TMI Blog2013 (11) TMI 1589X X X X Extracts X X X X X X X X Extracts X X X X ..... inancial company. It is in the business of finance, investments as well as in trading of cloth and garments. It regularly files its returns of income. 2.1. A search and seizure action was taken in the case of Rajdarbar group on 31.7.2008. The A.O. records in the assessment order that during the course of that search operations, certain documents, belonging to the assessee company were found and seized. Thereafter, the case of the assessee company was transferred from Central Circle V, New Delhi, to the present Assessing Officer, who is Dy.Commissioner of Income Tax, Central Circle-12, New Delhi vide order dt. 25.3.2010. 2.2. The Assessing Officer issued a notice u/s 153C of the Act dt. 23.7.2010. The same was returned unserved. Thereafter a fresh notice u/s 153C of the Act dt. 2.8.2010 was issued to the assessee company, at the new address furnished to the department by the A.R. of the assessee. In reply to the notice, the assessee filed a return of income for A.Y. 2004-05 on 13.8.2010 declaring loss of ₹ 1,28,670/-. The return filed by the assessee company was the same as that was filed originally u/s 139 of the Act on 31.10.2004. Thereafter, the Assessing Officer, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he course of search. Primarily he relied upon the decision of the Hon ble A.P.High Court in the case of Mr.Gopal Lal Bhadruka vs. DCIT (2012)-TIOL-357-HC-AP-IT. On the ground that the assessee has not discharged the onus that lay on it, he confirmed the disallowances/additions. 4. Aggrieved the assessee is before us on the following grounds for A.Y. 2004-05. 1. That the learned Commissioner of Income Tax (Appeals) has grossly erred both in law and on facts in upholding the order of assessment framed u/s 153C/143(3) of the Act without granting any fair, meaningful and, proper opportunity to the appellant company. 1.1 That the learned Commissioner of Income Tax (Appeals) while disposing of appeal expartee has failed to appreciate that appeal filed by the appellant company was part of a batch of appeals in the case of Rajdarbar group of cases and since counsel for the appellant had duly been appearing in other matters of Rajdarbar group of cases, there remained no occasion to hold that none appeared on behalf of the appellant company in response to notice u/s 250 of the Act and hence, disposal of appeal on expartee basis without granting opportunity to the appellant is un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to what is the document or documents that are belonging to the asseessee, which were found in the premises of the person searched, which triggered the issual of notice u/s 153 C of the Act. It is not mentioned as to which is the particular premises where the said documents if any were found. (b) No proper satisfaction is recorded by the Assessing Officer of the entity which was searched, where the alleged documents of the assessee are found. He argued that prima facie the material found should be incriminating and only in such situation a satisfaction note can be recorded by the Assessing Officer who has jurisdiction over the person searched and in whose premises the said documents belonging to the assessee are found and then the material found along with the satisfaction note has to be sent to the officer having jurisdiction over the assessee, who in turn would issue a notice u/s 153 C of the Act. (c) He submitted that once there are no incriminating material found no proceedings u/s 153 C can be initiated and hence the notice is bad in law. (d) He further submitted that even in a case where notice has been issued u/s 153 C , if the Assessing Officer finds that there i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e resorted to. He argued that the language of S.153 A is simple, clear and unambiguous and it empowers the Assessing Officer to make the assessments and reassessments, irrespective of the fact whether any incriminating material is found during the course of search or not. He submitted that on merits the additions are perfectly justified and the assessee has not disputed the same. He did not dispute the contentions of the assessee that no incriminating material was found during the course of search in the case of Rajdarbar group of companies as is evident from the assessment orders. 8. In reply the Ld.Counsel for the assessee pointed out that for the A.Y. 2006-07 as well as Assessment Year 2007-08/2008-09 the additions made in a regular assessment order passed u/s 143(3) were repeated in the order passed u/s 153 C r.w.s. 143(3) of the Act. For the A.Y. 2009-10 he submitted that the issue may be set aside to the file of Assessing Officer for fresh adjudication. He prayed that the ad-hoc disallowance be deleted. 9. Rival contentions heard. On a careful consideration of the facts and circumstances of the case and a perusal of the papers on record and the orders of the authoriti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at, the Satisfaction Note which says that books of accounts are contained in the hard disk, is a wrong recording of facts. The entire cash book or the bank book is not available in the hard disk. What was available in the hard disk was confirmation of accounts given by the assessee to Global Reality Ventures and statement of accounts, ledger etc. in support of the same. The relevant portion of the cash book, where the entries of Global Reality Ventures Ltd. are recorded was also there in the hard disk. Thus to hold that the hard disk contains books of accounts of M/s V.K.Fiscal Services P.Ltd. is prima facie wrong. Thus, in our view no money, bullion, jewellery or other valuable articles or books of accounts or documents seized belong to the assessee, warranting issual of notice u/s 153 C . 11.2. Hence we uphold the contention of the assessee that the issual of notice u/s 153 C , under the facts and circumstances, is bad in law. 11.3. We also notice that the A.O. of the assessee is the same as the A.O. of the searched party. We do not know in whose assessment proceedings this satisfaction note was considered. 