice had also expired before the date of search and therefore, the assessment for Assessment Year 2006-07 has also attained finality before the date of search. Regarding Assessment Year 2007-08, he submitted that the return of income for this year was filed by the assessee on 07.02.2008 and although time limit for issuing notice under section 143(2) did not expire on the date of search which was conducted on 17.06.2008 but still it cannot be said that the assessment for this year was pending at the time of search as was held by the Tribunal in the case of ACIT Vs. Prathiba Industries Ltd., (supra). He submitted that in the facts of the present case, for these 5 Assessment Years i.e., 2003-04 to 2007-08, the assessment was not pending on the date of search and therefore, in the absence of any incriminating material found in the course of search, no addition can be made in the Assessment Orders passed by the AO under 153A of the IT Act, 1961 and in support of this contention, reliance was placed on the decision of the Special Bench of the Tribunal rendered in the case of All Cargo Global Logistics Ltd., Vs. DCIT (2012) 18 ITR 106 (Trib.), copy available on pages 160 to

194 of the Paper Book.

4. In reply, learned DR of the revenue placed reliance on the judgment of Honble Karnataka High Court rendered in the case of Canara Housing Development Company vs CIT (Supra) and in the case of GMR (Supra) and submitted that in the case of PCIT vs. GMR Energy Limited in ITA No. 358 to 360 of 2018 dated 08.01.2019, copy filed and submitted that in the later case, it is held by Honble Karnataka High Court that its earlier judgment rendered in the case of ITA No. 126 to 130/Bang/2013 Page 5 of 24 Lancy Construction (Supra) is not a good law and therefore, this earlier judgment cannot be followed and the tribunal order rendered in the case of ACIT Vs. Cornerstone Properties Pvt. Ltd. (Supra) also cannot be followed because in this case, the tribunal has followed the judgment of Honble Karnataka High Court rendered in the case of Lancy Construction (Supra). He submitted that when the judgment of Honble Karnataka High Court rendered in the case of Canara Housing Development Company vs CIT (Supra) is available, the judgments of Honble Delhi High Court, of Honble Gujarat High Court and of Honble Bombay High Court cannot be followed and the issue should be decided against the assessee by following this judgment of Honble Karnataka High Court rendered in the case of Canara Housing Development Company vs CIT (Supra). In the rejoinder, Learned AR of the assessee submitted that the judgment of Honble Karnataka High Court rendered in the case of Canara Housing Development Company Vs. DCIT 274 CTR 122 (Kar) is not applicable in the present case because of two reasons. First reason is this that in the case of Canara Housing (supra), it is noted in para 2 of the judgment that in the course of search, incriminating material leading to undisclosed income was seized whereas in the present case, no such incriminating material leading to undisclosed income was found and seized in the course of search. The second reason for which this judgment of Honble Karnataka High Court is not applicable in the present case is this that in that case, the proceedings were in course of proceedings under section 263 whereas in the present case, proceedings had been initiated under section 153A of the IT Act, 1961 and not under section 263 of the IT Act. ITA No. 126 to 130/Bang/2013 Page 6 of 24

5. We have considered the rival submissions and we feel it proper to first understand the Ratio Decidendi of the judgment of Honble Karnataka High Court rendered in the case of Canara Housing Development Company vs CIT (Supra) and then discuss and decide about the applicability of it in the facts of the present case. In this regard, we feel that we should first take note of the facts of that case and the question raised before Honble Karnataka High Court in that case. Regarding facts of that case, we find that in Para 2 of that judgment, facts are noted and it is noted in this para that in course of search, incriminating material leading to undisclosed income was seized. The question before Honble Karnataka High Court in that case was as under:- When once the proceedings under Section 153A of the Act is initiated, whether the Commissioner of Income Tax can invoke the power under Section 263 of the Act to review the order of assessment passed by the Assessing Authority?

