TMI Blog2014 (7) TMI 214X X X X Extracts X X X X X X X X Extracts X X X X ..... are invalid - This contention of the assessee, according to us, is too far-fetched - in view of 2nd proviso to section 153A, normal assessment pending during the proceedings u/s 153A or 153C will abate and only single assessment is to be made both for disclosed and undisclosed income. If the contention of the assessee is accepted, it will lead to absurd situation whereby even reported income in a return of income could not be taxed when the same abate on account of initiation of proceedings u/s 153A or 153C. Such a situation can never be in the contemplation of Legislature and we, out rightly reject the main contention of the assessee - The findings of DRP were not correct as no documents were seized during the search conducted by the Police at the premises of Mr Hisham - Only cash was seized - When an assessment u/s 143(3) has already been made prior to the search proceedings, then such completed proceedings are final and they do not abate - No addition can be made in an assessment u/s 153C in the absence of any incriminating material. What is the scope of assessment or re-assessment of total income u/s 153A (1) (b) and the first proviso – Held that:- If any books of accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d at the premises of Tamiz on 5.8.2008 - The last of the authorization for requisition was executed during August 2008 - the only asset that has been seized was cash of ₹ 9.7 crores - During the course of assessment proceedings u/s 153C, a reference u/s 92CA (1) was made - an order u/s 92CA was passed on 31.10.2011 - the applicable provision which deals with the time-limit for making an assessment order u/s 153C was the fifth proviso to s. 153B(1) prior to its amendment by Finance Act, 2012. Section 144C (13) has been amended by Finance Act, 2012 to provide that the notwithstanding effect shall extend to s. 153B - The extended period of limitation is applicable only to those cases where the normal period of limitation u/s 153B to make assessment u/s 153C has not expired on the date on which the Finance Act, 2012 received the President’s assent. The Finance Act, 2012 received the President’s assent on 28.5.2012 - the period of limitation to pass an order u/s 153C had already expired on 31.12.2011 which was much earlier to the date on which the Finance Act, 2012 received the President’s assent and, hence, the re-assessment orders u/s 153C were barred by limitation. Relyin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y are listed below: (1) [Gr.III(1)] that the DRP was not justified in issuing its directions beyond the time limit specified u/s 144C(12) of the Act; (2) [Gr.II(1)] that the validity of search proceedings and order u/s 153C of the Act; (3) [Gr.XVI] that the validity of reference to TPO when the assessment was no more pending as on the date of search/requisition and no incriminating material was found during the search; (4) [Gr.V (2)] that the DRP had exceeded its jurisdiction by issuing Directions in respect of AMP Expenditure; (5) [Gr.V(1)] that the jurisdiction of the DRP in considering new grounds (6) [Gr.III(2) (3)]the order u/s 153C of the Act was barred by time as per s. 153B of the Act. On the other jurisdictional grounds, the learned AR relied on the written submissions filed by the assessee. The issue on merits was argued by both the learned AR and the learned DR on 30.4.2014, 1.5.2014, 2.5.2014, 5.5.2014, 6.5.2014, 7.05.2014, 8.5.2014 and 21.5.2014. 3. Briefly stated, the facts of the case are as under: The assessee firm is engaged in the business of manufacture and sale of herbal pharmaceutical products, personal care products, animal health care ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties are as follows: Ground No.III (1): Whether the DRP was justified in issuing its directions beyond the time limit specified u/s 144C (12) of the Act and whether the final assessment order passed by the AO u/s 153C of the Act based on the time barred directions of the DRP was tenable in law? 6. During the course of hearing before us, the elaborate submissions made by the learned AR on the issue are summarized as under: that the DRP directions have been issued beyond the time limit set out in s 144C(12) thereby rendering the said directions invalid; Sub-section (12) of s. 144C states: No direction under sub-section (5) shall be issued after nine months from the end of the month in which the draft order is forwarded to the eligible assessee. Sub-section (5) of s. 144C states: The Dispute Resolution Panel shall, in a case where any objection is received under sub-section (2), issue such directions, as it thinks fit, for the guidance of the assessing officer to enable him to complete the assessment Sub-section (2) of s. 144C states: (2) On receipt of the draft order, the eligible assessee shall, within thirty days of the receipt by him of the dra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O, acting upon an invalid direction, was bad in law. However, the AO passed an order u/s 154 of the Act, rejecting the assessee s contentions for the reasoning that: (i) there was no mistake apparent from record; (ii) the Hon ble DRP had issued the directions on 16.8.2012 which is well within the time-limit of 9 months from the end of the month in which the draft order is forwarded to the assessing officer; (iii)the assessment order has been passed within the timelimit prescribed u/s 144C(13); that the statement of the AO that the directions had been issued by the DRP on 16.8.2012 was factually wrong on the premise that the assessee s AR appeared before the DRP and made further submissions during the hearing on 16.8.2012 and that the DRP had noted at para 1.1 of its directions issued as: At the first hearing itself DIT (TP) and the TPO and AO were heard along with the assessee on request to take on record their submissions. On 13.8.2012, the TPO submitted her report, a copy of which was given to the assessee. The assessee filed its reply before the Panel on 16.8.2012 objecting to the proposed enhancement. Thus, it was not possible to issue directions on 16.8.