TMI Blog2022 (12) TMI 674X X X X Extracts X X X X X X X X Extracts X X X X ..... COURT] and the judgment Continental Warehousing Corporation (Nhava Sheva) Ltd.[ 2015 (5) TMI 656 - BOMBAY HIGH COURT] in absence of any incriminating material, we set aside the order passed by the CIT(A) and delete all the additions made by the Assessing Officer in the Assessment Order passed under Section 153C read with Section 143(3) of the Act for the Assessment Year 2010-11. Assessee appeal allowed. - ITA No. 3924 /MUM/2019 - - - Dated:- 30-9-2022 - ITA No. 3924 /MUM/2019 ITA No. 3925 /MUM/2019 ITA No. 3926 /MUM/2019 ITA No. 3927 /MUM/2019 ITA No. 3928/MUM/2019 ITA No. 4120/MUM/2019 ITA No. 4122/MUM/2019 ITA No. 4123/MUM/2019 ITA No. 3917 to 3921 /MUM/2019 ITA No. 4114/MUM/2019 Aniruddha Narayan Malpani Versus DCIT-Central Circle-3(2), Mumbai And DCIT CC 3(2), Central Range-3, Mumbai Versus Aniruddha Narayan Malpani Dr. Anjali Aniruddha Malpani DCIT-Central Circle-3(2), Mumbai And DCIT CC 3(2), Central Range-3, Mumbai Versus Dr. Anjali Aniruddha Malpani SHRI PRAMOD KUMAR, VICE PRESIDENT And SHRI RAHUL CHAUDHARY, JUDICIAL MEMBER For the Appellant/Assessee : Shri Hiro Rai Shri Dharan Gandhi For the Respondent/Department : Shri Rakesh Garg ORDER P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3.1 Without prejudice to the above, the Ld. CIT(A) erred in stating that incriminating statements are also incriminating material without pointing out as to what statement of the assessee was incriminating or adverse qua the additions made during the year under consideration. 4. In the facts and the circumstances of the case and in law, the Ld. CIT(A) erred in upholding the action of the Ld. AO in treating the short term capital gain of Rs. 53,05,487/- as business income. The reasons given in this regard are patently erroneous and unjustified. 4.1 Without prejudice to the above, the Ld. CIT(A) has erred in relying upon certain judgments of the Courts without putting it to the assessee and which are in fact, not applicable to facts of the present case. 4.2 Without prejudice to the above, the Ld. CIT(A) has erred in not allowing deductions of various expenditure incurred like, portfolio management charges, STT and other expenses as deduction while computing the business income. 5. The Ld. CIT(A) erred in upholding the levy of interest u/s 234B and 234C of the Act. 6. The Ld. CIT(A) erred in not setting aside the action of the Ld. AO in initiating penalt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee were rejected. 7. Being aggrieved by the order passed by the CIT(A), the Assessee has preferred the present appeal raising grounds reproduced in paragraph 2 above. 8. The Ld. Authorised Representative for the Assessee appearing before us submitted that recording of proper satisfaction is the prerequisite for initiation of proceedings under Section 153C of the Act. The Assessing Officer must record satisfaction that the material seized during the course of the search belongs to person other than the searched person, and that such material has a bearing on the determination of the income of the other person. Learned Authorised Representative for the Assessee submitted that the Assessing Officer is stated to have recorded satisfaction on 03.10.2017 that material seized during searched (i.e., jewellery) belonged to the Assessee and yet, a month later, on 03.11.2017, the Assessing Officer had sought for explanation from the Company regarding the same jewellery which goes on to show that on 03.10.2017 the Assessing Officer was not satisfied that the jewellery seized during the search action belonged to the Assessee. Learned Authorised Representative for the Assessee further s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thorised Representative for the Assessee submitted that the ratio of the aforesaid judgment is equally applicable to proceedings under Section 153C of the Act. Since in the facts of the present case no addition was made on account of unexplained portion of jewellery found/seized during the search proceedings in the hands of the Assessee, the satisfaction recorded should be held to be invalid and the assessment order under Section 153C read with Section 143(3) of the Act must be quashed. 9. Per contra, Ld. Departmental Representative vehemently contended that the search proceedings and the culmination thereof in the assessment order passed under Section 153C read with Section 143(3) of the Act were as per law and cannot be quashed in the facts and circumstances of the present case. He submitted that Section 132 of the Act uses the expression reasons to believe and therefore, there is no requirement of forming satisfaction for undertaking search action under Section 132 of the Act. Even if there are reasons to suspect , the search action under Section 132 of the Act can be conducted. He submitted that provisions of Section 153C are separate are distinct from provisions of Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r to the issuance of notice under Section 153C of the Act. The CIT(A) had, vide letter dated 19.11.2018, sought for the satisfaction recorded from the Assessing Officer and in response to the same, the Assessing Officer, vide letter dated 20.12.2018, furnished the satisfaction note recorded on 03.10.2017. Thus, it is clear that satisfaction was recorded before issuance of notice under Section 153C of the Act. In proceedings before us the Ld. Authorised Representative for the Assessee has challenged the satisfaction recorded on the ground that it is not proper and/or bad in law and therefore, we proceed to examine the same. 12. As per Section 153C of the Act notwithstanding anything contained in Section 139, Section 147, Section 148, Section 149, Section 151 and Section 153 of the Act, where the assessing officer of searched person is satisfied that, inter alia, any jewellery or other valuable article or thing seized, belongs to a person, other than the searched person referred to in Section 153A of the Act (hereinafter referred to as the Other Person ), then, the same shall be handed over to the assessing officer having jurisdiction over the Other Person (hereinafter referred t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contained