6. From the question raised in that case before Honble Karnataka High Court, it comes out that in that case, Honble Karnataka High Court was deciding this issue as to whether section 263 can be invoked against the original assessment order passed by the AO before search if section 153A is invoked later before invocation of section 263 by CIT. Hence, we find that this was not an issue before Honble Karnataka High Court in that case as to whether in the absence of any addition on the basis of incriminating material having been found in course of search, some other addition can be made in the assessment order passed u/s 153A of I T Act. In our considered opinion, the facts are different in that case because in that case, this is a fact noted by ITA No. 126 to 130/Bang/2013 Page 7 of 24 Honble Karnataka High Court that in course of search, incriminating material leading to undisclosed income was seized but in the present case, there is no such fact because as per the assessment orders for various years in the present case, no addition is made on the basis of any seized material and hence, it can be concluded that in the present case, no incriminating material leading to undisclosed income was seized. Moreover, the issue in dispute before Honble Karnataka High Court in the case of Canara Housing Development Company vs CIT (Supra) was this as to whether section 263 can be invoked against the original assessment order passed by the AO if section 153A is invoked later but before invocation of section 263 by CIT and this was not an issue in dispute in that case as to whether in the absence of any addition on the basis of incriminating material having been found in course of search, some other addition can be made in the assessment order passed u/s 153A of I T Act. In the present case before us, the issue in dispute is not about invocation of section 263 after search against the original assessment order passed by the AO prior to search as in that case and that too in a case where, incriminating material leading to undisclosed income was seized and in the present case, no such incriminating material leading to undisclosed income was seized because in none of the assessment order, any addition is made by the AO on the basis of any seized material.

7. Hence, in our humble understanding, Ratio Decidendi of the judgment of Honble Karnataka High Court rendered in the case of Canara Housing Development Company vs CIT (Supra) is this that in a case where incriminating material leading to undisclosed income was ITA No. 126 to 130/Bang/2013 Page 8 of 24 seized and section 153A is invoked, all additions can be made in the proceedings u/s 153A even if such addition is not in respect of income originally declared by the assessee in the return of income or addition made in original assessment or on the basis of incriminating material leading to undisclosed income seized and also any other addition. As per the learned DR of the revenue even if no incriminating material leading to undisclosed income was seized then also any other addition can be made in addition to income originally declared by the assessee in the return of income or addition made in original assessment. In our humble understanding, this is not the Ratio Decidendi of this judgment of Honble Karnataka High Court rendered in the case of Canara Housing Development Company vs CIT (Supra) because neither the facts of that case nor the dispute in that case supports this. In that case, the tribunal followed the decision of the Special Bench of the Tribunal rendered in the case of All Cargo Global Logistics Ltd., Vs. DCIT (Supra) and held that CIT can invoke his revisionary powers u/s 263 against the original assessment order because the tribunal was of the view that as per this decision of the Special Bench of the Tribunal rendered in the case of All Cargo Global Logistics Ltd. Vs. DCIT (Supra) in the proceedings u/s 153A, the AO can make addition only in respect of incriminating material leading to undisclosed income was seized and Honble Karnataka High Court did not approve this view of the tribunal and in our humble understanding, since no incriminating material leading to undisclosed income was seized in that case and for this reason, Honble High Court came to this conclusion that in such an assessment u/s 153A, all types of additions can be made. ITA No. 126 to 130/Bang/2013 Page 9 of 24

8. Now we examine the applicability of this judgment in the present case. In our humble understanding, because of difference in facts regarding finding and seizure of incriminating material leading to undisclosed income in that case and not finding of any such incriminating material leading to undisclosed income in the present case, this judgment is not applicable in the present case.