12. The law on the issue has developed. We refer to some case la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erson searched, he has to record the satisfaction that the money, bullion, jewellery or other valuable article or thing or books of account or documents belong to the person other than the person searched. Then, the copy of this satisfaction note is to be placed in the file of such other person and the relevant document should also be transferred from the file of person searched to the file of such other person. Thereafter, in the capacity of the Assessing Officer of such other person, he has to issue the notice under Section 153A read with Section 153C The Assessing Officer of the person searched and such other person may be the same but these are two different assessees and, therefore, the Assessing Officer has to carry out the dual exercise, first as the Assessing Officer of the person searched in which he has to record the satisfaction, during the course of assessment proceedings of the person searched. After recording such satisfaction note in the file of the person searched, the same is to be placed in the file of such other person. Then, in his capacity as the Assessing Officer of such other person, he should take cognizance of such satisfaction note and thereafter issue not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h is to be substituted by the date of receiving the books of account or documents or assets seized. Accordingly, the assessment can be reopened of the preceding six years than 21st June, 2010. They would be AY 2005-06 to 2010-11. The Revenue has reopened assessment for AY 2004-05 which is clearly barred by limitation. The learned OR has contended that since in this case the Assessing Officer of the person searched and the Assessing Officer of such other person was the same, there is no question of handing over and taking over of the document, therefore, for the purpose of limitation, the date of search would be relevant and not the date of initiation of proceedings under Section 153C. Since in this case satisfaction is recorded on 21st June, 2010 and notice under Section 153C is also issued on the same date, then only conclusion that can be drawn is that the Assessing Officer of such other person has taken over the possession of seized document on 21st June, 2010. Accordingly, as per Section 153(1), the Assessing Officer can issue the notice for the previous year in which search is conducted (for the purpose of Section 153C the document is handed over) and six AYs preceding s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble Gujarat High Court in Tax appeal no. 914 of 2012 in case of Jayaben Ratial Sorathia vide order dt. 2.7.2013 held as under. 3.00. Mr.Pranav G Desai, ld.Counsel appearing on behalf of the appellant has vehemently submitted that the Tribunal has not properly appreciated the provisions of law more particularly section 153A of the Act, which permits the Assessing Officer to reopen/reassess the return of six preceding years. It is submitted that therefore, considering section 153A of the Act, which permits the Assessing Officer to reopen/reassess the return of six preceding years. It is submitted that therefore, considering section 153A and 153C of the Act, the Assessing Officer was justified in reopening the assessment with respect to Assessment Year 2005-06 and considering the same ratio and ratio modus operandi with respect to Assessment Year 2006-07 and 2007-08 rightly added undisclosed income on the sale of plots of land admeasuring 6426.10 sq.mtrs. sold during the year under consideration being extra sale profits received on sale of plots of land at the rate of RS.575/- per sq.mtrs. as done in the A. Y. 2006-07 and 2007-08. 3.01. Mr.Pranav G. Desai, learned counsel app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; has been used in the context of abated proceedings and 'reassess' has been used for completed assessment proceedings which do not abate as they are not pending on the date of initiation of the search or making of requisition and can be tinkered only on the basis of incriminating material found during the course of search or requisition of documents therefore, it is not open to the assessee to seek deduction or claim relief not claimed by it in the original assessment which already stands completed in an assessment u/s 153A made in pursuance of a search or requisition. (Emphasis ours). 12.5. The Hon ble A.P. High Court in I.T..A. No. 266 of 2013 dt. 12.07.2013 in the case of M/s Hyderabad House Pvt., Ltd., held as under. JUDGMENT: (Per the Hon'ble the Chief Justice Sri Kalyan Jyoti Sengupta) This appeal is preferred and sought to be admitted on the following suggested question of law. Whether on the facts and circumstances of the case, the Tribunal is correct in law in holding that the computation of undisclosed income u/s 153A/153C of the Act should be confined only to the material found during the course of search proceedings? In our opin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the ClT {A} is perverse and not tenable in law and on facts. 7. The appellant craves leave to add, alter or amend any/all of the grounds of appeal before or during the course of the hearing of the appeal. In our considered view, there is no dispute with regard to the proposition that A.O jurisdiction u/s 153A of the Act to initiate assessment/ reassessment proceedings for a years to compute the total income of the assessee including the undisclosed income action have been taken against the assessee u/s 132{1} of the IT Act. However, the question remains that when return has been processed u/s 143{1} {a} and the time period for issuing notice u/s 143{2} for selecting return for scrutiny has elapsed then what nature of proceeding commenced and concluded u/s 143{1} {a}. How these are different from the proceedings commenced and concluded u/s 143(3) of the Act. There is no doubt that once the proceeding u/s 143(3) are completed and concluded then there is nothing which will abate as per provisions of section 153A of the Act. 9. In our considered opinion, section 153A referred to pending assessment or reassessment and not assessment orders . The assessment may not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income or income escaped assessment. In