TMI Blog2009 (1) TMI 344X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessments were completed prior to initiation of action under s. 153C. In the present assessment orders no addition has been made on account of documents stated to be pertaining to the assessee - Though all these assessments have been decided in further appeal and settled by CIT(A) or Tribunal, the same are subject-matter of the litigation. In our opinion the AO could not have done so since all these assessments have not abated. As per second proviso to s. 153C only those assessments or reassessments falling within the period of six assessment years referred to in sub-s. (1) of s. 153A and pending on the date of initiation of search shall abate. Since, the original assessments were not pending the same have not abated. The AO was not competent to assume jurisdiction u/s.153C as (i) none of the documents found during the course of search of other person belong to the assessee, (ii) the original assessments have not abated. What were pending were only the appeals. However, since the appeals do not abate the original assessments survive and hence cannot be reopened u/s.153C proceedings. We, therefore, set aside all the assessments made u/s.153C. In view of the finding and applying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anoli. The AO, therefore, held that since these papers belong to Meghmani Organics in view of s. 153C(1) of the Act proceedings were initiated for framing assessment as per s. 153A of the Act. The AO also noted as under: "Although the seized documents do not reveal any specific undisclosed income on verification, but the proceedings validly iniated have to be completed in the manner prescribed under s. 143(2) and 143(3) of the Act." 3. The assessee filed return of income in pursuant to notice under s. 153A of the Act declaring total income as declared in the original return. The AO completed assessment whereby the claim of deduction under ss. 80HHC and 80-IA of the Act was reduced. No addition was either proposed or made in respect of so-called papers found during the course of search and seized from the premises of Lalit K. Patel. 4. The assessee preferred further appeal before the learned CIT(A). The assessee challenged inter alia action for framing assessment under s. 153A r/w s. 153C of the Act. It was contended that the documents seized during the search do not belong to the assessee but maintained by Kantilal M. Patel himself since he is working as supervisor in profess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... things or documents seized or requisitioned belong to a person other than person in whose case warrant of authorisation is issued under s. 132(1) of the Act. Since none of the documents belongs to the assessee, though they may be referable to the work of the assessee the same cannot be considered as "belonging to the assessee". It is also admitted by the AO that the seized documents do not reveal any undisclosed income. The reductions in claim under s. 80HHC and 80-IA have all along been subject of litigation and now have attained finality prior to search. He accordingly pleaded that initiation of proceeding under s. 153C r/w s. 153A is bad in law and hence the impugned order be struck down. Reliance was placed on the decision of Tribunal Calcutta Bench in the case of LMJ International Ltd. vs. Dy. CIT (2008) 119 TTJ (Kol) 214 : (2008) 14 DTR (Kol)(Trib) 540. He also invited our attention to the circular issued by CBDT No. 7 of 2003, dt. 15th Sept., 2003 [(2003) 184 CTR (St) 33]. In the said circular it has been opined that only the assessment or reassessment pending on the date of initiation of search under s. 132 of the Act shall abate but it was also clarified that the appeal r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt appeal against the order under s. 153C such assessments are annulled the whole of the assessment will be annulled including the original assessment. Thus, even in these cases additions/disallowances that were made in original/regular assessment the same would also stand deleted. This situation is not envisaged under the Act. Therefore, the requirement for assumption of jurisdiction having been fulfilled in the present case framing of assessment is valid in law. Reliance was also placed on the decision of Tribunal, Delhi Benches in the following cases: (1) Ms. Shyam Lata Kaushik vs. Asstt. CIT (2008) 114 TTJ (Del) 940 : (2008) 4 DTR (Del)(Trib) 337; (2) Shivnath Rai Harnarain (India) Ltd. (2008) 117 TTJ (Del) 480 : (2008) 9 DTR (Del)(Trib) 466 : (2008) 304 ITR 271 (Del)(AT). He submitted that the decision of Tribunal, Bangalore Bench is in fact wherein it has been found that the documents seized do not belong to the person in whose case proceedings were sought to be initiated under s. 153C of the Act. That being the factual finding will not assist the case of the assessee. 8. In reply the learned counsel of the assessee submitted that the decisions relied on by the learne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ordingly as if such return were a return required to be furnished under s. 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 AO 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 years referred to in this sub-section pending on the date of initiation of the search, under s. 132 or making of requisition under s. 132A, as the case may be, shall abate. (2) If any proceeding initiated or any order or assessment or reassessment made under sub-s. (1) has been annulled in appeal or any other legal proceedings, then, notwithstanding anything contained in sub-s. (1) of s. 