9. Now we take note of various judgments of various High Courts. The first such judgment we consider is of Honble Gujarat High Court rendered in the case of PCIT vs. Saumya Construction (P) Ltd. (Supra). Paras 18 to 20 of this judgment are reproduced hereinbelow for ready reference:-

18. In this case, it is not the case of the appellant that any incriminating material in respect of the assessment year under consideration was found during the course of search. At the relevant time when the notice came to be issued under section 153A of the Act, the assessee filed its return of income. Much later, at the fag end of the period within which the order under section 153A of the Act was to be made, in other words, when the limit for framing the assessment as provided under section 153 was about to expire, the notice has been issued in the present case seeking to make the proposed addition of Rs.11,05,51,000/- on the basis of the material which was not found during the course of search, but on the basis of a statement of another person. In the opinion of this court, in a case like the present one, where an assessment has been framed earlier and no assessment or reassessment was pending on the date of initiation of search under section 132 or making of requisition under section 132A, while computing the total income of the assessee under section 153A of the Act, additions or disallowances can be made only on the basis of the incriminating material found during the search or requisition. In the present case, it is an admitted position that no incriminating material was found during the course of search, however, it is on the basis of some material collected by the Assessing Officer much subsequent to the search, that the impugned additions came to be made.

19. On behalf of the appellant, it has been contended that if any incriminating material is found, notwithstanding that in relation to the year under consideration, no incriminating material is found, it would be permissible to make additions and disallowance in respect of all the ITA No. 126 to 130/Bang/2013 Page 10 of 24 six assessment years. In the opinion of this court, the said contention does not merit acceptance, inasmuch as, the assessment in respect of each of the six assessment years is a separate and distinct assessment. Under section 153A of the Act, an assessment has to be made in relation to the search or requisition, namely, in relation to material disclosed during the search or requisition. If in relation to any assessment year, no incriminating material is found, no addition or disallowance can be made in relation to that assessment year in exercise of powers under section 153A of the Act and the earlier assessment shall have to be reiterated. In this regard, this court is in complete agreement with the view adopted by the Rajasthan High Court in the case of Jai Steel (India), Jodhpur v. Assistant Commissioner of Income Tax (supra). Besides, as rightly pointed out by the learned counsel for the respondent, the controversy involved in the present case stands concluded by the decision of this court in the case of Commissioner of Income-tax-1 v. Jayaben Ratilal Sorathia (supra) wherein it has been held that while it cannot be disputed that considering section 153A of the Act, the Assessing Officer can reopen and/or assess the return with respect to six preceding years; however, there must be some incriminating material available with the Assessing Officer with respect to the sale transactions in the particular assessment year.

20. For the foregoing reasons, it is not possible to state that the impugned order passed by the Tribunal suffers from any legal infirmity so as to give rise to a question of law, much less, a substantial question of law, warranting interference. The appeal, therefore, fails and is, accordingly, dismissed.

10. We find that in this case, it was held by Honble Gujarat High Court that u/s 153A, the AO can reopen and/or assess the return with respect to six preceding years but there must be some incriminating material available with the AO in respect of the relevant year in which addition is being made.

11. Now we take note of the judgment of Honble Bombay High Court rendered in the case of CIT vs. Continental Warehousing Corporation (Nhava Sheva) Ltd. (Supra). The following paras of this judgment are reproduced for ready reference because in these paras, Honble Bombay High Court has discussed about the judgment of ITA No. 126 to 130/Bang/2013 Page 11 of 24 Honble Karnataka High Court rendered in the case of Canara Housing (Supra).