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Harmonised reading of rule 10(3) and 11 shows that the directions are to be issued to the AO and the same should thereafter be communicated to the assessee. Thus, there is no conflict between the DRP Rules and s. 144C and even if there is a conflict, section prevails over the rule and rule cannot expand the scope of section; Relies on the following case laws: (i) Smt Vijay Dhir and Others v. DIT Ors. (2011) 335 ITR 112 (All); (ii) CIT v. Taj Mahal Hotel (1971)82 ITR 44 (SC); (iii) CIT v. M/s. Chemplast Sanmar Ltd (2009) 314 ITR 231 (Mad); (iv) CIT v. Tulsyan NEC LTD (2011) 330 ITR 226 (SC); (v) Assam Company Ltd v. State of Assam (2001) 248 ITR 567 (SC) that the time limit provided u/s 114C(12) is absolute and inflexible. Once the DRP fails to meet the deadline, the DRP ceases to have jurisdiction, no matter what is the length of delay. Wherever the Legislature intended that the time-limit could be relaxed, explicit provisions have been made like the following: (a) S. 131(3) of the Act which empowers impounding of books of account/documents under certain circumstances. Clause (b) of the proviso to s. 131 (3) states that an AO or an Asst. Director or Deput ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate for the CIT (A) to pass the order within one year from the end of the FY in which the appeal is filed. that the time limit specified u/s 144C(12) is categorical and absolute and there is no provision to relax the time-limit and, therefore, the time-limit laid down in s. 144C(12) for issuing the directions is mandatory. Thus, once the directions are not issued within the time limit specified in s. 144C (12), the directions become time barred and invalid; Relies on the following case laws: (i) CIT v. H.Gouthamchand (2012) 204 Taxman 86 (Kar)(Mag); (ii) Harsinagar Gutkha P Ltd v. CIT (2011) 336 ITR 90 (All); (iii) ACIT Anr v. Hotel Blue Moon (2010) 321 ITR 362 (SC); (iv) Hope Textiles Ltd v. Union of India (1994) 205 ITR 508 (SC) that once the directions have not been issued within the timelimit specified u/s 144C(12), it should follow that the objections of the assessee against the draft assessment order are to be accepted. Relies on Circular No.549 dt: 31.10.1989 of CBDT (1990) 82 CTR (St) 1; that the assessee relies on the following case laws for the proposition that if the directions are not issued within the time limit specified u/s 144C (12), th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er sub-section (5) shall be issued after nine months from the end of the month in which the draft order is forwarded to the eligible assessee. The word issued used in s. 144C (12) means served ; Relies on the following case laws: (i) Banarsi Debi v. ITO (1964) 53 ITR 100 (SC); (ii) CWT v. Kundan Lal Behari Lal (1975) 99 ITR 581 (SC) However, it was submitted that the judgment of the Hon ble Supreme Court in the case of R.K. Upadhyaya v. Shanabhai P Patel (1987) 166 ITR 163 (SC) is distinguishable since the decision was in the context of s. 147(b) of the Act; that s. 144C which deals with the DRP provisions has used the expressions forward , issue and receipt , but, nowhere used the expression SERVED . Thus, there is no need to draw a distinction between issue and served for the purpose of interpreting the expression issued in s. 144C (12). Hence, the ratio of decision rendered in R.K. Upadhyaya s case does not apply; that the decision in R.K. Upadhyaya s case was rendered by a Division Bench whereas the decision in Banarsi Debi s case had been rendered by Three Judges Bench. The well settled proposition of law is that if there were conflict ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12. However, the copy meant for the AO was dispatched on 4.9.2012; That from the above sequences of events, the assessee contends that the directions referred in sub-sec. 12 to s. 144C is only to the AO and in view of the dispatch of the directions of the DRP to the AO only on 4.9.2012, it was barred by limitation. The contention of the assessee cannot be accepted for the following reasons, namely: (i) Sub-section 5 to s. 144C refers to the issuance of directions for guidance of the AO to enable him to conclude the assessment. As per sub-section 5, the directions should be confined to enabling completion of the assessment and not otherwise; (ii) Sub-section 12 to s. 144C refers to limitation for completion of proceedings by DRP. The direction issued by the DRP on 16.8.2012 has lost control of the office of DRP on 30.8.2012 in view of dispatch of the order to the assessee and TPO. Hence, the DRP has issued directions within the time limit; (iii) As contended by the assessee, the word AO refer to in sub-section 5 cannot be read into sub-section 12 to s. 144C. If the intention of the Parliament was so, it would have been expressly provided in subsection 12, contemplating i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contention of the assessee is centred on the directions issued by the DRP u/s 144(5) r.w.s. 144C (8) of the Act to the AO was barred by limitation and, thus, the final assessment order passed by the AO u/s 153C r. w. s. 143 (3) (sic) 144C of the Act dated 29.10.2012 based on time barred directions of the DRP bad in law and liable to be quashed. 6.2.2. We shall now proceed to analyse, chronologically, the sequence of events which took place in the assessee s case, as under: 6.2.3. A draft assessment order for the AY under dispute, incorporating the transfer pricing adjustment u/s 92CA of the Act in respect of international transactions made by the assessee, was served on the assessee on 22.11.2011. Aggrieved, the assessee filed its objections before the DRP on 21.12.2011. After having considered the contentions of the assessee s objections to the draft assessment order, the remand report of the TPO and also further submissions made by the assessee s representative on 16.8.2012, the DRP, in its directions u/s 144(5) r.w.s. 144(8) of the Act, specified that the objections of the assessee against the draft assessment order stand rejected. Based on the directions of the DRP, the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e opportunity to the assessee, duly signed by the Dispute Resolution Panel Members, Bangalore, and, the same was dispatched to the assessee on 30.08.2012 i.e., within the time limit from this office by Speed Post bearing No.EK09206981 5 IN (Copy enclosed for reference). A copy of the DRP directions were (was) sent to the assessing officer through the inter-departmental procedure of forwarding the tappal thro tappals register on 04.09.2012 from this office. 