in Section 153C/153A of the Act is completely different from scheme of assessment/reassessment contained under Section 147 of the Act. The non-obstante clause contained in 153C/153A clearly provides that assessment/reassessment therein is not bound by the procedural requirements contained in Section 139, 147, 148, 149, 151 and 153 of the Act. Further, to initiate assessment/reassessment proceedings under Section 147 of the Act the Assessing Officer must have reasons to believe that income chargeable to tax has escaped assessment whereas there is no such requirement under Section 153C/153A of the Act. For the purpose of Section 153C of the Act, the Assessing Officer is required to the satisfied that books of accounts, documents or asset seized have a bearing on the determination of total income . For Section 153A of the Act no such satisfaction is required. Section 153A of the Act provides that where a search is initiated under Section 132 of the Act the assessing officer shall issue notice and thereafter, assess/re-assess the total income of for the specified assessment years. Since scheme assessment/reassessment under Section 153A/153C of the Act is different from t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd which led to the insertion of Explanation 3 to section 147. Parliament must be regarded as being aware of the interpretation that was placed on the words and also by the Rajasthan High Court in Shri Ram Singh's case (supra). Parliament has not taken away the basis of that decision. While it is open to Parliament, having regard to the plenitude of its legislative powers to do so, the provisions of section 147(1) as they stood after the amendment of 1-4-1989 continue to hold the field. (Emphasis Supplied) While accepting the contentions of the assessee in the above case, the Hon ble Bombay High Court had observed that to read the words and also as being in alternative would be to re-write the language used by the Parliament. In our view, in the case the contentions advanced on behalf of the Assessee in the present case are accepted, the same would amount to, in effect, re-writing the provisions of Section 153C/153A of the Act as explained hereinafter. The provisions of Section 153C/153A of the Act are not couched in the same language as the provisions contained in Section 147 of the Act. The words and also are not present in Section 153C of the Act. We are, theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al which was seized had to pertain to the Assessment Years in question and it is an undisputed fact that the documents which were seized did not establish any co-relation, document-wise, with these four Assessment Years. Since this requirement under Section 153C of the Act is essential for assessment under that provision, it becomes a jurisdictional fact. We find this reasoning to be logical and valid, having regard to the provisions of Section 153C of the Act. Para 9 of the order of the ITAT reveals that the ITAT had scanned through the Satisfaction Note and the material which was disclosed therein was culled out and it showed that the same belongs to Assessment Year 2004-05 or thereafter. After taking note of the material in para 9 of the order, the position that emerges therefrom is discussed in para 10. It was specifically recorded that the counsel for the Department could not point out to the contrary. It is for this reason the High Court has also given its imprimatur to the aforesaid approach of the Tribunal. That apart, learned senior counsel appearing for the respondent, argued that notice in respect of Assessment Years 2000-01 and 2001-02 was even time barred. 19. We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igh Court in the case of CIT-II, Thane Vs. Continental Warehousing Corporation (Nhava Sheva) Ltd: [2015] 374 ITR 645 (Bombay) has held that no additions can be made in respect of assessments which have become final if no incriminating material is found during search pertaining to the same. 18. We note that the Assessee has, in Ground No. 3 3.1 of the Appeal, challenged the additions on the ground that there was no incriminating material. However, the CIT(A) has in paragraph 6.5 of order, dated 29.03.2019, noted that there was incriminating material and prior to operation of the last prohibitory order to the search action the issue relating to capital gain/loss was examined by the Investigation Wing and statement of the Assessee and his wife was recorded on oath. Accordingly, a clarification was sought from the Learned Departmental Representative about the incriminating material found during the course of search. In response thereto, the Learned Departmental Representative placed on record the statements of the Assessee recorded under Section 132(4) of the Act during the course of the search action containing reply of the Assessee to 58 questions. He submitted that the aforesai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al. Therefore, in view of the facts and circumstances of the present case and respectfully following the judgment of the Hon ble Supreme Court in the case of Sinhgad Technical Education Society (supra), and the judgment of the Hon ble Bombay High Court in the case of Continental Warehousing Corporation (Nhava Sheva) Ltd. (supra), in absence of any incriminating material, we set aside the order passed by the CIT(A) and delete all the additions made by the Assessing Officer in the Assessment Order, dated 27.12.2017, passed under Section 153C read with Section 143(3) of the Act for the Assessment Year 2010-11. 20. In view of the above, Ground No. 1, 1.1 and 2 raised by the Appellant are dismissed, Ground No. 3 and 3.1 are allowed and Ground No. 4, 4.1 and 4.2 are disposed off as being infructuous. Ground No. 5 pertaining to levy of interest under Section 234B/234C of the Act is disposed off as being consequential while Ground No. 6 pertaining to levy of penalty under Section 271(1)(c) of the Act is disposed off as being premature. 21. In result, appeal filed by the Assessee (i.e. ITA No. 3924/Mum/2019) (Assessment Year 2010-11) is partly allowed. ITA No. 3925, 3926, 3927 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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