36. Similar is the case with the Division Bench judgment of the High Court of Karnataka at Bangalore. There as well a real estate firm was the assessee. A return of income was filed and when an order under section 143(3) of the Act came to be passed on 31st December, 2010, for assessment year 2008-09 that a search took place in the premises of the assessee on 12th April, 2011. In the course of search, incriminating material leading to undisclosed income was seized. Therefore, the proceedings under section 153A of the Act calling upon the assessee to file return of income under section 153A(1)(a) came to be initiated by a notice dated 13th January, 2012. Return of income was filed pursuant to receipt of such notice and for six years as required by the provision. When this return was under consideration on 14th March, 2013, the Commissioner of Income Tax initiated proceedings under section 263 of the Act on the ground that the order dated 31st December, 2010 in relation to the return of income for assessment year 2008-09 and holding that the same is erroneous and prejudicial to the interest of the Revenue came to be passed. The assessee filed his objection but the Commissioner maintained his action under section 263. That is how the aggrieved assessee carried the matter in appeal to the Tribunal and before the Tribunal it was contended that once section 263 of the Act has been invoked during the pendency of proceedings under section 153A of the Act, then, that was impermissible. That was impermissible for the assessments including for the assessment year 2008-09 stand reopened. Once they are reopened, then, there is no order of assessment in force and in regard to which any action under section 263 of the IT Act can be initiated. It is in dealing with this argument and which was negatived by the Tribunal that all the observations of the High Court of Karnataka have been made. In paragraphs 5 and 6, the arguments have been noted and thereafter the provision has been reproduced. In paragraph 9, extensive reference has been made to the judgment in Anil Kumar Bhatia of the High Court of Delhi (supra) and then the afollowing observations in paragraphs 10 and 11 are made :

10. Section 153A of the Acts start with a non obstante clause. The fetters imposed upon the Assessing Officer by the strict procedure to assume jurisdiction to reopen the assessment under Sections 147 and 148, have been removed by the non obstante clause with which sub section (1) of Section 153A opens. The time-limit within which the notice under Section 148 can be issued, as provided in Section 149 has also been made inapplicable by the non obstante clause. Section 151 which requires sanction to be obtained by the Assessing Officer by issue of notice to reopen the assessment under Section 148 has also been excluded in a case covered by Section 153A. The time- ITA No. 126 to 130/Bang/2013 Page 12 of 24 limit prescribed for completion of an assessment or reassessment by Section 153 has also been done away with in a case covered by Section 153A. With all the stops having been pulled out, the Assessing Officer under Section 153A has been entrusted with the duty of bringing to tax the total income of an assessee whose case is covered by Section 153A, by even making reassessments without any fetters, if need be. Therefore, it is clear even if an assessment order is passed under Section 143(1) or 143(3) of the Act, the Assessing Officer is empowered to reopen those proceedings and reassess 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 assess 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 income being unearthed during such search. The proviso to the aforesaid section makes it clear the assessing officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years. If any assessment proceedings are pending within the period of six assessment years referred to in the aforesaid sub-section on the date of initiation of the search under Section 132, the said proceeding shall abate. If such proceedings are already concluded by the assessing officer by initiation of proceedings under Section 153A, the legal effect is the assessment gets reopened. The block assessment roped in only the undisclosed income and the regular assessment proceedings were preserved, resulting in multiple assessments. Under Section 153A, however, the Assessing Officer has been given the power to assess or reassess the total income of the six assessment years in question in separate assessment orders. The Assessing Officer is empowered to reopen those proceedings and reassess 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 assessee 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 the undisclosed income would be brought to tax. When once the proceedings are initiated under Section 153A of the Act, the legal effect is even in case where the assessment order is passed it stands reopened. In the eye of law there is no order of assessment. Re- opened means to deal with or begin 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 return, any undisclosed income found during search or and also any other income which is not disclosed in the earlier ITA No. 126 to 130/Bang/2013 Page 13 of 24 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 the assessment order. Therefore, the Commissioner by virtue of the power conferred under Section 263 of the Act gets no jurisdiction to initiate proceedings under the said provision because the condition precedent for initiating proceedings under Section 263 is any order passed under the Act by the Assessing Officer is erroneous insofar as it is prejudicial to the interest of the revenue. Once the order passed by the Assessing Officer gets reopened, there is no order which can be said to be erroneous insofar as it is prejudicial to the interest of the revenue which confers jurisdiction on the Commissioner to exercise the power of the jurisdiction.