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to sub-s. (1), shall stand revived with effect from the date of receipt of the order of such annulment by the CIT: Provided that such revival shall ceas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts seized or requisitioned by the AO having jurisdiction over such other person, such AO shall issue the notice and assess or reassess total income of such other person of such assessment year in the manner provided in s. 153A." 10. The AO assumes jurisdiction for framing assessment under s. 153C of the Act where the AO is satisfied that any money, bullion, jewellery or other valuable articles or things or books of account or documents seized or requisitioned belongs to or belong to a person other than the person in whose case search is conducted under s. 132(1) of the Act. Therefore, for initiating action under s. 153C of the Act for framing assessment under s. 153A, the prerequisite is that the satisfaction of the AO that the money etc. and documents etc. belongs to a person other than the person searched under s. 132 of the Act. The AO in the assessment order has categorically held that pp. 87 to 91 of Annex. A-4 seized from Lalit K. Patel are his own handwritten estimate for the proposed work of the assessee. Therefore, though these documents may refer to for the work proposed on behalf of the assessee, the same cannot be considered as "documents belonging to the assessee". I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all other provisions of this Act shall apply to the assessment or reassessment made under s. 153A shall be subject to interest, penalty and prosecution, if applicable. In the assessment or reassessment made in respect of an assessment year under this section, this tax shall be chargeable at the rate or rates as applicable to such assessment year." 11. The assessee has filed a chart for all the years, it demonstrates that the original assessments were completed prior to initiation of action under s. 153C of the Act. The following table will reveal the said fact: ------------------------------------ Asst. yr. Original order passed on ------------------------------------ 2001-02 4-3-2003 2002-03 9-6-2003 2003-04 29-3-2003 2004-05 30-11-2005 2005-06 17-11-2001 ------------------------------------ In the present assessment orders no addition has been made on account of documents stated to be pertaining to the assessee. However, deductions claimed under ss. 80HHC and 80-IA of the Act have been recalculated. From the table filed in all the years, we find that the deductions under s. 80HHC of the Act was reduced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l to the interest of the Revenue. Thus, all the different types of assessments envisage different situations. 13. The Hon'ble Supreme Court in the case of Parashuram Pottery Works Co. Ltd. vs. ITO 1977 CTR (SC) 32 : (1977) 106 ITR 1 (SC) observed as under: "It has been said that the taxes are the price that we pay for civilization. If so, it is essential that those who are entrusted with the task of calculating and realising that price should familiarise themselves with the relevant provisions and become well-versed with the law on the subject. Any remissness on their part can only be at the cost of the national exchequer and must necessarily result in loss of revenue. At the same time, we have to bear in mind that the policy of law is that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi judicial controversies as it must in other spheres of human activity." 14. The Hon'ble Supreme Court in the case of CIT vs. Sun Engineering Works (P) Ltd. (1992) 107 CTR (SC) 209 : (1992) 198 ITR 297 (SC) held that the scope of reass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egislature. 17. The decision of the Tribunal Calcutta Bench in the case of LMJ International Ltd. relied on by the learned counsel for the assessee squarely applies. In the said case the assessments were sought to be made under s. 153A r/w s. 153C of the Act. The Tribunal in this case held as under: "A reading of s. 153A reveals apparent contradiction in the first proviso and the second proviso. The proviso provides that the assessment or reassessment shall be done by the AO in respect of each assessment year falling within six assessment years preceding the year of search. The second proviso, on the other hand, provides that the assessment/reassessment pending on the date of search shall abate. In other words, the assessments which are not pending, shall hold the field. The language of s. 153A is not unambiguous and is not susceptible to only one meaning. In the circumstances, the principle of literal construction is of no help. One of the salutary rule is rule of harmonious construction. According to this rule, a statute must he read as a whole and one provision of the Act should be construed with reference to other provisions in the same Act so as to make a consistent enactm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and 234B does not help the case of the Department. The submission of learned CIT-Departmental Representative that s. 153A starts with non obstante clause and excludes application of ss. 147 and 148 relating to reopening of assessments is tenable. But at the same time in terms of ss. 139, 142 and 143, concluded assessments can be reopened as per ss. 147 and 148 in case the AO has 'reasons to believe' that the income chargeable to tax has escaped assessment and provisions of ss. 153A to 153C can be resorted to for the assessment of undisclosed income in search cases. All the three procedures of assessment operate in different fields and have different purposes to be fulfilled altogether. Items of regular assessment cannot be added back in the proceedings under s. 153C when no incriminating documents were found n respect of the disallowed amounts in the search proceedings. The additions made by the AO, being all relating to regular assessments are hereby deleted." 18. The Tribunal Bangalore Bench in the case of P. Srinivas Naik held that if any documents found though pertaining to the assessee, if not belonging to such assessee, the action under s. 153C r/w s. 153A cannot be invoke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied upon by the learned Departmental Representative will not apply in this case as in both cases the facts are that the assessments were framed under s. 153A of the Act i.e., the assessee was the person in whose case search was initiated under s. 132(1) of the Act. It is also found that the assessments were pending in those cases and it was also observed that "it is not the complaint of the assessee that any income which is already subjected to the assessment under s. 143(3)/148 of the Act which was completed prior to search has also been included in the assessments framed under s. 153A of the Act." Therefore, both the cases relied upon by the learned Departmental Representative will not help the case of the Revenue. In view of our above finding and applying the decision of the Tribunal Calcutta Bench in the case of LMJ International Ltd., since we have found that the documents found during the search at the residential premises of Shri Lalit K. Patel and Kantilal M. Patel do not "belong to the assessee" the AO was not competent to initiate action under s. 153C of the Act so as to frame assessment under s. 153A of the Act. We, therefore, set aside the assessments. 20. The doubt r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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