TMI Blog2014 (11) TMI 603X X X X Extracts X X X X X X X X Extracts X X X X ..... /s 153C of the Act which have attained finality in original assessment dehorse any incriminating material found during the course of search - the only action left for the AO in that respect as no addition was conceived on incriminating materials is to drop the proceedings - under the provision of Act only the proceedings which is pending shall get abated - any proceedings that has reached its finality shall not be disturbed unless there are materials found, indicating existence of income embedded in incriminating documents - No incriminating material has been proved to have been found in the course of search which belonged to the assessee warranting the re-assessment u/s 153C of the Act for the AY. The person who is searched u/s 153A of the Act can be assessed only on the basis of incriminating material found and the other person who is assessed u/s 153C of the Act in connection with the same search should be assessed de hors any incriminating material - the provision of section 153C(1) was amended to obviate practical difficulties which arose in its interpretation - To put it simply this amendment to proviso to section 153C(1) of the Act debars the AO from making any assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. FOR THAT the Ld. Commissioner of Income Tax (Appeals) Central I, Kolkata was unjustified in upholding the finding of the Ld.Deputy Commissioner of Income Tax, Central Circle XI, Kolkata denying claim of deduction under the provisions of s.80IB of the Income Tax Act, 1961 derived on account of transport subsidy and crane hire charges without considering the pith and substance of that enactment and his purported finding on that behalf is wholly capricious, unreasonable and perverse. 4. FOR THAT the Ld. Commissioner of Income Tax (Appeals) Central I, Kolkata misread facts, considered improper issues, failed to consider proper position in law, misplaced onus of proof and came to erroneous findings thereupon in upholding the impugned action of the Ld.Deputy Commissioner of Income Tax, Central Circle-XI, Kolkata which is not predicated on merits. 4. At the outset, in this case the ld. Counsel of the assessee challenged the assessment order passed in this case on the ground that the AO has no jurisdiction in this case to pass an order u/s 153C of the Act for the concerned assessment year in as much as no incriminating material was found during the search. 5. We note that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceedings, which have been completed, or concluded and to restore the assessment to the file of the Assessing Authority. Only the assessment or reassessment which is pending before the Assessing Officer on the date of initiation of search shall abate. It is clarified by the CIRCULAR NO.7 OF 2003 (2003) 263 ITR (ST) 62 that an appeal, revision or rectification proceedings pending on the date of initiation of search under section 132 or requisition shall not abate. Admittedly, in the instant case, the handing over of the materials which allegedly belonged to the appellant was taken much later after the passing of assessment order u/s 143(3) of the Act and accordingly, such assessment did not abate. Therefore, the action of the Ld.Assessing Officer in assuming jurisdiction u/s 153C of the Income Tax Act, 1961 in the instant case was in contradiction to the second proviso to s.153A of the Act as it led to serious illegality, injustice and absurdity. A provision of the law has to be interpreted in a manner for which it is intended. It cannot be interpreted so as to advance injustice to the subjects. Where none of the assessments were pending on the date of search, the AO is precluded fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umed jurisdiction u/s 153C of the Act without any application of mind on the materials which did not reveal issues of incriminating nature so as to justify his action. In fact, the assessment framed u/s 153C/143(3) of the Act by reiterating only the additions made in the original assessment as well as another disallowance resorted to u/s 36(1)(va) read with s.2(24)(x) of the Act. Therefore, it is apparent from such action of the Ld. Assessing Officer that there was, in fact, no material, far from any of incriminating nature, belonging to the appellant which were seized during the search and seizure proceedings u/s 132 of the Act to justify the purported action u/s 153C of the Act. In fact, there was no satisfaction recorded by the Ld.Assessing Officer by forming his own opinion that the materials gathered were incriminating in nature. It is not in dispute that the Ld.Assessing Officer after assuming jurisdiction did not even raise a query in respect of such materials as he was sure that such materials do not reflect any undisclosed income justifying his action u/s 153C of the Act. In fact, the specious satisfaction reached by the Ld.Assessing Officer was merely an eye wash and has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eedings that were found pending before the Assessing Authority on the date of search. Therefore, only a proceeding which is pending 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 CIRCULAR NO.7 DATED 05-09-2003 (supra), unless there are materials found, indicating existence of income embedded in those incriminating documents. No material is adduced to prove that the Ld.Assessing Officer in the case of person searched was satisfied that any money, bullion, jewellery or other valuable articles or things or books of accounts or documents seized or requisitioned belongs to or belong to the appellant referred to as the other person in the provisions of s.153A of the Act. The Ld. Assessing Officer did not adduce any material to show if any such satisfaction as required u/s 153C of the Act was recorded in the case of the appellant. No material is adduced in record to comply with such requirement. The existence of subject-wise and year-wise incriminating document is a condition precedent to proceed u/s 153C of the Income Tax Act, 1961 and in absence of such essentially required satisfaction, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... involving same subject matter for the assessment year 2003-2004. Thus, such action was leading to absurdity and unintended consequences. While inserting the provisions of s.153C of the Act, the Legislature did not envisage such a situation where no incriminating materials relating to a third party was found in the course of search but still such party has to undergo assessment proceedings for six previous