11. The Tribunal has proceeded on the assumption by virtue of the judgment of the special bench of the Mumbai, the scope of enquiry under Section 153A is to be confined only to the undisclosed income unearthed during search and if there is any other income which is not the subject matter of search, the same cannot be taken into consideration. Therefore, the revisional authority can exercise the power under Section 263. In the entire scheme of 153A of the Act, there is no prohibition for the assessing authority to take note of such income. On the contrary, it is expressly provided under Section 153A of the Act the Assessing Officer shall assess or reassess the total income of six assessment years which means the said total income includes income which was returned in the earlier return, the income which was unearthed during search and income which is not the subject matter of aforesaid two income. If the commissioner has come across any income that the assessing authority has not taken note of while passing the earlier order, the said material can be furnished to the assessing authority and the assessing authority shall take note of the said income also in determining the total income of the assessee when the earlier proceedings are reopened and that income also shall become the subject matter of said proceedings. In that view of the matter the reasoning given by the Tribunal is not justified. The Commissioner did not have jurisdiction to initiate any proceedings under Section 263 of the Act.

37. We do not see as to how while allowing the appeal of the assessee and setting aside the order of the Commissioner 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 to be made in that regard. While making the order the income or the return of income filed for all these assessment years is ITA No. 126 to 130/Bang/2013 Page 14 of 24 to be taken into account. A reference will have to be made to the income disclosed therein. However, the scope of enquiry, though not confined as held by the High Court of Karnataka, it essentially revolves around the search or the requisition under section 132A as the case may be. We do not find anything in these observations and reproduced above which would enable us to conclude that the Division Bench judgment of this Court in the case of Murli Agro requires reconsideration or does not lay down a correct principle of law. We cannot, therefore, accede to the submissions of Mr. Pinto and revisit any of the conclusions rendered by the Division Bench of this Court.

12. We find that Honble Bombay High Court has examined and discussed in detail about the judgment of Honble Karnataka High Court rendered in the case of Canara Housing (Supra) and noted that in this case, Honble Karnataka High Court is allowing the appeal of the assessee and has set aside the order of CIT passed u/s 263 and hence, it cannot be said that a proposition of law was laid down in this case . Honble Bombay High Court held that in the assessment u/s 153A, the scope of enquiry is although not confined to as held by Honble Karnataka High Court but it essentially revolves around the search or requisition u/s 132A as the case may be.

13. Now at this juncture, we take note of a subsequent judgment of Honble Delhi High Court rendered in the case of PCIT vs. Meeta Gutgutia (Supra) against which SLP was filed by the revenue before Honble Apex court which is dismissed as per judgment reported in

257 Taxman 441 (SC). In this case, the dispute before Honble Delhi High Court was this as to whether the AO was justified in invoking section 153A in relation to A. Ys. 2000 01 to 2003 04 which were quashed by the tribunal in that case by following the judgment of ITA No. 126 to 130/Bang/2013 Page 15 of 24 Honble Delhi High Court rendered in the case of Kabul Chawla, 380 ITR 573 on the ground that no incriminating material was found in search. Before Honble Delhi High Court, reliance was placed on several judicial pronouncements being judgment of Honble Delhi high Court rendered in the case of Kabul Chawla (Supra), of Honble Gujrat High Court rendered in the case of PCIT vs. Saumya Construction (P) Ltd. (Supra), of Honble Bombay High Court rendered in the case of CIT vs. Continental warehousing Corporation (Nhava Sheva) Ltd. (Supra), of Honble Karnataka High Court rendered in the case of IBC Knowledge Park Pvt. Ltd., 385 ITR 346 in addition to several other judgments of Honble Delhi High Court where the judgment in the case of Kabul Chawla (Supra) was followed and also several tribunal orders. Honble Delhi High Court decided the issue in favour of the assessee by following its own judgment in the case of Kabul Chawla (Supra) and various other judgments of various High Courts noted above and held that the revenue was not justified in invoking section 153A in relation to A. Ys. 2000 01 to 2003 04 and SLP was dismissed by Honble Apex Court. Hence, in our considered opinion, the judgment of Honble Delhi High Court rendered in the case of PCIT vs. Meeta Gutgutia (Supra) stands approved by Honble apex court and impliedly, various other judgments followed by Honble Delhi High Court in this case also stand approved by Honble Apex Court and therefore, in preference to this judgment of Honble Karnataka High Court rendered in the case of Canara Housing Development Company vs CIT (Supra) where the facts and the issue in dispute are different as noted above, this judgment in the case of PCIT ITA No. 126 to 130/Bang/2013 Page 16 of 24 vs. Meeta Gutgutia (Supra) duly approved by Honble apex court should be followed because in this case, the facts and issue in dispute are similar to the present case and this is approved by Honble apex court.