6.2.7. It was the contention of the learned AR that the assessee s authorised representative did appear before the DRP on 16.8.2012 and made further written submissions, during the course of hearing, which was endorsed by the DRP in its directions, that 1.1 .. On 13.8.2012, the TPO submitted her report, a copy of which was given to the assessee. The assessee filed its reply before the Panel on 16.8.2012 objecting to the proposed enhancement . It was, therefore, questioned by the learned AR: How it could have been feasible for the DRP to issue directions on 16.8.2012 itself, by analysing the submissions made by the assessee on the same day? However, as a matter of fact, the hearing of the assessee s case was a continuous ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee on 22.11.2011 and that the directions u/s 144C (5) r.w.s. 144C (8) of the Act was issued well before [cut-off date] 31.8.2012 and, significantly, the direction was issued to the assessee on 30.8.2012 through speed post . 6.2.9. The contention of the assessee that the issuance of direction to the assessee does not give rise to any cause of action to the assessee and, the directions should have been issued to the AO within nine months as subscribed in sub-section (12) to s. 144C of the Act, in our view, doesn t carry any merit. As a matter of fact, the issuance of directions of the DRP came into fore only on the basis of the objections filed by the assessee before the DRP. Such being the situation, the learned AR s argument that Copy of directions is forwarded to the assessee only on principles of natural justice; and the issuance of the directions to the assessee does not give rise to any cause of action to the assessee [Refer: Para 20 on page 61 of A.R s submission] cannot be acceptable. When the directions of the DRP u/s 144C(5) r.w.s. 144C(8) of the Act has been issued to one of the parties involved i.e., to the assessee within the time specified in sub-section (12) t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to go out (Burrill); to go forth as a authoritative or binding, to proceed or arise from; to proceed as from a source (Century Dict.) Issue of process, going out of the hands of the clerk, expressed or implied, to be delivered to the Sheriff for service. A writ or notice is issued when it is put in proper form and placed in an officer s hands for service, at the time it becomes a perfected process. Any process may be considered issued if made out and placed in the hands of a person authorised to serve it, and with a bona fide intent to have it served. 16. Thus, the expression to issue in the context of issuance of notices, writs and process, has been attributed the meaning, to send out; to place in the hands of the proper officer for service. The expression shall be issued as used in section 149 would therefore have to be read in the aforesaid context 6.2.12. From the precedent on the subject, it is evident that the expression to issue means to send out so that the officer concerned has lost control over the order so that he is not in a position to tamper/alter the same. In the instant case, the DRP directions, admittedly, was issued to the assessee concerned on 30 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment order made u/s 144 of the Act was void ab initio as being contrary to the statutory requirement of issuance of a notice u/s 143(2) of the Act. At the out-set, we would like to point out that the case law relied on by the assessee has no relevance whatsoever to the issue under dispute for a simple reason that the directions of the DRP was issued within the time limit prescribed under subsection (12) to s. 144C of the Act. (ii) Likewise, the judgment of the Hon ble Allahabad High Court in the case of Harisinagar Gutkha P. Ltd v. CIT (2011) 336 ITR 90 (All), as relied on by the assessee, is not directly applicable to the facts of the issue under consideration, in a sense that the issue before the Hon ble Court was the service of a notice u/s 143(2) of the Act within the period provided under the proviso is mandatory. However, in the present case, the direction of the DRP was issued well before (cut-off date) 31.8.2012 and, significantly, the direction was issued to the assessee on 30.08.2012 through Speed Post [Refer: Para 7.5. of this order]. Therefore, the case law relied on by the assessee is not applicable to the present case. (iii) The judgment of the Hon ble Sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 153C of the Act etc., were absent in the case under consideration. The submissions made by the learned AR on the issue are summarized as under: that in the present case, the ADIT (Inv) had requisitioned the Police to handover the cash seized from Mr Hisham; that the jurisdiction on Hisham was since shifted from the ADIT (Inv) to the DCIT, Central Circle; and that in order to make an order u/s 153C on the assessee, it was necessary that the AO was satisfied that the seized cash belonged to the assessee; that as per s. 153C(1), the AO of the other person can assume jurisdiction only when the requisitioned assets were handed over by the AO of the requisitioned person. In the present case, the cash seized was deposited in PD account in the name of Hisham and that the same has not been transferred to the PD account of the assessee. Thus, the assumption of jurisdiction u/s 153C was bad in law; that it was essential that the AO [DCIT, Central Circle 1(1)] should have satisfied that the money, bullion, jewellery or other valuable article or thing or books of account or documents requisitioned belongs or belong to the other person. It was emphasized that the satisfaction rega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disclosed income should be satisfied. When the AO of the searched person is required to be satisfied that the assets belong to other person , it is trite to say that he should also be satisfied that the assets represent undisclosed income of the other person ; that though s. 153C does not explicitly state that the AO of the searched person has to arrive at satisfaction that the assets seized/requisitioned represent undisclosed income of the other person , considering the entire scheme of search and seizure provisions contained in sections 153A to 153C, arriving at such satisfaction is an inherent requirement. If it is not so, then it leads to absurd results. In case of a person who is searched, before requiring the authorized officer to make requisition, the Director or CCIT etc., should have reason to believe consequent to information in his possession that the person from whose custody the asset has been taken by any authority for the time being in force has not or would not disclose it. [C Ramaiah Reddy v. ACIT (2011) 339 ITR 210 (Kar)]; that when it comes to person other than the searched person, in order to assume jurisdiction u/s 153C, the AO of the searched pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hether it is an assessment u/s 153A or 153C, the sine qua non is that the requisitioned assets should represent either wholly or partly income or property which has not been or would not be disclosed. If this condition is not fulfilled, then the entire assessment u/s 153C is void ab initio. that in order to invoke s. 153C, recording of satisfaction, in writing, by the AO of the searched person that the seized assets belong to the other person and that they represent undisclosed income of the other person is a prerequisite. If the satisfaction in the manner as aforesaid is not recorded, then proceedings u/s 153C cannot be initiated. That there is nothing on record to prove that the AO of Hisham has recorded his satisfaction that the seized cash belonged to the assessee and the same represented undisclosed income of the assessee. The Revenue is required to produce the record of satisfaction; that since all the search cases had been centralized to DCIT, CC 1(1), the AO of Hisham and the assessee are the same. Even if the AO of the searched person and the other person are same, still it is essential that the satisfaction u/s 153C should be arrived at and duly recorded. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndias v. Dharmendra Textile Processors (2008) 306 ITR 277 (SC); (iv) CIT v. Reliance Petro Products (P) Ltd (2010) 322 ITR 158 (SC); (v) M/s. Veerabhadrappa Sangappa Co v. ACIT ITA No.1359/Bang/2008 [The findings of the Tribunal was confirmed by the Hon ble Karnataka H.C in ITA No.5209/2009. that as the Notice u/s 153C was not issued in the manner stipulated under the said section, the said notice was invalid and the entire proceedings were thus void. Hence, the order u/s 153C is liable to be quashed. 7.1. On the other hand, the submissions made on behalf of the Revenue are summarized as under: That requisition u/s 132A of the Act was issued in the case of Sri Hishasm Syed Tamiz on 5.8.2008 and based on the admission of Sri Tamiz in his statement on oath; the statements of the Director of the assessee as well as Smt Jayashree Ullal were recorded. Both of them have admitted that the cash requisitioned in the hands of Tamiz was belonged to the assessee and that the said amount required to be adjusted against the discharge of liabilities of the assessee and that there was no dispute regarding the amount belonged to the assessee. A satisfaction Note was recorde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... note of the AO clearly indicate that a notice u/s 153C was issued in order to bring the seized cash which belonged to the assessee to tax u/s 153A of the Act. With this background if the Notice issued u/s 153C is looked into, it is clear that notice was issued in substance and effect in conformity with or according to the intent and purpose of this Act. Hence, the defect, if any, in the notice issued u/s 153C is cured u/s 292B of the Act. Relies the following case laws: (i) S.Narayanapp and Ors v. CIT (1966) 62 ITR (Sh.N.9)(SC); (ii) Raymond Woollen Mills Ltd v. ITO Ors (1999) 236 ITR 34(SC); (iii) ACIT v. Rajesh Jhaveri Stock Brokers P Ltd (2007) 291 ITR 500 (SC); 7.2. We have carefully considered the rival submissions, relevant materials on records and also the case laws on which either of the party have placed their reliance. The requisition u/s 132A of the Act was issued in the case of Sri Hisham Syed Tamiz and his statement was recorded u/s 131 of the Act on the same day i.e., 5.8.2008. In his subsequent statement u/s 131 of the Act on 7.10.2008, he had reiterated what has been admitted earlier u/s 131 of the Act dt.5.8.2008. To question No.7, he had depose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing officer having jurisdiction over such other person and that assessing officer shall proceed against each such other person and issue such other person notice and assess or reassess income of such other person in accordance with the provisions of section 153A. . Incidentally, in the present case, as the AO in respect of such other person was same as that of the requisitioned person and, thus, the question of handing over of cash did not arise. In this connection, we would like to refer to the findings of the Hon ble ITAT, Ahmedabad Bench B in the case of Bharat Ginning Pressing Factory v. ITO reported in (2013) 32 Taxmann.com 322 (Ahmedabad Trib). After extensively analysing the rival submissions, the Hon ble Bench has recorded its findings as under: 5 The search operation was carried out at the residence as well as business premises of Shri Yakub A Colddrink where from the books of account of the firm as per annexure A/11 A/12 and loose paper as per Annexure 3 were found and seized. As per Section 153C, the books of account belonging to the other person is required to be found and seized at the premises of the search took place where assessment u/s 153A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ur case on 5.08.2008 wherein certain books of account and documents have been seized. On the basis of the seized material, I have reason to believe that you have not disclosed the income chargeable to tax . The same cannot be termed that the notice was issued in a mechanical manner as mentioned by the learned AR. In looking into the scenario which took place in the assessee s case as rightly pointed out by the Revenue, i.e., requisition of case u/s 132A of the Act from Sri Tamiz, his statement on oath that the cash belonged to the asssessee, acknowledging and confirming the statement of Sri Tamiz not only by the Managing Director but also by the CFO of the assessee on oath and the satisfaction note of the AO clearly indicate that a notice u/s 153C was issued in order to bring the seized cash which admittedly belonged to the assessee to tax u/s 153A of the Act. 7.2.4. We have, with due respects, perused the case laws on which the learned AR placed reliance and of the view that they are not directly applicable to the facts of the issue on hand. 7.2.5. In view of the sequence of the events narrated above, we are of the view that the issuance of a notice u/s 153C of the Act w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Finance Act, 2003 w.e.f. 1.6.2003 for assessments in respect of search u/s 132 or requisition u/s 132A after 31.5.2003. Prior to 1.6.2003, search and requisition, assessments were dealt under Chapter XIV-B of the Act. The provisions of Ch.XIV-B were dealing with block assessment in respect of the undisclosed income found during the course of search/requisition. The