2023 (11) TMI 347 - GUJARAT HIGH COURT

Rectification u/s 254 - Assessment u/s 153C - incriminating material found during the course of search in the concerned assessment or not? - Scope of expression "pertains to" or "relates to" - case of the Revenue before the Appellate Tribunal was that the assessment proceedings of the searched person was pending when the amendment to Section 153C came into force and since the assessment proceedings were not concluded post 1.6.2015 and therefore the scope of the Section was widened and therefore the satisfaction note rightly recorded that the documents related to/pertained to the person other than the searched person - whether the material found at the premises of the searched person, would indicate that these documents falls in the category of documents, which could be termed as document belong to or belongs to the assessee? - as per revenue Tribunal committed an error apparent in deleting the additions and ought to have verified the seized material and though the search

HELD THAT:- The perusal of the Misc. Applications in this category indicates that the same was filed on the ground that the Tribunal erred in not holding that various documents clearly proved that the documents seized “belong” to the assessee. The other ground was that the Tribunal erred in not considering the decision in the case of Kamleshbhai Dharamshibhai Patel [2015 (8) TMI 966 - GUJARAT HIGH COURT] which stated that the language used in the satisfaction note will have to be seen with reference to the seized material.

Reading of the satisfaction note which has been reproduced in the relevant paras of the Appellate Order indicates that the note has brought in the wider concept of correlating the documents seized pertain to/or related to the assessees. When the revenue’s case itself as per the satisfaction note wanted the scope to be considering the seized documents in “relation to/pertain to” now it is not open for them to apply for rectification on the ground that the Appellate Tribunal committed an error in not considering the fact that the seized material “belongs” to the assessees, when it was never the case of of the Revenue.

Tribunal did not consider the decision of the jurisdictional high court - Reading the decision of the Tribunal wherein the decision of the case of Anil Kumar Gopi Krishna Agrawal [2019 (6) TMI 746 - GUJARAT HIGH COURT] has been reproduced would indicate that the essential requirement for assumption of jurisdiction under Section 153C as it stood prior to the amendment qua the “other person” is that the seized documents forming the basis of the satisfaction note must not merely “pertain” to the other person but belong to the other person.

What is therefore evident on reading the decision reproduced herein above is that the Court had considered the decision of the Gujarat High Court in the case Kamleshbhai Dharamshibhai Patel (supra) and therefore the submission of the Revenue that the Tribunal did not consider the decision of the jurisdictional high court is baseless. What the decision in the case of Kamleshbhai Dharamshibhai Patel (supra) indicates is that the essential requirement to invoke Section 153C is that the documents seized must belong to the assessee concerned.

Tribunal in Appeal in context of the satisfaction note which brought in the concept of “pertains to/related to” in the case on hand found that when the search was prior to 1.6.2015, the post amendment criteria could not apply. In doing so, it considered various decisions especially that of the jurisdictional high court that covered the issue in the case of Anil Kumar Gopi Krishna Agrawal (supra) and therefore the Order refusing to entertain the Rectification Application on this count cannot be faulted.

As per Revenue that the decision of Vikram Bhatia [2023 (4) TMI 296 - SUPREME COURT] of the Supreme Court would squarely apply and when read in light to the decision in the case of Saurashtra Kutch Stock Exchange Ltd.(supra) which said that failure to consider subsequent decision would be a good ground to rectify an order, some dates need to be mentioned - The order of the Tribunal in Appeal is dated 12.11.2020. The date of the Tribunal order in MA was of 24.08.2022 whereas the judgement of the Supreme Court in the case of Vikram Bhatia (supra) was dated 6.4.2023 which was not available when the Tribunal decided the main appeals. The law on that date was governed by the decision in the case of Anil Kumar Gopi Krishna Agrawal (supra) which held the field.

Alternatively, even the submission of the learned Senior Counsel Shri Hemani for the assessee with regard to the provisions of Section 254(2) post 2016 merit consideration. Section 254(2) prior to its amendment permitted rectification of a mistake within a period of four years from the date of the order. This period with effect from 1.06.2016 was reduced to six months. The order of the Tribunal in Appeal is dated 12.11.2020. The Misc. Application order is dated 24.08.2022. The Supreme Court decided the case of Vikram Bhatia (supra) on 6.4.2023 which was beyond the cap of 6 months from the date of the Misc. Application order which would be 23.03.2023 and therefore even otherwise the decision of the Supreme Court could be no ground in rectifying of the Order.

Whether the assessment proceedings u/s 153A is to be framed strictly on the basis of the incriminating material found during the course of search in the concerned assessment? - Reading the findings of the Appellate Tribunal would indicate that the Tribunal had extensively considered the decision of the Delhi High Court in the case of CIT vs Kabul Chawla [2015 (9) TMI 80 - DELHI HIGH COURT] In the appeals under consideration before the Tribunal, simultaneous search was carried out at the premises of the Venus Infrastructure and Ashok Sunderdas Vaswani and the material found during the search could be used while framing assessment of Rajesh Vaswani and Deepak Vaswani. Material recovered from the premises of the other persons cannot be used in the hands of the searched persons.