years excluding the year in which the search took place and/or the documents handed over to the concerned Assessing Authority irrespective of the fact that there was no material wherefrom undisclosed income, which was not assessed, could be computed. In principle, the Legislatures found that the provision of s.153C of the Act was not interpreted according to their intention. The proposition that even bald documents which do not have any bearing on the assessment was enough to trigger the provisions of s.153C of the Act is fraught with absurdity. The consequences of s.153A and/or 153C of the Act are an outcome of a search and seizure proceedings u/s 132 of the Act. Therefore, if any undisclosed income is not found relating to a person, in principle, no action is liable to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from time to time. The amendment made by Finance (No.2) Act, 2014 as the Legislature found that different authorities were assigning different meanings to the provisions. As such, a state of affairs resulted in ambiguities which gave rise to conflicting decisions on subject, the Legislature in its wisdom thought it prudent to change the language thoroughly explicit. It so happened from time to time that during the course of conducting a search and seizure operation u/s 132 of the Act, money, bullion, jewellery or other valuable article or thing or books of account or documents belonging to another person were seized. On one hand, the seized materials were sent to the Assessing Authority having jurisdiction over the other person and on the other hand, the Assessing Authority receiving such seized material acts mechanically initiates proceedings u/s 153C of the Act without any verification. Such interpretation is never the intendment of the Legislature. The Legislature found that multiplicity of proceedings resulted and confusion reigned supreme. In order to eliminate such contradictory situations, it was made clear that the Assessing Authority while receiving such seized material b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith merely matters of procedure are presumed to be retrospective unless such a construction is textually inadmissible [DELHI CLOTH GENERAL MILLS CO.LTD. VS CIT (AIR 1927 PC 242)]. Further, as stated by Lord Denning that the rule that an act of Parliament is not to be given retrospective effects applies only to statues which affect vested rights. It doesn't apply to statues which only alter the form of procedure or the admissibility of evidence, or the effect which the courts give to evidence [BLYTH VS BLYTH (1966) 1 ALL ER 524 (HL)]. If the new act affects matters of procedure only, then, prima facie, it applies to all action pending as well as future [K.EAPIN CHACKO VS PROVIDENT FUND INVESTMENT COMPANY(P) :TD (AIR 1976 SC 2610)]. In stating the principle that a change in the law of procedure operates retrospectively, it was settled that with approval the reason of the rule as expressed by Maxwell that no person has a vested right in any course of procedure. He has only the right of prosecution or defence in the manner prescribed for the time being by or for the Court in which the case is pending, and if, by an act of Parliament the mode of procedure is altered, he has no oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... financial year 1964-1965, could be applied for the assessment year 1963-1964, and the IAC had jurisdiction under section 154(1)(bb) to rectify the mistake in the penalty order dated 4-3-1970 for the assessment year 1963-64 [NURUDDIN BROS VS CIT (1979) 116 ITR 704 (CAL)]. Thus, the provisions of s.153C of the Act as amended by Finance (No.2) Act, 2014 was made applicable on and from 01-10-2014 and is relevant for the assessment year under dispute as it cures the infirmities of the previous legislation and also makes the provisions workable by avoiding absurd consequences. Accordingly, such provision is to be given retrospective operation and is also applicable to pending proceedings. That being so, the action of the Ld.Assessing Officer is fraught with illegality as he proceeded de hors any incriminating materials to assume jurisdiction u/s 153C of the Act in the instant case and accordingly, his action is liable to be quashed being ab initio void, ultra vires and ex-facie null in law. 7.1. As regards the merits of the case ld. Counsel of the assessee contended that the issue is covered in favour of the assessee by the decision of Hon'ble Gauhati High Court in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gly as if such return were a return required to be furnished under section 139; (b) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made. Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years : Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this [sub-section] pending on the date of initiation of the search under section 132or making of requisition under section 132A, as the case may be, shall abate. [(2) If any proceeding initiated or any order of assessment or reassessment made under sub-section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) or section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to sub-section (1), shall stand revived with effect from the date of receipt of the order of such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jurisdiction conferred on him by section 153A of the Act for which assessments shall be made for each of the six assessment years separately. (2) In other cases any addition to the income already been assessed the assessments u/s 153A of the Act will be made on the basis of incriminating material i.e. (a) books of accounts and other documents found in the course of search but not produced in the course of original assessment and (b) undisclosed income or property disclosed in the course of search. 9.3. We find that the above interpretation which is with respect to section 153A of the Act should also be extended to assessment u/s 153C of the Act. It will be a absurd proposition that the person who is searched u/s 153A of the Act can be assessed only on the basis of incriminating material found and the other person who is assessed u/s 153C of the Act in connection with the same search should be assessed de hors any incriminating material. 9.4. We find that the above view is supported by the amendment to section 153C of the Act w.e.f. 01.10.2014. The provision to section 153C(1) prior to the amendment and sub-section to the amendment are already reproduced in assessee's ..... X X X X Extracts X X X X X X X X Extracts X X X X
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