14. Now, we summarize the facts in the case of judgment of Honble Karnataka High Court rendered in the case of Canara Housing Development Company vs CIT (Supra) and also summarize the issue in dispute in that case and the Ratio Decidendi of that case as per our humble understanding. Two most important relevant facts of that case are (1) that in course of search, incriminating material leading to undisclosed income was seized and (2) Assessment in that case also was not abated as in the present case because assessment was not pending on the date of search.

15. Regarding issue in dispute in that case, we find that in that case, the tribunal considered the decision of Special Bench of the Tribunal rendered in the case of All Cargo Global Logistics Ltd., Vs. DCIT (Supra) wherein it was held by the tribunal that in the assessment proceedings u/s 153A in a case where the assessment has not abated because it was not pending at the time of search, addition can be made only on the basis of seized incriminating material leading to undisclosed income. Based on this, the tribunal in that case came to conclusion that since in the assessment proceedings u/s 153A, addition can be made only on the basis of seized incriminating material leading to ITA No. 126 to 130/Bang/2013 Page 17 of 24 undisclosed income, on other aspects, the original assessment order survives and CIT can exercise his revisionary powers against that assessment order. Against this tribunal order, the assessee was in appeal before Honble Karnataka High Court and under these facts, Honble Karnataka High Court held that in the proceedings u/s 153A, the AO can make any addition even if it is not with regard to seized incriminating material leading to undisclosed income. Hence, the decision of the special bench of the tribunal rendered in the case of All Cargo Global Logistics Ltd., Vs. DCIT (Supra) stands disproved and in a case where the assessment has not abated and seized incriminating material leading to undisclosed income is available, addition can be made in respect of such seized material and also in respect of any other issue which comes before the AO in those proceedings as well as the income originally returned and additions originally made by the AO. In our humble understanding, this is the Ratio Decidendi of this judgment that in the assessment proceedings u/s 153A in a case where incriminating material leading to undisclosed income is seized, addition to be made by the AO can comprise of income declared by the assessee in the original return, additions originally made by the AO, addition to be made in respect of such seized material and also in respect of any other issue which comes before the AO in those proceedings. ITA No. 126 to 130/Bang/2013 Page 18 of 24

16. As per the revenue, even if no incriminating material leading to undisclosed income is seized then also addition can be made in respect of any other issue which comes before the AO in those proceedings in addition to income declared by the assessee in the original return and additions originally made by the AO. As per the assessee, in such a case, addition has to be confined to income declared by the assessee in the original return and additions originally made by the AO and no addition can be made in such a case on account of any other issue which comes before the AO in those proceedings.

17. In respect of this controversy, in our considered and humble opinion, this judgment of Honble Karnataka High Court does not throw any light specifically because in that case, incriminating material was seized in course of search and therefore, there was no occasion to examine and decide about such an eventuality where there is no seizure of incriminating material. We find that Para 11 of that judgment is relevant and hence, we reproduce it for ready reference-

11. The Tribunal has proceeded on the assumption by virtue of the judgment of the special bench of the Mumbai, the scope of enquiry under Section 153A is to be confined only to the undisclosed income unearthed during search and ii there is any other income which is not the subject matter of search, the same cannot be taken into consideration. Therefore, the revisional authority can exercise the power under Section 263. In the entire scheme of 153A of the Act, there is no prohibition for the assessing authority to take note of such income. On the contrary, it is expressly provided under Section 153A ITA No. 126 to 130/Bang/2013 Page 19 of 24 of the Act the Assessing Officer shall assess or reassess the total income of six assessment years which means the said total income includes income which was returned in the earlier return, the income which was unearthed during search and income which is not the subject matter of aforesaid two income. If the commissioner has come across any income that the assessing authority has not taken note of while passing the earlier order, the said material can be furnished to the assessing authority and the assessing authority shall take note of the said income also in determining the total income of the assessee when the earlier proceedings are reopened and that income also shall become the subject matter of said proceedings. In that view of the matter the reasoning given by the Tribunal is not justified. The Commissioner did not have jurisdiction to initiate any proceedings under Section 263 of the Act.