assessment under Ch. XIV-B was in addition to the regular assessment i.e. dual assessments, one under Ch.XIV-B and another under Ch.XIV of the Act. By introduction of section 153A, 153B, 153C and 153D, the Parliament has brought in single assessment concept in place of dual assessments, namely under Ch. XIV and XIVB of the Act. The assessment under Ch.XIV-B was confined to the undisclosed income found during the course of search and any addition to be made under Ch.XIV-B be undisclosed income and as a result of evidence found in the search/ requisition; S.153 provides for assessment/re-assessment not withstanding anything contained in sections 139, 147, 148, 149 and 153 when search u/s 132 or requisition u/s 132A of the Act initiated after 31.5.2003 and admittedly, in the present case, requisition u/s 132A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re applied, there is no remedy provided to bring such escaped income to tax and that the entire concept of assessment/re-assessment u/s 153A of the Act pursuant to search or requisition would be defeated; In view of the assessment u/s 153A being assessment/reassessment, utmost restriction on the Assessing Officer is not to relook into the issues already being considered in a completed assessment on application of mind and recording cogent reasons. Admittedly in the present case, there was no reference to the TPO by the Assessing Officer and further, 3CEB report does not report the expenditure incurred by the assessee on AMP. Thus, it was a case of assessment and no material was required to be found in the course of requisition. Further, in as reopened assessment each and every issue was open before the Assessing Officer except concluded on application of mind. Utmost, the Assessing Officer may not disturb the finding in a concluded assessment unless otherwise something found in the course of requisition contrary to the material considered for recording his finding in a concluded assessment. In such a position, detection of material in the course of search/requisition may be re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... islature has brought about single assessment concept in place of dual assessment contemplated under Chapter XIV-B. As a result, in view of 2nd proviso to section 153A, normal assessment pending during the proceedings u/s 153A or 153C will abate and only single assessment is to be made both for disclosed and undisclosed income. If the contention of the assessee is accepted, it will lead to absurd situation whereby even reported income in a return of income could not be taxed when the same abate on account of initiation of proceedings u/s 153A or 153C. Such a situation can never be in the contemplation of Legislature and we, out rightly reject the main contention of the assessee. 8.2.1. We shall now proceed to analyse the alternative contentions put forth on behalf of the assessee as under: We are of the view that the assessments u/s 153C pertaining to assessment years 2003-04 to 2006-07 are to be restricted to the incriminating material found during the course of search/requisition in view of the fact that the assessment proceedings for these years had attained finality prior to the initiation of search. In this context, it would be fruitful to place the following facts with r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer, no assessment or re-assessment relating to the assessment years 2003-04 and 2004-05 were pending. Even the appeal filed before the Tribunal was disposed off on 28.03.2008 itself; In so far as assessment year 2005-06 is concerned, the assessment u/s 143(3) had been completed prior to initiation of proceedings u/s 153C and an order has been passed on 15.12.2008. The assessee has filed an appeal before the learned CIT(A) against the said order dated 15.12.2008 which was pending for disposal. 8.2.2. Section 153C (1) r.w. second proviso to section 153A(1) states that any assessment or re-assessment pending on the date on which seized assets are handed over to the jurisdictional Assessing Officer shall abate. The Hon'ble Allahabad High Court in the case of CIT (Central) Kanpur v. Smt. Shaila Agarwal, 204 Taxman 276 held as under: The word abatement is referable to something, which is pending alive, or is subject to deduction. The abatement refers to suspension or termination of the proceedings either of the main action, or the proceedings ancillary or collateral to it. The word is commonly used in the legislations, which provide for abatement of action/suit, aba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g in appeal in the Tribunal, the entire proceedings will abate (Para 19) . 8.2.3. In the assessee s case, even the appeal which had been filed before the ITAT got disposed off in respect of assessment years 2003-04 and 2004-05. So far as assessment year 2005-06 was concerned, the assessment u/s 143(3) had been completed prior to initiation of proceedings u/s 153C. The assessee has filed appeal before the CIT (A) and the same was pending disposal as on date. Hence, assessments were not pending on the date of handing over of the seized cash for the above three years. 8.2.4. In so far as assessment year 2006-07 was concerned, the time limit for issuing notices u/s 143(2) expired. Hence, no action could be taken u/s 143. The circular No.549 dated 31st October, 1989 (1990) 82 CTR (St) 1) issued by the CBDT in the context of section 143(2). It was clarified therein as under: 5.13 A proviso to sub-s (2) provides that a notice under the sub-section can be served on the assessee only during the financial year in which the return is furnished or within six months from the end of the month in which the return is furnished, whichever is later. This means that the Department must serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vs. Abhinav Kumar Mittal (2013) 351 ITR 20 (Delhi) held as under: We have no reason to differ from the view taken by the Tribunal, particularly, as no material was found in the search and seizure operations, which would justify the Assessing Officer s action in referring the matter to the DVO for his opinion on valuation of the said properties. If that be the case, then the valuation arrived at by the DVO would be of no consequence . 