Tribunal in detail analyzed the decisions of various High Courts and held that looking to the scheme of the Income Tax Act in case a search is carried out on an assessee then the search would give rise to proceedings under Section 153A qua the person searched. The income has to be assessed on the basis of the material found during the course of the search.

Tribunal as is evident from the findings discussed had extensively considered various decisions including that of Kabul Chawla (supra). It had reproduced para 37 of the said decision and discussed it in the context of facts. The Tribunal discussed the issues and found that the revenue had framed assessments based on material seized from the premises of other persons. The only ground on which the rectification was sought was that the Tribunal had misinterpreted the judgement in the case of PCIT vs Saumya Construction P. Ltd [2016 (7) TMI 911 - GUJARAT HIGH COURT] and that of CIT vs Kabul Chawla [2015 (9) TMI 80 - DELHI HIGH COURT] - ITAT after elaborate discussion on the issue of assessment in case of search proceeding has taken a view that in the proceeding under section 153A of the Act, the addition to total income can only be made on the basis of material found from the premises of the assessee. In holding so, the ITAT analyses the facts available on record, gives various reasoning and also refers several judicial precedent. As Such the Revenue in M.A. has not pointed out any specific mistake in the order which is apparent from the record. The issue raised by the Revenue in M.A. requires long drawn argument which is not allowed under section 254(2).

Whether the assessments completed u/s 153A are within limitation or not? - Appreciating the provisions of Section 153B of the Act, the Tribunal observed that the assessment orders have to be passed within two years from the end of the financial year in which the last authorisation was executed. The Tribunal, considering and reproducing the decision of the Karnataka High Court, observed that once an order under Section 132(3) has been passed then the limitation period commences and such an order cannot be continued unless and until the provisions of Section 132(8A) are satisfied. The Tribunal held that the prohibitory orders were invalid as the search team had seized only 277 pages which was very much possible to seize during search proceedings which concluded on 13/3/2015. The Tribunal also relied on a decision in the case of CIT v Sandhya P. Naik reported [2000 (12) TMI 21 - BOMBAY HIGH COURT] Obviously, therefore, the Tribunal found that there could have been no justification to pass a prohibitory order as the same was not practicable.

Whether reopening of the assessments in the year 2008-09 in the case of Ashok Sundardas Vaswani is justifiable? - As material found during the course of search proceedings can be used for invoking the provisions of Section 147 of the Act. However, it is important to note that the provisions of Section 147 of the Act can be invoked only after complying the provisions/conditions as provided under Section 147/148/149/150 and 151 of the Act. We are not inclined to disturb the finding of the authorities below. Hence the contention raised i.e. the provisions of Section 147 of the Act cannot be invoked in view of the fact that there was special proceedings under Section 153A of the Act in case of search, by the assessee is dismissed. Thus the contention of the assessee is hereby dismissed.

Conclusion - A bare reading of Section 254(2) indicates that the Appellate Tribunal may at any time within six months from the month in which the order was passed with a view to rectifying the mistake apparent from the record amend any order passed. Therefore, the mistake has to be apparent from the face of the record and not one where an extensive delving into arguments and a re-look can be sought on questions decided on merits.

In the case of Commissioner of Income Tax (IT4), Mumbai vs Reliance Telecom Ltd [2021 (12) TMI 211 - SUPREME COURT] has held that when a detailed order has been passed by the ITAT, no rectification can be made on the ground that the order passed by the ITAT was erroneous either on facts or in law as in that case the only remedy was to prefer an appeal.

What is therefore evident on considering the decision of the ITAT in the Appellate proceedings where the issues have been examined threadbare on merits considering the case laws, merely because the Appellate Tribunal, which according to the Revenue has been decided by misinterpretation of facts and law, the same cannot be a subject matter of rectification.

In some of the cases before us in the each of the 4 Categories set out herein above, the Revenue has also filed Tax Appeals challenging the order of the Tribunal in various Tax Appeals under Section 260A of the Income Tax Act, 1960. We have set out against each Special Civil Application numbers category wise in which Tax Appeals have been filed.

In light of the decisions in the case of R.C.Sabharwal [2009 (7) TMI 1391 - DELHI HIGH COURT] and Muni Seva Ashram [2013 (10) TMI 113 - GUJARAT HIGH COURT] in such petitions where Tax Appeals are filed by the Revenue in the respective categories, the petitions so filed are not entertained while reserving the right of the Revenue to urge the grounds raised in these petitions while arguing the Appeals.