18. As per above para, in our humble understanding, this is the decision that in addition to the incriminating seized material, returned income and additions made by the AO in original assessment proceedings, addition can and should also be made in respect of any other issue which comes before the AO in those proceedings but this entire judgment is under these facts that incriminating material leading to undisclosed income is seized but what should be the position in a case where no such incriminating material leading to undisclosed income is seized is not clear. In our considered opinion, it may be a plausible view that if such incriminating material leading to undisclosed income is seized for at least one year out of relevant six years, such addition may be made but in a case where there is no such incriminating material leading to undisclosed income is seized even for one year out of relevant six years, no such addition should be made ITA No. 126 to 130/Bang/2013 Page 20 of 24 and the additions should be confined to returned income and additions made by the AO in original assessment proceedings. We are expressing this also as a plausible view and leave it at that because in the present case, the facts are different and no argument was advanced by any side on this aspect.

19. This view of us finds support from various judicial pronouncements in connection with reassessment proceedings u/s 147. In those proceedings, this was the dispute that if no addition is made in respect of those aspects which was the basis of the AO to form an opinion that there is escarpment of income, whether the AO can make addition in respect of those items which comes to his notice subsequently in course of proceedings u/s 147. It was held in those cases that if no addition is made in respect of even any one of the reasons recorded for reopening, then no other addition can be made. One of such judgments is of Honble Bombay High Court rendered in the case of CIT vs. Jet Airways (I) Ltd., 331 ITR 236. The following para of this judgment is relevant and therefore, reproduced for ready reference:-

21. Explanation 3 lifts the embargo, which was inserted by judicial interpretation, on the making of an assessment or reassessment on grounds other than those on the basis of which a notice was issued under s. 148 setting out the reasons for the belief that income had escaped assessment. Those judicial decisions had held that when the assessment was sought to be reopened on the ground that income had escaped assessment on a certain issue, the AO ITA No. 126 to 130/Bang/2013 Page 21 of 24 could not make an assessment or reassessment on another issue which came to his notice during the proceedings. This interpretation will no longer hold the field after the insertion of Expln. 3 by the Finance Act (No. 2) of 2009. However, Expln. 3 does not and cannot override the necessity of fulfilling the conditions set out in the substantive part of s. 147. An Explanation to a statutory provision is intended to explain its contents and cannot be construed to override it or render the substance and core nugatory. Sec. 147 has this effect that the AO has to assess or reassess the income ("such income") which escaped assessment and which was the basis of the formation of belief and if he does so, he can also assess or reassess any other income which has escaped assessment and which, comes to his notice during the course of the proceedings. However, if after issuing a notice under s. 148, he accepted the contention of the assessee and holds that the income which he has initially formed a reason to believe had escaped assessment, has as a matter of fact not escaped assessment, it is not open to him independently to assess some other income. If he intends to do so, a fresh notice under s. 148 would be necessary, the legality of which would be tested in the event of a challenge by the assessee.

20. As per this judgment, it was held that if the AO accepts that the income which escaped assessment as per reasons recorded by the AO for reopening has not in fact escaped assessment then it is not open to him to independently assess some other income. The assessment proceedings u/s 153A regarding unabated assessments are also in fact the reopening of completed assessment mainly to assess undisclosed income found in course of search based on incriminating material found in search although not limited to those income alone and in a case where, the assessment has abated, he has to make complete assessment and in unabated assessments also, he has to consider and add returned income and undisclosed income found in course of search based on incriminating material found in search ITA No. 126 to 130/Bang/2013 Page 22 of 24 along with any other addition made by the AO in original assessment and also any other item of income which comes to the notice of the AO in course of these proceedings but if no incriminating material found in search then the very basis of reassessment is not there and in line with this judgment of Honble Bombay High Court, it is not open to the AO to independently assess some other income.