8.2.9. After reproducing the relevant portion of the observations at Para 58 of the findings of the Hon'ble Special Bench of ITAT, Mumbai Bench (supra), the DRP in its directions at Para 11.2 on page 29, has stated as under: In this case the original assessments had been made u/s 143(3) and had abated. Accordingly the AO would retain the original jurisdiction hence additions made under this present jurisdiction are valid as per law. It is further submitted that the proceedings of transfer pricing for each year is an independent proceeding not governed by the findings in any other TP audit for any year. This being a search case, all assessments, proceedings till the date of search gets abated and a fresh assessment or audit is to be done ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question, guidance will have to be sought from section 132(1). If any books of accounts 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 accounts 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 jurisdiction to make original assessment and assessment u/s 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 AO (b) in respect of non-abated assessments, the assessment will be made on the basis of books of accounts or other documents not produced in the course of original assessment but found in the course of search and undisclosed income or undisclosed property disc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO shall, as per clause (ii), assess or reassess the total income of the searched person. This barrier has been set up by the legislature only with regard to proceedings that were found pending before the Assessing Officer on the date of search. Therefore, a proceeding which is pending, only those proceedings shall get abated. In other words, any proceeding that has reached its finality shall not be disturbed, as per the clarification issued by the CBDT, through circular No.7 dated 05.09.2003 (Supra), unless there are materials found, indicating existence of income embedded in those incriminating document(s) . 8.2.15. The DRP relied on the decision of the Tribunal in Intellinet Technologies India Pvt Ltd v. ITO 2010-TIOL-167-ITAT. At Para 11.2, page 30 of the Directions, the DRP observed as under: Further, in the case of Intellinet Technologies India Pvt Ltd vs ITO cited in 2010-TIOL-167-ITAT, the Hon'ble Court had occasion to observe that when the TPO has not made any addition the first time, there is no heroism in repeating the same mistake when the proceedings come before him once again. Accordingly the reference to the TPO made by the AO is valid. Hence, the objectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was passed by the assessing authority. The decisions were available in support of the contention of the assessee that the profit of the current year should not be diluted and the decisions are also available in support of the contention that current year s profit should be adjusted for brought forward losses and unabsorbed depreciation. So what he makes out is that where the assessing authority has adopted one of the possible views on a subject, then the view taken by the assessing authority cannot be held to be erroneous. While disposing of the above argument, the ITAT held as under: 24. It is not out of context here, to refer to the decision of the Income Tax Appellate Tribunal, Bangalore Bench rendered in the case of KPIT Cummins Infosystems (Bangalore) (P) Ltd v. Asstt. CIT (2008) 26 SOT 529. In the said decision, the Tribunal has held in favour of the assessee, accepting the argument that brought forward loss/unabsorbed depreciation need not be set off against profits eligible for deduction u/s 10A. In fact, one of us was a party to that order. But in the course of arguments, we found that the said order might not be reflecting the correct position of law. We have no h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iew, are not legally tenable. If the contention of the Revenue that once the proceedings u/s 153C is initiated, Assessing Officer has power to reopen the entire assessment even in respect of those assessments which do not abate is held to be legally tenable, the whole requirement of providing for abatement of only pending proceedings as on the date of handing over of assets [proviso to section 153C (1) r.w second proviso to section 153A (1)] would be rendered otiose. It would amount to abatement of all assessment proceedings whether completed or pending as on the date of handing over of assets. Where an assessment is completed prior to initiation of proceedings u/s 153C and an order u/s 143(3) is passed, the assessee prefers an appeal against such order u/s 143(3) and the appeal is pending. Meanwhile the proceedings u/s 153C is initiated. Going by the interpretation placed by the Revenue on the proviso to section 153C(1), even the assessment order which is subject matter of appeal would also abate. This interpretation is not correct. 8.2.20. During the course of hearing the learned Standing Counsel relied on the decision of the Hon'ble Rajasthan High Court in Jai Steel (Indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnings for the Assessing Officer and/or assessee beyond provision of section 139 (return of income), 139(5) (revised return of income), 147 (income escaping assessment) and 263 (revision of orders) of the Act . 8.2.21. The learned Standing Counsel relied on the decision of the Hon'ble ITAT in Scope (P) Ltd vs. DCIT (2013) 142 ITD 515. The decision does not help the Revenue. In fact, the Tribunal in Para 13 is held as under: 13. Before parting with the issue, we make it clear that having held that initiation of proceedings u/s 153A is valid, the Assessing Officer, cannot resort to a roving and fishing enquiry to find out whether any income has escaped assessment during the re-assessment proceedings when there is no incriminating material found or seized during the course of search action u/s 132 . 