the case under consideration, there is no incriminating material found during the course of search relating to the assessment year under consideration. The time period for issuing notice u/s 143(2) was already expired prior to the date of search. Therefore, the proceedings do not get abated by virtue of proviso to Section 153A. 10. Therefore, the question arises whether AO can make any addition in the reassessment proceedings u/s 153(A) after making inquiries which are not suggested by any document or asset seized during the search. It depends on the nature of addition. The facts and circumstances of the assessee clearly show that no incriminating document found relating to the land development expenses debited in the books of accounts. No material was on the record on the basis which income of assessee could be further assessed by Assessing Officer. Therefore, the assessing officer has no jurisdiction to make or to resort to roving and fishing inquiries to find out whether any income has escaped assessment during these reassessment proceedings. Particularly, when there is no incriminating material found and seized during the course of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, if any, unearthed during search. It was answered by the Hon ble High Court in affirmative and in favour of the revenue. In that case, the Hon ble High Court has been pleased to hold that the Assessing Officer has the power u/s 153A to make assessment for all the six years and compute the total income of the assessee, including the undisclosed income, notwithstanding that the assessee filed return before the date of search which stood processed u/s 143(1) (a) of the Act. The Tribunal had held that since the returns of income by the assessee for all the six years under consideration before the search took place were processed u/s 143 (1) (a) of the Act, the provisions of Section 153 A cannot be invoked. The Hon ble High Court did not agree with this, nor it agreed with the finding of the Tribunal that no material was found during the search. The Hon ble High Court observed in that case, that in the entire case and arguments before the departmental authorities as well as the Tribunal had proceeded on the basis that no document embodying the transaction with Mohni Sharma was recovered from the assessee. The same is not correct the reason being that in the order of the Tribunal itsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een framed u/s 143 (3) or returned filed u/s 139 of the Act has been processed u/s 143(1) (a) of the Act. Having gone through the other decisions relied upon by the Ld. A.R. we find that in the case of Anil Kumar Bhatia ors (Supra), the Tribunal held that in respect of an assessment u/s 153A, where processing of returns u/s 143(1) (a) stood completed in respect of returns filed in due course before search and no material is found in search thereafter, no addition can be made. In appeal preferred by Revenue against this order of the Tribunal, the Hon ble Delhi High Court was pleased to hold that where assessment order had already been passed in respect of all or any of those six assessment years, either u/s 143 (1) (a) or Section 143(3) prior to initiation of search/requisition, still Assessing Officer is empowered to reopen those proceedings u/s 153A without any fetters and reassess total income taking note of undisclosed income, if any, unearthed during search. The appeal was however, allowed in favour of the Revenue because the Hon ble High Court did not concur with the finding of the Tribunal on fact that no material was found during the search, whereas the document embodying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rch or requisition is initiated after 31/5/2003 and on satisfaction of this condition, the AO is under obligation to issue notice to the person requiring him to furnish the return of income for six years immediately preceding the year of search. The Special Bench further held that in case assessment has abated, the AO retain s the original jurisdiction as well as jurisdiction u/s 153A for which assessment shall be made for each assessment year separately. Thus in case where assessment has abated the AO can make additions in the assessment, even if no incriminating material, has been found. But in other case3s the Special Bench held that the assessment u/s 153 A can be made on the basis of incriminating material which in the context of relevant provisions means books of account and other documents found in the course of search but not produced in the course of original assessment and undisclosed income or property disclosed during the course of search. In the present case, the assessment had been completed under summary scheme u/s 143(1) and time limit for issue of notice u/s 143(2) had expired on the date of search. Therefore, there was no assessment pending in this case and such a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment Year 2004-05, 2005-06, 2006-07, 2007-08, 2008-09 on the following grounds. (a) No books of accounts belonging to the assessee were found and seized in the premises of the other person. What was found was in the hard disk was only a confirmation of account that an attached annexures. Such documents cannot be said to be books of accounts or documents belonging to the assessee. (b) The Revenue has not produced the record of the searched person to demonstrate that satisfaction was recorded during the course of assessment proceedings in the case of M/s Global Reality Ventures P.Ltd. On the date of recording of satisfaction, first notice u/s 153 was issued. There is no indication whatsoever, that the assessment proceedings in the case of Global Reality Ventures P.Ltd. were in progress or not, at that point of time and that the A.O. during the course of that proceedings recorded this satisfaction. The procedure contemplated under the Act was not followed. (c ) The satisfaction is recorded on 23rd July,2010. The relevant A.Y. would be 2011-12. The six preceding AYs relevant to this A.Y. would be 2005-06/2006- 07/2007-08/2008-09/2010-11. Thus the notice issued u/s 153 C ..... X X X X Extracts X X X X X X X X Extracts X X X X
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