21. We therefore hold that in the facts of the present case and in the light of above discussion, we have to see that whether any incriminating material was found in search for any of the years under consideration. We find that in A. Y. 2003 04, two additions are made by the AO. One addition is of Rs. 28,750/- and it is on this basis that remuneration income is short declared by the assessee in the return of income and there is no allegation that this addition is on the basis of any incriminating material found in course of search. The second addition is of Rs. 178,76,750/- on this basis that part of loan on which interest is claimed is not used for acquisition of property from which rental income is offered to tax it is also not on the basis of incriminating material found in course of search. Similarly, in A. Y. 2004 05, four additions are made (i) of Rs. 28,750/-, (ii) of Rs. 23,000/-, (iii) of Rs. 35,820/- and (iv) of Rs. 167,58,143/-. Addition No. (i) and (iv) are on same basis as in A. Y. 2003 04. Addition No. (ii) is on this basis that commission income is not declared in return of income. Addition No. (iii) is on this basis that the assessee has received this amount as the reimbursement of property tax paid but not offered it for tax in return of income as income. In this year also, there is no addition on the basis of incriminating material found in course of search. In A. Y. 2005 06, four additions are made by the AO being (i) of Rs. 743,070/-, (ii) of Rs. 286,100/-, (iii) of Rs. 10,67,310/- ITA No. 126 to 130/Bang/2013 Page 23 of 24 and (iv) of Rs. 202,38,283/-. The first addition is on this basis that this is short declaration of rental income. Second addition is on this basis that commission income is not declared in return of income. Third addition is on this basis that the assessee has received this amount as the reimbursement of property tax paid but not offered it for tax in return of income as income. Fourth addition is on similar basis as per second addition in A. Y. 2003 04 and addition No. (iv) in A. Y. 2004 - 05 but none of these additions is on the basis of incriminating material found in course of search. Similar is the case in A. Y. 2006 07. In this year, three additions are made out of which first two additions are on this basis that rental income and interest income are short declared and third addition is the major addition of Rs. 327,08,605/- made on same basis as per second addition in A. Y. 2003 04, addition No.

(iv) in A. Y. 2004 05 and addition No. (iv) in A. Y. 2005 06. Similar is the case in A. Y. 2007 08. In this year, five additions are made out of which first three additions are on this basis that rental income and interest income are short declared and property tax reimbursement is received but not offered to tax. Fourth addition in this year is of Rs. 14,09,477/- and this addition is on this basis that capital gain on sale of shares is not offered to tax. Fifth addition is the major addition of Rs. 3673,67,178/- made on same basis as per second addition in A. Y. 2003 04, addition No. (iv) in A. Y. 2004 05, addition No. (iv) in A. Y. 2005 06 and addition No. (iii) in A. Y. 2006 07. We find that none of various additions in these five years has any connection with any incriminating material found in course of search and even if these incomes escaped assessment, action could have been taken u/s 147 or 263 as per law but in the absence of any incriminating material having been found in course of search for any year out of relevant six years, addition u/s 153A is not justified and we delete the same. ITA No. 126 to 130/Bang/2013 Page 24 of 24

22. In the result, all the five appeals of the assessee are allowed in the terms indicated above. Pronounced in the open court on the date mentioned on the caption page. Sd/- Sd/- (N. V. VASUDEVAN) (A.K. GARODIA) Vice President Accountant Member Bangalore, Dated: March, 2020. /AM/* Copy to:

1. Appellants 2. Respondent 3. CIT

4. CIT(A) 5. DR, ITAT, Bangalore. 6. Guard file By order Assistant Registrar, ITAT, Bangalore.