8.2.22. Further, it was submitted by the learned Standing Counsel that where a proceeding u/s 153A/153C are initiated and the proposition that it is not open to the Assessing Officer to make addition in the absence of incriminating documents found would lead to an absurd situation where the Revenue would be left with no remedy to assess the income which, during the course of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so far as the procedure that is required to be followed. Section 147 contemplates that if the Assessing Officer has reasons to believe that there is escapement of income, then notice can be issued u/s 148 of the Act. Section 158BD of the Act provides that if the Assessing Officer is satisfied that any undisclosed income belongs to any person other than the person with respect to whom search was made u/s 132 of the Act, upon such satisfaction, is required to forward the relevant documents, papers etc. to the Assessing Officer having jurisdiction over such other person in respect of whom the undisclosed income has been disclosed for block assessment. Thus, it is open to the Assessing Officer to proceed against the assessee, if he has reason to believe that his income has either escaped the assessment or whose undisclosed income is unearthed during the search conducted u/s 132 of the Act of the premises of some other person. From plain reading of these provisions, we do not find any impediment in proceeding against such person by issuing notice u/s 148 of the Act. In other words, Chapter XIV-B do not preclude the Assessing Officer to proceed against such assessee by issuing notice u/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of any person having international transactions or in case of a foreign company. It has been provided under sub-section (8) of section 144C that DRP may confirm, reduce or enhance the variations proposed in the draft order of the AO. In a recent judgment, it was held that the power of DRP is restricted only to the issues raised in the draft assessment order and, therefore, it cannot enhance the variation proposed in the order as a result of any new issue which comes to the notice of the panel during the course of proceedings before it. This is not in accordance with the legislative intent. It is accordingly proposed to insert an Explanation in the provisions of section 144C to clarify that the powers of the DRP to enhance the variation shall include and shall always be deemed to have included the power to consider any matter arising out of the assessment proceedings relating to the draft assessment order. This power to consider any issue would be irrespective of the fact whether such matter was raised by the eligible assessee or not. This amendment will be effective retrospectively from the 1st day of April, 2009 and will accordingly apply to assessment year 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 (Kar), it was contended that the introduction of Explanation below s. 144C(8) was made to enable the DRP to issue directions in respect of new variations which are not related to TP matters and, thus, DRP does not possess powers to discover new international transaction not earlier considered by the TPO. 9.1. Rebutting the assessee s contention that Explanation to s. 144C (8) of the Act has been given effect from 1.4.2009 by Finance Act 2012 and by way of Circular the effect of amendment has been given for the AY 2009-10 on wards and the assessments involved in the present appeals are prior to the AY 2009-10 and, thus, the amendment has no application etc., the Revenue s submissions are as under: That the Memorandum explaining the Finance Bill 2012 expressed the commencement of Explanation was from the AY 2009-10 onwards. However, since the said observation was a mistake crept in in the Memorandum which has been subsequently rectified by issuance of a Circular No.3/2012 dated 12.6.2012 explaining the amendments moved in Finance Bill 2012. The clarification issued by the above circular reads as under: 1. A clarificatory amendment was proposed in the Finance Bill 2012 [cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re of the view that the DRP was within its domain and also justified in exercising the powers conferred under Explanation to s. 144C (8) of the Act. Moreover, it was the contention of the assessee that the DRP has power only to enhance or reduce the adjustment that has already been carried out u/s 92CA. In other words, it was the learned AR s submission that the DRP has no power to treat transactions in respect of which either no adjustment was proposed by the learned TPO or such transaction does not form part of the report u/s 92E. This submission of the learned AR is devoid any merits, in view of the Memorandum explaining the intention behind introduction of explanation below s. 144C (8) which read as under: Power of the DRP to enhance variations Dispute Resolution Panel [DRP] had been constituted with a view to expeditiously resolve the cases involving transfer pricing issues in the case of any person having international transactions or in case of a foreign company. It has been provided under sub-section (8) of section 144C that DRP may confirm, reduce or enhance the variations proposed in the draft order of the assessing officer. In a recent judgment, it was held tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the DRP to permit the TPO to examine the alleged international transactions not forming part of the original order, the TPO was seeking to reviews her order in an indirect manner which cannot be directly done. Relies on the following case laws: (i) CIT v. Anjum M.H. Ghaswala (2001) 252 ITR 1 (SC); (ii) Ramachandra Keshav Adke Ors v. Govind Joti Chavare Ors 1975 AIR 915 10.1. On the other hand, the Revenue argued that the assessee s contention of the remanding the issue for determining the ALP in respect of expenditure towards to AMP to the TPO was without jurisdiction etc., cannot be accepted for the following reasons: (a) That the DRP was brought into the Statute as an alternative method of resolving disputes in respect of international transactions as an alternative to the appeal remedy before the CIT (A); and that it is settled position of law that the powers of the CIT (A) coterminous with that of the AO and that the proceedings before the CIT (A) are continuation of assessment proceedings; (b) If the provisions of s. 144C are read with the provisions relating to the powers of CIT (A), it is clear that s. 144C is parimateria with s. 251 of the Act. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the TPO had determined the ALP on AMP expenditure too. Such being the situation, the assessee cannot take a stand that the view expressed by the TPO on a specific direction by the DRP, would amount to review. We have also carefully analysed the amendment to s. 92CA (2B) of the Act, the relevant portion of which, is reproduced as under [for ready reference]: Section 92 CA of the Act provides that the assessing officer, if he considers it necessary or expedient to do so, may with the previous approval of the Commissioner of Income-tax, refer the matter of determination of arm s length price in respect of an international transaction to the Transfer Pricing Officer (TPO). Once reference is made to the TPO, TPO is competent to exercise all powers that are available to the AO under sub-section (3) of s. 92C for determination of ALP and consequent adjustment. Further u/s 92E of the Act, there is reporting requirement on the taxpayer and the taxpayer is under obligation to file an audit report in the prescribed from before the AO containing details of all international transactions undertaken by the taxpayer during the year. This audit report is the primary document with the AO which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or for requisition u/s 132A is executed or - Twenty one months from the end of the FY in which the assets seized or requisitioned are handed over u/s 153C to the jurisdictional AO of the other person whichever is later; As per s. 153B(2)(b), the last of the authorization shall be deemed to have been executed in the case of requisition u/s 132A on the actual receipt of the books of account or other documents or assets by the authorized officer. The date of such handing over by the Police to authorized officer can be taken not later than 31.3.2009. Thus, the last of the authorization for requisition u/s 132A was deemed to have been executed in the FY 2008-09 and that the period of thirty-three months referred above ended on 31.12.2011; Without prejudice to the submission that there was no proper handing over of cash so as to confer jurisdiction u/s 153C for this alternative ground on limitation, one may assume that the cash seized was handed over u/s 153C to the jurisdictional AO on or before 11.5.2009 [which was the date of notice u/s 153C]. Thus, the period of twenty months referred above ended on 31.12.2011. Since the order u/s 153C was passed only on 29.10.2012, the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplicable to all applications/objections filed after 1.10.2009. In the present case, the objection was filed after 1.10.2009 and the amendment and extension provided u/s 144C (13) was applicable. The assessment order passed u/s 153C r.w.s 144C of the Act was within the time limit prescribed u/s 144C (13) of the Act. The above intention was clear and explicit from the Memorandum explaining the amendment. As there was no ambiguity in the language of s. 144C, no judgments are required for interpretation. The order of DRP was subsequent to the amendment and, hence, the AO was entitled to extension of time provided u/s 144C (13) of the Act. 11.2. In a rejoinder to the revenue s argument, the submissions made by the learned AR are summarized as under: As is evident from the submissions of the revenue, reliance is placed solely on the Memorandum which states that under the provisions of s. 144C of the Act where an eligible assessee files an objection against the draft assessment order before the DRP, then, the time limit for completion of assessments are as provided in s. 144C notwithstanding anything in s. 153. A similar provision is proposed to be made where assessments are framed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l year and during the course of the proceedings for the assessment or re-assessment of total income in case of other person referred to in section 153C, a reference under subsection (1) of section 92CA- (i) was made before the 1st day of June, 2007 but an order under sub-section (3) of section 92CA has not been made before such date; or (ii) is made on or after the 1st day of June, 2007, the period of limitation for making the assessment or reassessment in case of such other person shall, notwithstanding anything contained in clause (ii) of the second proviso, be the period of thirty-three months from the end of the financial year in which the last of the authorisations for search under section 132 or for requisition under section 132A was executed or twenty-one months from the end of the financial year in which books of account or documents or assets seized or requisitioned are handed over under section 153C to the assessing officer having jurisdiction over such other person, whichever is later. 11.3.2. As per the fifth proviso to section 153B(1) of the Act, the period of limitation for making assessment or re-assessment u/s 153C is: (i) thirty-three months from the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 153C were barred by limitation. 11.3.6. In this connection, we rely on the judgment of the Hon ble Supreme Court in the case of S.S. Gadgil v. Lal Co reported in (1964) 53 ITR 231 (SC). The brief facts in the said case are that a Notice was issued against the assessee as an agent of a non-resident on 27th March, 1957 and that notice related to the assessment year 1954-55. Under clause (iii) of the proviso to s. 34(1) as it stood prior to its amendment by the Finance Act, 1956, a Notice of assessment or re-assessment could not be issued against a person deemed to be an agent of a non-resident after the expiry of one year from the end of the year of assessment. The right to commence a proceeding for assessment against the assessee as agent of a non-resident for the AY 1954-55, therefore, ended on 31st March 1956 under the new Act before its amendment in 1956. This provision was, however, amended by the Finance Act, 1956, and under the amended provision the period of limitation was extended to two years from the end of the assessment year. The amendment was made on 8th September, 1958, but was given effect to from 1st April, 1956. Since the time within which notice could be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essly mentioned, nor to authorize the Income-tax Officer to commence proceeding which before the new Act came into force had by the expiry of the period provided become barred. 11.3.8. We have duly perused the arguments put-forth by the learned Counsel for the Revenue as well as the rejoinder to the revenue s submission made by the learned AR. As highlighted by the assessee in its rejoinder to the revenue s argument, the revenue has placed its strong reliance on the Memorandum. However, on a perusal of the said Memorandum, it is evident that it was intended to make the amendment to remove any omission or flaws in the Statute and as such, it was neither clarificatory nor procedural in nature. Moreover, there was no trace of any mention in the Memorandum to illustrate that it applies to objection/application filed on or after 1.10.2009. In the present case, the time-limit to pass the orders u/s 153C r.w.s. 153B of the Act has expired on 31.12.2011 itself and that the Finance Act, 2012 received the President s nod (assent) only on 28.5.2012. 11.3.9. Taking all the above aspects into consideration, we are of the view that the re-assessments orders passed u/s 153C of the Act on 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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